20-F

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

(Mark One)
o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
or
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 113/7 pence 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 11³/7 pence each                              356,116,049

      Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:     Yes þ          No o

      If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:     Yes o          No þ

      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 þ          No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  þ Accelerated filer  o Non-accelerated filer  o

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

Item 17 o          Item 18 þ

      If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes                     o                          No                     þ

TABLE OF CONTENTS

		Page
Introduction			4
Cautionary Note Regarding Forward-Looking Statements			5
PART I
Item 1.	Identity of Directors, Senior Management and Advisors		7
Item 2.	Offer Statistics and Expected Timetable		7
Item 3.	Key Information		7
	Selected Consolidated Financial Information		7
	Risk Factors		13
Item 4.	Information on the Company		16
	Summary		16
	Segmental Information		20
	Hotels		24
	Soft Drinks		45
	Trademarks		45
	Organizational Structure		45
	Property, Plant and Equipment		45
	Environment		46
Item 4A.	Unresolved Staff Comments		47
Item 5.	Operating and Financial Review and Prospects		47
	Introduction		47
	Critical Accounting Policies Under International Financial Reporting Standards (“IFRS”) and US GAAP		47
	Operating Results		50
	Liquidity and Capital Resources		60
Item 6.	Directors, Senior Management and Employees		62
	Directors and Senior Management		62
	Compensation		65
	Board Practices		67
	Employees		69
	Share Ownership		71
Item 7.	Major Shareholders and Related Party Transactions		71
	Major Shareholders		71
	Related Party Transactions		72
Item 8.	Financial Information		72
	Consolidated Statements and Other Financial Information		72
	Significant Changes		72
Item 9.	The Offer and Listing		72
	Plan of Distribution		74
	Selling Shareholders		74
	Dilution		74
	Expenses of the Issue		74

2

		Page
Item 10.	Additional Information		74
	Memorandum and Articles of Association		74
	Material Contracts		77
	Exchange Controls		79
	Taxation		79
	Documents on Display		83
Item 11.	Quantitative and Qualitative Disclosures About Market Risk		83
Item 12.	Description of Securities Other Than Equity Securities		85
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies		85
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		85
Item 15.	Controls and Procedures		85
Item 16.	[Reserved]		86
Item 16A.	Audit Committee Financial Expert		86
Item 16B.	Code of Ethics		86
Item 16C.	Principal Accountant Fees and Services		86
Item 16D.	Exemptions from the Listing Standards for Audit Committees		87
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		87
PART III
Item 17.	Financial Statements		87
Item 18.	Financial Statements		88
Item 19.	Exhibits		88

3

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 InterContinental Hotels Limited or Six Continents Limited;

•  “Britvic” refers to Britannia Soft Drinks Limited for the period up to November 18, 2005, and thereafter, Britannia SD Holdings Limited (renamed Britvic plc on November 21, 2005) which became the holding company of the Britvic Group on November 18, 2005;

•  “Britvic Group” refers to Britvic and its subsidiaries from time to time;

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

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

•  “Hotels” or “IHG Hotels” refers to the hotels business of the Group;

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

•  “IHL” refers to InterContinental Hotels Limited, previously InterContinental Hotels Group PLC, former parent company of the Group and re-registered as a private limited company on June 27, 2005;

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

•  “ordinary share” or “share” refers, before April 14, 2003, to the ordinary shares of 28 pence each in Six Continents Limited; following that date and until December 10, 2004 to the ordinary shares of £1 each in IHL; following that date and until June 27, 2005 to the ordinary shares of 112 pence each in IHL; following that date and until June 12, 2006 to the ordinary shares of 10 pence each in IHG; and following June 12, 2006 to the ordinary shares of 11³/7 pence each in IHG;

•  “Six Continents” refers to Six Continents Limited; previously Six Continents PLC and re-registered as a private limited company on June 6, 2005;

•  “Soft Drinks” and “Britvic business” refer to the soft drinks business of InterContinental Hotels Group PLC, which the Company had through its controlling interest in Britvic and which the Company disposed of by way of an initial public offering effective December 14, 2005; and

•  “VAT” refers to UK value added tax levied by HM Revenue and Customs 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, references to “pounds sterling”, “sterling”, “£”, “pence” or “p” are to UK currency and references to “A$” are to Australian (“A”) 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 = $1.96, 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, 2006. On March 16, 2007 the Noon Buying Rate was

4

£1.00 = $1.94. For information regarding rates of exchange between pounds sterling and US dollars from fiscal 2002 to the present, see “Item 3. Key Information  — Exchange Rates”.

      The Company’s fiscal year ends on December 31. 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 facilitates 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 year ended December 31, 2006 are shown as 2006 and references to the year ended December 31, 2005 are shown as 2005, unless otherwise specified, references to the fiscal period ended December 31, 2004, are shown as 2004 and references to other fiscal years are shown in a similar manner.

      The Company’s Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) which differ from the accounting principles generally accepted in the United States (“US GAAP”). The significant differences applicable to the Group are explained in Note 32 of Notes to the Financial Statements.

      IHG believes that the reporting of profit and earnings measures before other operating income and expenses 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 other operating income and expenses. Throughout this document earnings per share is also calculated excluding the effect of all other operating income and expenses, special interest, special tax and gain on disposal of assets and is referred to as adjusted earnings per share.

      The Company furnishes JP Morgan Chase Bank, N.A., 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 IFRS. 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 registered holders of ADRs and mails to all registered holders of ADRs notices of shareholders’ meetings received by the Depositary. During 2006, the Company reported interim financial information at June 30, 2006 in accordance with the Listing Rules of the UK Listing Authority. In addition, it provided quarterly financial information at March 31, 2006 and at September 30, 2006 and intends to continue to provide quarterly financial information during fiscal 2007. The Financial Statements may be found on the Company’s website at www.ihg.com.

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 InterContinental Hotels Group and certain plans and objectives of the Board of Directors of InterContinental Hotels Group 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 words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, or other words of similar meaning. These statements are based on assumptions and assessments made by InterContinental Hotels Group’s management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

      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.

5

      By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in, or implied by, such forward-looking statements, including, but not limited to: the risks involved with the Group’s reliance on the reputation of its brands and protection of its intellectual property rights; the risks relating to identifying, securing and retaining management and franchise agreements; the effect of political and economic developments; the ability to recruit and retain key personnel; events that adversely impact domestic or international travel, including terrorist incidents and epidemics such as Severe Acute Respiratory Syndrome (“SARS”); the risks involved in the Group’s reliance upon its proprietary reservation system and increased competition from third-party intermediaries who provide reservation infrastructure; the risks involved with the Group’s reliance on technologies and systems; the future balance between supply and demand for the Group’s hotels; the lack of selected development opportunities; the risk of litigation; the risks associated with the Group’s ability to maintain adequate insurance; the Group’s ability to borrow and satisfy debt covenants; compliance with data privacy regulations; and the risks associated with funding the defined benefits under its pension plans.

6

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 years ended December 31, 2006, 2005 and 2004 has been prepared in line with International Financial Reporting Standards as adopted in the European Union (“EU”), which is consistent with IFRS, and is derived from the Consolidated Financial Statements of the Group, which have been audited by its independent registered public accounting firm, Ernst & Young LLP. There is no available comparative data for the years ended prior to December 31, 2004 as consolidated financial data was then prepared in accordance with accounting principles generally accepted in the United Kingdom (“UK GAAP”). The selected consolidated financial data set forth below should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report.

7

Consolidated Profit and Loss Account Data

		Years ended December 31,
		2006(2)			2006			2005(1)			2004(1)
		$			£			£			£
		(in millions, except per share and ADS amounts)
Amounts in accordance with IFRS
Revenue:
	Continuing operations		1,480			805			713			606
	Discontinued operations		285			155			1,197			1,598
			1,765			960			1,910			2,204
Total operating profit before other operating income and expenses:
	Continuing operations		369			201			173			120
	Discontinued operations		55			30			166			226
			424			231			339			346
Other operating income and expenses:
	Continuing operations		50			27			(22	)		(49	)
			50			27			(22	)		(49	)
Total operating profit:
	Continuing operations		419			228			151			71
	Discontinued operations		55			30			166			226
			474			258			317			297
Financial income			48			26			30			70
Financial expenses			(68	)		(37	)		(63	)		(103	)
Profit before tax			454			247			284			264
Tax			75			41			(80	)		127
Profit after tax			529			288			204			391
Gain on disposal of assets, net of tax			215			117			311			19
Profit available for shareholders			744			405			515			410
Attributable to:
	Equity holders of the parent		744			405			496			383
	Minority equity interest		—			—			19			27
Profit for the year			744			405			515			410
Earnings per ordinary share:
	Basic		191.9p			104.1p			95.2p			53.9p
	Diluted		186.9p			101.5p			93.1p			53.3p

Footnotes on page 10.

8

															Three months			12 months			15 months
															ended			ended			ended			Year ended
			Year ended December 31,												December 31,			December 31,			December 31,			September 30,
			2006(2)			2006			2005(1)			2004(1)			2002			2003			2003(1)			2002(1)
						£			£			£			£			£			£			£
			$
						(in millions, except per share and ADS amounts)
Amounts in accordance with US GAAP
Income/(loss) before cumulative effect on prior years of change in accounting principle:
	Continuing operations			928			505			104			257			14			(63	)		(49	)		102
	Discontinued operations:
		Income from discontinued operations		—			—			41			62			46			92			138			226
		Surplus on disposal		—			—			210			21			—			—			—			171
	Total discontinued operations			—			—			251			83			46			92			138			397
Cumulative effect on prior years of: adoption of FAS 142				—			—			—			—			(712	)		—			(712	)		—
	adoption of FAS 123(R)			(35	)		(19	)		—			—			—			—			—			—
Net income/(loss)				893			486			355			340			(652	)		29			(623	)		499
Per ordinary share and American Depositary Share(4)
Basic
Income/(loss) before cumulative effect on prior years of change in accounting principle:
	Continuing operations			238.6	¢		129.8	p		20.0	p		36.2	p		1.9	p		(8.6	)p		(6.7	)p		14.0	p
	Discontinued operations			—			—			48.2	p		11.7	p		6.3	p		12.6	p		18.9	p		54.3	p
Cumulative effect on prior years of: adoption of FAS 142				—			—			—			—			(97.1	)p		—			(97.1	)p		—
	adoption of FAS 123(R)			(9.0	)¢		(4.9	)p		—			—			—			—			—			—
Net income/(loss)				229.6	¢		124.9	p		68.2	p		47.9	p		(88.9	)p		4.0	p		(84.9	)p		68.3	p
Diluted
Income/(loss) before cumulative effect on prior years of change in accounting principle:
	Continuing operations			233.8	¢		127.2	p		19.5	p		35.7	p		1.9	p		(8.6	)p		(6.7	)p		13.9	p
	Discontinued operations			—			—			47.1	p		11.5	p		6.3	p		12.6	p		18.9	p		54.1	p
Cumulative effect on prior years of: adoption of FAS 142				—			—			—			—			(97.1	)p		—			(97.1	)p		—
	adoption of FAS 123(R)			(8.8	)¢		(4.8	)p		—			—			—			—			—			—
Net income/(loss)				225.0	¢		122.4	p		66.6	p		47.2	p		(88.9	)p		4.0	p		(84.9	)p		68.0	p

Footnotes on page 10.

9

Consolidated Balance Sheet Data

	December 31,
	2006(3)		2006		2005		2004
	$		£		£		£
	(in millions)
Amounts in accordance with IFRS
Goodwill and intangible assets		516		263		238		206
Property, plant and equipment		1,956		997		1,356		1,926
Investments and other financial assets		251		128		155		122
Current assets		892		455		707		598
Non-current assets classified as held for sale		98		50		279		1,826
Total assets		3,713		1,893		2,735		4,678
Current liabilities(5)		1,261		643		794		926
Long-term debt(5)		594		303		410		1,156
Share capital		129		66		49		723
IHG shareholders’ equity		1,330		678		1,084		1,821
Number of Shares in issue at period end (millions)				356		433		622

	December 31,
	2006(3)		2006		2005		2004		2003		2002
	$		£		£		£		£		£
	(in millions)
Amounts in accordance with US GAAP
Goodwill and intangible assets		2,401		1,224		1,395		1,384		1,587		2,702
Property, plant and equipment		2,605		1,328		1,685		3,454		3,916		6,552
Investments and other financial assets		214		109		141		115		174		189
Current assets		979		499		738		699		978		983
Non-current assets classified as held for sale		84		43		258		300		—		—
Total assets		6,283		3,203		4,217		5,952		6,655		10,426
Current liabilities(5)		1,671		852		1,161		2,021		1,496		2,109
Long-term debt(5)		190		97		36		52		523		622
Share capital		80		41		43		697		739		243
IHG shareholders’ equity		2,938		1,498		2,015		2,796		3,380		6,221
Number of Shares in issue at period end (millions)				356		433		622		739		734

(1)	The year ended 2002 includes Hotels 12 months and Soft Drinks 52 weeks. The period ended 2003 includes Hotels 15 months, Soft Drinks 64 weeks ended December 20, 2003 and Mitchells and Butlers 28 weeks ended April 12, 2003. The year ended 2004 includes Hotels 12 months and Soft Drinks 53 weeks ended December 25, 2004. The year ended 2005 includes Hotels 12 months and Soft Drinks 50 weeks and three days ended December 14, 2005.
(2)	US dollar amounts have been translated at the weighted average rate for the year of £1.00 = $1.84.
(3)	US dollar amounts have been translated at the Noon Buying Rate on December 31, 2006 of £1.00 = $1.96 solely for convenience.
(4)	Each American Depositary Share represents one ordinary share.
(5)	Long-term debt under IFRS includes amounts supported by long-term credit facilities, which are classified as current liabilities under US GAAP.

10

     Dividends

      InterContinental Hotels Group PLC paid an interim dividend of 5.1 pence per share on October 5, 2006. The IHG board has proposed a final dividend of 13.3 pence per share, payable on June 8, 2007, if approved by shareholders at the Annual General Meeting to be held on June 1, 2007, bringing the total IHG dividend for the year ended December 31, 2006 to 18.4 pence per share.

      On February 20, 2007, IHG announced its intention to pay a £700 million special dividend to shareholders during the second quarter of 2007.

      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 (as IHL then was) and Six Continents PLC (as Six Continents then was), 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.

     Ordinary dividend

	Pence per ordinary share						$ per ADS
	Interim		Final		Total		Interim		Final			Total
Year ended September 30,
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		0.174			0.242
Year ended December 31,
2004		4.30		10.00		14.30		0.077		0.191			0.268
2005		4.60		10.70		15.30		0.081		0.187			0.268
2006		5.10		13.30		18.40		0.096		0.259	(2)		0.355

(1)	Restated to reflect an equivalent number of shares in InterContinental Hotels Group PLC.
(2)	The 2006 final dividend payable to ADS holders will be paid in USD and was set using the closing USD/ GBP spot rate of £1.00: $1.94 on February 16, 2007.

     Special Dividend

	Pence per
	ordinary share		$ per ADS
December 2004		72.00		1.39
June 2006		118.00		2.17

     Return of Capital

	Pence per
	ordinary share		$ per ADS
June 2005		165.00		2.86

11

     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 16, 2007 was £1.00 = $1.94.

	Month’s		Month’s
	highest		lowest
Month	exchange rate		exchange rate
September 2006		1.91		1.86
October 2006		1.91		1.86
November 2006		1.97		1.89
December 2006		1.98		1.95
January 2007		1.99		1.93
February 2007		1.97		1.94
March 2007 (through March 16, 2007)		1.96		1.92

	Period		Average
	end		rate(1)		High		Low
Year ended September 30,
2002		1.56		1.48		1.58		1.41
Period ended December 31,
2003		1.78		1.63		1.78		1.54
Year ended December 31,
2004		1.93		1.84		1.95		1.75
2005		1.73		1.82		1.93		1.71
2006		1.96		1.84		1.97		1.74
2007 (through March 16, 2007)		1.94		1.96		1.99		1.92

(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 the euro. For a discussion of the impact of exchange rate movements, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

12

RISK FACTORS

      This section describes some of the risks that could materially affect the Group’s business. The factors below should be considered in connection with any financial and forward-looking information in this Form 20-F and the cautionary note regarding forward-looking statements contained on pages 5 and 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 business, revenue, operating profit, earnings, net assets and liquidity and/or capital resources.

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

      Any event that materially damages 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. In addition, the value of the Group’s brands is influenced by a number of other factors, some of which may be outside the Group’s control, including commoditisation (whereby price/quality becomes relatively more important than brand identifications due, in part, to the increased prevalence of third party intermediaries), consumer preference and perception, failure by the Group or its franchisees to ensure compliance with the significant regulations applicable to hotel operations (including fire and life safety requirements), or other factors affecting consumers’ willingness to purchase goods and services, including any factor which adversely affects the reputation of those brands.

      In particular, where the Group is unable to enforce adherence to its operating and quality standards, or the significant regulations applicable to hotel operations, pursuant to its management and franchise contracts, there may be further adverse impact upon brand reputation or customer perception and therefore the value of the hotel brands.

      Given the importance of brand recognition to the Group’s business, the Group has invested considerable effort in protecting its intellectual property, including registration of trademarks and domain names. However, the laws of certain foreign countries in which the Group operates do not protect the Group’s proprietary rights to the same extent as the laws in the United States and the European Union. This is particularly relevant in China where, despite recent improvements in IP ownership rights, the relative lack of protection increases the risk that the Group will be unable to prevent infringements of its intellectual property in this key growth market. Any widespread infringement or misappropriation could materially harm the value of the Group’s brands and its ability to develop the business.

The Group is exposed to a variety of risks related to identifying, securing and retaining management and franchise agreements

      The Group’s growth strategy depends on its success in identifying, securing and retaining management and franchise agreements. Competition with other hotel companies 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. The terms of new management or franchise agreements may not be as favourable as current arrangements and the Group may not be able to renew existing arrangements on the same terms.

      There can also be no assurance that the Group will be able to identify, retain or add franchisees to the Group system or to secure management contracts. For example, the availability of suitable sites, planning and other local regulations or the availability of finance may all restrict the supply of suitable hotel development opportunities under franchise or management agreements. 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 including, for example, the unwillingness of franchisees to support brand improvement initiatives. In connection with entering into management or franchise agreements, the Group may be required to make investments in or guarantee the obligations of third parties or guarantee minimum income to third parties.

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      Changes in legislation or regulatory changes may be implemented that have the effect of favouring franchisees relative to brand owners.

The Group is exposed to the risks of political and economic developments

      The Group is exposed to the risks of global and regional adverse political, economic and financial market developments, including recession, inflation and currency fluctuations 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 reducing the value of properties in affected economies.

      Further political or economic factors or regulatory action could effectively prevent the Group from receiving profits from, or selling its investments in, certain countries, or otherwise adversely affect operations. For example, changes to tax rates or legislation in the jurisdictions in which the Group operates could decrease the proportion of profits the Group is entitled to retain, or the Group’s interpretation of various tax laws and regulations may prove to be incorrect, resulting in higher than expected tax charges. In addition, fluctuations in currency exchange rates between 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 business. Fluctuations of this type have been experienced over recent years with the significant strengthening of sterling against the US dollar. As the Group’s profits have become increasingly weighted towards North America, such fluctuations may have greater impact on the Group’s reported results.

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 incentive 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 the risk of events that adversely impact domestic or international travel

      The room rates and occupancy levels of the Group could be adversely impacted by events that reduce domestic or international travel, such as actual or threatened acts of terrorism or war, epidemics (such as SARS and avian flu), 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. A decrease in the demand for hotel rooms as a result of such events may have an adverse impact on the Group’s operations and financial results. In addition, inadequate preparedness, contingency planning or recovery capability in relation to a major incident or crisis may prevent operational continuity and consequently impact the value of the brand or the reputation of the Group.

The Group is reliant upon its proprietary reservation system and is exposed to the risk of failures in the system and increased competition in reservation infrastructure

      The value of the brands of the Group is partly derived from the ability to drive reservations through its proprietary HolidexPlus reservation system, an electronic booking and delivery channel directly linked to travel agents, hotels and internet networks. Inadequate disaster recovery arrangements, or inadequate continued investment in this technology, leading to loss of key communications linkages, particularly in relation to HolidexPlus, internet reservation channels and other key parts of the Information Technology (“IT”) infrastructure for a prolonged period, or permanently, may result in significant business interruption and subsequent impact on revenues.

      The Group is also exposed to the risk of competition from third party intermediaries who provide reservation infrastructure. In particular, any significant increase in the use of these reservation channels in

14

preference to proprietary channels may impact the Group’s ability to control the supply, presentation and price of its room inventory.

The Group is exposed to certain risks in relation to technology and systems

      To varying degrees, the Group is reliant upon certain technologies and systems (including IT systems) for the running of its business, particularly those which are highly integrated with business processes. Disruption to those technologies or systems could adversely affect the efficiency of the business, notwithstanding business continuity or disaster recovery processes. The Group may have to make substantial additional investments in new technologies or systems to remain competitive. Failing to keep pace with developments in technologies or systems may put the Group at a competitive disadvantage. The technologies or systems that the Group chooses may not be commercially successful or the technology or system strategy employed may not be sufficiently aligned to the needs of the business or responsive to changes in business strategy. As a result, the Group could lose customers, fail to attract new customers or incur substantial costs 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 exposed to the risks of the hotel industry supply and demand cycle

      The future operating results of the Group could be adversely affected by industry over-capacity (by number of rooms) and weak demand due, in part, to the cyclical nature of the hotel industry, or other differences between planning assumptions and actual operating conditions. Reductions in room rates and occupancy levels would adversely impact the results of Group operations.

The Group may experience a lack of selected development opportunities

      While the strategy of the Group 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.

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 or fines imposed by regulatory authorities may affect the reputation of the Group even though the monetary consequences are not significant.

The Group may face difficulties insuring its business

      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 business in which it operates. However, forces beyond the Group’s control including market forces, may limit the scope of coverage the Group can obtain as well as the Group’s ability to obtain coverage at reasonable rates. Other forces beyond the Group’s control, such as terrorist attacks or natural disasters may be uninsurable or simply too expensive to insure against. Inadequate or insufficient insurance could expose the Group to large claims or could result in the loss of capital invested in properties as well as the anticipated future revenue from properties, and could leave the Group responsible for guarantees, debt or other financial obligations related to such properties.

The Group is exposed to a variety of risks associated with its ability to borrow and satisfy debt covenants

      The Group is reliant on having access to borrowing facilities to meet its expected capital requirements and to maintain an efficient balance sheet. The majority of the Group’s borrowing facilities are only available if the financial covenants in the facilities are complied with. If the Group is not in compliance with the covenants, the lenders may demand the repayment of the funds advanced. If the Group’s financial

15

performance does not meet market expectations it may not be able to refinance its existing facilities on terms it considers favourable. The availability of funds for future financing is in part dependent on conditions and liquidity in the capital markets.

The Group is required to comply with data privacy regulations

      Existing and emerging data privacy regulations limit the extent to which the Group can use customer information for marketing or promotional purposes. Compliance with these regulations in each jurisdiction in which the Group operates may require changes in marketing strategies and associated processes which could increase operating costs or reduce the success with which products and services can be marketed to existing or future customers. In addition, non-compliance with privacy regulations may result in fines, damage to reputation or restrictions on the use or transfer of information.

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 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) include:

•  poor investment performance of pension fund investments which are substantially weighted towards global equity markets;

•  long life expectancy (which will make pensions payable for longer and therefore more expensive to provide);

•  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

•  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 trustees of the UK defined benefits plans can demand increases to the contribution rates relating to the funding of those pension plans, which would oblige the relevant members of the Group to contribute extra amounts to such pension funds. The trustees must consult the plans’ actuary and principal employer before exercising this power. In practice, contribution rates are agreed between the Group and the trustees on actuarial advice, and are set for three year terms. The last such review was as at March 31, 2006. As at March 16, 2007, being the latest practicable date prior to publication of this document, the Group has agreed to make a special contribution to the UK Pension Plan of £40 million over the next three years. However, this action does not preclude the trustees from further demands in respect of increases to contribution rates and funding levels.

ITEM 4.      INFORMATION ON THE COMPANY

SUMMARY

Group Overview

      The Group is a worldwide owner, manager and franchisor of hotels and resorts. Through its various subsidiaries it owned, leased, managed, or franchised 3,741 hotels and 556,246 guest rooms in nearly 100 countries and territories around the world, as at December 31, 2006. The Group’s brands include InterContinental Hotels & Resorts (“InterContinental”), Crowne Plaza Hotels & Resorts (“Crowne Plaza”), Holiday Inn Hotels & Resorts (“Holiday Inn”), Holiday Inn Express (or Express by Holiday Inn outside of

16

the Americas), Staybridge Suites, Candlewood Suites and Hotel Indigo. The Group also manages the hotel loyalty program, Priority Club Rewards.

      With the disposal of the Group’s interests in Britvic, a manufacturer and distributor of soft drinks in the United Kingdom, by way of an initial public offering (“IPO”) in December 2005, the Group is now focused solely on hotel franchising, management and ownership.

      The Group’s revenue and earnings are derived from (i) hotel operations, which include operation of the Group’s owned hotels, management and other fees paid under management contracts, where the Group operates third-parties’ hotels, and franchise and other fees paid under franchise agreements and (ii) until December 14, 2005, the manufacture and distribution of soft drinks.

      On March 16, 2007, InterContinental Hotels Group PLC had a market capitalization of approximately £4.3 billion, and was included in the list of FTSE 100 companies, a list of the 100 largest companies by market capitalization on the London Stock Exchange. Following a capital restructuring in June 2005, InterContinental Hotels Group PLC became the holding company for the Group. Six Continents Limited (formerly Six Continents PLC), which was formed in 1967, is the principal subsidiary company.

      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.ihg.com

      InterContinental Hotels Group PLC was incorporated in Great Britain on May 21, 2004 and registered in, and operates under, the laws of England and Wales. Operations undertaken in countries other than England and Wales are subject to 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 as, among other things, a brewer, soft drinks manufacturer, hotelier, leisure operator, and restaurant, pub and bar owner. In the last several years, the Group has undergone a major transformation in its operations and organization, as a result of the Separation (as discussed below) and a number of significant disposals during this period, which has narrowed the scope of its business.

      On April 15, 2003, following shareholder and regulatory approval, Six Continents PLC (as it then was) separated into two new listed groups, InterContinental Hotels Group PLC (as it then was) comprising the Hotels and Soft Drinks businesses and Mitchells & Butlers plc comprising the Retail and Standard Commercial Property Developments businesses (the “Separation”).

Acquisitions and Dispositions

      Since the Separation, 174 hotels with a net book value of £2.9 billion have been sold, generating aggregate proceeds of £3.0 billion. Of these 174 hotels, 156 have remained in the IHG global system (the number of hotels and rooms owned, leased, managed or franchised by the Group) through either franchise or management agreements. As of March 16, 2007 the Group had on the market a further five hotels. The following are the more significant transactions which have occurred since January 1, 2006:

      On February 10, 2006 the Group announced the sale of 9.5 million shares in FelCor Lodging Trust, Incorporated (“FelCor”) for $180.5 million, ($19 per share). This sale followed renegotiation of the management agreement with FelCor.

      On March 13, 2006, the Group announced the sale to Westbridge Hospitality Fund LP, (“Westbridge”), of 24 hotels in Continental Europe. Westbridge is a joint venture between CADIM, a Montreal-based pension

17

fund manager, and Westmont Hospitality, one of IHG’s largest franchisees. The portfolio was sold for £240 million, before transaction costs. IHG retained a 15 year franchise contract on each of the hotels. The sale completed on May 2, 2006.

      On July 13, 2006 the Group announced the sale of seven European InterContinental hotels to Morgan Stanley Real Estate Funds (“MSREF”) for £440 million, before transaction costs. IHG retained a 30 year management contract on each of the hotels, with two 10 year renewals at IHG’s discretion. The long-term contracts ensure continued representation of the InterContinental brand in key European markets.

      On October 28, 2006 the Group announced the signing of a hotel joint venture with All Nippon Airways (“ANA”), IHG ANA Hotels Group Japan LLC (“IHG ANA”). IHG invested £10 million for a 75% share in the joint venture, increasing IHG’s portfolio in Japan from 12 hotels (3,686 rooms) to 25 hotels (8,623 rooms). As part of the transaction, ANA has signed a 15 year management contract with IHG ANA Hotels Group Japan for its 13 owned and leased hotels (4,937 rooms).

      On January 16, 2007 the Group announced the sale of its 33.3% interest in the Crowne Plaza London — The City to Grupo Statuto, a leading Italian real estate investor. The hotel has been sold for gross proceeds of £81 million. IHG’s net proceeds after debt repayments are £18 million, £11 million above net book value.

      The asset disposal program which commenced in 2003 has significantly reduced the capital requirements of the Group whilst largely retaining the hotels in the IHG system through management and franchise agreements.

      Capital expenditure in 2006 totaled £124 million compared with £183 million in 2005 and £257 million in 2004. Capital expenditure in 2006 included the refurbishment of the InterContinental London, Park Lane and a rolling rooms refurbishment program at the InterContinental Hong Kong.

      At December 31, 2006 capital committed, being contracts placed for expenditure on property, plant and equipment not provided for in the financial statements, totaled £24 million.

      Following the completion of the hotel disposals in 2006, the Group owns 25 hotels.

FIGURE 1

Asset disposal program detail	Number of hotels		Proceeds		Net book value
			(£ billion)
Disposed to date		174		3.0		2.9
Remaining hotels		25		—		1.0

Return of Funds

      Since March 2004, the Group has announced the return of £3.6 billion of funds to shareholders by way of special dividends, share repurchase programs and capital returns (see Figure 2).

      In 2006, 28.4 million shares were repurchased at an average price of 909 pence per share (total £258 million). These repurchases completed the second and initiated the third £250 million share repurchase program, announced on September 8, 2005. The precise timing of share purchases will be dependent upon, amongst other things, market conditions. By March 16, 2007, a total of 26.05 million shares had been repurchased under the third repurchase program at an average price per share of 938 pence per share (approximately £244 million). Purchases are made under the existing authority from shareholders which will be renewed at the Company’s Annual General Meeting. Any shares repurchased under these programs will be canceled.

      Information, relating to the purchases of equity securities can be found in Item 16E.

      On February 20, 2007, IHG announced a further £850 million return of funds to shareholders. This comprises a proposed special dividend of approximately £700 million with share consolidation and a further £150 million share repurchase program to commence after completion of the third £250 million program.

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      In June 2006, £497 million was returned to shareholders by way of a special dividend of 118 pence per ordinary share held on June 9, 2006.

FIGURE 2

Return of funds program	Timing		Total return		Returned to date(i)		Still to be returned
					(£ million)
£501 million special dividend		Paid December 17, 2004		501		501		Nil
First £250 million share buyback		Completed in 2004		250		250		Nil
£996 million capital return		Paid July 8, 2005		996		996		Nil
Second £250 million share buyback		Completed in 2006		250		250		Nil
£497 million special dividend		Paid June 22, 2006		497		497		Nil
Third £250 million share buyback		Ongoing		250		244		6
£700 million special dividend		Expected second quarter 2		007 700		—		700
£150 million share buyback		Yet to commence		150		—		150
Total				3,594		2,738		856

(i)  As at March 16, 2007.

Hotels

      IHG owns a number of hotel brands including InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo. As at December 31, 2006, IHG’s brands comprised 3,741 franchised, managed, owned or leased hotels and 556,246 guest rooms in nearly 100 countries and territories.

Soft Drinks

      In December 2005 IHG disposed of its interests in Britvic, one of the two leading manufacturers of soft drinks by value and volume in Great Britain, by way of an IPO. IHG received aggregate proceeds of approximately £371 million (including two additional dividends, one of £47 million received in November 2005 and another of £89 million received in May 2005, before any commissions or expenses). The Group results for fiscal 2005 include the results of Soft Drinks for the period up until the IPO of Britvic on December 14, 2005.

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SEGMENTAL INFORMATION

Geographic Segmentation

      The following table shows revenue and operating profit before other operating income and expenses in pounds sterling and percentage by geographical area, for the following periods: years ended December 31, 2006, 2005 and 2004.

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2006			2005			2004
		(£ million)
Revenue(1)(4)
	Americas		433			384			306
	Europe, the Middle East and Africa		206			200			186
	Asia Pacific		111			87			74
	Central(5)		55			42			40
Continuing operations			805			713			606
	Americas		30			61			189
	Europe, the Middle East and Africa		125			1,082			1,349
	Asia Pacific		—			54			60
Discontinued operations(3)			155			1,197			1,598
Total			960			1,910			2,204
Operating profit before other operating income and expenses(1)(2)
	Americas		217			186			149
	Europe, the Middle East and Africa		36			31			11
	Asia Pacific		29			21			17
	Central(5)		(81	)		(65	)		(57	)
Continuing operations			201			173			120
	Americas		4			12			24
	Europe, the Middle East and Africa		26			143			195
	Asia Pacific		—			11			7
Discontinued operations(3)			30			166			226
Total			231			339			346

Footnotes on page 21.

20

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2006			2005			2004
		(%)
Revenue
	Americas		45.1			20.1			13.9
	Europe, the Middle East and Africa		21.5			10.4			8.4
	Asia Pacific		11.6			4.6			3.4
	Central(5)		5.7			2.2			1.8
Continuing operations			83.9			37.3			27.5
	Americas		3.1			3.2			8.6
	Europe, the Middle East and Africa		13.0			56.7			61.2
	Asia Pacific		—			2.8			2.7
Discontinued operations			16.1			62.7			72.5
Total			100.0			100.0			100.0
Operating profit before other operating income and expenses
	Americas		93.9			69.1			43.1
	Europe, the Middle East and Africa		15.6			11.5			3.2
	Asia Pacific		12.6			7.8			4.9
	Central(5)		(35.1	)		(24.1	)		(16.5	)
Continuing operations			87.0			64.3			34.7
	Americas		1.7			4.5			6.9
	Europe, the Middle East and Africa		11.3			27.1			56.4
	Asia Pacific		—			4.1			2.0
Discontinued operations			13.0			35.7			65.3
Total			100.0			100.0			100.0

(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 rate is 2006: £1 = $1.84; (2005: £1 = $1.83, 2004: £1 = $1.82). In the case of the euro, the translation rate is 2006: £1 = €1.47; (2005: £1 = €1.46, 2004: £1 = €1.47).
(2)	Operating profit before other operating income and expenses does not include other operating income and expenses for all periods presented. Other operating income and expenses (charge unless otherwise noted) by region are the Americas (2006: £25 million credit; 2005: £5 million; 2004: £15 million credit); Europe, the Middle East and Africa (2006: £2 million credit; 2005: £12 million; 2004: £57 million); and Asia Pacific (2006: £nil; 2005: £5 million; 2004: £7 million).
(3)	Europe, the Middle East and Africa includes discontinued operations for Hotels (2006: £26 million; 2005: £73 million; 2004: £118 million) and Soft Drinks (2006: £nil; 2005: £70 million; 2004: £77 million). The Americas and Asia Pacific discontinued operations all relate to Hotels. Hotels discontinued operations were all owned and leased.
(4)	Amounts are reported by origin. See Note 2 of Notes to the Consolidated Financial Statements for details by destination, for which the amounts are not significantly different.
(5)	Central revenue primarily relates to Holidex (IHG’s proprietary reservation system) fee income. Central operating profit includes central revenue less costs related to global functions.

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     Activity Segmentation

      The following table shows revenue and operating profit before other operating income and expenses in pounds sterling by activity and the percentage contribution of each activity for the following periods: years ended December 31, 2006, 2005 and 2004.

			Year ended			Year ended			Year ended
			December 31,			December 31,			December 31,
			2006			2005			2004
			(£ million)
Revenue(1)(4)
	Hotels
		Americas		433			384			306
		Europe, the Middle East and Africa		206			200			186
		Asia Pacific		111			87			74
		Central(5)		55			42			40
Continuing operations				805			713			606
	Hotels(3)
		Americas		30			61			189
		Europe, the Middle East and Africa		125			411			643
		Asia Pacific		—			54			60
	Soft Drinks			—			671			706
Discontinued operations				155			1,197			1,598
Total				960			1,910			2,204
Operating profit before other operating income and expenses(1)(2)
	Hotels
		Americas		217			186			149
		Europe, the Middle East and Africa		36			31			11
		Asia Pacific		29			21			17
		Central(5)		(81	)		(65	)		(57	)
Continuing operations				201			173			120
	Hotels(3)
		Americas		4			12			24
		Europe, the Middle East and Africa		26			73			118
		Asia Pacific		—			11			7
	Soft Drinks			—			70			77
Discontinued operations				30			166			226
Total				231			339			346

Footnotes on page 23.

22

			Year ended			Year ended			Year ended
			December 31,			December 31,			December 31,
			2006			2005			2004
			(%)
Revenue
	Hotels
		Americas		45.1			20.1			13.9
		Europe, the Middle East and Africa		21.5			10.4			8.4
		Asia Pacific		11.6			4.6			3.4
		Central		5.7			2.2			1.8
Continuing operations				83.9			37.3			27.5
	Hotels
		Americas		3.1			3.2			8.6
		Europe, the Middle East and Africa		13.0			21.5			29.2
		Asia Pacific		—			2.9			2.7
	Soft Drinks			—			35.1			32.0
Discontinued operations				16.1			62.7			72.5
Total				100.0			100.0			100.0
Operating profit before other operating income and expenses
	Hotels
		Americas		93.9			54.9			43.1
		Europe, the Middle East and Africa		15.6			9.1			3.2
		Asia Pacific		12.6			6.2			4.9
		Central		(35.1	)		(19.2	)		(16.5	)
Continuing operations				87.0			51.0			34.7
	Hotels
		Americas		1.7			3.6			6.9
		Europe, the Middle East and Africa		11.3			21.5			34.1
		Asia Pacific		—			3.2			2.0
	Soft Drinks			—			20.7			22.3
	Discontinued operations			13.0			49.0			65.3
Total				100.0			100.0			100.0

(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 rate is 2006: £1 = $1.84 (2005: $1.83, 2004: £1 = $1.82). In the case of the euro, the translation rate is 2006: £1 = €1.47 (2005: £1 = €1.46, 2004: £1 = €1.47).
(2)	Operating profit before other operating income and expenses does not include other operating income and expenses for all periods presented. Other operating income and expenses items (charge unless otherwise noted) by business segment are the Americas (2006: £25 million credit; 2005: £7 million; 2004: £15 million credit); Europe, the Middle East and Africa (2006: £2 million credit; 2005: £10 million; 2004: £57 million); and Asia Pacific (2006: nil million; 2005: £5 million; 2004: £7 million).
(3)	Hotels discontinued operations were all owned and leased.
(4)	Amounts are reported by origin. See Note 2 of Notes to the Consolidated Financial Statements for details by destination, for which the amounts are not significantly different.
(5)	Central revenue primarily relates to Holidex (IHG’s proprietary reservation system) fee income. Central operating profit includes central revenue less costs related to global functions.

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HOTELS

     Overview

      InterContinental Hotels Group is an international hotel business which owns a portfolio of well-recognized and respected hotel brands, including InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo, with 3,741 franchised, managed, owned and leased hotels and 556,246 guest rooms in nearly 100 countries and territories as at December 31, 2006. Approximately 98.5% of the Group’s rooms are operated under managed and franchised models.

      IHG operates in the global hotel market, which has an estimated total room capacity of 18.8 million rooms. Room capacity has been growing at approximately 3% per annum over the last five years. The hotel market is geographically concentrated with 12 countries accounting for two-thirds of worldwide hotel room supply. The Group has a leadership position (top three by room numbers) in six of these 12 countries — US, UK, Mexico, Canada, Greater China and Australia — more than any other major hotel company.

      The hotel market is, however, a fragmented market with the four largest companies controlling only 11% of the global hotel room supply and the 10 largest controlling less than 21%. The Group is the largest of these companies by room numbers with a 3% market share. The major competitors in this market include other large global hotel companies, smaller hotel companies and independent hotels.

      Within the global market, a relatively low proportion of hotel rooms are branded (see figure 3), but there has been an increasing trend towards branded rooms. For example, Mintel, a market research company, estimates that the proportion of branded rooms in Europe has grown from 15% in 2000 to 25% in 2004. Larger branded companies are therefore gaining market share at the expense of smaller companies and independent hotels. IHG is well positioned to benefit from this trend. Hotel owners are increasingly recognising the benefits of working with a group such as IHG which can offer a portfolio of brands to suit the different real-estate opportunities an owner may have. Furthermore, hotel ownership is increasingly being separated from hotel operations, encouraging hotel owners to use third parties such as IHG to manage or franchise their hotels.

FIGURE 3

Percentage of branded hotel rooms by region	2004
North America		65%
South America		20%
Europe		25%
Middle East		25%
East Asia		25%

Source: Mintel (latest data available)

     US market data indicates a steady increase in hotel industry revenues, broadly in line with Gross Domestic Product, with growth of approximately 1-1.5% per annum in real terms since 1967, driven by a number of underlying trends:

• change in demographics — as the population ages and becomes wealthier, increased leisure time and income encourages more travel and hotel visits;

• increase in travel volumes as low cost airlines grow rapidly;

• globalisation of trade and tourism;

• increase in affluence and freedom to travel within the Chinese middle class; and

• increase in the preference for branded hotels amongst consumers.

      Potential negative trends include increased terrorism, increased costs associated with compliance with environmental regulations and economic factors such as rising oil prices. Currently, however, there are no indications that demand is being significantly affected by these factors.

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      Supply growth in the industry is cyclical, averaging between zero and 5% per annum historically. The Group’s profit is partly protected from supply pressure due to its model of third party ownership of hotels under IHG management and franchise contracts.

     Operations

      The Group currently operates an ‘asset-light’ business model and owns only a small number of hotels deemed to be strategically important to the brands they represent. Through three distinct business models which offer different growth, return, risk and reward opportunities, IHG achieves growth through its partnerships with financial participants who may provide capital in exchange for, among other things, IHG’s expertise and brand value. The models are summarized as follows:

franchised, where Group companies neither own nor manage the hotel, but license the use of a Group brand and provide access to reservation systems, loyalty schemes and know-how. The Group derives revenues from a brand royalty or licensing fee, based on a percentage of room revenue. At the end of 2006, 76% of the Group’s rooms were franchised, with 89% of rooms in the Americas operating under this model.

managed, where in addition to licensing the use of a Group brand, a Group company manages the hotel for third party owners. The Group derives revenues from base and incentive management fees and provides the system infrastructure necessary for the hotel to operate. Management contract fees are linked to total hotel revenue and may have an additional incentive fee linked to profitability and/or cash flow. The terms of these agreements vary, but are often long term (for example, 10 years or more). The Group’s responsibilities under the management agreement typically include hiring, training and supervising the managers and employees that operate the hotels under the relevant brand standards. The Group prepares annual budgets for the hotels that it manages, and the property owners are responsible for funding periodic maintenance and repair on a basis to be agreed with the Group. In order to gain access to central reservation systems, global and regional brand marketing and brand standards and procedures, the owners are typically required to make a further contribution. In certain cases, property owners may require performance targets, with consequences for management fees and sometimes the contract itself (including on occasion, the right of termination) if those targets are not met. At the end of 2006, 23% of the Group’s rooms were operated under management contracts.

owned and leased (“O & L”), where a Group company both owns (or leases) and operates the hotel and, in the case of ownership, takes all the benefits and risks associated with ownership. The Group has sold a significant proportion of its owned and leased portfolio and in future expects to own only hotels where it is considered strategically important to do so. Rooms owned or leased by the Group at the end of 2006 represented 1% of the Group’s rooms.

      In addition, the Group also makes equity investments in hotel ownership entities, where its equity investment is less than 100% and it participates in a share of the benefits and risks of ownership. A management contract is generally entered into as well as the equity investment.

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      The following table shows the number of hotels and rooms owned, leased, managed or franchised by IHG as at December 31, 2006, December 31, 2005 and December 31, 2004.

					Management
					contracts and joint
	Owned or leased				ventures				Franchised				Total
	No. of		No. of		No. of		No. of		No. of		No. of		No. of		No. of
	hotels		rooms		hotels		rooms		hotels		rooms		hotels		rooms
2006		25		8,460		512		125,214		3,204		422,572		3,741		556,246
2005		55		15,485		504		121,249		3,047		400,799		3,606		537,533
2004		166		38,420		403		98,953		2,971		396,829		3,540		534,202

      The Group sets quality and service standards for all of its hotel brands (including those operated under management contracts 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.

     Strategy

      IHG owns, operates and franchises hotels, with its brands represented in nearly 100 countries and territories around the world. The Group’s strategy is to become the preferred hotel company for guests and owners by building the strongest operating system in the industry, focused on the largest markets and segments where scale really counts. During 2006, IHG initiated a number of research projects, the results of which will strengthen the Group’s strategy with respect to brand development, franchising operations and growth opportunities.

      The Group has four stated strategic priorities:

• brand performance — to operate a portfolio of brands attractive to both owners and guests that have clear market positions in relation to competitors;

• excellent hotel returns — to generate higher owner returns through revenue delivery and improved operating efficiency;

• market scale and knowledge — to accelerate profitable growth in the largest markets where the Group currently has scale; and

• aligned organisation — to create a more efficient organization with strong core capabilities.

      Executing the four strategic priorities is designed to achieve:

• organic growth of at least 50,000 to 60,000 net rooms by the end of 2008 (up 19,246 from 537,000 in June 2005), with specific growth targets for the InterContinental brand and the key Chinese market; and

• out-performance of total shareholder return against a competitor set.

      Growth is planned to be attained predominantly from managing and franchising rather than owning and leasing hotels. The managed and franchised model is attractive because it enables the Group to achieve its goals with limited capital investment. With a relatively fixed cost base, such growth yields high incremental margins for IHG, and is primarily how the Group has grown recently. For this reason, the Group has executed a disposal program for most of its owned hotels, releasing capital and enabling returns of funds to shareholders.

      A key characteristic of the managed and franchised business model on which the Group has focused is that it generates more cash than is required for investment in the business, with a high return on capital employed. During the year ended December 31, 2006, 92% of continuing earnings before interest, tax and regional and central overheads was derived from managed and franchised operations.

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      The Group aims to deliver its growth targets through the strongest operating system in the industry which includes:

• a strong brand portfolio across the major markets, including two leading brands: InterContinental and Holiday Inn;

• market coverage — a presence in nearly 100 countries and territories;

• scale — 3,741 hotels, 556,246 rooms and 130 million guest stays per annum;

• IHG global reservation channels delivering $5.7 billion of global system room revenue in 2006, including $2.0 billion from the internet;

• a loyalty program, Priority Club Rewards, contributing $4.4 billion of global system room revenue; and

• a strong web presence — holidayinn.com is the industry’s most visited site, with around 75 million total site visits per annum.

      With a clear target for rooms growth and a number of brands with market premiums offering excellent returns to owners, the Group is well placed to execute its strategy and achieve its goals.

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Segmental Results

      The following table shows revenue and operating profit before other operating income and expenses in sterling of the IHG continuing Hotels business by activity and the percentage contribution of each activity for the following periods: years ended December 31, 2006, 2005 and 2004.

			Year ended			Year ended			Year ended
			December 31,			December 31,			December 31,
			2006			2005			2004
			(£ million)
Continuing revenue(1)(4)
	Americas
		Owned and leased		115			106			80
		Managed		77			65			30
		Franchised		241			213			196
				433			384			306
	EMEA
		Owned and leased		100			110			116
		Managed		71			55			43
		Franchised		35			35			27
				206			200			186
	Asia
		Owned and leased		71			59			50
		Managed		36			25			21
		Franchised		4			3			3
				111			87			74
	Central(3)			55			42			40
Total				805			713			606
Continuing operating profit before other operating income and expenses(1)(2)
	Americas
		Owned and leased		14			14			3
		Managed		27			20			6
		Franchised		208			186			167
		Regional overheads		(32	)		(34	)		(27	)
				217			186			149
	EMEA
		Owned and leased		(5	)		(5	)		(11	)
		Managed		37			31			24
		Franchised		24			26			21
		Regional overheads		(20	)		(21	)		(23	)
				36			31			11
	Asia Pacific
		Owned and leased		17			11			9
		Managed		21			16			14
		Franchised		3			2			2
		Regional overheads		(12	)		(8	)		(8	)
				29			21			17
	Central(3)			(81	)		(65	)		(57	)
Total				201			173			120

Footnotes on page 29.

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			Year ended			Year ended			Year ended
			December 31,			December 31,			December 31,
			2006			2005			2004
			(%)
Continuing revenue
	Americas
		Owned and leased		14.3			14.8			13.2
		Managed		9.6			9.1			5.0
		Franchised		29.9			29.9			32.3
				53.8			53.8			50.5
	EMEA
		Owned and leased		12.4			15.4			19.1
		Managed		8.8			7.8			7.1
		Franchised		4.4			4,9			4.5
				25.6			28.1			30.7
	Asia Pacific
		Owned and leased		8.8			8.3			8.2
		Managed		4.5			3.5			3.5
		Franchised		0.5			0.4			0.5
				13.8			12.2			12.2
	Central			6.8			5.9			6.6
Total				100.0			100.0			100.0
Continuing operating profit before other operating income and expenses
	Americas
		Owned and leased		7.0			8.0			2.5
		Managed		13.6			11.4			5.0
		Franchised		103.5			107.9			139.2
		Regional overheads		(16.0	)		(19.7	)		(22.5	)
				108.1			107.6			124.2
	EMEA
		Owned and leased		(2.5	)		(2.9	)		(9.2	)
		Managed		18.4			18.0			20.0
		Franchised		12.0			15.1			17.5
		Regional overheads		(10.0	)		(12.2	)		(19.2	)
				17.9			18.0			9.1
	Asia Pacific
		Owned and leased		8.4			6.4			7.5
		Managed		10.6			9.2			11.7
		Franchised		1.3			1.3			1.7
		Regional overheads		(6.0	)		(4.8	)		(6.7	)
				14.3			12.1			14.2
	Central			(40.3	)		(37.7	)		(47.5	)
Total				100.0			100.0			100.0

(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 rate is 2006: £1 = $1.84; (2005: £1 = $1.83, 2004: £1 = $1.82). In the case of the euro, the translation rate is 2006: £1 = €1.47; (2005: £1 = €1.46, 2004: £1 = €1.47).
(2)	Operating profit before other operating income and expenses does not include other operating income and expenses for all periods presented. Other operating income and expenses (charge unless otherwise noted) by region are the Americas (2006: £25 million credit; 2005: £5 million; 2004: £15 million credit); Europe, the Middle East and Africa (2006: £2 million credit; 2005: £12 million; 2004: £57 million); and Asia Pacific (2006: £nil; 2005: £5 million; 2004: £7 million).
(3)	Central revenue primarily relates to Holidex (IHG’s proprietary reservation system) fee income. Central operating profit includes central revenue less costs related to global functions.
(4)	Amounts are reported by origin. See Note 2 of Notes to the Consolidated Financial Statements for details by destination, for which the amounts are not significantly different.

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     The following table shows revenue and operating profit in US dollars of the IHG continuing Hotels business by activity and the percentage contribution of each activity for the following periods: years ended December 31, 2006, 2005 and 2004.

			Year ended			Year ended			Year ended
			December 31,			December 31,			December 31,
			2006			2005			2004
			($ million)
Continuing revenue(1)(4)
	Americas
		Owned and leased		211			195			146
		Managed		143			118			55
		Franchised		443			389			357
				797			702			558
	EMEA
		Owned and leased		184			201			211
		Managed		131			100			78
		Franchised		63			64			50
				378			365			339
	Asia Pacific
		Owned and leased		131			108			91
		Managed		65			45			38
		Franchised		8			6			5
				204			159			134
	Central(3)			101			77			74
Total				1,480			1,303			1,105
Continuing operating profit before other operating income and expenses(1)(2)
	Americas
		Owned and leased		26			25			6
		Managed		50			36			12
		Franchised		382			340			304
		Regional overheads		(59	)		(62	)		(50	)
				399			339			272
	EMEA
		Owned and leased		(9	)		(9	)		(20	)
		Managed		68			56			43
		Franchised		44			48			38
		Regional overheads		(36	)		(39	)		(42	)
				67			56			19
	Asia Pacific
		Owned and leased		31			20			17
		Managed		39			29			25
		Franchised		5			5			3
		Regional overheads		(23	)		(15	)		(15	)
				52			39			30
	Central(3)			(149	)		(118	)		(102	)
Total				369			316			219

Footnotes on pages 31 and 32.

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			Year ended			Year ended			Year ended
			December 31,			December 31,			December 31,
			2006			2005			2004
			(%)
Continuing revenue
	Americas
		Owned and leased		14.3			15.0			13.2
		Managed		9.7			9.0			5.0
		Franchised		29.9			29.9			32.3
				53.9			53.9			50.5
	EMEA
		Owned and leased		12.4			15.4			19.1
		Managed		8.8			7.7			7.1
		Franchised		4.3			4.9			4.5
				25.5			28.0			30.7
	Asia Pacific
		Owned and leased		8.9			8.3			8.2
		Managed		4.4			3.4			3.4
		Franchised		0.5			0.5			0.5
				13.8			12.2			12.1
	Central			6.8			5.9			6.7
Total				100.0			100.0			100.0
Continuing operating profit before other operating income and expenses
	Americas
		Owned and leased		7.0			8.1			2.7
		Managed		13.5			10.4			5.5
		Franchised		103.5			98.0			138.8
		Regional overheads		(16.0	)		(17.9	)		(22.8	)
				108.0			98.6			124.2
	EMEA
		Owned and leased		(2.4	)		5.8			(9.1	)
		Managed		18.4			16.4			19.6
		Franchised		11.9			13.5			17.4
		Regional overheads		(9.7	)		(11.0	)		(19.2	)
				18.2			24.7			8.7
	Asia
		Owned and leased		8.4			5.5			7.8
		Managed		10.6			8.4			11.4
		Franchised		1.3			1.4			1.4
		Regional overheads		(6.2	)		(4.3	)		(6.9	)
				14.1			11.0			13.7
	Central			(40.3	)		(34.3	)		(46.6	)
Total				100.0			100.0			100.0

(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 rate is 2006: £1 = $1.84; (2005: £1 = $1.83, 2004: £1 = $1.82). In the case of the euro, the translation rate is 2006: £1 = €1.47; (2005: £1 = €1.46, 2004: £1 = €1.47).

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(2)	Operating profit before other operating income and expenses does not include other operating income and expenses for all periods presented. Other operating income and expenses (charge unless otherwise noted) by region are the Americas (2006: £25 million credit; 2005: £5 million; 2004: £15 million credit); Europe, the Middle East and Africa (2006: £2 million credit; 2005: £12 million; 2004: £57 million); and Asia Pacific (2006: £nil; 2005: £5 million; 2004: £7 million).
(3)	Central revenue primarily relates to Holidex (IHG’s proprietary reservation system) fee income. Central operating profit includes central revenue less costs related to global functions.
(4)	Amounts are reported by origin. See Note 2 of Notes to the Consolidated Financial Statements for details by destination, for which the amounts are not significantly different.

     Global System

      The Group supports revenue delivery into its hotels through its global reservation channels and global loyalty program (Priority Club Rewards) which is paid for by assessments from each hotel in the Group. The elements of the global system include:

      Priority Club Rewards: The Group operates the Priority Club Rewards loyalty program. Members enjoy a variety of privileges and rewards as they stay at the Group’s hotels around the world. IHG has alliances with over 40 airlines, which enable members to collect frequent flyer miles, and with external partners such as car hire companies and credit card companies, which provide exposure and access to IHG’s system. Global system rooms sales generated from Priority Club Rewards members during 2006 was $4.4 billion and represented approximately 34% of IHG global system rooms sales.

      Central Reservation System Technology: The Group operates the HolidexPlus reservation system. The HolidexPlus system receives 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 system immediately confirms reservations or indicates alternative accommodation available within IHG’s network. Confirmations are transmitted electronically to the hotel for which the reservation is made.

      Reservation Call Centers: The Group operates 12 reservation centers around the world which enable it to sell in local languages in many countries and offer a high quality service to customers.

      Internet: The Group introduced electronic hotel reservations in 1995. The Internet continues to be an important communications, branding and distribution channel for the Group’s sales. During 2006, the internet channel continued to show strong growth, with global system rooms sales booked through the internet increasing by 18% to $2.0 billion. Approximately 16% of IHG global system rooms sales is via the internet through various branded websites, such as www.intercontinental.com and www.holiday-inn.com, as well as certified third parties (up from 14% in 2005). IHG has established standards for working with third party intermediaries — on-line travel distributors — who sell or re-sell IHG hotel rooms via their internet sites. Under the standards, certified distributors are required to respect IHG’s trademarks, ensure reservations are guaranteed through an automated and common confirmation process, and clearly present fees to customers. About 86% of IHG global system rooms sales booked on the web is now booked directly through the Group’s own brand sites.

      The Group estimates that, during 2006, global system rooms sales booked through these reservation systems (which include company reservation centers, global distribution systems and internet reservations) rose by approximately 21% to $5.7 billion, and the proportion of IHG global system rooms sales booked through IHG’s reservation channels increased from 41% to 44%.

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.

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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.

Global Brands

Brands Overview

      The Group’s portfolio includes seven established and diverse brands. These brands cover several market segments and in the case of InterContinental, Crowne Plaza, Holiday Inn and Express, operate internationally. Staybridge Suites operates in the Americas and was launched in the United Kingdom in 2005. Candlewood Suites and Hotel Indigo operate exclusively in the United States.

	December 31, 2006
Brands	Room numbers		Hotels
InterContinental		49,599		148
Crowne Plaza		75,632		275
Holiday Inn		260,470		1,395
Holiday Inn Express		143,582		1,686
Staybridge Suites		10,953		97
Candlewood Suites		14,149		130
Hotel Indigo		893		6
Other		968		4
Total		556,246		3,741

InterContinental

	Americas		Americas		EMEA		EMEA
	total		O & L		total		O & L		Asia Pacific
Average room rate $(1)		152.75		227.59		164.11		269.15		160.73
Room numbers(2)		16,525		2,271		21,423		1,288		11,651

(1)	For the year ended December 31, 2006; quoted at constant US$ exchange rate. Owned and leased average room rate is for comparable InterContinental hotels.
(2)	As at December 31, 2006.

     InterContinental is IHG’s most prestigious hotel brand. The brand aims to meet the tastes of discerning business and leisure travellers. InterContinental hotels are generally located in prime locations in major cities and key resorts around the world. There were 148 InterContinental hotels across 60 countries and territories which represented 9% of all of IHG’s hotel rooms as at December 31, 2006.

      InterContinental hotels are principally owned, leased or managed by the Group. The brand is one of the largest international premium hotel brands based on room numbers and has more than 50 years of heritage. 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).

      During 2006, 14 new InterContinental hotels were added to the portfolio. After removals there was a net gain of 11 in the total number of InterContinental hotels.

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Crowne Plaza

	Americas		Americas		EMEA		EMEA
	total		O & L		total		O & L		Asia Pacific
Average room rate $(1)		111.05		85.24		130.75		111.64		95.21
Room numbers(2)		42,604		293		16,440		732		16,588

(1)	For the year ended December 31, 2006; quoted at constant US$ exchange rate. Owned and leased average room rate is for comparable Crowne Plaza hotels.
(2)	As at December 31, 2006.

     Crowne Plaza is IHG’s global upscale hotel brand which had grown to 275 hotels worldwide by December 31, 2006. Defined as “the Place to Meet”, the brand is targeted at the business guest, with a particular focus on executive meetings and business events. Mostly located in principal cities, the upscale Crowne Plaza hotels provide the high level of comfort, amenities, services, facilities and meeting space expected by business and leisure travellers of a full service hotel. Crowne Plaza represented 14% of IHG hotel rooms as at December 31, 2006.

      Approximately 68% of the upscale Crowne Plaza hotels and resorts are franchised hotels. As at December 31, 2006, 56% of Crowne Plaza brand properties were in the Americas. The key competitors in this segment include Sheraton, Marriott, Hilton, Double-Tree, Wyndham and Radisson.

      During 2006, 45 Crowne Plaza hotels were added to the portfolio while five were removed, resulting in a net increase of 40 hotels.

Holiday Inn

	Americas		Americas		EMEA		EMEA
	total		O & L		total		O & L		Asia Pacific
Average room rate $(1)		91.35		93.67		105.70		92.86		73.82
Room numbers(2)		186,067		1,882		50,628		915		23,775

(1)	For the year ended December 31, 2006; quoted at constant US$ exchange rate. Owned and leased average room rate is for comparable Holiday Inn hotels.
(2)	As at December 31, 2006.

     Holiday Inn is one of the world’s most recognized hotel brands, with a global reputation for full service, comfort and value. Holiday Inn International was acquired in 1988, with the remaining North American business of Holiday Inn being acquired in 1990. The Holiday Inn brand is targeted at the mid-market guest and is the Group’s largest global hotel brand based on room numbers. The Holiday Inn brand continues to expand and evolve globally to provide convenient and productive facilities for business travellers as well as memorable holiday experiences for families.

      There were 1,395 Holiday Inn hotels located in more than 70 countries and territories which represented 47% of all IHG’s hotel rooms as at December 31, 2006. The brand is predominantly franchised. As at December 31, 2006, 71% of the Holiday Inn branded hotels were located in the Americas.

Holiday Inn Express

	Americas		EMEA
	total		total		Asia Pacific
Average room rate $(1)		87.46		91.82		42.86
Room numbers(2)		123,718		18,109		1,755

(1)	For the year ended December 31, 2006; quoted at constant US$ exchange rate. Owned and leased average room rate is for comparable Express hotels.
(2)	As at December 31, 2006.

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     Holiday Inn Express is a rapidly growing, fresh and uncomplicated brand, offering limited-service comfort, convenience and good value. IHG recognized the need for a brand in this category in the early 1990s and subsequently developed Holiday Inn Express to extend the reach of the Holiday Inn brand and enter the midscale limited service market. The brand aims to provide the room quality of midscale hotels where guests enjoy smart bedrooms, contemporary bathrooms and complimentary breakfast.

      There were 1,686 Holiday Inn Express hotels worldwide, which represented 26% of IHG’s hotel rooms as at December 31, 2006. Holiday Inn Express is one of the largest brands in the US midscale limited service sector based on room numbers, and approximately 86% of the Holiday Inn Express branded rooms are located in the Americas. Holiday Inn Express hotels are almost entirely franchised. Holiday Inn 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.

      During 2006, 145 new Holiday Inn Express hotels were added to the portfolio, while 49 hotels were removed from the portfolio, resulting in a net gain of 96 hotels. A further 299 franchise agreements were signed, adding to the system pipeline.

Staybridge Suites

	Americas
	total
Average room rate $(1)		100.53
Room numbers(2)		10,953

(1)	For the year ended December 31, 2006; quoted at constant US$ exchange rate.
(2)	As at December 31, 2006.

     Staybridge Suites is IHG’s organically developed long-stay upscale brand that offers guests a home away from home. The rooms offer more space than the typical hotel room, offering studios and one and two bedroom suites, complete with kitchens and living rooms, work stations and high-speed internet access, along with breakfast. As at December 31, 2006, there were 97 Staybridge Suites hotels, all of which are located in the Americas, representing 2% of all IHG’s hotel rooms. The Staybridge Suites brand is primarily operated under franchised and managed models. The primary competitors include Residence Inn, Homewood, Summerfield and Hawthorne. On April 6, 2005 the Group announced the launch of Staybridge Suites in the United Kingdom.

      During 2006, 12 hotels were added to the portfolio with two removals.

     Candlewood Suites

	Americas
	total
Average room rate $(1)		67.27
Room numbers(2)		14,149

(1)	For the year ended December 31, 2006; quoted at constant US$ exchange rate.
(2)	As at December 31, 2006.

     The Candlewood Suites brand was acquired on December 31, 2003. Candlewood Suites is a mid-scale extended-stay brand which complements Staybridge Suites’ upside positioning. Candlewood Suites is an established brand of carefully designed and purpose-built hotels created for stays of a week or longer with studio and one-bedroom suites featuring well-equipped kitchens, spacious work areas and an array of convenient amenities. As at December 31, 2006 there were 130 Candlewood Suites hotels. The major owner of Candlewood Suites properties is HPT and the Group manages all 76 of HPT’s Candlewood Suites properties under a 20 year agreement. At the end of 2006, Candlewood Suites represented 2% of all of the Group’s rooms.

35

     Hotel Indigo

      In April 2004, the Group launched its seventh brand, Hotel Indigo, which is a new, innovative brand, designed for the style-conscious traveller who seeks the ambience of a boutique hotel with the benefits and consistencies of a global hotel operation. Inspired by lifestyle retailing, Hotel Indigo features inviting service, inspiring artwork, casual gourmet restaurants, airy guest rooms and 24-hour business amenities. The first Hotel Indigo opened in Atlanta, Georgia in the United States in October 2004. As at December 31, 2006 there were six Hotel Indigo hotels, with 893 rooms.

	Americas
	total
Average room rate $(1)		100.77
Room numbers(2)		893

(1)	For the year ended December 31, 2006; quoted at constant US$ exchange rate.
(2)	As at December 31, 2006.

Geographical Analysis

      Although it has worldwide hotel operations, the Group is most dependent on the Americas for operating profit, reflecting the structure of the branded global hotel market. In terms of its continuing operating profit before central overheads and other operating income and expenses, the Americas represented 77%, EMEA represented 13% and the Asia Pacific region represented 10% in the year ended December 2006.

      The geographical analysis, split by number of rooms and operating profit, is set out in the table below.

	Americas		EMEA		Asia Pacific
	(% of total)
Room numbers(1)		71		19		10
Hotel level operating profit (before central overheads and other operating income and expenses)(2)		77		13		10

(1)	As at December 31, 2006.
(2)	For the year ended December 31, 2006.

     The following table shows information concerning the geographical locations and ownership of IHG’s hotels as at December 31, 2006.

						Management contract
		Owned or leased				and joint ventures				Franchised				Total
		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms
United States
	InterContinental		4		1,914		10		4,103		3		852		17		6,869
	Crowne Plaza		—		—		14		5,439		108		30,224		122		35,663
	Holiday Inn		3		758		26		8,639		817		152,758		846		162,155
	Holiday Inn Express		—		—		1		252		1,430		115,138		1,431		115,390
	Staybridge Suites		2		233		39		4,765		51		5,356		92		10,354
	Candlewood Suites		—		—		77		9,340		53		4,809		130		14,149
	Hotel Indigo		—		—		2		305		4		588		6		893
Total			9		2,905		169		32,843		2,466		309,725		2,644		345,473

36

						Management contract
		Owned or leased				and joint ventures				Franchised				Total
		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms
Rest of Americas
	InterContinental		1		357		11		3,498		20		5,801		32		9,656
	Crowne Plaza		1		293		3		737		29		5,911		33		6,941
	Holiday Inn		2		1,124		4		1,844		135		20,944		141		23,912
	Holiday Inn Express		—		—		—		—		75		8,328		75		8,328
	Staybridge Suites		—		—		2		335		3		264		5		599
	Candlewood Suites		—		—		—		—		—		—		—		—
	Hotel Indigo		—		—		—		—		—		—		—		—
Total			4		1,774		20		6,414		262		41,248		286		49,436
Total Americas
	InterContinental		5		2,271		21		7,601		23		6,653		49		16,525
	Crowne Plaza		1		293		17		6,176		137		36,135		155		42,604
	Holiday Inn		5		1,882		30		10,483		952		173,702		987		186,067
	Holiday Inn Express		—		—		1		252		1,505		123,466		1,506		123,718
	Staybridge Suites		2		233		41		5,100		54		5,620		97		10,953
	Candlewood Suites		—		—		77		9,340		53		4,809		130		14,149
	Hotel Indigo		—		—		2		305		4		588		6		893
Total			13		4,679		189		39,257		2,728		350,973		2,930		394,909
United Kingdom
	InterContinental		1		447		—		—		—		—		1		447
	Crowne Plaza		—		—		6		1,530		9		1,938		15		3,468
	Holiday Inn		—		—		58		9,973		46		6,483		104		16,456
	Holiday Inn Express		—		—		1		120		106		10,949		107		11,069
	Staybridge Suites		—		—		—		—		—		—		—		—
	Candlewood Suites		—		—		—		—		—		—		—		—
Total			1		447		65		11,623		161		19,370		227		31,440
Europe
	InterContinental		1		470		23		7,972		3		951		27		9,393
	Crowne Plaza		3		732		6		1,351		32		7,644		41		9,727
	Holiday Inn		3		915		9		2,059		174		26,393		186		29,367
	Holiday Inn Express		1		153		9		1,005		54		5,778		64		6,936
	Staybridge Suites		—		—		—		—		—		—		—		—
	Candlewood Suites		—		—		—		—		—		—		—		—
Total			8		2,270		47		12,387		263		40,766		318		55,423

37

						Management contract
		Owned or leased				and joint ventures				Franchised				Total
		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms
The Middle East and Africa
	InterContinental		1		371		33		10,264		4		948		38		11,583
	Crowne Plaza		—		—		11		3,041		1		204		12		3,245
	Holiday Inn		—		—		18		3,360		9		1,445		27		4,805
	Holiday Inn Express		—		—		—		—		1		104		1		104
	Staybridge Suites		—		—		—		—		—		—		—		—
	Candlewood Suites		—		—		—		—		—		—		—		—
	Other		—		—		—		—		—		—		—		—
Total			1		371		62		16,665		15		2,701		78		19,737
Total EMEA
	InterContinental		3		1,288		56		18,236		7		1,899		66		21,423
	Crowne Plaza		3		732		23		5,922		42		9,786		68		16,440
	Holiday Inn		3		915		85		15,392		229		34,321		317		50,628
	Holiday Inn Express		1		153		10		1,125		161		16,831		172		18,109
	Staybridge Suites		—		—		—		—		—		—		—		—
	Candlewood Suites		—		—		—		—		—		—		—		—
	Other		—		—		—		—		—		—		—		—
Total			10		3,088		174		40,675		439		62,837		623		106,600
Far East and Australasia (Asia Pacific)
	InterContinental		1		495		24		8,789		8		2,367		33		11,651
	Crowne Plaza		—		—		44		13,806		8		2,782		52		16,588
	Holiday Inn		1		198		70		20,101		20		3,476		91		23,775
	Holiday Inn Express		—		—		7		1,618		1		137		8		1,755
	Staybridge Suites		—		—		—		—		—		—		—		—
	Candlewood Suites		—		—		—		—		—		—		—		—
	Other		—		—		4		968		—		—		4		968
Total			2		693		149		45,282		37		8,762		188		54,737

38

						Management contract
		Owned or leased				and joint ventures				Franchised				Total
		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms
Total
	InterContinental		9		4,054		101		34,626		38		10,919		148		49,599
	Crowne Plaza		4		1,025		84		25,904		187		48,703		275		75,632
	Holiday Inn		9		2,995		185		45,976		1,201		211,499		1,395		260,470
	Holiday Inn Express		1		153		18		2,995		1,667		140,434		1,686		143,582
	Staybridge Suites		2		233		41		5,100		54		5,620		97		10,953
	Candlewood Suites		—		—		77		9,340		53		4,809		130		14,149
	Hotel Indigo		—		—		2		305		4		588		6		893
	Other		—		—		4		968		—		—		4		968
Total			25		8,460		512		125,214		3,204		422,572		3,741		556,246

     Americas

      In the Americas, the largest proportion of rooms is operated under the franchise business model primarily in the midscale segment (Holiday Inn and Holiday Inn Express). Similarly, in the upscale segment, Crowne Plaza is predominantly franchised, whereas the majority of the InterContinental brand is operated under franchise and management agreements. With 2,930 hotels, the Americas represented the bulk of hotels and approximately 77% of the Group’s continuing operating profit before central costs and other operating income and expenses during the year ended December 31, 2006. The key profit producing region is the United States, although IHG is also represented in each of Latin America, Canada, Mexico and the Caribbean.

     EMEA

      Comprising 623 hotels at the end of 2006, EMEA represented approximately 13% of the Group’s continuing operating profit before central costs and other operating income and expenses during the year ended December 31, 2006. Profits are primarily generated from hotels in the United Kingdom, continental European gateway cities and the Middle East portfolio.

     Asia Pacific

      Asia Pacific represented 10% of the Group’s rooms and 10% of the Group’s operating profit before central costs and other operating income and expenses during the year ended December 31, 2006. IHG has a strong and growing presence in Asia Pacific, comprising 188 hotels in total. Greater China is expected to generate significant growth in the hotel and tourism industry over the next decade. As at December 31, 2006 the Group had 65 hotels in Greater China and a further 55 in development.

     Room Count and System Pipeline

      The IHG global system grew significantly during 2006 ending the fiscal year at 3,741 hotels and 556,246 rooms, 135 hotels and 18,713 rooms higher than at December 31, 2005 (see Figure 4). During 2006, 286 hotels with 42,841 rooms were added to the system, while 151 hotels with 24,128 rooms were removed from the system. Of the hotels removed from the system, 126 (18,310 rooms) were in the Americas.

      One of the key elements of the asset disposal program is the retention of management contracts for the hotels sold. Of those sold between Separation and December 31, 2006, management contracts or franchise agreements were retained for 156 hotels. Overall, the number of owned and leased rooms fell by 7,025 while the number of managed and franchised rooms in the system grew by 3,965 rooms and 21,773 rooms respectively.

39

      At the end of 2006, the number of rooms in the pipeline (contracts signed but hotels and rooms yet to enter the system) was 1,241, an increase of 40% from 2005 (see figure 5). This positions the Group well to achieve its stated goal of organic growth of at least 50,000 to 60,000 net rooms in the period June 2005 to December 2008. Whilst there is no guarantee that all of the pipeline will enter the system in that period, a number of initiatives are in place to both secure new deals and to reduce the time between a hotel signing with IHG and opening.

      The growth in pipeline was fuelled by record level signings during 2006; 102,774 rooms were signed which represents an increase of over 100% of the average between 2001 and 2005. This partly reflects the increased investment in development resource particularly in the Americas and Asia Pacific.

      There are no assurances that all of the hotels in the pipeline 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 system pipeline could decrease.

FIGURE 4

		Hotels							Rooms
						Change							Change
Global hotel and room count at December 31, 2006		2006		2005		over 2005			2006		2005		over 2005
Analyzed by brand:
	InterContinental		148		137		11			49,599		46,262		3,337
	Crowne Plaza		275		235		40			75,632		65,404		10,228
	Holiday Inn		1,395		1,435		(40	)		260,470		267,816		(7,346	)
	Holiday Inn Express		1,686		1,590		96			143,582		133,554		10,028
	Staybridge Suites		97		87		10			10,953		9,915		1,038
	Candlewood Suites		130		112		18			14,149		12,683		1,466
	Hotel Indigo		6		3		3			893		497		396
	Other		4		7		(3	)		968		1,402		(434	)
Total			3,741		3,606		135			556,246		537,533		18,713
Analyzed by ownership type:
	Owned and leased		25		55		(30	)		8,460		15,485		(7,025	)
	Managed		512		504		8			125,214		121,249		3,965
	Franchised		3,204		3,047		157			422,572		400,799		21,773
Total			3,741		3,606		135			556,246		537,533		18,713

40

FIGURE 5

		Hotels							Rooms
						Change							Change
Global pipeline at December 31, 2006		2006		2005		over 2005			2006		2005		over 2005
Analyzed by brand:
	InterContinental		36		27		9			13,211		9,353		3,858
	Crowne Plaza		60		54		6			17,113		13,514		3,599
	Holiday Inn		299		204		95			44,774		31,035		13,739
	Holiday Inn Express		574		429		145			55,520		38,066		17,454
	Staybridge Suites		120		79		41			12,605		8,195		4,410
	Candlewood Suites		128		83		45			11,723		7,467		4,256
	Hotel Indigo		24		8		16			3,045		882		2,163
Total			1,241		884		357			157,991		108,512		49,479
Analyzed by ownership type:
	Owned and leased		—		2		(2	)		—		574		(574	)
	Managed		139		98		41			41,648		27,805		13,843
	Franchised		1,102		784		318			116,343		80,133		36,210
Total			1,241		884		357			157,991		108,512		49,479

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 nearly 100 countries and territories and the relative stability of the income stream from management and 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 Hotels International, Inc., Best Western International, Inc., Hilton Hotels Corporation, Cendant Corporation, Four Seasons Hotels Inc. and Accor S.A.

Key Relationships

      IHG maintains effective business relationships across all aspects of its operations. However, the Group’s operations are not dependent upon any single customer, supplier or hotel owner due to the extent of its brands, market segments and geographical coverage. For example, the largest hotel owner controls less than 4% of the Group’s total room count.

      To promote effective owner relationships, the Group’s management meets with owners of IHG branded hotels on a regular basis. In addition, IHG has an important relationship with the International Association of Holiday Inns (“IAHI”). The IAHI is an independent worldwide association for owners of the Crowne Plaza, Holiday Inn, Holiday Inn Express, Hotel Indigo, Staybridge Suites and Candlewood Suites brands. IHG and the IAHI work together to support and facilitate the continued development of IHG’s brands and systems.

      Many jurisdictions and countries regulate the offering of franchise agreements and recent trends indicate an increase in the number of countries adopting franchise legislation. As a significant percentage of the

41

Group’s revenues is derived from franchise fees, the Group’s continued compliance with franchise legislation is important to the successful deployment of the Group’s strategy.

      On January 25, 2006 IHG announced a restructured management agreement with FelCor, covering all of the hotels (15,790 rooms) owned by FelCor and managed by IHG. Seventeen hotels (6,301 rooms) were retained by FelCor and managed by IHG, under revised contract terms (the contract duration was extended to 2025 and the incentive fees on all the hotels have been rebased). HPT purchased seven of the hotels (2,072 rooms) from FelCor for $160 million, which IHG continues to manage under a separate management agreement. There was no increase in the guarantees to HPT (described in “Item 10. Additional Information — Material Contracts”) as a result of this transaction.

      On February 10, 2006, the Group announced the sale of its entire shareholding in FelCor for $180.5 million in cash, ($19 per share). This sale followed the renegotiation of the management agreement with FelCor.

      On October 28, 2006 IHG announced the signing of a hotel operating joint venture agreement with ANA. IHG invested £10 million for a majority stake in the joint venture increasing IHG’s portfolio in Japan from 12 hotels (3,686 rooms) to 25 hotels (8,623 rooms). As part of the transaction, ANA signed a 15 year management contract for its 13 owned and leased hotels (4,937 rooms).

Key Performance Indicators (KPIs)

      In addition to the traditional profit measures, the management team at IHG monitor the Group and regional performance of the business through a range of financial and non-financial KPIs, the most significant of which include:

• total gross revenue — measure of the scale and reach of IHG’s brands;

• revenue per available room (RevPAR) — measure of underlying hotel revenue with year-on-year performance being measured by the RevPAR movement against the prior year;

• hotel and room count — measure of the size of IHG’s portfolio; and

• pipeline of hotels and rooms — measure of demand and growth potential for IHG’s brands.

      Data for the calculation of KPIs is provided from IHG and underlying hotel records.

42

RevPAR

      The following tables present RevPAR statistics for the years ended December 31, 2006 and 2005.

      Owned and leased, and managed statistics are for comparable hotels, and include only those hotels in the IHG system as of December 31, 2006 and owned and leased, or managed by the Group since January 1, 2005.

      The comparison with 2005 is at constant US$ exchange rates.

			Owned & leased comparable									Managed comparable									Franchised
									Change vs									Change vs									Change vs
			2006			2005			2005			2006			2005			2005			2006			2005			2005
Americas
	InterContinental
		Occupancy		78.5	%		73.5	%		5.0	% pts		68.7	%		67.2	%		1.5	% pts.		61.7	%		59.8	%		1.9	% pts.
		Average daily rate	$	227.59		$	216.58			5.1	%	$	157.11		$	145.82			7.7	%	$	117.50		$	106.53			10.3	%
		RevPAR	$	178.63		$	159.19			12.2	%	$	107.89		$	97.96			10.1	%	$	72.50		$	63.73			13.8	%
	Crowne Plaza
		Occupancy		72.4	%		66.1	%		6.3	% pts.		75.4	%		74.5	%		1.0	% pts.		62.7	%		61.5	%		1.2	% pts.
		Average daily rate	$	85.24		$	73.41			–16.1	%	$	135.26		$	120.07			12.7	%	$	106.38		$	98.39			8.1	%
		RevPAR	$	61.75		$	48.52			27.3	%	$	102.05		$	89.42			14.1	%	$	66.74		$	60.53			10.3	%
	Holiday Inn
		Occupancy		69.2	%		70.6	%		1.4	% pts.		67.7	%		69.0	%		–1.3	% pts.		62.5	%		61.9	%		0.6	% pts.
		Average daily rate	$	93.67		$	89.72			4.4	%	$	98.56		$	92.33			6.7	%	$	90.86		$	85.20			6.6	%
		RevPAR	$	64.79		$	63.33			2.3	%	$	66.76		$	63.76			4.7	%	$	56.77		$	52.75			7.6	%
	Holiday Inn Express
		Occupancy		—			—			—			74.8	%		75.1	%		–0.3	% pts.		68.0	%		66.7	%		1.4	% pts.
		Average daily rate		—			—			—		$	133.55		$	119.12			12.1	%	$	87.36		$	80.52			8.5	%
		RevPAR		—			—			—		$	99.91		$	89.51			11.6	%	$	59.44		$	53.68			10.7	%
	Staybridge Suites
		Occupancy		66.7	%		73.7	%		–7.0	% pts.		76.4	%		76.8	%		–0.5	% pts.		72.9	%		73.2	%		–0.4	% pts.
		Average daily rate	$	91.53		$	73.18			–25.1	%	$	104.22		$	95.25			9.4	%	$	97.34		$	91.23			6.7	%
		RevPAR	$	61.06		$	53.93			13.2	%	$	79.59		$	73.17			8.8	%	$	70.92		$	66.80			6.2	%
	Candlewood Suites
		Occupancy		—			—			—			75.7	%		75.0	%		0.7	% pts.		66.1	%		69.5	%		–3.4	% pts.
		Average daily rate		—			—			—		$	66.50		$	61.03			8.9	%	$	69.22		$	64.45			7.4	%
		RevPAR		—			—			—		$	50.31		$	45.76			9.9	%	$	45.72		$	44.77			2.1	%
	Hotel Indigo
		Occupancy		—			—			—			69.0	%		55.9	%		13.2	% pts.		39.2	%		42.4	%		–3.3	% pts.
		Average daily rate		—			—			—		$	127.05		$	115.19			10.3	%	$	86.02		$	84.44			1.9	%
		RevPAR		—			—			—		$	87.70		$	64.35			36.3	%	$	33.70		$	35.85			–6.0	%

43

			Owned & leased comparable									Managed comparable									Franchised
									Change vs									Change vs									Change vs
			2006			2005			2005			2006			2005			2005			2006			2005			2005
EMEA
	InterContinental
		Occupancy		70.6	%		69.9	%		0.7	% pts.		65.4	%		60.9	%		4.5	% pts.		71.3	%		68.5	%		2.8	% pts.
		Average daily rate	$	269.15		$	223.15			20.6	%	$	155.76		$	145.66			6.9	%	$	173.14		$	141.33			22.5	%
		RevPAR	$	190.08		$	156.08			21.8	%	$	101.92		$	88.71			14.9	%	$	123.46		$	96.87			27.4	%
	Crown Plaza
		Occupancy		70.4	%		68.8	%		1.6	% pts.		75.2	%		73.7	%		1.5	% pts.		67.3	%		64.5	%		2.8	% pts.
		Average daily rate	$	111.64		$	104.66			6.7	%	$	140.25		$	129.91			8.0	%	$	126.50		$	119.16			6.2	%
		RevPAR	$	78.59		$	71.99			9.2	%	$	105.53		$	95.74			10.2	%	$	85.13		$	76.84			10.8	%
	Holiday Inn
		Occupancy		70.7	%		66.2	%		4.5	% pts.		73.6	%		71.2	%		2.4	% pts.		65.6	%		64.5	%		1.1	% pts.
		Average daily rate	$	92.86		$	94.18			–1.4	%	$	111.58		$	106.62			4.7	%	$	103.50		$	92.46			11.9	%
		RevPAR	$	65.66		$	62.37			5.3	%	$	82.12		$	75.90			8.2	%	$	67.87		$	59.64			13.8	%
	Holiday Inn Express
		Occupancy		70.1	%		63.9	%		6.3	% pts.		63.8	%		56.6	%		7.2	% pts.		70.8	%		68.8	%		2.0	% pts.
		Average daily rate	$	78.12		$	79.01			–1.1	%	$	76.04		$	71.68			6.1	%	$	92.62		$	88.39			4.8	%
		RevPAR	$	54.79		$	50.45			8.6	%	$	48.49		$	40.56			19.5	%	$	65.59		$	60.85			7.8	%

			Owned & leased comparable									Managed comparable									Franchised
									Change vs									Change vs									Change vs
			2006			2005			2005			2006			2005			2005			2006			2005			2005
Asia Pacific
	InterContinental
		Occupancy		72.5	%		65.9	%		6.6	% pts.		71.1	%		71.0	%		0.1	% pts.		70.8	%		68.0	%		2.8	% pts.
		Average daily rate	$	340.73		$	284.50			19.8	%	$	146.55		$	140.56			4.3	%	$	159.64		$	135.26			18.0	%
		RevPAR	$	247.07		$	187.39			31.8	%	$	104.23		$	99.80			4.4	%	$	113.03		$	92.01			22.8	%
	Crowne Plaza
		Occupancy		—			—			—			78.6	%		76.8	%		1.8	% pts.		77.7	%		74.6	%		31.1	% pts.
		Average daily rate		—			—			—		$	94.52		$	87.95			7.5	%	$	98.31		$	91.29			7.7	%
		RevPAR		—			—			—		$	74.27		$	67.56			9.9	%	$	76.41		$	68.13			12.2	%
	Holiday Inn
		Occupancy		78.6	%		76.9	%		1.7	% pts.		76.6	%		75.8	%		0.8	% pts.		69.5	%		71.3	%		–1.8	% pts.
		Average daily rate	$	104.63		$	92.06			13.7	%	$	75.35		$	69.25			8.8	%	$	66.17		$	63.98			3.4	%
		RevPAR	$	82.24		$	70.76			16.2	%	$	57.72		$	52.47			10.0	%	$	45.97		$	45.62			0.8	%
	Holiday Inn Express
		Occupancy		—			—			—			77.2	%		77.8	%		–0.6	% pts.		65.4	%		67.3	%		–1.9	% pts.
		Average daily rate		—			—			—		$	39.38		$	37.44			5.2	%	$	53.81		$	52.20			3.1	%
		RevPAR		—			—			—		$	30.39		$	29.11			4.4	%	$	35.19		$	35.13			0.2	%
	Other
		Occupancy		—			—			—			67.1	%		70.1	%		–3.0	% pts.		—			—			—
		Average daily rate		—			—			—		$	74.73		$	72.21			3.5	%		—			—			—
		RevPAR		—			—			—		$	50.17		$	50.64			–0.9	%		—			—			—

Regulation

      Both in the United Kingdom and internationally, the Group’s hotel operations are subject to regulation, including health and safety, zoning and similar land use laws as well as regulations that influence or determine wages, prices, interest rates, construction procedures and costs.

44

SOFT DRINKS

      The Group disposed of its interest in Britvic by way of an IPO in December 2005. The Group received aggregate proceeds of approximately £371 million (including two additional dividends, one of £47 million received in November 2005, and another of £89 million, received in May 2005, before any commissions or expenses).

      The Group results for fiscal 2005 include the results of Soft Drinks for the period up until the IPO of Britvic on December 14, 2005.

      Britvic generated operating profits before other operating income and expenses of £70 million on revenues of £671 million in the period up to December 14, 2005.

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.

ORGANIZATIONAL STRUCTURE

Principal operating subsidiary undertakings

      InterContinental Hotels Group PLC (or, where appropriate IHL) was the beneficial owner of all (unless specified) of the equity share capital, either itself or through subsidiary undertakings, of the following companies during the year. Unless stated otherwise, the following companies were incorporated in Great Britain, registered in England and Wales and operate principally within the United Kingdom. The companies listed below include those which principally affect the amount of profit and assets of the Group.

      Six Continents Limited (formerly Six Continents PLC)

      InterContinental Hotels Group Services Company

      InterContinental Hotels Group (Management Services) Limited

InterContinental Hotels Group Operating Corporation (incorporated and operates principally in the United States)

PROPERTY, PLANT AND EQUIPMENT

      Group companies own and lease properties throughout the world. The table below analyzes the net book value of land and buildings (excluding assets classified as held for sale) at December 31, 2006. Approximately 40% of the properties by value were directly owned, with 55% held under leases having a term of 50 years or longer.

	Europe,
Net book value of land and buildings as	the Middle East
at December 31, 2006	and Africa		Americas		Asia Pacific		Total
	(£ million)
Hotels		278		289		172		739

      Group properties comprise hotels. Approximately 85% of the Group’s property values relate to the top five owned and leased hotels (in terms of value) of a total of 21 hotels.

      In the year ended December 31, 2006 property, plant and equipment have been written down by £nil million (2005, £7 million) following an impairment review of certain hotel assets based on current market trading conditions. Fair value was measured by reference to recent transactions for hotel assets in these markets.

45

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 strong presence in the United States and European Union 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 is a member of the FTSE4Good Index Series.

      We have a wide range of environmental responsibilities and a unique opportunity to lead the world’s hospitality industry in environmental innovation.

      As we pursue our strategic growth and continue to develop our environmental practice, we aim to minimise our negative effects on the environment. We are committed to providing updated information to stakeholders on:

•  developments in global environmental policy;

•  how we establish management responsibility and accountability for environmental performance;

•  how we evaluate and manage our hotels’ environmental footprint;

•  new projects and developments; and

•  performance benchmarking against best practice.

      In 2006 we improved data collection and reporting to increase our energy efficiency. The Group’s hotels already take steps to conserve resources, including energy and water, and to manage waste and recycling effectively. In 2007, we intend to benchmark these achievements across our business so that we can set clear targets for improvement.

      In September 2006 we created the new role of Senior Vice President with responsibility for developing and implementing the Group’s Corporate Social Responsibility (“CSR”) policies and practices. This position reports directly to Richard Winter in his capacity as the IHG Executive Committee member responsible for the development of our global CSR strategy. A comprehensive review of IHG’s current position on CSR was undertaken and a revised strategy was considered and approved by the Board in December 2006.

      Following research throughout 2006, we now have a much better understanding of our main risks and opportunities. The Group’s immediate priorities for action are environmental management and support for the communities in which we operate. The travel and tourism industry is coming under increasing pressure to address its impact on the environment and society and become more sustainable. We must address this challenge as a priority.

      IHG believes that travel and tourism should be operated responsibly and that the benefits of taking this approach far outweigh the costs. Tourism provides opportunities for local economic development, new business and much needed jobs, especially in developing countries. It also opens the door to improved learning, better communication, greater diversity and richer, more fulfilling social experiences.

      The Group accepts that there are actions that hotel operators can take to minimise travel and tourism’s negative effects still further. We will be launching several new initiatives in 2007 and will encourage our owners and guests to support these activities.

      IHG will continue to concentrate its efforts on supporting local communities and seek to develop protocols to assess the responsible management of our supply chain.

      Addressing our risks and opportunities in a cohesive way has required us to develop a more integrated CSR strategy — one that is consistent with our Winning Ways. We have created a global team, representing all parts of our business, to manage our CSR agenda and to develop detailed future plans.

      The Group’s reporting systems will also be strengthened in 2007 so that we can collect better data and set ourselves appropriate performance targets.

      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 2006, such expenditure was not material in the context of their Financial results.

46

ITEM 4A. UNRESOLVED STAFF COMMENTS

      None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

INTRODUCTION

Business and Overview

      The Group is a worldwide owner, manager and franchisor of hotels and resorts. Through its various subsidiaries, the Group owned, managed, leased or franchised 3,741 hotels and 556,246 guest rooms in nearly 100 countries and territories around the world, as at December 31, 2006. The Group’s brands include InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts, Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo. The Group also manages the hotel loyalty program, Priority Club Rewards.

      The Group’s revenue and earnings are derived from (i) hotel operations, which include operation of the Group’s owned hotels, management and other fees paid under management contracts, where the Group operates third-parties’ hotels, and franchise and other fees paid under franchise agreements and (ii) until December 14, 2005, the manufacture and distribution of soft drinks.

Operational Performance

      For the year ended December 31, 2006, the Hotels business reported growth in all regions at the revenue and operating profit lines for continuing operations. The 2006 regional increases were driven by RevPAR growth of approximately 10% across the 3,741 hotels and were primarily the result of higher room rates.

      The performance of the Hotels business is evaluated primarily on a regional basis. The regional operations are split by similar product or services: franchise agreement, management contract, and owned and leased operations. All three income types are affected by occupancy and room rates achieved by hotels, our ability to manage costs and the change in the number of available rooms through acquisition, development and disposition. Results are also impacted by economic conditions and capacity. The Group’s segmental results are shown before other operating income and expenses, interest expense, interest income and income taxes.

      The Group believes the period-over-period movement in RevPAR to be a meaningful indicator for the performance of the Hotels business.

CRITICAL ACCOUNTING POLICIES UNDER IFRS 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 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.

47

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

Goodwill, intangible assets, and property, plant and equipment

      Under IFRS, goodwill arising on acquisitions prior to October 1, 1998 was eliminated against equity. From October 1, 1998 to December 31, 2003, acquired goodwill was capitalized and amortized over a period not exceeding 20 years. Since January 1, 2004, goodwill continued to be capitalized but amortization ceased as at that date, replaced by an annual review for impairment.

      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. From October 1, 2002, goodwill and indefinite life intangible assets are not amortized but are reviewed annually for impairment.

      Under both IFRS and US GAAP, the Company uses discounted cash flow models to test goodwill and indefinite life intangibles for impairment on an annual basis, or more frequently if there are indicators of impairment. The discounted cash flow models require 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 the assets.

      Under both IFRS and US GAAP, finite lived intangible assets are capitalized and amortized over their anticipated life.

      Under both IFRS and US GAAP, the carrying value of property, plant and equipment and finite lived intangible 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.

      Under IFRS, property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Assets that do not generate independent cash flows are combined into cash-generating units. If carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. Recoverable amount is the greater of fair value less cost to sell and value in use. Value in use is assessed based on estimated future cash flows discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The outcome of such an assessment is subjective, and the result sensitive to the assumed future cashflows to be generated by the assets and discount rates applied in calculating the value in use, both of which will be dependent on the type of asset and its location. Any impairment arising is charged to the income statement. Under US GAAP, the assessment of an asset’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 income statement.

      During 2006, under IFRS the Company recorded an impairment of its property, plant and equipment of £3 million, relating to an asset held for sale. For the purposes of US GAAP, no impairment was required.

Sale of real estate

      Under IFRS, the Company recognises the sales proceeds and related profit or loss on disposal on completion of the sales process. The Group considers the following questions in determining whether revenue and profit should be recorded:

• does the Company have a continuing managerial involvement of the degree associated with asset ownership;

• has the Company transferred the significant risks and rewards associated with asset ownership;

• can the Company reliably measure the proceeds; and

48

• will the Company actually receive the proceeds.

      For US GAAP, the Company accounts for sales of real estate in accordance with FAS 66 “Accounting for Sales of Real Estate”. If there is significant continuing involvement with the property, any gain on sale is deferred and is recognized over the life of the continuing involvement, normally a long-term management contract retained on the property. The deferral of gains on such sales totaled £nil in 2006, £5 million in 2005 and £nil in 2004.

Income taxes

      Under IFRS, the Company provides for deferred tax in accordance with IAS 12 “Income Taxes” in respect of temporary differences between the tax base and carrying value of assets and liabilities including accelerated capital allowances, unrelieved tax losses, unremitted profits from overseas where the Company does not control remittance, gains rolled over into replacement assets, gains on previously revalued properties and other short-term temporary differences. Under US GAAP, deferred tax is computed, in accordance with FAS No. 109 “Accounting for Income Taxes”, on 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 tax assets under IFRS are recognized to the extent that it is regarded as probable that the deductible temporary differences can be realized. Under US GAAP, deferred tax assets are recognized in full and a valuation allowance is made to the extent that it is not more likely than not that they will be realized. Under both IFRS and US GAAP, the Company estimates deferred tax assets and liabilities based on current tax laws and rates, and in certain cases, business plans. Changes in these estimates may affect the amount of deferred tax liabilities or the valuation of deferred tax assets.

      Under both IFRS and US GAAP, accruals for tax contingencies require judgments on the expected outcome of tax exposures which may be subject to significant uncertainty, and therefore the actual results may vary from expectations resulting in adjustments to contingencies and cash tax settlements.

Loyalty program

      Priority Club Rewards enables members to earn points, funded through hotel assessments, 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 trade and other payables 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 future redemption liability amounted to £180 million at December 31, 2006.

Pensions and other post-employment benefit plans

      Under IFRS, the Company applies IAS 19 “Employee Benefits”. Under US GAAP, the Company has adopted FAS 158 “Employer’s Accounting for Defined Benefit Pension Plans and Other Post-Retirement Plans” as at December 31, 2006, amending the accounting methodology under FAS 87 “Employer’s Accounting for Pensions” and FAS 106 “Employer’s Accounting for Post-Retirement Benefits other than Pensions” on a prospective basis.

      These accounting standards require the Company to make assumptions including, but not limited to, future asset returns, rates of inflation, discount rates, life expectancies and health care costs. The use of different assumptions, in any of the above calculations, could have a material effect on the accounting values of the relevant assets and liabilities which could result in a material change to the cost of such liabilities as recognized in the income statement over time. These assumptions are subject to periodic review.

49

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 IFRS. The principal differences between IFRS and US GAAP as they relate to the Group are discussed in Note 32 of Notes to the Consolidated Financial Statements.

      The Group was required to produce its first set of audited financial statements in accordance with IFRS for the year ending December 31, 2005.

      For the year ended December 31, 2006 the results include special items totaling a net credit of £238 million (2005 £297 million — see “year ended December 31, 2006 compared to year ended December 31, 2005 — Special Items”). For comparability of the periods presented, some performance indicators in this Operating and Financial Review and Prospects discussion have been calculated after eliminating these special items. Such indicators are prefixed with “adjusted”. A reconciliation to the amounts under IFRS including such special items is included in Note 9 of Notes to the Consolidated Financial Statements.

50

Year ended December 2006 compared with year ended December 2005

		Year ended			Year ended
		December 31,			December 31,
		2006			2005
		(£ million)
GROUP RESULTS
Revenue:
Continuing operations
	Hotels		805			713
Discontinued operations
	Hotels		155			526
	Soft Drinks		—			671
Total revenue			960			1,910
Operating profit before other operating income and expenses:
Continuing operations
	Hotels		201			173
Discontinued operations
	Hotels		30			96
	Soft Drinks		—			70
Total operating profit before other operating income and expenses			231			339
Other operating income and expenses			27			(22	)
Operating profit			258			317
Interest			(11	)		(33	)
Profit before tax			247			284
Tax			41			(80	)
Profit after tax			288			204
Gain on disposal of assets, net of tax			117			311
Profit available for the year			405			515
Earnings per ordinary share:
	Basic		104.1p			95.2p
	Adjusted		42.9p			38.2p
	Adjusted - continuing operations		37.5p			22.5p

      IHG revenue from continuing operations for the year ended December 31, 2006 was £805 million (2005 £713 million). Operating profit before other operating income and expenses from continuing operations for the year ended December 31, 2006 was £201 million (2005 £173 million).

     Other operating income and expenses

      Other operating income and expenses for the year ended December 31, 2006 totaled £27 million and included the gain on the sale of the Group’s investment in FelCor.

      In 2005 other operating income and expenses totaled £(22) million and included a £13 million restructuring charge, a £9 million charge relating to property damage from fire and natural disasters, a £7 million impairment charge on property, plant and equipment and a £7 million credit related to the curtailment of employee benefits following the UK hotels disposal.

51

      Other operating income and expenses are treated as special items by reason of their size or incidence and are excluded from the calculation of adjusted earnings per share in order to provide a more meaningful comparison of performance.

     Net Financing Costs

      Net financing costs decreased from £33 million in 2005 to £11 million in 2006, primarily as a result of significantly lower average debt levels in the year (£92 million in 2006 compared to £700 million in 2005). Financing costs included £10 million (2005 £5 million) of interest costs associated with Priority Club Rewards where interest is charged on the accumulated balance of cash received in advance of the redemption points awarded. The increase over 2005 arises from growth in the scheme membership and higher interest rates. Net financing costs in 2006 also included £4 million in respect of the InterContinental Boston finance lease. Prior year financing costs included £9 million in respect of the discontinued Soft Drinks operations.

     Taxation

      The effective rate of tax on profit before tax, excluding the impact of special items, was 24%. By also excluding the impact of prior year items, which are included wholly within continuing operations, the equivalent effective tax rate would be 36%. This rate is higher than the UK statutory rate of 30% due mainly to overseas profits (predominantly in the United States) being subject to statutory rates higher than the UK statutory rate, unrelieved losses and other disallowable expenses. The equivalent effective rates for 2005, were 29% and 38% respectively.

      Taxation within special items totaled a £94 million credit (2005 £8 million credit). In 2006 and 2005, this represented, primarily, the release of provisions which were special by reason of their size or incidence, relating to tax matters which were settled during the year, or in respect of which the statutory limitation period had expired. In 2006, taxation special items, in addition to such provision releases, included £12 million for the recognition of a deferred tax asset in respect of tax losses.

      Net tax paid in 2006 was £49 million (2005 £91 million) including £6 million in respect of disposals.

     Gain on Disposal of Assets

      The gain on disposal of assets, net of related tax, totaled £117 million in 2006 (2005 £311 million) and primarily comprised the gain on the sale of seven InterContinental hotels to Morgan Stanley Real Estate Funds (“MSREF”). The gain on disposal of assets in 2005 mainly comprised a net gain on disposal of Soft Drinks of £284 million and a net gain on hotel asset disposals of £27 million.

     Earnings

      Basic earnings per share for 2006 were 104.1 pence, compared with 95.2 pence in 2005. Adjusted earnings per share were 42.9 pence against 38.2 pence in 2005. Adjusted earnings per share for continuing operations were 37.5 pence, 67% up on last year.

52

Highlights for the year ended December 31, 2006

      The following is a discussion of the year ended December 31, 2006 compared with the year ended December 31, 2005.

Continuing Hotels Results

		Year ended			Year ended
		December 31,			December 31,
		2006			2005			Change
								%
		(£ million)
Revenue:
	Americas		433			384			12.8
	EMEA		206			200			3.0
	Asia Pacific		111			87			27.6
	Central		55			42			31.0
			805			713			12.9
Operating profit before other operating income and expenses:
	Americas		217			186			16.7
	EMEA		36			31			16.1
	Asia Pacific		29			21			38.1
	Central		(81	)		(65	)		24.6
			201			173			16.2

      Revenue. Continuing Hotels revenue increased £92 million (12.9%) from £713 million for the year ended December 31, 2005, to £805 million for the year ended December 31, 2006.

      Operating profit. Continuing Hotels operating profit before other operating income and expenses for the year ended December 31, 2006 was £201 million, up 16.2% from £173 million for year ended December 31, 2005.

53

Americas

Continuing Americas Results

		Year ended			Year ended
		December 31,			December 31,
		2006			2005			Change
								%
		($ million)
Revenue:
	Owned and leased		211			195			8.2
	Managed		143			118			21.2
	Franchised		443			389			13.9
			797			702			13.5
Operating profit before other operating income and expenses:
	Owned and leased		26			25			4.0
	Managed		50			36			38.9
	Franchised		382			340			12.4
			458			401			14.2
Regional overheads			(59	)		(62	)		(4.8	)
Total $ million			399			339			17.7
Sterling equivalent £ million(i)			217			186			16.7

(i)  The results have been translated into pounds sterling at weighted average rates of exchange for the year. The translation rates are fiscal 2006: £1 = $1.84 (2005: £1 = $1.83).

     For the year ended December 31, 2006, revenue and operating profit from continuing operations increased by 13.5% to $797 million and 17.7% to $399 million, respectively. Underlying trading performance across all ownership types was strong, although the pace of RevPAR growth achieved in the first half of the year was not maintained throughout the second half of the year.

      Continuing owned and leased revenue and operating profit increased by 8.2% to $211 million and 4.0% to $26 million respectively. Owned and leased InterContinental branded hotels achieved RevPAR growth in excess of 12% over 2005, driven by gains in both daily rates and occupancy levels. The owned and leased results were impacted, as expected, by a $6 million loss at the recently opened InterContinental Boston. Excluding this loss, the combined impact of RevPAR growth and operating efficiencies led to a 28% increase in operating profit from continuing owned and leased hotels.

      Managed revenues increased by 21.2% to $143 million during the year as a result of strong underlying trading, restructured management agreements, an increased number of hotels under management contracts and the full year benefit of contracts negotiated during 2005 as part of the hotel disposal program. RevPAR growth in the managed hotels was strong across most brands. Holiday Inn growth levels were impacted during the fourth quarter by hotel refurbishments (nine of 28 hotels). Managed revenues include $80 million (2005 $70 million) from properties that are structured, for legal reasons, as operating leases but with the same characteristics as management contracts.

      Managed operating profit increased by 38.9% to $50 million including $9 million (2005 $9 million) from the managed properties held as operating leases and $3 million from the receipt of business interruption proceeds following hurricane damage in 2005. As a consequence of the 2005 hurricane season, ongoing insurance costs increased significantly, reducing managed operating profit in 2006 by an incremental $3 million.

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      Franchised revenue and operating profit increased by 13.9% to $443 million and 12.4% to $382 million respectively, driven by RevPAR growth of 9.2%, net room count growth of 4% and fees associated with record levels of signings. The RevPAR gains were achieved across all brands despite high prior year comparables. Holiday Inn Express and Crowne Plaza both reported double digit RevPAR growth, driven by higher average daily rates.

      Americas regional overheads were 4.8% lower in 2006, primarily as a result of lower claims in the Group-funded employee healthcare program.

      Americas net hotel and room count grew by 96 hotels (8,303 rooms) to 2,930 hotels (394,909 rooms). The net growth includes openings of 222 hotels (26,613 rooms) led by demand for Holiday Inn Express 128 hotels (11,155 rooms). Although the regions’ net growth was predominantly achieved in the US markets, Mexico represented over 10% of the expansion. The net growth also included removals of 126 hotels (18,310 rooms), of which Holiday Inn hotels represented 56% (74% of rooms).

      The Americas pipeline continued to achieve record growth levels and totaled 1,012 hotels (105,685 rooms) at December 31, 2006. Signing levels outpaced prior year as demand for the new Holiday Inn prototype and Holiday Inn Express continued to accelerate throughout 2006. During the year 61,673 room signings were completed, compared to 49,765 room signings in 2005. This level of growth demonstrates strong demand for IHG brands and represents a key driver of future profitability.

Europe, Middle East and Africa

          Continuing EMEA Results

		Year ended			Year ended
		December 31,			December 31,
		2006			2005			Change
		(£ million)
								%
Revenue:
	Owned and leased		100			110			(9.1	)
	Managed		71			55			29.1
	Franchised		35			35			—
			206			200			3.0
Operating profit before other operating income and expenses:
	Owned and leased		(5	)		(5	)		—
	Managed		37			31			19.4
	Franchised		24			26			(7.7	)
			56			52			7.7
Regional overheads			(20	)		(21	)		(4.8	)
Total £ million			36			31			16.1
Dollar equivalent $ million(i)			67			56			19.6

(i)  The results have been translated into US dollars at weighted average rates of exchange for the year. The translation rates are 2006: $1 = £0.54 (2005: $1 = £0.55).

     In the owned and leased estate, continuing revenues declined by £10 million to £100 million as a result of the major refurbishment at the InterContinental London Park Lane. The hotel reopened in November 2006 following a 13 month closure and is expected to be fully operational by Spring 2007. Continuing operating loss remained in line with 2005. However, excluding the impact of the InterContinental London Park Lane in 2005 and 2006, the continuing owned and leased operating profit increased by £5 million, driven by enhanced trading performance at the InterContinental Paris Le Grand where RevPAR growth was more than 25% over 2005.

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      Managed revenues and operating profit increased by 29.1% to £71 million and 19.4% to £37 million respectively. The growth was driven by the impact of management contracts negotiated in 2005 and 2006 as part of the hotel disposal program in the UK and Europe, together with strong RevPAR growth in the key regions including Continental Europe and the Middle East.

      Franchised revenue of £35 million was in line with 2005 revenues, whilst operating profit decreased by £2 million to £24 million. The prior year included £7 million in liquidated damages for the termination of franchise contracts in South Africa. Excluding the impact of this, franchised operating profit increased by 26.3% as a result of strong RevPAR growth across the UK and Continental Europe and increased room count. The increased room count was driven by the negotiation of franchise contracts in Continental Europe as part of the hotel disposal program and further expansion in the region.

      During 2006, EMEA hotel and room count grew by 13 hotels (1,181 rooms). The net growth included the opening of 31 hotels (4,823 rooms) and the removal of 18 hotels (3,642 rooms), including exits on a limited number of managed hotels, as agreed at the time of the UK portfolio disposal in May 2005.

      The pipeline in EMEA increased by 57 hotels (7,779 rooms) to 143 hotels (22,057 rooms). The growth included a record level of 13,321 room signings, driven by demand for Holiday Inn and Holiday Inn Express in the UK, Continental Europe and South Africa, and for all brands in the Middle East and Russia.

Asia Pacific

          Continuing Asia Pacific Results

		Year ended			Year ended
		December 31,			December 31,
		2006			2005			Change
		($ million)
								%
Revenue:
	Owned and leased		131			108			21.3
	Managed		65			45			44.4
	Franchised		8			6			33.3
			204			159			28.3
Operating profit before other operating income and expenses:
	Owned and leased		31			20			55.0
	Managed		39			29			34.5
	Franchised		5			5			—
			75			54			38.9
Regional overheads			(23	)		(15	)		53.3
Total $ million			52			39			33.3
Sterling equivalent £ million(i)			29			21			38.1

(i)  The results have been translated into pounds sterling at weighted average rates of exchange for the year. The translation rates are fiscal 2006: £1 = $1.84 (2005: £1 = $1.83).

     Revenue and operating profit from continuing operations increased by 28.3% to $204 million and 33.3% to $52 million, respectively, during 2006.

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      Continuing owned and leased operating profit increased by 55.0% to $31 million driven by trading at the InterContinental Hong Kong which achieved rate-led RevPAR growth of over 30.0%. The hotel also benefited from a rooms refurbishment program and the prior year repositioning of its food and beverage operations.

      The managed estate achieved revenue growth of 44.4% increasing from $45 million to $65 million due to the retention of management contracts on the 10 owned and leased hotels sold in 2005 combined with strong underlying trading in Greater China where comparable RevPAR increased by 12.1% over 2005.

      Regional overheads increased by $8 million to $23 million. The increase reflects infrastructure and development costs including additional headcount, office facility and IT costs, all associated with ongoing expansion in the region.

      Net hotel and room count in Asia Pacific increased by 26 hotels (9,229 rooms). The net growth includes 14 hotels (3,628 rooms) in Greater China reflecting continued expansion in one of IHG’s strategic markets, and 13 hotels (4,937 rooms) in Japan that joined the system as part of the IHG ANA transaction.

      The pipeline in Asia Pacific increased by 30 hotels (12,880 rooms) to 86 hotels (30,249 rooms). The substantial growth indicates the demand for IHG’s brands in the Chinese market where signings of 16,445 rooms were more than double 2005 signings.

Central

	Year ended			Year ended
	December 31,			December 31,
	2006			2005			Change
							%
	(£ million)
Revenue		55			42			31.0
Gross central costs		(136	)		(107	)		27.1
Net central costs £ million		(81	)		(65	)		24.6
Dollar equivalent $ million(i)		(149	)		(118	)		26.3

(i)  The results have been translated into US dollars at weighted average rates of exchange for the year. The translation rates are 2006: $1 = £0.54 (2005: $1 = £0.55).

     Net central costs increased by £16 million to £81 million and included significant investment in new global research, designed to enable higher quality brand development and enhance IHG’s franchising capability; the increase also included higher IT infrastructure costs.

Discontinued Operations

      For the year ended December 31, 2006 operating profit from hotels classified as discontinued was £30 million (2005 £96 million) and was £nil (2005 £70 million) for the Soft Drinks business.

      The net gain on disposal of assets for Hotels was £117 million (2005 £27 million) and for Soft Drinks was £nil (2005 £284 million).

Highlights for the 12 months ended December 31, 2005

      Continuing revenue increased £107 million (17.7%) from £606 million for the year ended December 31, 2004 to £713 million for the year ended December 31, 2005.

      Continuing operating profit before other operating income and expenses increased £53 million (44.2%) from £120 million for the year ended December 31, 2004 to £173 million for the year ended December 31, 2005.

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Americas

      Americas continuing operating profit was $339 million, a 24.6% increase on continuing operating profit for the year ended December 31, 2004 of $272 million.

      Continuing owned and leased revenue increased by over 30% driven by strong trading in the comparable estate (those hotels fully trading as owned and leased in both financial years). Comparable RevPARs were 17.7% up for InterContinental and 14.0% up for Holiday Inn with average daily rate growth fuelling the increased RevPAR. The InterContinental Buckhead, Atlanta, also contributed its first full year of trading after opening in November 2004. These revenue increases, together with improved operating efficiency in the hotels, led to continuing owned and leased operating profit increasing significantly over 2004, from $6 million to $25 million.

      Managed revenue increased from $55 million in 2004 to $118 million as a result of strong trading in the comparable estate and the contribution from management contracts negotiated during 2004 and 2005 as part of the asset disposal program. Managed revenue also includes $70 million (2004 $27 million) from properties (including the InterContinental San Juan sold in the year) that are structured, for legal reasons, as operating leases but with the same economic characteristics as a management contract. Overall, managed RevPARs grew by 16.2% for InterContinental, 12.9% for Crowne Plaza, 11.0% for Holiday Inn, 9.1% for Staybridge Suites and 14.8% for Candlewood Suites.

      Managed operating profit increased from $12 million to $36 million including $9 million (2004 $3 million) from the managed properties held as operating leases, including a contribution from the 15 hotels moving from ownership to management.

      Franchised revenue increased by 9.0% to $389 million as a result of strong trading and increased room count and signings. RevPARs across the brands showed strong growth, with Holiday Inn RevPAR 9.2% up on 2004, Holiday Inn Express 10.3% up and Crowne Plaza 8.4% up. The franchised estate increased by 3,878 rooms in the year with the most significant increase being in the Holiday Inn Express brand. Franchised revenue also benefited from the number of signings in 2005 with a record 47,245 room signings (50% up on 2004) leading to higher sales revenues than in 2004. Franchised operating profit rose by $36 million to $340 million.

      Americas regional overheads increased to $62 million from $50 million in 2004, reflecting investment in additional development resources and information technology.

      Americas hotel and room count grew by a net 51 hotels (279 rooms) to 2,834 hotels (386,606 rooms). 190 hotels (22,043 rooms) entered the system and 139 hotels (21,764 rooms) left the system. Of the removals, 83 hotels (16,188 rooms) were Holiday Inn and 53 hotels (4,561 rooms) were Holiday Inn Express.

      The Americas pipeline grew to record levels, 742 hotels (76,865 rooms), with 447 hotels (49,765 rooms) signing contracts during the year to enter the system. Of these signings, 19,355 rooms were Holiday Inn Express.

EMEA

      The EMEA operating model changed in 2005 as a result of the disposal of 73 hotels in the United Kingdom to LRG Acquisition and LRG Holdings Limited (“LRG”) and a number of smaller transactions. As a result, the number of owned and leased hotels reduced by 85 whilst the number of managed hotels increased by 77, including 73 in connection with the LRG transaction.

      Revenue from continuing operations increased by 7.5% to £200 million and continuing operating profit before other operating income and expenses increased by £20 million to £31 million.

      Owned and leased revenue from continuing operations decreased by 5.2% from £116 million in 2004 to £110 million in 2005. Performance across the region was mixed with variable trading conditions in parts of Continental Europe. The refurbishment of the InterContinental London impacted the overall result with the hotel being disrupted for most of the year and closed in the final quarter of the year. Owned and leased

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operating profit from continuing operations increased by £6 million during 2005, reducing the £11 million loss in 2004 to £6 million in 2005.

      Managed revenue increased by £12 million to £55 million. The 2004 result benefited from the receipt in 2004 of approximately £4 million liquidated damages from the early termination of the InterContinental Barcelona management contract. The 2005 result was affected by a loss of earnings following the bombings in Beirut, but underlying trading was strong, particularly in the Middle East where managed RevPAR increased by 11.9%. Management fees are also included from LRG for the hotels sold in May 2005 (including incentive fees); Holiday Inn UK RevPAR overall was up to 4.6%.

      Franchised revenue for EMEA increased by £8 million to £35 million. Holiday Inn franchised RevPAR increased by 4.9% and Holiday Inn Express RevPAR increased by 5.9%. Franchised operating profit increased by £5 million to £26 million and included £7 million liquidated damages for the termination of franchise agreements in South Africa.

      EMEA hotel and room count at December 31, 2005 was broadly level with December 31, 2004 at 610 hotels (105,419 rooms) despite the termination of the master franchise agreement in South Africa (6,338 rooms). Two significant deals added hotels to the system during the year, five Holiday Inn hotels (602 rooms) in the UK from a franchise agreement with Stardon, a joint venture company formed between Starwood Capital Europe and Chardon Hotels, and 13 hotels (2,233 rooms) in the UK from a franchise agreement with Queens Moat Houses Limited.

      The EMEA pipeline at December 31, 2005 was 86 hotels (14,278 rooms).

Asia Pacific

      Asia Pacific revenue from continuing operations increased by 18.7% to $159 million and operating profit before other operating income and expenses increased by 30.0% to $39 million.

      Continuing owned and leased operating profit grew from $17 million in 2004 to $20 million in 2005 mainly reflecting strong trading in the InterContinental Hong Kong which achieved RevPAR growth of 11.7% over 2004, driven by average daily rate growth.

      Asia Pacific managed operating profit grew strongly from $25 million to $29 million, reflecting both the impact of improved RevPAR and an increase in room count over 2004. Greater China managed RevPAR increased by 13.6% and Australia, New Zealand and South Pacific managed RevPAR increased by 6.1%. Asia Pacific franchised operating profit increased by $2 million $5 million.

      Regional overheads were level at $15 million despite increased resources for the planned expansion in Greater China.

      During 2005, a further nine hotels (2,839 rooms) opened in Greater China and 20 hotels (7,308 rooms) signed contracts and entered the pipeline. On a net basis, the number of hotels in Asia Pacific increased by 13 hotels (3,383 rooms). During the year, ten owned and leased hotels (2,315 rooms) in Australia, New Zealand and Fiji were sold but retained with management contracts.

      Asia Pacific pipeline grew by 14 managed hotels (4,564 rooms) primarily in the InterContinental and Crowne Plaza brands. In addition, on February 15, 2006, IHG announced that it had signed contracts with a single owner to manage six hotels (over 4,500 rooms) in China’s Sichuan province, and on February 24, 2006 announced that it had signed contracts with an owner to manage four hotels, with over 1,400 rooms, also in China.

Central

      Net central costs increased by £8 million reflecting increased governance costs, further investment to support development and the accounting treatment of share scheme costs. Under IFRS, the charges for share option schemes established after November 2002 are accounted for in the income statement. As share scheme

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awards are generally made annually and the accounting cost is spread over three years, 2005 is the first year that a full annual cost is taken into account.

Discontinued Operations

      For the year ended December 31, 2005 operating profit from Hotels classified as discontinued was £96 million (2004 £149 million) and operating profit from the Soft Drinks business was £70 million (2004 £77 million).

      The net gain on disposal of assets for Hotels was £27 million (2004 £19 million) and for Soft Drinks was £284 million (2004 £nil).

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

      The Company is financed by a £1.1 billion Syndicated Facility which has a maturity of November 2009. Short-term borrowing requirements are met from drawings under bilateral bank facilities.

      At December 31, gross debt was £313 million (£533 million after derivative transactions). The currency denomination of non sterling gross debt, after derivative transactions, was £101 million of euro denominated borrowings, £282 million of US dollar denominated borrowings £48 million of borrowings denominated in other currencies mainly Hong Kong dollars.

      At December 31, 2006 committed bank facilities amounted to £1,157 million of which £944 million were unutilized. Uncommitted facilities totaled £39 million. In the Company’s opinion, the available facilities are sufficient for the Company’s present requirements.

      The Company also held short term deposits and investments at December 31, 2006 amounting to £179 million (£403 million after the effect of derivative transactions). Credit risk on treasury transactions is minimised 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 Company’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 Company is in compliance with its financial covenants in its loan documentation none of which represent 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

      Net cash from operating activities totaled £230 million for the year ended December 31, 2006 (2005 £302 million). The decrease reflects the impact of the asset disposals.

      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 From Investing Activities

      Net cash from investing activities totaled £620 million (2005 £1,863 million) reflecting the lower level of asset disposals in 2006 compared to 2005. The main hotel disposals in 2006 were the sale of 24 hotels in Continental Europe to a subsidiary of Westbridge Hospitality Fund LP and the sale of seven European InterContinental hotels to Morgan Stanley Real Estate Funds. In 2006 proceeds from the disposal of hotels and other assets totaled £744 million.

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Cash Used in Financing Activities

      Net cash used in financing activities totaled £1,002 million (2005 £1,906 million). Cash outflows associated with shareholder returns in 2006 totaled £821 million and included £260 million of share repurchases and a special dividend of £497 million. On February 20, 2007 the Company announced a £150 million share repurchase and a special dividend of £700 million.

      As of December 31, 2006, the Group had committed contractual capital expenditure of £24 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.

Off-Balance Sheet Arrangements

      As at December 31, 2006, the Company had no off-balance sheet arrangements that have or are reasonably likely to have an effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Contractual Obligations

      The Company had the following contractual obligations outstanding as of December 31, 2006:

	Total amounts		Less than						After
	committed		1 year		1-3 years		3-5 years		5 years
	(£ million)
Long-term debt		216		7		209		—		—
Finance lease obligations(i)		1,781		3		16		17		1,745
Operating lease obligations		190		27		40		23		100
Agreed pension scheme contributions		47		27		20		—		—
Capital contracts placed		24		24		—		—		—
		2,258		88		285		40		1,845

(i)  Represents the minimum lease payments related to the 99 year lease on the InterContinental Boston.

     The Company may provide performance guarantees to third-party owners to secure management contracts. The maximum exposure under such guarantees is £142 million (2005 £134 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.

      As of December 31, 2006, the Group had outstanding letters of credit of £31 million mainly relating to self-insurance programs.

      The Company 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, 2006, the Group was a guarantor of loans which could amount to a maximum exposure of £13 million.

      The Company 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

      IHG operates two main schemes; the InterContinental Hotels UK Pension Plan, and the US based InterContinental Hotels Pension Plan.

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      The InterContinental Hotels UK Pension Plan was established with effect from April 1, 2003. On an IAS 19 “Employee Benefits” basis, at December 31, 2006 the Plan had a deficit of £29 million. The defined benefits section of this Plan is generally closed to new members. In 2007, the Group expects to make projected regular contributions to the UK principal plan of £7 million. In addition the Group has agreed to pay special contributions of £40 million to the UK Pension Plan; £20 million in 2007, £10 million in 2008 and £10 million in 2009.

      The US based InterContinental Hotels Pension Plan is closed to new members and pensionable service no longer accrues for current employee members. On an IAS 19 basis, at December 31, 2006 the Plan had a deficit of $65 million.

      The Group is exposed to the funding risks in relation to the defined benefit sections of the InterContinental Hotels UK Pension Plan and the US based InterContinental Hotels Pension Plan, as explained in “Item 3. Key Information — Risk Factors”.

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 by members of the executive committee.

      The directors and officers of InterContinental Hotels Group PLC as at March 16, 2007 are:

Directors

		Initially		Date of next
		appointed to		reappointment
Name	Title	the board		by shareholders*
Andrew Cosslett	Director and Chief Executive		2005		2008
Richard Hartman(2)	Director and President, EMEA		2003		N/A
David Kappler(1)	Director and Senior Independent Director		2004		2008
Ralph Kugler(1)	Director		2003		2008
Jennifer Laing(1)	Director		2005		2009
Robert C. Larson(1)	Director		2003		2007
Jonathan Linen(1)	Director		2005		2009
Stevan Porter	Director and President, The Americas		2003		2009
Sir David Prosser(1)	Director		2003		2007
Richard Solomons	Director and Finance Director		2003		2007
David Webster	Chairman		2003		2007

(1)	Non-executive independent director.
(2)	Richard Hartman due to retire in September 2007.

*  Robert C. Larson, being over the age of 70, is required to retire and stand for re-election at each Annual General Meeting, if he wishes to continue to serve as a director. Sir David Prosser and David Webster are required, under the Company’s articles of association, to stand for re-election at the 2007 Annual General Meeting. Richard Solomons is also standing for re-election at the 2007 meeting on a voluntary basis. Andrew Cosslett, David Kappler and Ralph Kugler will be required to stand for re-election at the 2008 Annual General Meeting. Any further appointments at the 2008 meeting would be on a voluntary basis.

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Officers

Name	Title	Initially appointed
Tom Conophy	Executive Vice President and Chief		2006
	Information Officer
Peter Gowers	Executive Vice President and Chief Marketing		2003
	Officer
Patrick Imbardelli	President, Asia Pacific		2003
Tracy Robbins	Executive Vice President, Global Human Resources		2005
Richard Winter	Executive Vice President, Corporate Services,		2003
	General Counsel and Company Secretary

Former Directors and Officers

      Sir Howard Stringer served as an independent non-executive director from April 2003 until November 2006.

Directors and Officers

     Tom Conophy

      Has over 26 years’ experience in the IT industry, including management and development of new technology solutions within the travel and hospitality business. He joined the Group in February 2006 from Starwood Hotels & Resorts International where he held the position of Executive Vice President & Chief Technology Officer. Responsible for global technology, including IT systems and information management throughout the Group. Age 46.

     Andrew Cosslett

      Appointed Chief Executive in February 2005. He joined the Group from Cadbury Schweppes plc where he was most recently President, Europe, Middle East & Africa. During his career at Cadbury Schweppes he held a variety of senior regional management and marketing roles in the UK and Asia Pacific. He also has over 11 years’ experience in brand marketing with Unilever. He is Non-Executive Chairman of Duchy Originals Limited. Age 51.

     Peter Gowers

      Has previous international experience in management consultancy based in London and Singapore. He joined the Group in 1999 and was appointed Executive Vice President, Global Brand Services in January 2003. Appointed Chief Marketing Officer in 2005, he now has responsibility for worldwide brand management, reservations, e-commerce, global sales, relationship and distribution marketing and loyalty program. Age 34.

     Richard Hartman

      Has over 40 years’ experience in the hotel industry including 30 years with Sheraton. He joined the Group in 1999 as Managing Director, Asia Pacific. Subsequently, as Managing Director, Europe, Middle East and Africa, he was appointed an Executive Director in April 2003. Responsible for the business development and performance of all the Hotel brands and properties in the EMEA region. He will retire from the Group in September 2007. Age 61.

     Patrick Imbardelli

      Has over 25 years’ experience in the hotel industry including 12 years with Southern Pacific Hotels Corporation. He joined the Group in 2000 and was appointed Managing Director, Asia Pacific in January

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2003. Responsible for the business development and performance of all the Hotel brands and properties in the Asia Pacific region. Age 46.

     David Kappler

      Appointed a Director and Senior Independent Director in June 2004. He is Non-Executive Chairman of Premier Foods plc and a Non-Executive Director of Shire plc. A qualified accountant and formerly Chief Financial Officer of Cadbury Schweppes plc until April 2004, he also served as a Non-Executive Director of Camelot Group plc and HMV Group plc. Chairman of the Audit Committee. Age 60.

     Ralph Kugler

      Appointed a Director in April 2003, he is President, Unilever Home and Personal Care, and joined the Boards of Unilever plc and Unilever NV in May 2005. He has held a variety of senior positions globally for Unilever and has experience of regional management in Asia, Latin America and Europe, with over 25 years’ experience of general management and brand marketing. Age 51.

     Jennifer Laing

      Appointed a Director in August 2005, she is Associate Dean, External Relations at the London Business School. A fellow of the Marketing Society and of the Institute of Practitioners in Advertising, she has over 30 years’ experience in advertising including 16 years with Saatchi & Saatchi, to whom she sold her own agency. She also serves as a Non-Executive Director of Hudson Highland Group Inc., a US human resources company. Age 60.

     Robert C Larson

      Appointed a Director in April 2003, he is a Managing Director of Lazard Frères Alternative Investments LLC and Chairman of Lazard Frères Real Estate Investors, LLC. He is also Chairman of Larson Realty Group and Non-Executive Chairman of United Dominion Realty Trust Inc. and Commonwealth Atlantic Properties Inc. He served as a Non-Executive Director of Six Continents PLC (formerly Bass PLC) from 1996 until April 2003. Age 72.

     Jonathan Linen

      Appointed a Director in December 2005, he was formerly Vice Chairman of the American Express Company, having held a range of senior positions including in New Product Development, Marketing and Sales and Travel Services throughout his career of over 35 years with American Express. A management development graduate of Harvard Business School, he also serves on the Board and Executive Committees of a number of US companies and Councils. Age 63.

     Stevan Porter

      Previously 13 years with Hilton Corporation in a variety of senior management positions. He joined the Group in 2001 as Chief Operating Officer, The Americas. Subsequently, as President, The Americas, he was appointed an Executive Director in April 2003. Responsible for the business development and performance of all the Hotel brands and properties in the Americas region. Additionally, he has responsibility for the development and deployment of best practice in franchising, globally. Age 52.

     Sir David Prosser

      Qualified actuary with over 40 years’ experience in financial services. Appointed a Director in April 2003, he was formerly Group Chief Executive of Legal & General Group Plc. He is a Non-Executive Director of Investec plc and of Investec Limited, a Director of the Royal Automobile Club Limited and of Epsom Downs Racecourse Limited. Chairman of the Remuneration Committee. Age 63.

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     Tracy Robbins

      Has over 21 years’ experience in line and HR roles in service industries. She joined the Group in December 2005 from Compass Group PLC, a world leading food service company, where she was Group Human Resources Leadership & Development Director. Previously Group HR Director for Forte Hotels Group. Responsible for global talent management and leadership development, reward strategy and implementation. Age 43.

     Richard Solomons

      Qualified as a chartered accountant in 1985, followed by seven years in investment banking, based in London and New York. He 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 Separation. Responsible for corporate and regional finance, Group financial control, asset management, strategy and corporate development, investor relations, tax and treasury. Age 45.

     David Webster

      Appointed Deputy Chairman and Senior independent Director of InterContinental Hotels Group upon the Separation. Appointed Non-Executive Chairman on 1 January 2004. He is also Non-Executive Chairman of Makinson Cowell Limited, a capital markets advisory firm. He was formerly Chairman of Safeway plc and a Non-Executive Director of Reed Elsevier PLC. Chairman of the Nomination Committee. Age 62.

     Richard Winter

      Solicitor, qualified in 1973 with over 20 years’ commercial law experience in private practice. He joined the Group in 1994 as Director of Group Legal and was appointed Company Secretary in 2000. Now responsible for corporate governance, corporate social responsibility, risk management, insurance, internal audit, data privacy, company secretariat and group legal matters. Age 57.

      There are no family relationships between any of the persons named above.

      There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person named above was selected as a director or member of senior management.

COMPENSATION

      In fiscal 2006, the aggregate compensation (including pension contributions, bonus and awards under the long term incentive plans) of the directors and officers of the Company was £17.9 million. The aggregate amount set aside or accrued by the Company in fiscal 2006 to provide pension retirement or similar benefits for those individuals was £858,900. An amount of £7.9 million was charged in fiscal 2006 in respect of bonuses payable to them under performance related cash bonus schemes and long term incentive plans.

      Note 3 of Notes to the Financial Statements sets out the individual compensation of the directors. The following are details of the Company’s principal share schemes, in which the directors of the Company participated during the period.

     Share Plans

      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 options for equivalent value new options over IHG PLC shares. At December 31, 2006 4,055,674 such options were outstanding.

     Executive Share Option Plan

      The Remuneration Committee, consisting solely of independent non-executive directors, may select employees within the Group, including executive directors, of the Company, to receive a grant of options to

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acquire ordinary shares in the Company. Under the terms of the Plan the option price may not be less than the market value of an ordinary share, or the nominal value if higher. The market value is either 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 share plan extends it to executives outside the United Kingdom. Grants of options under the Executive Share Option Plan have normally been made annually and except in exceptional circumstances, have not, in any year, exceeded three times annual salary for executive directors. A performance condition must be met before options can be exercised. The performance condition is set by the Remuneration Committee.

      Following a full review of incentive arrangements, the Remuneration Committee concluded in 2005 that share options are not the most effective incentive for the foreseeable future and therefore no further grants of options have been made or are expected to be made. However, the Remuneration 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.

      As of March 16, 2007, options over 13,540,481 IHG PLC shares were outstanding under the Executive Share Option Plan.

     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 shares on a deferred basis. Matching shares may also be awarded up to half the deferred amount. The bonus and matching shares are deferred and will normally be released at the end 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. As of March 16, 2007, there were 716,257 IHG shares over which conditional rights had been awarded to participants under the Plan.

     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, 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. 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. As of March 16, 2007 there were 8,653,114 IHG shares over which conditional rights had been awarded to employees under the Plan. The Plan provides for the grant of “nil cost options” to participants as an alternative to share awards. As of March 16, 2007, 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 immediately before invitations go out. As of March 16, 2007, options over 83,111 IHG shares were outstanding under the Sharesave Plan at a subscription price of 420.5p, exercisable up to the year 2009.

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Options and Ordinary Shares held by Directors

      Details of the directors’ interests in the Company’s shares are set out on page 70 and page F-41.

BOARD PRACTICES

Contracts of Service

      The Remuneration Committee’s policy is for Executive Directors to have rolling contracts with a notice period of 12 months.

      Andrew Cosslett, Richard Hartman, Stevan Porter and Richard Solomons have service agreements with a notice period of 12 months. All new appointments are intended to have 12-month notice periods. However, on occasion, to complete an external recruitment successfully, a longer initial period reducing to 12 months may be useful.

      David Webster’s appointment as non-executive Chairman, effective from January 1, 2004, is subject to six months’ notice.

      Non-executive directors, Ralph Kugler, Robert C Larson and Sir David Prosser signed letters of appointment effective from the listing of IHG in April 2003. These were renewed, effective from completion of the capital reorganisation of the Group and the listing of new IHG shares on June 27, 2005. David Kappler signed a letter of appointment effective from his date of original appointment to the Board on June 21, 2004. This was also renewed, effective from June 27, 2005. Jennifer Laing and Jonathan Linen signed letters of appointment effective from their appointment dates, respectively August 25, 2005 and December 1, 2005.

      All non-executive directors’ appointments, with the exception of the Chairman, are subject to three months’ notice.

Directors’ Contracts

	Contract		Unexpired term/
Directors	date		notice period
Andrew Cosslett		2.3.05		12 months
Richard Hartman		4.15.03		6 months(1	)
Stevan Porter		4.15.03		12 months
Richard Solomons		4.15.03		12 months

(1)  Richard Hartman is due to retire in September 2007. Having given contractual notice, his unexpired term of office as at the date of this report is six months.

     Each of the executive directors signed a letter of appointment, effective from completion of the capital reorganization of the Company and the listing of new IHG shares on June 27, 2005. The terms of each appointment were as set out in each executive director’s original service agreement.

      On September 25, 2006 IHG announced the forthcoming retirement of Richard Hartman who will leave the Group in September 2007.

      See Note 3 of the Notes to the Consolidated Financial Statements for details of directors’ service contracts.

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 3 of Notes to the Financial Statements for details of directors’ pension entitlements at December 31, 2006.

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Committees

      Each Committee of the Board has written terms of reference which have been approved by the Board.

     Executive Committee

      The Executive Committee is chaired by the Chief Executive. 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, until its flotation as an independent company in December 2005, the Britvic business. It is authorised to approve capital and revenue investment within levels agreed by the Board. It reviews and recommends to the Board the most significant investment proposals.

     Audit Committee

      The Audit Committee is chaired by David Kappler who has significant recent and relevant financial experience and is the Committee’s financial expert. During 2006, the other Audit Committee members were Sir David Prosser, Ralph Kugler and Jennifer Laing. All Audit Committee members are independent. The Audit Committee is scheduled to meet at least four times a year. All Audit Committee members attended every meeting.

      The Audit Committee’s principal responsibilities are as follows:

•  review the Group’s public statements on internal control and corporate governance compliance prior to their consideration by the Board;

•  review the Group’s processes for detecting and addressing fraud, misconduct and control weaknesses and to consider the response to any such occurrence, including overseeing the process enabling the anonymous submission of concerns;

•  review reports from management, internal audit and external audit concerning the effectiveness of internal control, financial reporting and risk management processes;

•  review with management and the external auditor any financial statements required under UK or US legislation before submission to the Board;

•  establish, review and maintain the role and effectiveness of the Internal Audit function, including overseeing the appointment of the Head of Internal Audit;

•  assuming responsibility for the appointment, compensation, resignation, dismissal and the oversight of the external auditor, including review of the external audit, its cost and effectiveness;

•  pre-approve non-audit work to be carried out by the external auditor and the fees to be paid for that work along with the monitoring of the external auditor’s independence; and

•  adopt the Group’s Code of Ethics and Business Conduct and oversight of associated procedures for monitoring adherence.

      The Committee discharges its responsibilities through a series of Audit Committee meetings during the year at which detailed reports are presented for review. The Audit Committee commissions reports, either from external advisers, the Head of Internal Audit, or Group management, after consideration of the major risks to the Group or in response to developing issues. The external auditor attends its meetings as does the Head of Internal Audit, both of whom have the opportunity to meet privately with the Audit Committee, in the absence of Group management, at the conclusion of each meeting.

      All proposals for the provision of non-audit services by the external auditor are pre-approved by the Audit Committee or its delegated member, the overriding consideration being to ensure that the provision of non-audit services does not impact the external auditors independence and objectivity.

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     Remuneration Committee

      The Remuneration Committee, chaired by Sir David Prosser, also comprises the following non-executive, independent directors: David Kappler, Robert C Larson, Jonathan Linen and Sir Howard Stringer (until November 10, 2006). It meets at least three times a year. The Remuneration Committee advises the Board on overall remuneration policy. The Remuneration 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. No member of the Remuneration Committee has any personal financial interest, other than as a shareholder, in the matters to be decided by the Remuneration Committee.

     Nomination Committee

      The Nomination Committee’s quorum comprises any three non-executive, independent directors although, where possible, all non-executive directors are present. It is chaired by the Chairman of the Company. The Nomination Committee is responsible for nominating, for the approval of the Board, candidates for appointment to the Board, and also for succession planning. The Nomination Committee generally engages external consultants to advise on candidates for Board appointments, and did so in connection with the appointments of Jennifer Laing and Jonathan Linen. Candidate profiles and objective selection criteria were prepared in advance of these engagements. The Nominations Committee also assists the Board in identifying and developing the role of the Senior Independent Director.

     Disclosure Committee

      The Disclosure Committee, chaired by the Group’s Financial Controller and comprising of the Company Secretary and other senior executives, reports to the Chief Executive, 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.

     General Purposes Committee

      The General Purposes Committee comprises any two executive directors or any one executive director together with a senior officer from an agreed and restricted list of senior executives. It is always chaired by a director. It attends to business of a routine nature and to the administration of matters on an ad hoc basis, the principles of which have been agreed previously by the Board or an appropriate Committee.

      A description of the significant ways in which the Company’s actual corporate governance practices differ from the New York Stock Exchange corporate governance requirements followed by U.S. companies can be found on the Company’s website at www.ihg.com.

EMPLOYEES

      The Group employed an average of 11,456 people worldwide in the year ended December 31, 2006. Of these, approximately 88% were employed on a full-time basis and 12% were employed on a part-time basis.

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

			Rest of Europe,
			the Middle East
	United Kingdom		and Africa		United States		Asia Pacific		Total
2006		960		3,763		4,268		2,465		11,456
2005:
Hotels		4,610		6,145		6,329		1,911		18,995
Soft Drinks(i)		2,991		—		—		—		2,991
InterContinental Hotels Group		7,601		6,145		6,329		1,911		21,986
2004:
Hotels		9,676		6,601		8,241		2,317		26,835
Soft Drinks(i)		2,824		—		—		—		2,824
InterContinental Hotels Group		12,500		6,601		8,241		2,317		29,659

(i)  With effect from December 14, 2005, the Group no longer employed any individuals in the Soft Drinks Sector.

     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, 2006, the minimum wage for individuals between 18 and under the age of 22 was £4.45 per hour and £5.35 per hour for individuals age 22 and above. 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 of the Company at March 16, 2007 were as follows:

	Ordinary shares			% of shares
	of 113/7 pence			outstanding
Directors
Andrew Cosslett		111,243			0.03
Richard Hartman		84,114			0.02
David Kappler		1,669			N/A
Ralph Kugler		1,393			N/A
Jennifer Laing		1,673			N/A
Robert C. Larson		6,874	(1)		N/A
Jonathan Linen		8,750	(1)		N/A
Stevan Porter		200,364			0.06
Sir David Prosser		2,863			N/A
Richard Solomons		186,838			0.05
David Webster		31,975			0.01
Officers
Tom Conophy		Nil			N/A
Peter Gowers		93,990			0.03
Patrick Imbardelli		101,723			0.03
Tracy Robbins		11,740			N/A
Richard Winter		105,637			0.03

(1) Held in the form of American Depositary Receipts

     The above shareholdings are all beneficial interests and include shares held for the benefit of directors and officers by trustees of the Company’s Executive Share Ownership Trust. The percentage of ordinary share capital owned by each of the directors is negligible.

      On March 16, 2007, the executive directors’ technical interest in unallocated IHG ordinary shares held by the Trustees of the Employee Share Ownership Trust was 2,410,526 shares.

      The directors’ interests in options to subscribe for shares in InterContinental Hotels Group PLC as at December 31, 2006 are set out on page F-40.

      The directors do not have different voting rights from other shareholders of the Company.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

      As far as is known to management, IHG is not directly or indirectly owned or controlled by another corporation or by any government. Under the provisions of the Companies Act, the Company has been advised of the following interests in its shares, being greater than 3% of its issued share capital as of March 16, 2007:

	March 2007						March 2006						April 2005
	Number of			Percent			Number of			Percent			Number of			Percent
Identity of person or group	shares/ADSs			of class			shares/ADSs			of class			shares/ADSs			of class
Ellerman Corporation Limited		25,286,950			7.13%				(1)			(1)			(1)			(1)
Lloyds TSB Group Plc		13,619,563			3.84%			19,534,651			4.51%			26,773,575			4.44%
Legal & General Group Plc		11,927,715			3.37%			13,753,588			3.17%			24,233,225			4.02%
Barclays PLC			(1)			(1)			(1)			(1)		20,246,584			3.36%
AXA SA			(1)			(1)			(1)			(1)		18,121,201			3.00%

(1) No notification of an above 3% shareholding received.

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     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 16, 2007, 26,610,300 ADSs equivalent to 26,610,300 ordinary shares, or approximately 7.51% of the total ordinary shares in issue, were outstanding and were held by 1,009 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 16, 2007, there were a total of 67,402 record holders of ordinary shares, of whom 200 had registered addresses in the United States and held a total of 519,278 ordinary shares (0.15% of the total issued).

RELATED PARTY TRANSACTIONS

      The Company has not entered into any related party transactions or loans for the period beginning January 1, 2006 up to March 16, 2007.

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 and arbitration proceedings incidental to those operations. It is the Company’s view that such proceedings, either individually or in the aggregate, have not in the recent past and are not likely to have a significant effect on the Group’s financial position or profitability.

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 JPMorgan Chase Bank, N.A. as Depositary.

      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

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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
Year ended September 30	High		Low		High		Low
2002		7.83		5.41		11.73		7.49

	£ per
	ordinary share				$ per ADS
15 months ended December 31	High		Low		High		Low
2003 — October 1 to April 11 Six Continents		6.35		4.61		10.08		7.49
2003 — April 15 to December 31 IHG		5.55		3.38		9.82		5.26
Year ended December 31
2004		6.91		4.79		13.09		8.70
2005		8.42		6.12		14.53		11.49

	£ per
	ordinary share				$ per ADS
Year ended December 31	High		Low		High		Low
2005
First quarter		6.97		6.17		13.06		11.65
Second quarter		7.06		6.12		12.99		11.49
Third quarter		7.57		7.01		13.81		12.44
Fourth quarter		8.42		6.88		14.53		12.04
2006
First quarter		9.01		8.07		15.83		14.40
Second quarter(1)		10.00		8.98		21.21		16.54
Third quarter		9.56		8.37		17.91		15.99
Fourth quarter		12.65		9.31		26.27		17.64
2007
First quarter (through March 16, 2007)		13.15		11.82		25.86		22.80

(1)  Prices adjusted for the share consolidation effective June 12, 2006. Unadjusted prices for the quarter were £10.01 and £8.98 and $18.56 and $15.06, respectively.

	£ per
	ordinary share				$ per ADS
Month ended	High		Low		High		Low
September 2006		9.47		9.15		17.91		17.35
October 2006		10.19		9.31		19.50		17.64
November 2006		10.66		10.02		20.44		19.29
December 2006		12.65		10.18		26.27		20.37
January 2007		13.08		11.84		25.79		23.12
February 2007		13.15		12.00		25.86		22.97
March 2007 (through to March 16, 2007)		12.43		11.82		24.03		22.80

      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.

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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. 333-126139) filed with the SEC on June 27, 2005.

      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 5134420. 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, 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.

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

      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 11³/7 pence 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

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•  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.

      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.

      Each Director shall retire every three years in Annual General Meeting and unless otherwise decided by the Directors, shall be eligible for re-election. Any director attaining 70 years of age shall retire at the next Annual General Meeting. Such a director may be re-elected but shall retire every year (and be eligible for re-election) at the next, and all subsequent, Annual General Meetings.

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.

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MATERIAL CONTRACTS

      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.

IHG Facility Agreement

      On November 9, 2004, InterContinental Hotels Limited signed a five year £1,600 million bank facility agreement (the “IHG Facility Agreement”) with The Bank of Tokyo-Mitsubishi, Ltd., Barclays Capital, Citigroup Global Markets Limited, HSBC Bank plc, J.P. Morgan plc, Lloyds TSB Bank plc, The Royal Bank of Scotland plc, SG Corporate & Investment Banking (the corporate and investment banking division of Société Generale) and WestLB AG, London Branch, all acting as mandated lead arrangers and underwriters and HSBC Bank plc as agent bank.

      The facility was split into a £1.1 billion five year revolving credit facility and a £500 million 364 day revolving credit facility. The latter was canceled in November 2005.

      The interest margin payable on borrowings under the IHG Facility Agreement is linked to IHG’s consolidated net debt to consolidated EBITDA ratio; initially the margin was set at LIBOR + 0.375% p.a. The margin can vary between LIBOR + 0.325% and LIBOR + 0.60% depending on the level of the ratio.

      As part of this refinancing the Group repurchased its euro and sterling denominated bonds. The Group’s new parent company InterContinental Hotels Group PLC, acceded to the IHG Facility Agreement in July 2005, following the capital restructuring described in Item 4.

Disposal to Hospitality Properties Trust

      On December 17, 2004, BHR Texas L.P., InterContinental Hotels Group Resources, Inc., Crowne Plaza LAX, LLC, Crowne Plaza Hilton Head Holding Company, Holiday Pacific Partners Limited Partnership, 220 Bloor Street Hotel Inc. and Staybridge Markham, Inc. (together, the “Vendors”) entered into a Purchase and Sale Agreement (as amended and restated on February 9, 2005) with HPT IHG — 2 Properties Trust (“HPT IHG-2”), pursuant to which HPT IHG-2 purchased from the Vendors 12 hotels situated in the United States and Canada. On the same date, Six Continents International Holdings B.V. (“SIH”), entered into a Stock Purchase Agreement (as amended and restated on February 9, 2005) with HPT IHG-2, pursuant to which HPT IHG-2 purchased from SIH all of the shares in Crowne Plaza (Puerto Rico) Inc., which is the owner of a hotel in Puerto Rico. The total consideration payable by HPT IHG-2 for the sales amounted to US$425 million, before transaction costs, equivalent to net book value (of which US$395 million was received upon the main completion of the sale on February 16, 2005, with the remaining US$30 million received upon the completion of the sale of the InterContinental Hotel in Austin, on June 1, 2005). The Group continues to manage the hotels.

      Under the Purchase and Sale Agreement and Stock Purchase Agreement, the Vendors have given certain customary warranties and indemnities to HPT IHG-2.

      In connection with the disposals referred to above, IHG has agreed to guarantee certain amounts payable to HPT IHG and HPT IHG-2 in relation to the managed hotels sold by the Group to HPT IHG and HPT IHG-2. The guarantee is for a maximum amount of $125 million and requires amounts to be paid by IHG to HPT IHG and/or HPT IHG-2 (and/or their designated affiliate) irrespective of the revenue generated by the relevant hotels. The guarantee may be terminated if certain financial tests are met.

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UK Hotels Disposal

      A Share Purchase Agreement (the “SPA”) was entered into on March 10, 2005 between Six Continents, IHC London (Holdings) Limited (“IHC Holdings”) and LRG. Pursuant to the SPA, Six Continents and IHC Holdings (the “Sellers”) agreed to sell all of the issued ordinary share capital of Six Continents Hotels & Holidays Limited, Holiday Inn Limited, NAS Cobalt No. 2 Limited and London Forum Hotel Limited respectively (together, the “LRG Shares”) to LRG and to transfer to LRG certain contractual rights to the extent they related to the hotels LRG indirectly acquired under the SPA (the “LRG Hotels”) and which remained to be completed or performed, or remained in force, after completion of the sale of the LRG Shares to LRG.

      The agreed sale price for the LRG Shares was £1 billion. Proceeds of £40 million were deferred and are contingent upon certain pre-agreed performance targets being reached. Following completion, the Group continues to manage the LRG Hotels.

      Under the SPA, the Sellers gave certain warranties in relation to the assets disposed of and LRG gave certain warranties in relation to its authority to enter into the SPA and its capacity to perform its obligations under the SPA. Certain indemnities were also given by the Sellers.

Australasian Hotels Disposals

      On September 1, 2005, Holiday Inn Holdings (Australia) Pty Limited, SPHC Group Pty Limited and HIA(T) Pty Limited (for the Australian assets) and Hale International Limited (for the New Zealand asset), all three of which are members of the Group, (“IHG”) entered into two sale and purchase agreements with HANZ (Australia) Pty Limited (for the Australian assets) and HANZ Holdings (New Zealand) Limited (for the New Zealand asset), both companies being subsidiaries of the Hotel Alternative (Australia and New Zealand) Private Syndicate managed by Eureka Funds Management Limited (“Eureka”) pursuant to which Eureka purchased from IHG nine hotels situated in Australia and New Zealand for AUS$390 million in cash (before transaction costs) which is AUS$75 million above the net book value of AUS$315 million. IHG gave to Eureka normal warranties in relation to the hotels and an indemnity for pre-completion tax liabilities. The transaction completed on October 31, 2005.

      The Group continues to manage the hotels for Eureka under ten year management contracts entered into at the time of the transaction, with an option to extend for ten further years at the Group’s discretion.

Disposal to Dabicam SAS

      On September 8, 2005, a sale and purchase agreement (“SPA”) was entered into between BHR Holdings BV, a wholly owned subsidiary of IHG, and Dabicam SAS, an affiliate of GIC Real Estate Pte. Ltd. Under the SPA the seller agreed to sell the InterContinental Hotel Paris. The agreed sale price for the hotel was €315 million. The hotel is no longer operated under an IHG brand. Under the SPA the sellers gave certain customary warranties and indemnities to the purchaser. Following receipt of shareholder approval, in connection with the sale, at an Extraordinary General Meeting of IHG on October 26, 2005 the sale was completed on November 1, 2005.

Britvic Underwriting Agreement

      An Underwriting Agreement was entered into on November 25, 2005 between, inter alia, Britvic, IHG in its capacity as a selling shareholder, the directors of Britvic, Citigroup and Deutsche Bank AG (as joint sponsors) and Citigroup, Deutsche Bank AG, Lehman Brothers International (Europe) and Merrill Lynch International (as joint Underwriters). This set out the mechanics for the Britvic initial public offering and included customary termination rights. Britvic gave customary warranties, indemnities and undertakings in the context of an agreement of this sort. IHG also gave customary warranties and indemnities in its capacity as a selling shareholder. Under this agreement, each of the selling shareholders paid a commission equal to 2% of the offer price multiplied by the number of shares sold by that selling shareholder to the joint Underwriters.

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Disposal to Westbridge

      On March 10, 2006 a Sale and Purchase Agreement (“SPA”) was entered into between BHR Luxembourg S.a.r.l. and other wholly owned subsidiaries of IHG as sellers (BHR Luxembourg S.a.r.l. being the principal seller) and Cooperatie Westbridge Europe I U.A. as purchaser and Westbridge Hospitality Fund L.P. as the purchaser’s guarantor. Under the SPA the sellers agreed to sell 23 hotels situated across Europe in France, Germany, Belgium, the Netherlands, Austria, Italy and Spain.

      The agreed sale price was €352 million. IHG’s share of the proceeds was €345.2 million (before transaction costs), in cash and the assumption of debt, and the balance of €6.8 million relates to third-party minority interests.

      The hotels continue to be operated by the purchaser under the same IHG brands under 15 year franchise agreements.

      Under the SPA the sellers gave certain customary warranties and indemnities to the purchaser.

Disposal to Morgan Stanley Real Estate Funds

      On July 13, 2006 a sale and purchase agreement (“SPA”) was entered into between BHR Holdings BV and other wholly owned subsidiaries of IHG as sellers (BHR Holdings BV being the principal seller) and a subsidiary of Morgan Stanley Real Estate Funds MSREF VI Danube BV. Under the SPA the sellers agreed to sell seven InterContinental branded hotels situated across Europe in France, Germany, the Netherlands, Austria, Hungary, Italy and Spain.

      The agreed sale price for the seven hotels was €634 million. IHG retained 30 year management contracts on the hotels, with two ten year renewals at IHG’s discretion, giving a total potential contract length of 50 years.

      Under the SPA the sellers gave certain customary warranties and indemnities to the purchaser.

EXCHANGE CONTROLS

      There are no restrictions on dividend payments to US citizens.

      Although there are currently no UK foreign exchange control restrictions on the export or import of the capital or 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, such as

• certain financial institutions;

• insurance companies;

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• dealers and traders in securities or foreign currencies;

• persons holding ordinary shares or ADSs as part of a hedge, straddle, conversion transaction or other integrated transaction;

• persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

• partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

• persons liable for the alternative minimum tax;

• tax-exempt organizations;

• persons who acquired our ADSs or shares pursuant to the exercise of any employee stock option or otherwise as compensation.

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, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or (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 HM Revenue and Customs, all as of the date hereof, and on the current Double Taxation Convention between the United States and the United Kingdom (the “Treaty”). These laws are subject to change, possibly on a retroactive basis.

      This section is further based in part upon the representations of the Depositary and assumes that each obligation in the Company ADR Deposit Agreement and any related agreement will be performed in accordance with its terms. For US 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.

      The US Treasury has previously expressed concerns that parties to whom ADRs are pre-released may be taking actions that are inconsistent with the claiming of foreign tax credits for US holders of ADRs. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, for qualified dividend income. Accordingly, the analysis of the availability of the reduced rate of tax for qualified dividend income described below could be affected by actions taken by parties to whom the ADRs are pre-released.

      Investors should consult their own tax advisor regarding the US 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 Treaty.

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.

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United States Federal Income Taxation

      Subject to the passive foreign investment company (“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). Subject to applicable limitations and the discussion above regarding concerns expressed by the US Treasury, dividends paid to a non-corporate US holder in taxable years beginning before January 1, 2011 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15%. The Company expects that dividends paid by the Company with respect to the shares or ADSs will constitute qualified dividend income. U.S. Holders should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to be taxed at this favorable 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. For foreign tax credit limitation purposes, dividends will be income from sources outside the United States.

      The amount of any dividend paid in pounds 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 and accumulated earnings and profits, as determined for US 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. Because the Company has not historically maintained, and does not currently maintain, books in accordance with US tax principles, the Company does not expect to be in a position to determine whether any distribution will be in excess of the Company’s current and accumulated earnings and profits as computed for US federal income tax purposes. As a result, the Company expects that amounts distributed will be reported to the Internal Revenue Service as dividends.

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 generally be liable for UK taxation on capital gains realized 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 or has become temporarily treated as non-resident 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, for the year of assessment when that individual becomes resident again in the UK, 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.

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.

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Generally, capital gain of a non-corporate US holder that is recognized in tax years beginning before January 1, 2011 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 will not be treated as stock of a PFIC for US federal income tax purposes for its 2006 taxable year. However, this conclusion is an annual factual determination and thus may be subject to change. Unless a US holder elects to be taxed annually on a mark-to-market basis with respect to the Company shares or ADSs, if the Company were to be treated as a PFIC, 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 taxable year of the sale or other exchange and to any year before the Company became a PFIC, would be taxed as ordinary income. The amount allocated to each other taxable year 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” received by certain non-corporate US holders would not apply. Certain elections may be available (including a market-to-market election) to US holders that may mitigate the adverse tax consequences resulting from PFIC status.

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 agreement and duly stamped, any liability to SDRT will usually be repaid, if already paid, or canceled. 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.

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      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 100 F Street, NE 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 Company’s treasury policy is to manage the financial risks that arise in relation to the underlying business needs. The activities of the treasury function are carried out in accordance with board approved policies and are subject to regular internal audit. The treasury function does not operate as a profit center.

     Treasury Risk Management

      The treasury function seeks to reduce the financial risk of the Company and manages liquidity to meet all foreseeable cash needs. Treasury activities include money market investments, spot and forward foreign exchange instruments, currency options, currency swaps, interest rate swaps, options and forward rate agreements. One of the primary objectives of the Company’s treasury risk management policy is to mitigate the adverse impact of movements in interest rates and foreign exchange rates. Derivatives are not used for trading or speculative purposes.

     Credit Risk

      Credit Risk on treasury transactions is minimised by operating a policy on the 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 for individual counterparties. Most of the Company’s surplus funds are held in the UK or US and there are no material funds where repatriation is restricted as a result of foreign exchange regulations.

     Interest Rate Risk

      The Company has an exposure to interest rate fluctuations on its borrowings and it seeks to manage these by the use of interest rate swaps and options, and forward rate agreements. The Company takes out interest rate swaps to fix the interest flows on between 25% and 75% of its borrowings in major currencies.

      At December 31, 2006, the Company held interest rate swaps with notional principals of US$100 million and €80 million (2005 US$200 million and €160 million). Based on the year 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 would increase the annual net interest charge by approximately £1 million.

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     Currency Risk

      The US dollar is the predominant currency of the Company’s revenue and cash flows and movements in foreign exchange rates, particularly the US dollar and euro, can affect the company’s reported profits, net assets and interest cover. To hedge this translation exposure the Company denominates the currency of its debt (either directly or via derivatives) to match the currency of its net assets, whilst trying to maximise the amount of US dollars borrowed. At December 31, 2006, the Company held outstanding forward foreign exchange contracts of £224 million which were used as effective hedges against the currency of the Company’s net assets.

      A general weakening of the US dollar (specifically as a one cent rise in the sterling: US dollar rate) would have reduced the Company’s profit before tax by an estimated £1 million.

      The Company is exposed to foreign currency risk on income streams denominated in foreign currencies. Foreign exchange transaction exposure is managed by forward purchase or sale of foreign currencies or the use of currency options. Most significant exposures of the Company are in currencies that are freely convertible. At the year end there were no outstanding contracts hedging currency risk on income streams.

Quantitative Information about Market Risk

Interest Rate Sensitivity

      The tables below provide information about the Company’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, 2006

	Expected to mature before December 31,
	2007			2008			2009			2010			2011			Thereafter			Total			Fair value(i)
	(£ million, except percentages)
Long-Term Debt:
Fixed Rate lease debt (US dollar)		3			7			6			6			5			70			97			97
Average dollar interest rate		9.7	%		9.7	%		9.7	%		9.7	%		9.7	%		9.7	%		9.7	%
Variable Rate (various currencies)		7			—			209			—			—			—			216			216
Average interest rate		7.5	%					5.3	%											5.3	%

	Expected to mature before December 31,
	2007		2008			2009		2010		2011		Thereafter		Total			Fair value(i)
	(local currency million, except percentages)
Interest Rate Swaps and Forward rate agreements:
Principal (US dollar)		—		100			—		—		—		—		100			—
Fixed rate payable				4.5	%										4.5	%
Variable rate receivable				5.7	%										5.7	%
Principal (euro)		—		80			—		—		—		—		80			—
Fixed rate payable				3.0	%										3.0	%
Variable rate receivable				4.0	%										4.0	%

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

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Exchange Risk Sensitivity

      The following information provides details of the Company’s derivative and other financial instruments by currency presented in sterling equivalents. Forward exchange contracts provide a currency hedge against currency net assets. All forward exchange agreements mature within one year.

	Pay			Receive
	2006			2006
	(local currency			(£ million)
	million)
Sale of US dollars against sterling		(251	)		130
Sale of euros against sterling		(70	)		47
Sale of Hong Kong dollars against sterling		(690	)		47

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

      Not applicable.

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

Disclosure Controls and Procedures

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

Management’s Report on Internal Control Over Financial Reporting

      Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934.

      Management has issued a report on the effectiveness of the Company’s Internal Control over Financial reporting as at December 31, 2006. This report appears on page F-1 of the Company’s Consolidated Financial Statements contained in this Annual Report.

      Ernst & Young LLP, an independent registered public accounting firm, has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting. This report appears on page F-2 of the Company’s consolidated financial statements contained in this Annual Report.

85

Changes in Internal Control Over Financial Reporting

      There have been no 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 Company’s internal control over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

      The Senior Independent Director David Kappler, who has significant recent and relevant financial experience is the “Audit Committee Financial Expert” as defined under the regulations of the US Securities and Exchange Commission. David Kappler is independent as that term is defined under the listing Standards of the NYSE.

ITEM 16B.     CODE OF ETHICS

      The board has adopted a global Code of Ethics and Business Conduct that applies to all directors, officers and employees of IHG, including the Chief Executive and Finance Director. 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 and Business Conduct on its website www.ihg.com.

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:

	Year ended		Year ended
	December 31,		December 31,
	2006		2005
	(£ million)
Audit Fees		2.4		3.9
Audit Related Fees		2.1		2.7
Tax Fees		0.7		0.6
Total		5.2		7.2

      Further detail is provided in Note 4 “Auditor’s remuneration paid to Ernst & Young LLP” of Item 18 — Financial Statements.

      Audit fees in respect of the pension scheme were not material.

      The Audit Committee has 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.

86

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

      Not applicable.

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

							(d) Maximum
					(c) Total number		number (or
					of shares (or		approximate dollar
			(b) Average		units) purchased		value) of shares (or
	(a) Total number		price paid		as part of publicly		units) that may yet be
	of shares (or		per share		announced plans		purchased under the
Period of fiscal year	units) purchased		(or unit)		or programs		plans or programs
Month 1 (no purchases in this month)		0		0.00		0		55,178,065.00
Month 2 (no purchases in this month)		0		0.00		0		55,178,065.00
Month 3 (03.03.06 – 03.28.06)		3,195,000		8.68		3,195,000		51,983,065.00
Month 4 (04.03.06 – 04.25.06)		3,327,752		9.41		3,327,752		48,655,313.00
Month 5 (05.19.06 – 05.25.06)		4,500,000		9.18		4,500,000		44,155,313.00
Month 6 (06.05.06 – 06.03.06)		1,645,001		9.19		1,645,001		53,805,720.00
Month 7 (07.03.06 – 07.31.06)		6,522,000		9.12		6,522,000		47,283,720.00
Month 8 (08.01.06 – 08.31.06)		5,710,000		8.62		5,710,000		41,573,720.00
Month 9 (09.04.06 – 09.29.06)		1,763,000		9.29		1,763,000		39,810,720.00
Month 10 (10.03.06 – 10.13.06)		815,000		9.53		815,000		38,995,720.00
Month 11 (no purchases in this month)		0		0.00		0		38,995,720.00
Month 12 (12.05.06 – 12.11.06)		932,000		10.73		932,000		38,063,720.00

      The first share repurchase program was announced on March 11, 2004 with the intention to repurchase £250 million worth of shares (US$456,525,000). A second £250 million share repurchase program followed, announced September 9, 2004. These programs were completed on December 20, 2004 and April 11, 2006, respectively.

      On September 8, 2005, the Company announced a further £250 million share repurchase program. By December 31, 2006 23.9 million shares had been repurchased at an average price per share of 913 pence (approximately GBP£219 million). By March 16, 2007 a total of 26.05 million shares had been repurchased under the third repurchase program at an average price of 938 pence per share (approximately £244 million).

      During fiscal 2006, 4,997,699 ordinary shares were purchased by the Company’s Employee Share Ownership Trust at prices ranging from 839 pence to 1054 pence per share, for the purpose of satisfying future share awards to employees.

      On February 20, 2007, the Company announced a fourth, £150 million share repurchase program. By March 16, 2007 no shares had been repurchased under the fourth repurchase program.

PART III

ITEM 17. FINANCIAL STATEMENTS

      Not applicable.

87

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
Management’s Report on Internal Control over Financial Reporting		F-1
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting		F-2
Report and Consent of Independent Registered Public Accounting Firm		F-3
Financial Statements
Consolidated Income Statement for the years ended December 31, 2006, 2005 and 2004		F-5
Consolidated Statement of Recognized Income and Expense for the years ended December 31, 2006, 2005 and 2004		F-6
Consolidated Balance Sheet for the years ended December 31, 2006 and 2005		F-7
Consolidated Statement of Changes in Shareholders’ Funds for the years ended December 31, 2006, 2005 and 2004		F-8
Consolidated Cash Flow Statement for the years ended December 31, 2006, 2005 and 2004		F-10
Notes to the Financial Statements		F-11
Schedule for the years ended December 31, 2006, 2005 and 2004
Schedule II — Valuation and Qualifying Accounts		S-1

ITEM 19. EXHIBITS

      The following exhibits are filed as part of this Annual Report:

Exhibit 1	Memorandum and Articles of Association of IHG (incorporated by reference to Exhibit 4 of InterContinental Hotels Group’s Registration Statement on S-8 (File No. 333-126139) filed with the SEC on June 27, 2005)
Exhibit 4(a)(i)	£1,600 million Facility Agreement dated November 9, 2004 among Bank of Tokyo-Mitsubishi, Ltd., Barclays Capital, Citigroup Global Markets Limited, HSBC Bank plc, JP Morgan plc, Lloyds Bank plc, The Royal Bank of Scotland plc, SG Corporate & Investment Banking and West LB AG (incorporated by reference to Exhibit 4(ii) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No 1-10409) dated May 3, 2005)
Exhibit 4(b)(i)	Amended and Restated Purchase and Sale Agreement dated February 9, 2005 among BHR Texas L.P., InterContinental Hotels Group Resources Inc, Crowne Plaza LAX, LLC, Crowne Plaza Hilton Head Holding Company, Holiday Pacific Partners Limited Partnership, Staybridge Markham and HPT (incorporated by reference to Exhibit 4(b)(ii) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated May 3, 2005)
Exhibit 4(b)(ii)	Amended and Restated Stock Purchase Agreement dated February 9, 2005 between Six Continents International Holdings, B.V. and HPT IHG-2 (incorporated by reference to Exhibit 4(b)(v) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated May 3, 2005)
Exhibit 4(b)(iii)	Share Purchase Agreement dated March 10, 2005 between IHC London (Holdings) Limited, and LGR Acquisition (currently LRG Acquisition) and LGR Holdings Limited (currently LRG Holdings Limited) (incorporated by reference to Exhibit 4(b)(iv) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated May 3, 2005)

88

Exhibit 4(b)(iv)	New Zealand Share Sale Deed dated September 1, 2005 between Hale International Limited, Six Continents Limited, HANZ Holdings (New Zealand) Limited and Eureka Funds Management Limited (incorporated by reference to Exhibit 4(b)(v) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 4(b)(v)	Australia Share and Unit Sale Deed dated September 1, 2005 between Holiday Inns Holdings (Australia) Pty Limited, SPHC Group Pty Limited, HIA(T) Pty Ltd, Six Continents Limited, HANZ (Australia) Pty Limited and Eureka Funds Management Limited (incorporated by reference to Exhibit 4(b)(vi) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 4(b)(vi)	Sale and Purchase Agreement dated September 8, 2005 between BHR Holdings BV and DABICAM SAS relating to the sale of the InterContinental Hotel, Paris.
Exhibit 4(b)(vii)	Britvic Underwriting Agreement dated November 25, 2005 between, inter alia, Britvic, IHG, the directors of Britvic, Citigroup and Deutsche Bank AG (as joint sponsors) and Citigroup, Deutsche Bank AG, Lehman Brothers International (Europe) and Merrill Lynch International (as joint Underwriters) (incorporated by reference to Exhibit 4(b)(vii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 4(b)(viii)	Sale and Purchase Agreement dated March 10, 2006 among BHR Luxembourg S.à.r.l., Others, Cooperatie Westbridge Europe I.U.A., Others and Westbridge Hospitality Fund L.P. relating to a portfolio of certain companies and businesses in continental Europe (incorporated by reference to Exhibit 4(b)(viii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 4(b)(ix)	Sale and Purchase Agreement dated July 13, 2006 between BHR Holdings BV and MSREF VI Danube BV relating to the sale of certain companies and businesses in continental Europe and Side Letter dated September 5, 2006.
Exhibit 4(c)(i)	Richard Hartman’s service contract dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(i) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated April 8, 2004)
Exhibit 4(c)(ii)	Richard Hartman’s letter of appointment dated April 2005, effective from June 27, 2005 on completion of the Scheme of Arrangement and the introduction of the new parent company to the Group (incorporated by reference to Exhibit 4(c)(ii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 4(c)(iii)	Stevan Porter’s service contract dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(iii) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated April 8, 2004)
Exhibit 4(c)(iv)	Stevan Porter’s letter of appointment dated April 2005, effective from June 27, 2005 on completion of the Scheme of Arrangement and the introduction of the new parent company to the Group (incorporated by reference to Exhibit 4(c)(iv) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 4(c)(v)	Richard Solomons’ service contract dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(iv) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated April 8, 2004)

89

Exhibit 4(c)(vi)	Richard Solomons’ letter of appointment dated April 2005, effective from June 27, 2005 on completion of the Scheme of Arrangement and the introduction of the new parent company to the Group (incorporated by reference to Exhibit 4(c)(vi) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 4(c)(vii)	Andrew Cosslett’s service contract dated December 13, 2004 (incorporated by reference to Exhibit 4(c)(v) of InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated May 3, 2005)
Exhibit 4(c)(viii)	Andrew Cosslett’s letter of appointment dated April 2005, effective from June 27, 2005 on completion of the Scheme of Arrangement and the introduction of the new parent company to the Group (incorporated by reference to Exhibit 4(c)(viii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated March 31, 2006)
Exhibit 8	List of Subsidiaries
Exhibit 12(a)	Certification of Andrew Cosslett filed pursuant to 17 CFR 240.13a-14(a)
Exhibit 12(b)	Certification of Richard Solomons filed pursuant to 17 CFR 240.13a-14(a)
Exhibit 13(a)	Certification of Andrew Cosslett and Richard Solomons furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.1350
Exhibit 15(a)	Consent of Ernst & Young LLP (included on page F-4)

90

MANAGEMENT’S REPORT ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

      Management of InterContinental Hotels Group PLC (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with generally accepted accounting principles.

      The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In connection with the preparation of the Company’s annual consolidated financial statements, management has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls.

      Based on this assessment, management has concluded that as of December 31, 2006, the Company’s internal control over financial reporting is effective based on those criteria.

      Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements, has issued an attestation report on management’s assessment of internal control over financial reporting, a copy of which appears on the next page of this annual report.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Shareholders of InterContinental Hotels Group PLC:

      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that InterContinental Hotels Group PLC maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). InterContinental Hotels Group PLC’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that InterContinental Hotels Group PLC maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, InterContinental Hotels Group PLC maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of InterContinental Hotels Group PLC as of December 31, 2006 and 2005, and the related Consolidated Income Statements, Consolidated Statements of Recognized Income and Expense, Consolidated Statements of Changes in Shareholders’ Funds and Consolidated Cash Flow Statements for each of the three years in the period ended December 31, 2006, and the financial statement schedule listed in the Index at Item 18. Financial Statements and our report dated March 30, 2007 expressed an unqualified opinion thereon.

Ernst & Young LLP

London, England

March 30, 2007

F-2

INTERCONTINENTAL HOTELS GROUP PLC

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of InterContinental Hotels Group PLC

      We have audited the accompanying Consolidated Balance Sheets of InterContinental Hotels Group PLC as of December 31, 2006 and 2005, and the related Consolidated Income Statements, Consolidated Statements of Recognized Income and Expense, Consolidated Statements of Changes in Shareholders’ Funds and Consolidated Cash Flow Statements for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the index at Item 18. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of InterContinental Hotels Group PLC at December 31, 2006 and 2005, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended December 31, 2006, in conformity with International Financial Reporting Standards as adopted by the European Union which differ in certain respects from United States generally accepted accounting principles (see Note 32 of Notes to the Consolidated 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.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of InterContinental Hotels Group PLC’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 30, 2007 expressed an unqualified opinion thereon.

      As discussed in Note 32 of the Notes to the Consolidated Financial Statements, the Company changed its method of accounting for financial instruments in 2005.

Ernst & Young LLP

London, England

March 30, 2007.

F-3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      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, 333-99785, 333-104691 and 333-126139) of InterContinental Hotels Group PLC of the reference to our name in “Item 3. Key Information” and our reports dated March 30, 2007, with respect to the Consolidated Financial Statements and Schedule of InterContinental Hotels Group PLC, InterContinental Hotels Group PLC management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of InterContinental Hotels Group PLC, included in this Annual Report (Form 20-F) for the year ended December 31, 2006.

Ernst & Young LLP

London, England

March 30, 2007

F-4

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED INCOME STATEMENT

		Year ended December 31,									Year ended December 31,									Year ended December 31,
		2006									2005									2004
		Continuing			Discontinued						Continuing			Discontinued						Continuing			Discontinued
		operations			operations			Total			operations			operations			Total			operations			operations			Total
								(£ million, except per ordinary share amounts)
Revenue (Note 2)			805			155			960			713			1,197			1,910			606			1,598			2,204
Cost of sales			(364	)		(121	)		(485	)		(333	)		(884	)		(1,217	)		(300	)		(1,177	)		(1,477	)
Administrative expenses			(180	)		—			(180	)		(150	)		(74	)		(224	)		(140	)		(68	)		(208	)
			261			34			295			230			239			469			166			353			519
Depreciation and amortization (Note 2)			(60	)		(4	)		(64	)		(57	)		(73	)		(130	)		(46	)		(127	)		(173	)
Other operating income and expenses (Note 5)			27			—			27			(22	)		—			(22	)		(49	)		—			(49	)
Operating profit (Note 2)			228			30			258			151			166			317			71			226			297
Financial income (Note 6)			26			—			26			30			—			30			70			—			70
Financial expenses (Note 6)			(37	)		—			(37	)		(54	)		(9	)		(63	)		(103	)		—			(103	)
Profit before tax			217			30			247			127			157			284			38			226			264
Tax (Note 7)			50			(9	)		41			(24	)		(56	)		(80	)		196			(69	)		127
Profit after tax			267			21			288			103			101			204			234			157			391
Gain on disposal of assets, net of tax charge of £6 million (2005 £38 million: 2004 credit of £4 million)			—			117			117			—			311			311			—			19			19
Profit for the year			267			138			405			103			412			515			234			176			410
Attributable to:
	Equity holders of the parent(i)		267			138			405			103			393			496			234			149			383
	Minority equity interest		—			—			—			—			19			19			—			27			27
Profit for the year			267			138			405			103			412			515			234			176			410
Earnings per ordinary share:(Note 9)
	Basic		68.6p			35.5p			104.1p			19.8p			75.4p			95.2p			32.9p			21.0p			53.9p
	Diluted		66.9p			34.6p			101.5p			19.3p			73.8p			93.1p			32.6p			20.7p			53.3p

(i) A summary of the significant adjustments to profit available for IHG equity holders of the parent that would be required had United States generally accepted accounting principles been applied instead of International Financial Reporting Standards as adopted by the European Union is set out in Note 32 of Notes to the Consolidated Financial Statements.

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

F-5

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2006			2005			2004
		(£ million)
Income and expense recognized directly in equity
Gains on valuation of available-for-sale assets			16			31			—
Gains on cash flow hedges			1			1			—
Exchange differences on retranslation of foreign operations			(30	)		29			(12	)
Actuarial losses on defined benefit pension plans			(2	)		(23	)		(51	)
Deficit transferred in respect of previous acquisition			—			—			(6	)
			(15	)		38			(69	)
Transfers to the income statement
On cash flow hedges			(1	)		(6	)		—
On disposal of foreign operations			4			2			—
On disposal of available-for-sale assets			(14	)		—			—
			(11	)		(4	)		—
Tax
Tax on items above taken directly to or transferred from equity			4			(1	)		14
Deferred tax related to share schemes recognized directly in equity			26			8			—
			30			7			14
Net income/(expense) recognized directly in equity			4			41			(55	)
Profit for the year			405			515			410
Total recognized income and expense for the year(i)			409			556			355
Attributable to:
	Equity holders of the parent		409			541			338
	Minority equity interest		—			15			17
			409			556			355
Effects of changes in accounting policy
Losses on valuation of available-for-sale assets			—			(10	)		—
Gains on cash flow hedges			—			6			—
			—			(4	)		—

(i) The statement of comprehensive income required under United States generally accepted accounting principles is set out in Note 32 of Notes to the Consolidated Financial Statements.

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

F-6

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED BALANCE SHEET

	December 31,			December 31,
	2006			2005
	(£ million)
ASSETS
Property, plant and equipment — (Note 10)		997			1,356
Goodwill — (Note 12)		109			118
Intangible assets — (Note 13)		154			120
Investment in associates — (Note 14)		32			42
Other financial assets — (Note 15)		96			113
Total non-current assets		1,388			1,749
Inventories — (Note 16)		3			3
Trade and other receivables — (Note 17)		237			252
Current tax receivable		23			22
Cash and cash equivalents — (Note 18)		179			324
Other financial assets — (Note 15)		13			106
Total current assets		455			707
Non-current assets classified as held for sale — (Note 11)		50			279
Total assets		1,893			2,735
LIABILITIES
Loans and other borrowings — (Note 20)		(10	)		(2	)
Trade and other payables — (Note 19)		(402	)		(468	)
Current tax payable		(231	)		(324	)
Total current liabilities		(643	)		(794	)
Loans and other borrowings — (Note 20)		(303	)		(410	)
Employee benefits — (Note 3)		(71	)		(76	)
Trade and other payables — (Note 19)		(109	)		(107	)
Deferred tax payable — (Note 25)		(79	)		(210	)
Total non-current liabilities		(562	)		(803	)
Liabilities classified as held for sale — (Note 11)		(2	)		(34	)
Total liabilities		(1,207	)		(1,631	)
Net assets		686			1,104
EQUITY
Equity share capital		66			49
Capital redemption reserve		4			1
Shares held by employee share trusts		(17	)		(22	)
Other reserves		(1,528	)		(1,528	)
Unrealized gains and losses reserve		27			23
Currency translation reserve		(3	)		19
Retained earnings		2,129			2,542
IHG shareholders’ equity(i)		678			1,084
Minority equity interest — (Note 26)		8			20
Total equity		686			1,104

(i)  A summary of the significant adjustments to IHG shareholders’ equity that would be required had United States generally accepted accounting principles been applied instead of International Financial Reporting Standards as adopted by the European Union is set out in Note 32 of Notes to the Consolidated Financial Statements.

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

F-7

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ FUNDS

		Share Capital						Retained earnings and other reserves
																	Shares
																	held by
		Number of									Capital						employee			Unrealized		Currency						Total IHG
		ordinary			Ordinary			Share			redemption			Other			share			gains and		translation			Retained			shareholders’
		shares(i)			shares(i)			premium(ii)			reserve(ii)			reserves(iii)			trusts(iv)			losses(v)		reserve(vi)			earnings			equity
		(£ million, except per ordinary share amounts)
At January 1, 2004			739			739			14			—			1,462			(11	)		—		—			119			2,323
Total recognized income and expense for the year			—			—			—			—			—			—			—		(12	)		350			338
Share capital consolidation			(75	)		—			—			—			—			—			—		—			—			—
Issue of ordinary shares			4			4			12			—			—			—			—		—			—			16
Repurchase of shares			(46	)		(46	)		—			—			—			—			—		—			(211	)		(257	)
Transfer to capital redemption reserve			—			—			—			46			—			—			—		—			(46	)		—
Purchase of own shares by employee share trusts			—			—			—			—			—			(33	)		—		—			—			(33	)
Release of own shares by employee share trusts			—			—			—			—			—			22			—		—			(6	)		16
Equity-settled share-based cost			—			—			—			—			—			—			—		—			18			18
Equity dividends paid			—			—			—			—			—			—			—		—			(600	)		(600	)
At December 31, 2004			622			697			26			46			1,462			(22	)		—		(12	)		(376	)		1,821
Effect of implementing IAS 32/39			—			—			—			—			—			—			3		—			(7	)		(4	)
At January 1, 2005			622			697			26			46			1,462			(22	)		3		(12	)		(383	)		1,817
Total recognized income and expense for the year			—			—			—			—			—			—			20		31			490			541
Issue of ordinary shares			1			1			3			—			—			—			—		—			—			4
Repurchase of shares			(19	)		(22	)		—			—			—			—			—		—			(102	)		(124	)
Transfer to capital redemption reserve			—			—			—			22			—			—			—		—			(22	)		—
Capital reorganization			(161	)		(632	)		(29	)		(68	)		(2,990	)		—			—		—			2,723			(996	)
Proceeds from capital reorganization			—			—			—			—			—			4			—		—			—			4
Issue of ordinary shares			1			—			6			—			—			—			—		—			—			6
Repurchase of shares			(11	)		(1	)		—			—			—			—			—		—			(82	)		(83	)
Transfer to capital redemption reserve			—			—			—			1			—			—			—		—			(1	)		—
Purchase of own shares by
	employee share trusts		—			—			—			—			—			(29	)		—		—			—			(29	)
Release of own shares by employee share trusts			—			—			—			—			—			25			—		—			(17	)		8
Equity-settled share-based cost			—			—			—			—			—			—			—		—			17			17
Equity dividends paid			—			—			—			—			—			—			—		—			(81	)		(81	)
At December 31, 2005			433			43			6			1			(1,528	)		(22	)		23		19			2,542			1,084
Total recognized income and expense for the year			—			—			—			—			—			—			4		(22	)		427			409
Issue of ordinary shares			4			1			19						—			—			—		—			—			20
Repurchase of shares			(28	)		(3	)		—			—			—			—			—		—			(257	)		(260	)
Share capital consolidation			(53	)		—			—			—			—			—			—		—			—			—
Transfer to capital redemption reserve			—			—			—			3			—			—			—		—			(3	)		—
Purchase of own shares by
	employee share trusts		—			—			—			—			—			(47	)		—		—			—			(47	)
Release of own shares by employee share trusts			—			—			—			—			—			52			—		—			(37	)		15
Equity-settled share-based cost			—			—			—			—			—			—			—		—			18			18
Equity dividends paid			—			—			—			—			—			—			—		—			(561	)		(561	)
At December 31, 2006			356			41			25			4			(1,528	)		(17	)		27		(3	)		2,129			678

At December 31, 2003 the authorized share capital was £10,000,050,000 comprising 10,000,000,000 ordinary shares of £1 each and one redeemable preference share of £50,000.

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

F-8

(i) The Company was incorporated and registered in England and Wales with registered number 5134420 on May 21, 2004 as a limited company under the Companies Act 1985 with the name Hackremco (No. 2154) Limited. On March 24, 2005 Hackremco (No. 2154) Limited changed its name to New InterContinental Hotels Group Limited. On April 27, 2005 New InterContinental Hotels Group Limited re-registered as a public limited company and changed its name to New InterContinental Hotels Group PLC. On June 27, 2005 New InterContinental Hotels Group PLC changed its name to InterContinental Hotels Group PLC.

On May 21, 2004 the Company had an authorized share capital of £100, divided into 100 ordinary shares of £1 each, of which one ordinary share was allotted, called up and fully paid on incorporation.

On December 10, 2004 shareholders approved a share capital consolidation on the basis of 25 new ordinary shares for every 28 existing ordinary shares. This provided for all the authorized ordinary shares of £1 each (whether issued or unissued) to be consolidated into new ordinary shares of 112 pence each. The share capital consolidation became effective on December 13, 2004. The consolidation had no impact on the authorized redeemable preference share.

On April 21, 2005 the authorized share capital was increased to £50,100 by the creation of 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.

On May 20, 2005 the authorized share capital of the Company was increased from £50,100 to £10,000,050,000 by the creation of 9,999,999,900 ordinary shares of £1 each. On May 20, 2005 all of the ordinary shares of £1 each were consolidated into ordinary shares of £6.25 each.

On June 27, 2005 the capital reorganization (by means of a scheme of arrangement under Section 425 of the Companies Act 1985) was completed. Under the arrangement, shareholders received 11 new ordinary shares and £24.75 cash in exchange for every 15 existing ordinary shares held on June 24, 2005. The entire issued share capital of InterContinental Hotels Group PLC was transferred to New InterContinental Hotels Group PLC at fair market value, in exchange for the issue of 443 million fully paid ordinary shares of 10 pence 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 443 million shares are recorded only at nominal value.

On June 30, 2005 £6.15 on every £6.25 ordinary share was canceled, thereby reducing the nominal value of each ordinary share to 10 pence.

On September 8, 2005 the redeemable preference share was redeemed at par value. The redeemable preference share did not carry any right to receive dividends nor to participate in the profits of the Company.

During 2004 and 2005, the Company undertook to return funds of up to £750 million to shareholders by way of three consecutive £250 million share repurchase program, the third of which is expected to be completed in the first half of 2007. During the year, 28,409,753 (2005 30,600,010; 2004 46,385,981) ordinary shares were repurchased and canceled under the authorities granted by shareholders at general meetings held during 2003, 2004, 2005 and 2006. Of these, 11,122,753 were 10 pence shares in the capital of InterContinental Hotels Group PLC and 17,287,000 were 11³/7 pence shares in the capital of InterContinental Hotels Group PLC.

On June 1, 2006, shareholders approved a share capital consolidation on the basis of seven new ordinary shares for every eight existing ordinary shares. This provided for all the authorized ordinary shares of 10 pence each (whether issued or unissued) to be consolidated into new ordinary shares of 11³/7 pence each. The share capital consolidation became effective on June 12, 2006.

Whilst the authorized share capital includes one redeemable preference share of £50,000, following its redemption in September 2005, this redeemable preference share has not been re-issued.

The authority given to the Company at the Annual General Meeting on June 1, 2006 to purchase its own shares was still valid at December 31, 2006. A resolution to renew the authority will be put to shareholders at the Annual General Meeting on June 1, 2007.

At December 31, 2006 the authorized share capital was £160,050,000, comprising 1,400,000,000 ordinary shares of 11³/7 pence each and one redeemable preference share of £50,000.

(ii)	The share premium account and capital redemption reserve are not distributable.
(iii)	Other reserves comprises the revaluation reserve previously recognized under UK GAAP and a merger reserve.
(iv)	The shares held by employee share trusts comprises £16.8 million (2005 £21.7 million, 2004 £21.8 million) in respect of 1.7 million (2005 2.9 million; 2004 3.1 million) InterContinental Hotels Group PLC ordinary shares held by employee share trusts, with a market value at December 31, 2006 of £21 million (2005 £25 million, 2004 £20 million).
(v)	The net unrealized gains and losses reserve records movements for available-for-sale financial assets to fair value and the effective portion of the cumulative net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred. The fair value of cashflow hedging instruments outstanding at December 31, 2006 was a £1 million asset (2005 £1 million, 2004 £nil).
(vi)	The currency translation reserve records the movement in exchange differences arising from the translation of the financial statements of foreign operations and exchange differences on foreign currency borrowings and derivative instruments that provide a hedge against net investments in foreign operations. On adoption of IFRS, cumulative exchange differences were deemed to be zero as permitted by IFRS 1. During the year ended December 31, 2006, the impact of hedging net investments in foreign operations was to reduce the amount recorded in the currency translation reserve by £32 million (2005 £9 million, 2004 £54 million). The fair value of derivative instruments designated as hedges of net investments in foreign operations outstanding at December 31, 2006 was a £3 million asset (2005 £5 million net liability, 2004 £nil million).

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

F-9

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED CASH FLOW STATEMENT

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2006			2005			2004
		(£ million)
Profit for the year			405			515			410
Adjustments for:
	Net financial expense		11			33			33
	Income tax (credit)/charge		(41	)		80			(127	)
	Gain on disposal of assets, net of tax		(117	)		(311	)		(19	)
	Other operating income and expenses		(27	)		22			49
	Depreciation and amortization		64			130			173
	Equity settled share-based cost, net of payments		14			12			12
	Other gains and losses		—			—			4
Operating cash flow before movements in working capital			309			481			535
Decrease in inventories			—			—			1
Increase in receivables			(31	)		—			(13	)
Increase/(decrease) in provisions and other payables			10			(32	)		50
Employee benefit contributions, net of cost			—			(26	)		(58	)
Cash flow from operations			288			423			515
Interest paid			(33	)		(59	)		(91	)
Interest received			24			29			72
Tax paid			(49	)		(91	)		(35	)
Net cash from operating activities			230			302			461
Cash flow from investing activities
Purchases of property, plant and equipment — Hotels			(87	)		(107	)		(143	)
Purchases of intangible assets — Hotels			(23	)		(19	)		(33	)
Purchases of other financial assets — Hotels			(8	)		(10	)		(11	)
Acquisition of subsidiary, net of cash acquired			(6	)		—			—
Disposal of assets, net of cash disposed of — Hotels			620			1,816			101
Proceeds from other financial assets — Hotels			124			10			5
Purchases of property, plant and equipment — Soft Drinks			—			(47	)		(70	)
Disposal of business, net of cash disposed of — Soft Drinks			—			220			—
Net cash from investing activities			620			1,863			(151	)
Cash flow from financing activities
Proceeds from the issue of share capital			20			10			16
Purchase of own shares			(260	)		(207	)		(257	)
Payment to shareholders as a result of the capital reorganisation on June 27, 2005			—			(996	)		—
Purchase of own shares by employee share trusts			(47	)		(29	)		(33	)
Proceeds on release of own shares by employee share trusts			19			16			16
Dividends paid to shareholders			(561	)		(81	)		(600	)
Dividends paid to minority interests			(1	)		(177	)		(26	)
(Decrease)/increase in borrowings			(172	)		(442	)		258
Costs associated with new facilities			—			—			(5	)
Financial expense on early settlement of debt			—			—			(17	)
Net cash from financing activities			(1,002	)		(1,906	)		(648	)
Net movement in cash and cash equivalents in the year			(152	)		259			(338	)
Cash and cash equivalents at beginning of the year			324			72			411
Exchange rate effects			7			(7	)		(1	)
Cash and cash equivalents at end of the year			179			324			72

The significant differences between the cash flow statement presented above and that required under United States generally accepted accounting principles are described in Note 32 of Notes to the Consolidated Financial Statements.

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

F-10

Note 1 — Corporate Information and Accounting Policies

Corporate information

      The consolidated financial statements of InterContinental Hotels Group PLC (“IHG”) were prepared under IFRS for the year ended December 31, 2006 were authorized for issue in accordance with a resolution of the Directors on February 19, 2007. InterContinental Hotels Group PLC (the “Company”) is incorporated in Great Britain and registered in England and Wales.

Summary of significant accounting policies

     Basis of preparation

      The consolidated financial statements are presented in sterling and all values are rounded to the nearest million except where otherwise indicated.

Statement of compliance

      The consolidated financial statements of IHG have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and as applied in accordance with the provisions of the Companies Act 1985.

      New accounting standards and interpretations issued by the International Accounting Standard Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”) becoming effective during the year, have not had a material impact on the Company’s financial statements.

      The principal accounting policies of the Company are set out below.

Basis of consolidation

      The consolidated financial statements comprise the financial statements of the parent company and entities controlled by the Company. All inter-company balances and transactions have been eliminated.

      The results of those businesses acquired or disposed of are consolidated for the period during which they were under the Company’s control.

Foreign currencies

      Transactions in foreign currencies are translated into the functional currency at the exchange rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the relevant rates of exchange ruling at the balance sheet date. All foreign exchange differences arising on translation are recognized in the income statement except on foreign currency borrowings that provide a hedge against a net investment in a foreign operation. These are taken directly to the currency translation reserve until the disposal of the net investment, at which time they are recycled against the gain or loss on disposal.

      The assets and liabilities of foreign operations, including goodwill, are translated into sterling at the relevant rates of exchange ruling at the balance sheet date. The revenues and expenses of foreign operations are translated into sterling at weighted average rates of exchange for the period. The exchange differences arising on the retranslation are taken directly to the currency translation reserve. On disposal of a foreign operation, the cumulative amount recognized in the currency translation reserve relating to that particular foreign operation is recycled against the gain or loss on disposal.

Derivative financial instruments and hedging

      Interest arising from currency swap agreements is taken to financial income or expense on a gross basis over the term of the relevant agreements. Interest arising from other currency derivatives and interest rate swaps is taken to financial income or expense on a net basis over the term of the agreement.

F-11

      Foreign exchange gains and losses on currency instruments are recognized in financial income and expense unless they form part of effective hedge relationships.

      Derivatives designated as hedging instruments are accounted for in line with the nature of the hedging arrangement. The Company’s detailed accounting policies with respect to hedging instruments are set out in note 21. Documentation outlining the measurement and effectiveness of the hedging arrangement is maintained throughout the life of the hedge relationship. Any ineffective element of a hedge arrangement is recognized in financial income or expense.

      The fair value of derivatives is calculated by discounting the expected future cash flows at prevailing interest rates.

Property, plant and equipment

      Property, plant and equipment are stated at cost less depreciation and any impairment.

      Borrowing costs are not capitalized. Repairs and maintenance costs are expensed as incurred.

      Land is not depreciated. All other property, plant and equipment are depreciated to a residual value over their estimated useful lives, namely:

Buildings	lesser of 50 years and unexpired term of lease;
Fixtures, fittings and equipment	3-25 years; and
Plant and machinery	4-20 years.

      All depreciation is charged on a straight line basis. Residual value is reassessed annualy.

      Property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Assets that do not generate independent cash flows are combined into cash-generating units. If carrying values exceed estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. Recoverable amount is the greater of fair value less cost to sell and value in use. Value in use is assessed based on estimated future cash flows discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Goodwill

      Goodwill arises on consolidation and is recorded at cost, being the excess of the cost of acquisition over the fair value at the date of acquisition of the Company’s share of identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

      Goodwill is tested for impairment at least annualy by comparing carrying values of cash-generating units with their recoverable amounts.

Intangible assets

     Software

      Acquired software licenses and software developed in-house are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. Costs are amortized over estimated useful lives of three to seven years on a straight line basis.

     Management contracts

      When assets are sold and a purchaser enters into a management or franchise contract with the Company, the Company capitalizes as part of the gain or loss on disposal an estimate of the fair value of the contract entered into. The value of management contracts is amortized over the life of the contract which ranges from six to 50 years on a straight line basis.

F-12

     Other intangible assets

      Amounts paid to hotel owners to secure management contracts and franchise agreements are capitalized and amortized over the shorter of the contracted period and 10 years on a straight line basis.

      Internally generated development costs are expensed unless forecast revenues exceed attributable forecast development costs, at which time they are capitalized and amortized over the life of the asset.

      Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Associates

      An associate is an entity over which the Company has the ability to exercise significant influence, but not control, through participation in the financial and operating policy decisions of the entity.

      Associates are accounted for using the equity method unless the associate is classified as held for sale. Under the equity method, the Company’s investment is recorded at cost adjusted by the Company’s share of post acquisition profits and losses. When the Company’s share of losses exceeds its interest in an associate, the Company’s carrying amount is reduced to £nil and recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of an associate.

Financial assets

      Under IAS 39 “Financial Instruments: Recognition and Measurement” current and non-current financial assets are classified as loans and receivables; held-to-maturity investments; or as available-for-sale. The Company determines the classification of its financial assets at initial recognition and they are subsequently held at fair value or amortized cost. Changes in fair values of available-for-sale financial assets are recorded directly in the unrealized gains and losses reserve.

      Financial assets are tested for impairment at each balance sheet date. If impaired, the difference between carrying value and fair value is transferred from equity to the income statement to the extent that there is sufficient surplus in equity; any excess goes directly to the income statement.

Financial liabilities

      A financial liability is derecognized when the obligation under the liability is discharged, canceled or expires.

Inventories

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

Trade receivables

      Trade receivables are recorded at their original amount less an allowance for any doubtful amounts. An allowance is made when collection of the full amount is no longer considered probable.

Cash and cash equivalents

      Cash comprises cash in hand and demand deposits.

      Cash equivalents are short-term highly liquid investments with an original maturity of three months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

      In the cash flow statement cash and cash equivalents are shown net of short-term overdrafts which are repayable on demand and form an integral part of the Company’s cash management.

F-13

Assets held for sale

      Non-current assets and associated liabilities are classified as held for sale when their carrying amount will be recovered principally through a sale transaction rather than continuing use and a sale is highly probable.

      Assets designated as held for sale are held at the lower of carrying amount at designation and sales value less cost to sell.

      Depreciation is not charged against property, plant and equipment classified as held for sale.

Trade payables

      Trade payables are non interest bearing and are stated at their nominal value.

Loyalty program

      The hotel loyalty program, Priority Club Rewards, enables members to earn points, funded through hotel assessments, during each stay at an IHG hotel and redeem the points at a later date for free accommodation or other benefits. The future redemption liability is included in trade and other payables and is estimated using actuarial methods to give eventual redemption rates and points values.

      The Company pays interest to the loyalty program on the accumulated cash received in advance of redemption of the points awarded.

Self insurance

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

Provisions

      Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that a payment will be made and a reliable estimate of the amount payable can be made. If the effect of the time value of money is material, the provision is discounted.

Bank and other borrowings

      Bank and other borrowings are initially recognized at the fair value of the consideration received less directly attributable transaction costs. They are subsequently measured at amortized cost. Finance charges, including issue costs, are charged to the income statement using an effective interest rate method.

      Borrowings are classified as non-current when the repayment date is more than 12 months from the balance sheet date or where they are drawn on a facility with more than 12 months to expiry.

Employee benefits

     Defined contribution plans

      Payments to defined contribution schemes are charged to the income statement as they fall due.

     Defined benefit plans

      Plan assets are measured at fair value and plan liabilities are measured on an actuarial basis, using the projected unit credit method and discounting at an interest rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the plan liabilities.

      The service cost of providing pension benefits to employees for the year is charged to the income statement. The cost of making improvements to pensions is recognized in the income statement on a straight

F-14

line basis over the period during which any increase in benefits vests. To the extent that improvements in benefits vest immediately, the cost is recognized immediately as an expense.

      Actuarial gains and losses may result from: differences between the expected return and the actual return on plan assets; differences between the actuarial assumptions underlying the plan liabilities and actual experience during the year; or changes in the actuarial assumptions used in the valuation of the plan liabilities. Actuarial gains and losses, and taxation thereon, are recognized in the consolidated statement of recognized income and expense.

      Actuarial valuations are normally carried out every three years and are updated for material transactions and other material changes in circumstances (including changes in market prices and interest rates) up to the balance sheet date.

Taxes

Current tax

      Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred tax

      Deferred tax assets and liabilities are recognized in respect of temporary differences between the tax base and carrying value of assets and liabilities, including accelerated capital allowances, unrelieved tax losses, unremitted profits from overseas where the Company does not control remittance, gains rolled over into replacement assets, gains on previously revalued properties and other short-term temporary differences.

      Deferred tax assets are recognized to the extent that it is regarded as probable that the deductible temporary differences can be realized. The recoverability of all deferred tax assets is reassessed at each balance sheet date.

      Deferred tax is calculated at the tax rates that are expected to apply in the periods in which the asset or liability will be settled, based on rates enacted or substantively enacted at the balance sheet date.

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 Company’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 recognized when services have been rendered. The following is a description of the composition of revenues of the Company.

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

      Management fees — earned from hotels managed by the Company, 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 hotel’s profitability or cash flows. Revenue is recognized when earned and realized or realizable under the terms of the contract.

      Franchise fees — received in connection with the license of the Company’s brand names, usually under long-term contracts with the hotel owner. The Company charges franchise royalty fees as a percentage of room revenue. Revenue is recognized when earned and realized or realizable under the terms of the agreement.

F-15

Share-based payments

      The cost of equity-settled transactions with employees is measured by reference to fair value at the date at which the shares are granted. Fair value is determined by an external valuer using option pricing models.

      The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which any performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date).

      The income statement charge for a period represents the movement in cumulative expense recognized at the beginning and end of that period. No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

      The Company has taken advantage of the transitional provisions of “IFRS” 2 “Share-based Payments” in respect of equity-settled awards and has applied “IFRS” 2 only to equity-settled awards granted after November 7, 2002 that had not vested before January 1, 2005.

Leases

      Operating lease rentals are charged to the income statement on a straight line basis over the term of the lease.

      Assets held under finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease, with a corresponding liability being recognized for the fair value of the leased asset or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.

Disposal of non-current assets

      The Company recognizes the sales proceeds and related gain or loss on disposal on completion of the sales process. In determining whether revenue and gain or loss should be recorded, the Company considers whether it:

•  has a continuing managerial involvement to the degree associated with asset ownership;

•  has transferred significant risks and rewards associated with asset ownership; and

•  can reliably measure and will actually receive the proceeds.

Discontinued operations

      Discontinued operations are those relating to hotels sold or those classified as held for sale when the results relate to a separate line of business, geographical area of operations, or where there is a co-ordinated plan to dispose of a separate line of business or geographical area of operations.

Special items

      The Company discloses certain financial information both including and excluding special items. The presentation of information excluding special items allows a better understanding of the underlying trading performance of the Company and provides consistency with the Company’s internal management reporting. Special items, which include other operating income and expenses, are identified by virtue of either their size or incidence so as to facilitate comparison with prior periods and to assess underlying trends in financial performance. Special items can include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and reversals, restructuring costs and the release of tax provisions.

F-16

Use of accounting estimates and judgments

      The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 may differ from these estimates under different assumptions and conditions.

      The estimates and assumptions that have the most significant effect on the amounts recognized in the financial statements are:

•  Impairment — the Company determines whether goodwill is impaired on an annual basis or more frequently if there are indicators of impairment. Other non-current assets, including property, plant and equipment, are tested for impairment if there are indicators of impairment. Impairment testing requires an estimate of future cash flows and the choice of a suitable discount rate and, in the case of hotels, an assessment of recoverable amount based on comparable market transactions.

•  Pension and other post-employment benefits — the cost of defined benefit pension plans and other post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases.

•  Tax — provisions for tax accruals require judgments on the interpretation of tax legislation, developments in tax case law and the potential outcomes of tax audits and appeals. In addition, deferred tax assets are recognized for unused tax attributes to the extent that it is probable that taxable profit will be available against which they can be utilized. Judgment is required as to the amount that can be recognized based on the likely amount and timing of future taxable profits, taking into account expected tax planning.

•  Loyalty program — the future redemption liability included in trade and other payables is estimated using actuarial methods based on statistical formulae that project the timing of future point redemptions based on historical levels to give eventual redemption rates and points values.

•  Trade receivables — an allowance for doubtful amounts of trade receivables is made on the basis of historical experience and other factors considered relevant by management.

•  Other — the Company also makes estimates and judgments in the valuation of management and franchise agreements acquired on asset disposals, the valuation of financial assets classified as available-for-sale, the outcome of legal proceedings and claims and in the valuation of share-based payment costs.

New standards and interpretations

      The International Accounting Standards Board (“IASB”) and International Financial Reporting Interpretations Committee (“IFRIC”) issued the following standards and interpretations with an effective date after the date of these financial statements. They have not been adopted early by the Company and the Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Company’s reported income or net assets in the period of adoption.

IFRS 7	Financial Instruments: Disclosures Effective from January 1, 2007
IFRS 8	Operating Segments Effective from January 1, 2009
IFRIC 10	Interim Financial Reporting and Impairment Effective from November 1, 2006
IFRIC 11	Group and Treasury Share Transactions Effective from March 1, 2007

Note: the effective dates are in respect of accounting periods beginning on or after the date.

F-17

Note 2 — Segmental Information

Exchange Rates

      The results of foreign 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 = $1.84 (2005 £1 = $1.83, 2004 £1 = $1.82). In the case of the euro, the translation rate is £1 = €1.47 (2005 £1 = €1.46, 2004 £1 = €1.47).

      Foreign currency denominated assets and liabilities have been translated into sterling at the rates of exchange on the balance sheet date. In the case of the US dollar, the translation rate is £1 = $1.96 (2005 £1 = $1.73, 2004 £1 = $1.93). In the case of the euro, the translation rate is £1 = €1.49 (2005 £1 = €1.46; 2004 £1 = €1.41).

Hotels

      The primary segmental reporting format is determined to be three main geographical regions:

      the Americas;

      Europe, the Middle East and Africa (“EMEA”); and

      Asia Pacific.

      These, together with Central functions, form the principal format by which management is organized and makes operational decisions.

      The Company further breaks each geographical region into three distinct business models which offer different growth, return, risk and reward opportunities:

Franchised

      Where the Company neither owns nor manages the hotel, but licenses the use of a Company brand and provides access to reservation systems, loyalty schemes, and know-how. The Company derives revenues from a brand royalty or licensing fee, based on a percentage of room revenue.

Managed

      Where, in addition to licensing the use of a Company brand, the Company manages the hotel for third party owners. The Company derives revenues from base and incentive management fees and provides the system infrastructure necessary for the hotel to operate. Management contract fees are generally a percentage of hotel revenue and may have an additional incentive fee linked to profitability or cash flow. The terms of these agreements vary, but are often long-term (for example, 10 years or more). The Company’s responsibilities under the management agreement typically include hiring, training and supervising the managers and employees that operate the hotels under the relevant brand standards. In order to gain access to central reservation systems, global and regional brand marketing and brand standards and procedures, owners are typically required to make a further contribution.

Owned and leased

      Where the Company both owns (or leases) and operates the hotel and, in the case of ownership, takes all the benefits and risks associated with ownership.

      Segmental results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Soft Drinks

      This business, which manufactures a variety of soft drink brands with distribution concentrated mainly in the UK, was sold in December 2005.

F-18

Segmental Information

Year ended December 31, 2006

     Revenue

						Asia				Total
		Americas		EMEA		Pacific		Central		Group
		(£ million)
Hotels
	Owned and leased		115		100		71		—		286
	Managed		77		71		36		—		184
	Franchised		241		35		4		—		280
	Central		—		—		—		55		55
	Continuing operations		433		206		111		55		805
	Discontinued operations — owned and leased		30		125		—		—		155
			463		331		111		55		960

Segmental result

														Total
		Americas			EMEA			Asia Pacific			Central			Group
		(£ million)
Hotels
	Owned and leased		14			(5	)		17			—			26
	Managed		27			37			21			—			85
	Franchised		208			24			3			—			235
	Regional and central		(32	)		(20	)		(12	)		(81	)		(145	)
	Continuing operations		217			36			29			(81	)		201
	Discontinued operations — owned and leased		4			26			—			—			30
			221			62			29			(81	)		231

Year ended December 31, 2006

		Continuing			Discontinued			Group
		(£ million)
Group
	Hotels		201			30			231
Other operating income and expenses			27			—			27
Operating profit			228			30			258
Net finance costs			(11	)		—			(11	)
Profit before tax			217			30			247
Tax			50			(9	)		41
Profit after tax			267			21			288
Gain on disposal of assets, net of tax			—			117			117
Profit for the year			267			138			405

F-19

Assets and liabilities

						Asia				Total
		Americas		EMEA		Pacific		Central		Group
		(£ million)
Segment assets			647		583		338		73		1,641
Non-current assets classified as held for sale			40		10		—		—		50
			687		593		338		73		1,691
Unallocated assets:
	Current tax receivable										23
	Cash and cash equivalents										179
Total assets											1,893
Segment liabilities			295		234		53		—		582
Liabilities classified as held for sale			2		—		—		—		2
			297		234		53		—		584
Unallocated liabilities:
	Current tax payable										231
	Deferred tax payable										79
	Loans and other borrowings										313
Total liabilities											1,207

Year ended December 31, 2006

Other segmental information

								Asia				Total
			Americas		EMEA			Pacific		Central		Group
			(£ million)
Continuing operations:
	Capital expenditure(i)			34		50			17		15		116
	Additions to:
		Property, plant and equipment		116		53			9		4		182
		Intangible assets		10		31			1		11		53
	Depreciation and amortization(ii)			18		19			10		13		60
	Reversal of previously recorded impairment			—		(2	)		—		—		(2	)
Discontinued operations:
	Capital expenditure(i)			1		7			—		—		8
	Additions to property, plant and equipment			—		4			—		—		4
	Depreciation and amortization(ii)			1		3			—		—		4
	Impairment of assets held for sale			3		—			—		—		3

(i) Comprises purchases of property, plant and equipment, intangible assets and other financial assets and acquisitions of subsidiaries as included in the cash flow statement.

(ii) Included in the £64 million of depreciation and amortization is £21 million relating to administrative expenses and £43 million relating to cost of sales.

F-20

Year ended December 31, 2005*

     Revenue

						Asia				Total
		Americas		EMEA		Pacific		Central		Hotels
		(£ million)
Hotels
	Owned and leased		106		110		59		—		275
	Managed		65		55		25		—		145
	Franchised		213		35		3		—		251
	Central		—		—		—		42		42
	Continuing operations		384		200		87		42		713
	Discontinued operations — owned and leased		61		411		54		—		526
			445		611		141		42		1,239

		Continuing		Discontinued		Group
		(£ million)
Group
	Hotels		713		526		1,239
	Soft Drinks		—		671		671
Total revenue			713		1,197		1,910

Year ended December 31, 2005*

Segmental result

														Total
		Americas			EMEA			Asia Pacific			Central			Hotels
		(£ million)
Hotels
	Owned and leased		14			(5	)		11			—			20
	Managed		20			31			16			—			67
	Franchised		186			26			2			—			214
	Regional and central		(34	)		(21	)		(8	)		(65	)		(128	)
	Continuing operations		186			31			21			(65	)		173
	Discontinued operations — owned and leased		12			73			11			—			96
			198			104			32			(65	)		269

F-21

		Continuing			Discontinued			Group
		(£ million)
Group
	Hotels		173			96			269
	Soft Drinks		—			70			70
			173			166			339
Other operating income and expenses			(22	)		—			(22	)
Operating profit			151			166			317
Net finance costs			(24	)		(9	)		(33	)
Profit before tax			127			157			284
Tax			(24	)		(56	)		(80	)
Profit after tax			103			101			204
Gain on disposal of assets, net of tax			—			311			311
Profit for the year			103			412			515

*  Other than for Soft Drinks which reflects the 50 weeks and three days ended December 14.

Year ended December 31, 2005*

Assets and liabilities

						Asia				Total		Soft		Total
		Americas		EMEA		Pacific		Central		Hotels		Drinks		Group
		(£ million)
Segment assets			689		987		346		88		2,110		—		2,110
Non-current assets classified as held for sale			21		258		—		—		279		—		279
			710		1,245		346		88		2,389		—		2,389
Unallocated assets:
	Current tax receivable										22		—		22
	Cash and cash equivalents										324		—		324
Total assets											2,735		—		2,735
Segment liabilities			340		261		50		—		651		—		651
Liabilities classified as held for sale			1		33		—		—		34		—		34
			341		294		50		—		685		—		685
Unallocated liabilities:
	Current tax payable										324		—		324
	Deferred tax payable										210		—		210
	Loans and other borrowings										412		—		412
Total liabilities											1,631		—		1,631

F-22

Other segmental information

							Asia				Total		Soft		Total
			Americas		EMEA		Pacific		Central		Hotels		Drinks		Group
			(£ million)
Continuing operations:
	Capital expenditure(i)			22		19		28		13		82		—		82
	Additions to:
		Property, plant and equipment		12		15		30		6		63		—		63
		Intangible assets		27		51		9		7		94		—		94
	Depreciation and amortization(ii)			19		15		8		15		57		—		57
	Impairment of property, plant and equipment			—		7		—		—		7		—		7
Discontinued operations:
	Capital expenditure(i)			6		44		4		—		54		47		101
	Additions to:
		Property, plant and equipment		4		33		4		—		41		36		77
		Intangible assets		—		—		—		—		—		7		7
	Depreciation and amortization(ii)			1		24		3		—		28		45		73

*	Other than for Soft Drinks which reflects the 50 weeks and three days ended December 14.
(i)	Comprises purchases of property, plant and equipment, intangible assets and other financial assets and acquisitions of subsidiaries as included in the cash flow statement.

(ii) Included in the £130 million of depreciation and amortization is £23 million relating to administrative expenses and £107 million relating to cost of sales.

Year ended December 31, 2004**

Revenue

						Asia				Total
		Americas		EMEA		Pacific		Central		Hotels
		(£ million)
Hotels
	Owned and leased		80		116		50		—		246
	Managed		30		43		21		—		94
	Franchised		196		27		3		—		226
	Central		—		—		—		40		40
	Continuing operations		306		186		74		40		606
	Discontinued operations — owned and leased		189		643		60		—		892
			495		829		134		40		1,498

		Continuing		Discontinued		Group
		(£ million)
Group
	Hotels		731		767		1,498
	Soft Drinks		—		706		706
Total revenue			731		1,473		2,204

F-23

     Segmental result

								Asia						Total
		Americas			EMEA			Pacific			Central			Hotels
		(£ million)
Hotels
	Owned and leased		3			(11	)		9			—			1
	Managed		6			24			14			—			44
	Franchised		167			21			2			—			190
	Regional and central		(27	)		(23	)		(8	)		(57	)		(115	)
	Continuing operations		149			11			17			(57	)		120
	Discontinued operations — owned and leased		24			118			7			—			149
			173			129			24			(57	)		269

Year ended December 31, 2004**

		Continuing			Discontinued			Group
		(£ million)
Group
	Hotels		120			149			269
	Soft Drinks		—			77			77
			120			226			346
Other operating income and expenses			(49	)		—			(49	)
Operating profit			71			226			297
Net finance costs			(33	)		—			(33	)
Profit before tax			38			226			264
Tax			196			(69	)		127
Profit after tax			234			157			391
Gain on disposal of assets, net of tax			—			19			19
Profit available for shareholders			234			176			410

**  Other than for Soft Drinks which reflects the 53 weeks ended December 25.

F-24

     Assets and liabilities

						Asia				Total		Soft			Total
		Americas		EMEA		Pacific		Central		Hotels		Drinks			Group
		(£ million)
Segment assets			583		1,202		437		86		2,308		458			2,766
Non-current assets classified as held for sale			424		1,402		—		—		1,826		—			1,826
			1,007		2,604		437		86		4,134		458			4,592
Unallocated assets:
	Current tax receivable										14		—			14
	Cash and cash equivalents										60		12			72
Total assets											4,208		470			4,678
Segment liabilities			300		290		28		—		618		291			909
Liabilities classified as held for sale			24		124		—		—		148		—			148
			324		414		28		—		766		291			1,057
Unallocated liabilities:
	Current tax payable										248		13			261
	Deferred tax payable										246		(12	)		234
	Loans and other borrowings										1,185		3			1,188
Total liabilities											2,445		295			2,740

Year ended December 31, 2004**

     Other segmental information

							Asia				Total		Soft		Total
			Americas		EMEA		Pacific		Central		Hotels		Drinks		Group
			(£ million)
Continuing operations:
	Capital expenditure(i)			43		14		15		12		84		—		84
	Additions to:
		Property, plant and equipment		32		16		10		—		58		—		58
		Intangible assets		4		—		1		12		17		—		17
	Depreciation and amortization(ii)			11		14		6		15		46		—		46
	Impairment of property, plant and equipment			14		30		4		—		48		—		48
Discontinued operations:
	Capital expenditure(i)			17		81		5		—		103		70		173
	Additions to:
		Property, plant and equipment		17		81		5		—		103		56		159
		Intangible assets		—		—		—		—		—		16		16
	Depreciation and amortization(ii)			18		56		7		—		81		46		127

**	Other than for Soft Drinks which reflects the 53 weeks ended December 25.
(i)	Comprises purchases of property, plant and equipment, intangible assets and other financial assets of subsidiaries as included in the cash flow statement.
(ii)	Included in the £173 million of depreciation and amortization is £23 million relating to administrative expenses and £150 million relating to cost of sales.

F-25

Note 3 — Staff costs and Directors’ emoluments

Costs

		Year ended		Year ended		Year ended
		December 31,		December 31,		December 31,
		2006		2005		2004
		(£ million)
Wages and salaries			301		465		570
Social security costs			38		61		66
Pension and other post-retirement benefits:
	Defined benefit plans		6		19		21
	Defined contribution plans		11		15		12
			356		560		669

Employee numbers

      Average number of employees, including part-time employees:

	Year ended		Year ended		Year ended
	December 31,		December 31,		December 31,
	2006		2005		2004
	(Number)
Hotels		11,456		18,995		26,835
Soft Drinks		—		2,991		2,824
		11,456		21,986		29,659

Employee benefits

      Retirement and death in service benefits are provided for eligible employees in the United Kingdom principally by the InterContinental Hotels UK Pension Plan. The plan covers approximately 410 (2005 400) employees, of which 220 (2005 240) are in the defined benefit section which provides pensions based on final salaries and 190 (2005 160) are in the defined contribution section. The assets of the plan are held in self-administered trust funds separate from the Company’s assets. The Company also maintains a US-based InterContinental Hotels Pension Plan and post-employment benefits scheme. This plan is now closed to new members and pensionable service no longer accrues for current employee members. In addition, the Company 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, those schemes.

      On December 14, 2005, the Soft Drinks business, including the Britvic Pension Plan, was sold. The comparative information provided below includes movements for the Britvic Pension Plan up to the date of disposal.

F-26

      The amounts recognized in the income statement are:

	Pension plans
																			Post-
																			employment
	UK									US									benefits						Total
Recognized in administrative expenses	2006			2005			2004			2006			2005			2004			2006		2005		2004		2006			2005			2004
	(£ million)
Current service costs		5			19			18			—			—			—			—		—		—		5			19			18
Past service costs		—			—			1			—			—			—			—		—		—		—			—			1
Interest cost on benefit obligation		13			30			27			5			6			5			1		1		1		19			37			33
Expected return on plan assets		(14	)		(32	)		(27	)		(4	)		(5	)		(4	)		—		—		—		(18	)		(37	)		(31	)
		4			17			19			1			1			1			1		1		1		6			19			21
Recognized in other operating income and expense
Plan curtailment		—			(7	)		—			—			—			—			—		—		—		—			(7	)		—

The curtailment gain arose as a result of the sale of 73 UK hotel properties.

      The amounts recognized in the consolidated statement of recognized income and expense are:

	Pension plans
																			Post-employment
	UK									US									benefits							Total
Actuarial gains and losses	2006			2005			2004			2006			2005			2004			2006		2005		2004			2006			2005			2004
	(£ million)
Actual return on scheme assets		21			79			41			6			4			5			—		—		—			27			83			46
Less: expected return on scheme assets		(14	)		(32	)		(27	)		(4	)		(5	)		(4	)		—		—		—			(18	)		(37	)		(31	)
		7			47			14			2			(1	)		1			—		—		—			9			46			15
Other actuarial gains and losses		(12	)		(67	)		(60	)		—			(3	)		(5	)		1		1		(1	)		(11	)		(69	)		(66	)
		(5	)		(20	)		(46	)		2			(4	)		(4	)		1		1		(1	)		(2	)		(23	)		(51	)
Deficit transferred in respect of previous acquisition		—			—			(6	)		—			—			—			—		—		—			—			—			(6	)

      The assets and liabilities of the schemes are:

		Pension plans
														Post-
														employment
		UK						US						benefits						Total
		2006			2005			2006			2005			2006			2005			2006			2005
		(£ million)
Fair value of scheme assets			269			250			56			62			—			—			325			312
Present value of benefit obligations			(298	)		(274	)		(89	)		(103	)		(9	)		(11	)		(396	)		(388	)
Employee benefits liability			(29	)		(24	)		(33	)		(41	)		(9	)		(11	)		(71	)		(76	)
Comprising:
	Funded plans		(6	)		(2	)		(9	)		(14	)		—			—			(15	)		(16	)
	Unfunded plans		(23	)		(22	)		(24	)		(27	)		(9	)		(11	)		(56	)		(60	)
			(29	)		(24	)		(33	)		(41	)		(9	)		(11	)		(71	)		(76	)

F-27

      The principal assumptions used by the actuaries to determine the benefit obligation were:

	Pension plans
													Post-employment
	UK						US						benefits
	2006		2005		2004		2006		2005		2004		2006		2005		2004
	(%)
Wages and salaries increases		4.6		4.3		4.3		—		—		—		4.0		4.0		4.0
Pensions increases		3.1		2.8		2.8		—		—		—		—		—		—
Discount rate		5.0		4.7		5.3		5.8		5.5		5.8		5.8		5.5		5.8
Inflation rate		3.1		2.8		2.8		—		—		—		—		—		—
Healthcare cost trend rate assumed for next year														10.0		9.0		9.5
Ultimate rate that the cost trend rate trends to														5.0		4.5		4.5

      In 2017 the healthcare cost trend rate reaches the assumed ultimate rate. A one per cent point increase/(decrease) in assumed healthcare costs trend rate would increase/(decrease) the accumulated post-employment benefit obligations as of December 31, 2006, 2005 and 2004, by approximately £1 million, and would increase/(decrease) the total of the service and interest cost components of net post-employment healthcare cost for the period then ended by approximately £nil.

	Pension plans
	UK						US
Post-retirement mortality (years)	2006		2005		2004		2006		2005		2004
Current pensioners at 65 – male(i)		23		21		21		18		17		17
Current pensioners at 65 – female(i)		26		24		24		20		22		22
Future pensioners at 65 – male(ii)		24		22		22		18		17		17
Future pensioners at 65 – female(ii)		27		25		25		20		22		22

⁽ⁱ⁾   Relates to assumptions based on longevity (in years) following retirement at the balance sheet date.

⁽ⁱⁱ⁾  Relates to assumptions based on longevity (in years) relating to an employee retiring in 2026.

     The post-retirement mortality assumptions allow for expected increases in longevity.

	Pension plans
													Post-
													employment
	UK						US						benefits						Total
Movement in benefit obligation	2006			2005			2006			2005			2006			2005			2006			2005
	(£ million)
Benefit obligation at beginning of year		274			600			103			88			11			11			388			699
Current service cost		5			19			—			—			—			—			5			19
Past service cost		—			—			—			—			—			—			—			—
Members’ contributions		1			2			—			—						—			1			2
Interest expense		13			30			5			6			1			1			19			37
Benefits paid		(7	)		(11	)		(6	)		(6	)		(1	)		(1	)		(14	)		(18	)
Plan curtailment		—			(7	)		—			—			—			—			—			(7	)
Deficit transferred in respect of previous acquisition		—			—			—			—			—			—			—			—
Actuarial loss/(gain) arising in the year		12			67			—			3			(1	)		(1	)		11			69
Separation of Soft Drinks		—			(426	)		—			—			—			—			—			(426	)
Exchange adjustments		—			—			(13	)		12			(1	)		1			(14	)		13
Benefit obligation at end of year		298			274			89			103			9			11			396			388

F-28

      The defined benefit obligation comprises £340 million (2005 £328 million) arising from plans that are wholly or partly funded and £56 million (2005 £60 million) arising from unfunded plans.

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

	2006				2005				2004
	Long-term				Long-term				Long-term
	rate of				rate of				rate of
	return				return				return
	expected		Value		expected		Value		expected		Value
	(%)		(£ million)		(%)		(£ million)		(%)		(£ million)
UK Schemes
Equities		7.9		128		7.5		125		8.0		272
Bonds		4.6		123		4.2		110		4.9		173
Other		7.9		18		7.5		15		8.0		25
Total market value of assets				269				250				470
US Schemes
Equities		9.5		34		9.6		38		9.6		34
Fixed income		5.5		22		5.5		24		5.5		22
Total market value of assets				56				62				56

      The expected rate of return on assets has been determined following advice from the plans’ independent actuaries and is based on the expected return on each asset class together with consideration of the long-term asset strategy.

	Pension plans
													Post-
													employment
	UK						US						benefits						Total
Movement in benefit obligation	2006			2005			2006			2005			2006			2005			2006			2005
	(£ million)
Fair value of plan assets at beginning of year		250			470			62			56			—			—			312			526
Company contributions		4			45			1			2			1			1			6			48
Members’ contributions		1			2			—			—			—			—			1			2
Assets transferred in respect of previous acquisition		—			—			—			—			—			—			—			—
Benefits paid		(7	)		(11	)		(6	)		(6	)		(1	)		(1	)		(14	)		(18	)
Expected return on assets		14			32			4			5			—			—			18			37
Actuarial gain/(loss) arising in the year		7			47			2			(1	)		—			—			9			46
Separation of Soft Drinks		—			(335	)		—			—			—			—			—			(335	)
Exchange adjustments		—			—			(7	)		6			—			—			(7	)		6
Fair value of plan assets at end of year		269			250			56			62			—			—			325			312

      Normal company contributions are expected to be £7 million in 2007. In addition, the Company has agreed to pay special contributions of £40 million to the UK Pension Plan; £20 million in 2007, £10 million in 2008 and £10 million in 2009.

F-29

      History of experience gains and losses:

UK Pension plans	2006			2005			2004			2003
	(£ million)
Fair value of scheme assets		269			250			470			353
Present value of benefit obligations		(298	)		(274	)		(600	)		(477	)
Deficit in the scheme		(29	)		(24	)		(130	)		(124	)
Experience adjustments arising on plan liabilities		(12	)		(67	)		(60	)
Experience adjustments arising on plan assets		7			47			14

US Pension plans	2006			2005			2004			2003
	(£ million)
Fair value of scheme assets		56			62			56			48
Present value of benefit obligations		(89	)		(103	)		(88	)		(91	)
Deficit in the scheme		(33	)		(41	)		(32	)		(43	)
Experience adjustments arising on plan liabilities		—			(3	)		(5	)
Experience adjustments arising on plan assets		2			(1	)		1

US Post-employment benefits	2006			2005			2004			2003
	(£ million)
Present value of benefit obligations		(9	)		(11	)		(11	)		(11	)
Experience adjustments arising on plan liabilities		1			1			(1	)

      The cumulative amount of actuarial gains and losses recognized since January 1, 2004 in the statement of recognized income and expense is £76 million (2005 £74 million, 2004 £51 million). The Company is unable to determine how much of the pension scheme deficit recognized on transition to IFRS of £178 million and taken directly to total equity is attributable to actuarial gains and losses since inception of the schemes. Therefore, the Company is unable to determine the amount of actuarial gains and losses that would have been recognized in the statement of recognized income and expense before January 1, 2004.

Policy on remuneration of Executive Directors and senior executives

      The following policy has applied throughout the year and, except where stated, 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 Remuneration Committee is aware that, as the Company’s primary listing is on the London Stock Exchange, IHG’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.

F-30

The main components

      The Company has 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 Company and the individual. Company 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.

      The normal policy for all Executive Directors is that, using ‘target’ or ‘expected value’ calculations, their performance-related incentives will equate to approximately 70% of total annual remuneration (excluding pensions & benefits).

      The main components of remuneration are as follows:

      Basic salary and benefits The salary for each Executive Director is reviewed annually and based on both individual performance and on the most recent relevant market information provided from independent professional sources on comparable salary levels. Internal relativities and salary levels in the wider employment market are also taken into account.

      Basic salary is the only element of remuneration which is pensionable.

      In addition, benefits are provided to Executive Directors in accordance with the policy applying to other executives in their geographic location.

      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

•  relevance to the hotel industry.

      Annual Performance Bonus This has two elements — the Short Term Incentive Plan (“STI”) and the Short Term Deferred Incentive Plan (“STDIP”). Both elements require the achievement of challenging performance goals before target bonus is payable.

      The STI is linked to individual performance as measured by an assessment of comprehensive business unit deliverables, demonstrated leadership behaviours, and the achievement of specific Key Performance Objectives that are linked directly to the Company’s strategic priorities. For Executive Directors, the target bonus opportunity under the STI in 2007 is 40% of salary, payable in cash.

      The STDIP is linked to the Company’s financial and operational performance. The target bonus opportunity under the STDIP in 2007 is 50% of salary of which half is linked to net annual room additions and half is linked to earnings before special items, interest and taxation.

      It is possible for participants to earn maximum bonuses of double the targets under the STI and the STDIP. No bonus is payable if financial and operational performance is less than 90% of target and maximum bonus is payable if performance exceeds 110% of target.

      Under the 2006 STDIP, 80% of bonus must be paid in shares and deferred. Participants may defer the remaining 20% of bonus on the same terms. For 2007, 100% of the bonus will be paid in shares and deferred. Matching shares may also be awarded up to half the total deferred amount. Any matching award is taken into account when the Remuneration Committee decides the basic level of payment under the STDIP. Therefore there is no separate performance test governing the vesting of matching awards. Such awards are, however, conditional on the Directors’ continued employment with the Company until the release date. The shares will normally be released at the end of the three years following deferral.

F-31

      Performance Restricted Shares The Performance Restricted Share Plan (“PRSP”) 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, other than in exceptional circumstances, will not exceed three times annual salary for Executive Directors.

      For the 2006/08 PRSP cycle, performance will be measured by reference to:

•  the increase in IHG’s Total Shareholder Return (“TSR”) over the performance period relative to nine* identified comparator companies: Accor, Hilton Hotels Corp., Choice, Marriott Hotels, Millennium & Copthorne, NH Hotels, Sol Melia, Starwood Hotels and Wyndham Worldwide; and

•  the cumulative annual growth in the number of rooms within the IHG system over the performance period relative to eight identified comparator companies: Carlson Hospitality Worldwide, Choice, Hilton Hotels Corp., Hyatt Hotels & Resorts, Marriott Hotels, Sol Melia, Starwood Hotels and Wyndham Worldwide.

*  Following the delisting of De Vere Group Plc Shares in September 2006.

     In respect of TSR performance, 10% of the award will be released for the achievement of fifth place within the TSR group and 50% of the award will be released for the achievement of first or second place. In respect of rooms growth performance, 10% of the award will be released for the achievement of median growth and 50% of the award will be released for the achievement of upper quartile growth. Vesting between all stated points will be on a straight line basis which is the simplest and fairest method of calculating awards that lie between threshold and maximum levels.

      Awards under the PRSP lapse if the performance conditions are not met — there is no retesting.

      As indicated in last year’s report, the Remuneration Committee believes that relative TSR and a rooms growth related performance measure are appropriate performance measures, effectively aligning appropriate elements of incentive pay with shareholder interests and the Company’s stated objective of increasing organic growth and the number of rooms in the IHG system.

      The target date for achieving the current rooms growth objective is the end of 2008 and therefore the Remuneration Committee has concluded that a rooms growth related measure is now more appropriately measured and awarded through the annual bonus plan. For the 2007/09 cycle, the performance measures for the PRSP will therefore be as follows:

•  50% of the award will continue to be based on IHG’s TSR relative to its peer comparator companies. 10% of the award will be released for the achievement of median growth and 50% of the award will be released for the achievement of first place only (previously first or second place). Vesting between all stated points will continue to be on a straight line basis.

•  The other 50% of the award will depend on growth in adjusted earnings per share (“EPS”) over the period. 10% of the award will be released if adjusted EPS growth is 10% per annum and 50% of the award will be released if adjusted EPS growth is 20% per annum or more. There will be no adjustment for any increase in the UK Retail Price Index (“RPI”) because this does not significantly affect IHG’s results.

      Executive Share Options As reported last year, executive share options do not presently form part of the Company’s remuneration strategy. Details of prior executive share option grants are given in the table on page F-40.

      For options granted in 2004 and 2005, a performance condition has to be met before options can be exercised. For both grants, the Company’s adjusted EPS over a three-year period must increase by at least nine percentage points over the increase in 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.

F-32

      Share Ownership The Remuneration 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.

      The Executive Directors are expected to hold all shares earned (net of any share sales required to meet personal tax liabilities) from the Company’s remuneration plans while the value of their holding is less than twice their base salary or three times in the case of the Chief Executive.

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 Group’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.

      Andrew Cosslett is Non-Executive Chairman of Duchy Originals Limited, for which he receives no remuneration.

Contracts of service

a) Policy

      The Remuneration Committee’s policy is for Executive Directors to have rolling contracts with a notice period of 12 months. Andrew Cosslett, Richard Hartman, Stevan Porter and Richard Solomons have service agreements with a notice period of 12 months. All new appointments are intended to have 12-month notice periods. However, on occasion, to complete an external recruitment successfully, a longer initial period reducing to 12 months may be used, following guidance in the Combined Code.

      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 minimise any liability.

      David Webster’s appointment as Non-Executive Chairman, effective from January 1, 2004, is subject to six months’ notice. All other Non-Executive Directors’ appointments are subject to three months’ notice.

     b) Directors’ contracts

	Contract		Unexpired term/
Director	effective date1		notice period
Andrew Cosslett		02.03.05		12 months
Richard Hartman		04.15.03		6 months	2
Stevan Porter		04.15.03		12 months
Richard Solomons		04.15.03		12 months

1	Each of the Executive Directors signed a letter of appointment, effective from completion of the June 2005 capital reorganisation of the Company on the same terms as their original service agreements.
2	Richard Hartman is due to retire in September 2007. Having given contractual notice, his unexpired term of office as at the date of this report is six months.

     Policy regarding pensions

      Andrew Cosslett, Richard Solomons and other senior UK-based 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. The latter is an unfunded arrangement, but with appropriate security provided via a fixed charge on a hotel asset. Currently, pensions benefits are provided from both the registered InterContinental Hotels UK Pension Plan and the unfunded InterContinental Executive Top-Up Scheme.

F-33

      In response to the new pension regime resulting from the Finance Act 2004, from 2006 these plans were amended to continue to provide, tax efficiently, similar benefits in total, but with a different split of benefits between the two plans. As an alternative to these arrangements, a cash allowance may be taken.

      Stevan Porter and senior US-based executives participate in US retirement benefits plans.

      With effect from January 30, 2006, Richard Hartman ceased to be an active member of the InterContinental Hotels UK Pension Plan and InterContinental Executive Top-Up Scheme, and from that date participates in the InterContinental Hotels Group International Savings and Retirement Plan. Executives in other countries participate in these plans or local plans.

Directors’ emoluments

							Total emoluments
							excluding pensions
	Base
	salaries		Performance				1.1.06 to		1.1.05 to
	and fees		payments1		Benefits2		12.31.06		12.31.05
	£000		£000		£000		£000		£000
Executive Directors
Andrew Cosslett		688		549		31		1,268		663
Richard Hartman		503		203		299		1,005		798
Stevan Porter3		427		290		9		726		429
Richard Solomons		440		351		15		806		423
Non-executive Directors
David Webster4		350		—		4		354		522
David Kappler5		80		—		—		80		80
Ralph Kugler6		50		—		—		50		50
Jennifer Laing6		50		—		—		50		18
Robert C. Larson6		50		—		—		50		50
Jonathan Linen6		50		—		—		50		4
Sir David Prosser7		65		—		—		65		65
Sir Howard Stringer8		43		—		—		43		50
Former directors9		—		—		1		1		917
Total		2,796		1,393		359		4,548		4,069

1	“Performance payments” include bonus awards in cash in respect of participation in the Short Term Incentive (“STI”) Plan and the Short Term Deferred Incentive Plan (“STDIP”) but exclude bonus awards in deferred shares and any matching shares, details of which are set out in the STDIP table on page F-36.
2	“Benefits” incorporate all tax assessable benefits arising from the individual’s employment. For Messrs Cosslett, Hartman 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 other expatriate benefits. For Stevan Porter, benefits relate in the main to private healthcare cover and financial counselling.
3	Emoluments for Stevan Porter include £51,413 that was chargeable to UK income tax.
4	With effect from January 1, 2007, David Webster is paid an annual fee of £390,000.
5	With effect from January 1, 2007, David Kappler is paid a total annual fee of £95,000, reflecting his roles as Senior Independent Director and Chairman of the Audit Committee.
6	With effect from January 1, 2007, an annual fee of £60,000 is payable to each of Ralph Kugler, Jennifer Laing, Robert C. Larson and Jonathan Linen. All fees due to Ralph Kugler are paid to Unilever.
7	With effect from January 1, 2007, Sir David Prosser is paid a total annual fee of £80,000, reflecting his role as Chairman of the Remuneration Committee.
8	Sir Howard Stringer resigned as a Director on November 10, 2006.
9	Sir Ian Prosser retired as a Director on December 31, 2003. However, he had an ongoing healthcare benefit of £1,027 during the year.

F-34

Long-term Reward

     Short-Term Deferred Incentive Plan (“STDIP”)

      Messrs Cosslett, Hartman, Porter and Solomons participated in the STDIP during the year ended December 31, 2006, and received an award on February 26, 2007.

      Directors’ pre-tax interests during the year were:

				STDIP							STDIP													Value
				shares awarded					Market		shares vested				Market									based on
	STDIP			during the					price per		during the				price per					STDIP				share price
	shares held			year 1.1.06 to			Award		share at		year 1.1.06		Vesting		share at		Value at			shares held		Planned		of 1262.0p
	at 1.1.06			12.31.06			date		award		to 12.31.06		date		vesting		vesting			at 12.31.06		vesting date		at 12.31.06
																	£							£
Directors
Andrew Cosslett		39,916	1					4.1.05		617.5p		39,916		4.3.06		942p		376,009			—
		39,916	1					4.1.05		617.5p											39,916		4.1.07		503,740
					105,276	3,7		3.8.06		853.67p											32,168		3.8.07		405,961
																					32,167		3.8.08		405,948
																					32,168		3.8.09		405,961
Total																					136,419				1,721,610
Richard Hartman		29,447	2					3.16.05		654p		29,447		3.16.06		891.58p		262,544			—
		29,447	2					3.16.05		654p											29,447		3.16.07		371,622
		29,447	2					3.16.05		654p											29,447		3.16.08		371,622
					64,518	4,7		3.8.06		853.67p											19,714		3.8.07		248,791
																					19,714		3.8.08		248,791
																					19,713		3.8.09		248,779
Total																					118,035				1,489,605
Stevan Porter		26,978	2					3.16.05		654p		26,978		3.16.06		891.58p		240,530	8		—
		26,978	2					3.16.05		654p											26,978		3.16.07		340,463
		26,978	2					3.16.05		654p											26,978		3.16.08		340,463
					67,557	5,7		3.8.06		853.67p											20,643		3.8.07		260,515
																					20,642		3.8.08		260,503
																					20,642		3.8.09		260,503
Total																					115,883				1,462,447
Richard Solomons		29,020	2					3.16.05		654p		29,020		3.16.06		891.58p		258,737			—
		29,020	2					3.16.05		654p											29,020		3.16.07		366,233
		29,021	2					3.16.05		654p											29,021		3.16.08		366,246
					67,296	6,7		3.8.06		853.67p											20,563		3.8.07		259,506
																					20,562		3.8.08		259,493
																					20,563		3.8.09		259,506
Total																					119,729				1,510,984

1	This special award was made to Andrew Cosslett as part of his overall recruitment terms. The shares vest in equal portions on the first and second anniversary of the award date, subject to his continued employment until that time. The first half of the award vested on April 3, 2006 and the second half of the award is due to vest on April 2, 2007.
2	This award was based on financial year 2004 performance where the performance measures were related to earnings per share (“EPS”), earnings before interest and tax (“EBIT”) and personal performance. Total Shares held include matching shares.
3	This award was based on financial year 2005 performance and the bonus target was 50% of base salary. Andrew Cosslett was awarded 70% of his bonus target for EPS performance, 69.4% of his bonus target for Group EBIT performance and 45% of his bonus target for his personal performance. Andrew Cosslett’s total bonus was therefore 184.4% of his bonus target. One matching share was awarded for every two bonus shares earned.
4	This award was based on financial year 2005 performance and the bonus target was 50% of base salary. Richard Hartman was awarded 70% of his bonus target for EPS performance, 46.2% of his bonus target for EMEA EBIT performance and 30% of his bonus target for

F-35

	his personal performance. Richard Hartman’s total bonus was therefore 146.2% of his bonus target. One matching share was awarded for every two bonus shares earned.
5	This award was based on financial year 2005 performance and the bonus target was 50% of base salary. Stevan Porter was awarded 70% of his bonus target for EPS performance, 64.4% of his bonus target for The Americas EBIT performance and 45% of his bonus target for his personal performance. Stevan Porter’s total bonus was therefore 179.4% of his bonus target. One matching share was awarded for every two bonus shares earned.
6	This award was based on financial year 2005 performance and the bonus target was 50% of base salary. Richard Solomons was awarded 70% of his bonus target for EPS performance, 69.4% of his bonus target for Group EBIT performance and 45% of his bonus target for his personal performance. Richard Solomons’ total bonus was therefore 184.4% of his bonus target. One matching share was awarded for every two bonus shares earned.
7	These share interests were in InterContinental Hotels Group PLC 10p ordinary shares prior to the share consolidation effective from June 12, 2006. For every eight existing InterContinental Hotels Group PLC shares held on June 9, 2006, shareholders received seven new ordinary shares of 113/7p each and 118p per existing ordinary share. As a consequence, shares held at December 31, 2006 have been reduced accordingly.
8	The value of Stevan Porter’s shares at vesting includes £17,037 that was chargeable to UK income tax.

F-36

     Performance Restricted Share Plan (“PRSP”)

      In 2006, there were three cycles in operation and one cycle which vested.

      The awards made in respect of the Performance Restricted Share Plan cycles ending on December 31, 2005, December 31, 2006, December 31, 2007 and December 31, 2008 and the maximum pre-tax number of ordinary shares due if performance target are achieved in full are set out in the table below. In respect of the cycle ending on December 31, 2006, the Company finished in third place in the TSR group and achieved ROCE growth of 98.2%. Accordingly, 62.4% of the award vested on February 21, 2007.

				Maximum
				PRSP							PRSP
				shares							shares											Maximum		Expected
	Maximum			awarded							vested									Maximum		value based		value
	PRSP			during					Market		during		Market					Actual/		PRSP		on share		based on
	shares			the year					price per		the year		price per					planned		shares		price of		share price
	held at			1.1.06 to			Award		share at		1.1.06 to		share at		Value at			vesting		held at		1262.0p at		of 1262.0p
	1.1.06			12.31.06			date		award		12.31.06		vesting		vesting			date		12.31.06		12.31.06		at 12.31.06
															£							£		£
Directors
Andrew Cosslett		68,216	1					4.1.05		617.5p		29,196		858p		250,502			3.3.06		—
		136,432	2					4.1.05		617.5p		—							2.21.07		136,432		1,721,772		1,074,386	8
		276,200	3					6.29.05		706p		—							2.20.08		276,200		3,485,644
					200,740	4		4.3.06		941.5p		—							2.18.09		200,740		2,533,339
Total																					613,372		7,740,755
Richard Hartman		167,900	1					6.18.03		445p		71,861		858p		616,567			3.3.06		—
		165,130	2					6.24.04		549.5p		—							2.21.07		165,130		2,083,941		1,300,380	8
		214,870	3					6.29.05		706p		—							2.20.08		214,870		2,711,660
					146,110	4		4.3.06		941.5p		—							2.18.09		146,110		1,843,909
Total																					526,110		6,639,510
Stevan Porter		170,710	1					6.18.03		445p		73,063		858p		626,881	7		3.3.06		—
		142,290	2					6.24.04		549.5p		—							2.21.07		142,290		1,795,700		1,120,517	8
		174,900	3					6.29.05		706p		—							2.20.08		174,900		2,207,238
					132,240	4		4.3.06		941.5p		—							2.18.09		132,240		1,668,869
Total																					449,430		5,671,807
Richard Solomons		165,160	1					6.18.03		445p		70,688		858p		606,503			3.3.06		—
		144,990	2					6.24.04		549.5p		—							2.21.07		144,990		1,829,774		1,141,779	8
		176,550	3					6.29.05		706p		—							2.20.08		176,550		2,228,061
					128,470	4		4.3.06		941.5p		—							2.18.09		128,470		1,621,292
Total																					450,010		5,679,127
Former Directors
Richard North		259,545	1,5					6.18.03		445p		111,085		858p		953,109			3.3.06		—
		144,993	2,5					6.24.04		549.5p		—							2.21.07		144,993		1,829,812		1,141,803	8
Total																					144,993		1,829,812
Sir Ian Prosser		65,410	1,6					6.18.03		445p		27,995		858p		240,197			3.3.06		—
Total		—																			—
Total																							27,561,011

1  This award was based on performance to December 31, 2005 where the performance measure related to both the Company’s Total Shareholder Return (“TSR”) against a group of 11 other comparator companies and growth in return on capital employed (“ROCE”). The number of shares released was graded, according to a) where the Company finished in the TSR comparator group, with 50% of the award being released for first or second position and 10% of the award being released for sixth place, and b) growth in ROCE, with 50%

F-37

	of the award being released for 80% growth and 10% of the award being released for 30% growth. The Company finished in fifth place in the TSR group and achieved ROCE growth of 46%. Accordingly 42.8% of the award vested on March 3, 2006.
2	This award is based on performance to December 31, 2006 where the performance measure relates to both the Company’s TSR against a group of eight other comparator companies and growth in ROCE. The number of shares released is graded, according to a) where the Company finishes in the TSR comparator group, with 50% of the award being released for first or second position and 10% of the award being released for fifth place; and b) growth in ROCE, with 50% of the award being released for 141.6% growth and 10% of the award being released for 70% growth.
3	This award is based on performance to December 31, 2007 where the performance measure relates to both the Company’s TSR against a group of eight other comparator companies and the relative cumulative annual growth rate of rooms in the IHG system.
4	This award is based on performance to December 31, 2008 where the performance measure relates to both the Company’s TSR against a group of nine other comparator companies and the relative cumulative annual growth of rooms in the IHG system.
5	Richard North’s awards were pro-rated to reflect his contractual service during the applicable performance periods.
6	Sir Ian Prosser’s award was pro-rated to reflect his actual service during the applicable performance period.
7	The value of Stevan Porter’s shares at vesting includes £44,404 that was chargeable to UK income tax.
8	The Company finished in third place in the TSR group and achieved ROCE growth of 98.2%. Accordingly, 62.4% of the award vested on February 21, 2007.

F-38

     Share options

      In 2003, Directors and other executives with outstanding options under the Six Continents Executive Share Option Schemes were permitted to roll over those options into options of equivalent value over shares. In 2003, a grant of options was made under the IHG all-employee Sharesave Plan. In 2003, 2004 and 2005, grants of options were made under the IHG Executive Share Option Plan.

	Ordinary shares under option
														Weighted
	Options held at			Granted		Lapsed		Exercised			Options			average
	1.1.06 or date			during the		during the		during the			held at			option		Option
Directors	of appointment			year		year		year			12.31.06			price		price
														(pence)		(pence)
Andrew Cosslett
		157,300													619.83
												157,300	1
Total		157,300			—		—		—			157,300			619.83
Richard Hartman		952,832													458.66
									136,795								349.13
									105,332								422.81
									122,261								434.22
									250,684								438.00
												337,760	1		538.37
Total		952,832			—		—		615,072			337,760			538.37
Stevan Porter		576,513													490.34
									254,883	3							438.00
												321,630	1		531.82
Total		576,513			—		—		254,883			321,630			531.82
Richard Solomons		574,365	2												494.24
									239,726								438.00
												334,639	1,2		531.10
Total		574,365			—		—		239,726			334,639			531.10

1	Where options are not yet exercisable. Sharesave options granted in 2003 are exercisable for six months from March 2009. Executive share options granted in 2004 are exercisable between April 2007 and April 2014. Executive share options granted in 2005 are exercisable between April 2008 and April 2015. The performance condition relating to both the 2004 and 2005 grants of executive share options is set out on page F-33.
2	Includes 3,769 Sharesave options granted in 2003.
3	The value of Stevan Porter’s shares on exercise includes £91,778 that was chargeable to UK income tax.

     Option prices range from 308.48 pence to 619.83 pence per share. The closing market value share price on December 29, 2006 was 1262.00 pence and the range during the year was 806.69 pence to 1265.00 pence per share.

      The gain on exercise by Directors in aggregate was £6,662,750 in the year ended December 31, 2006 (£1,658,109 in the year ended December 31, 2005). The market value share prices on the exercise of options by Richard Hartman, Stevan Porter and Richard Solomons were 1047.34 pence, 946.35 pence and 1054.12 pence per share, respectively.

F-39

     Directors’ shareholdings

	December 31, 2006			January 1, 20061
	InterContinental Hotels Group PLC			InterContinental Hotels Group PLC
	ordinary shares of 113/7 pence3			ordinary shares of 10 pence
Executive Directors
Andrew Cosslett		42,063			7,332
Richard Hartman		—			70,117
Stevan Porter		114,446			64,589
Richard Solomons		104,247			60,339
Non-executive Directors
David Kappler		1,669			1,908
Ralph Kugler		572			654
Jennifer Laing		872			—
Robert C Larson		6,874	2		7,857	2
Jonathan Linen		8,750	2		—
Sir David Prosser		2,863			3,273
David Webster		31,975			31,823

1	These share interests were in InterContinental Hotels Group PLC 10 pence ordinary shares prior to the share consolidation effective from June 12, 2006. For every eight existing InterContinental Hotels Group PLC shares held on June 9, 2006, shareholders received seven new ordinary shares of 113/7 pence each and 118 pence per existing ordinary share.
2	Held in the form of American Depositary Receipts.
3	These shareholdings are all beneficial interests and include shares held by Directors’ spouses and other connected persons. None of the Directors has a beneficial interest in the shares of any subsidiary.

     At December 31, 2006, the Executive Directors of the Company, as potential beneficiaries under the Company’s Employee Benefit Trust (the Trust), were each technically deemed to be interested in 1,324,110 unallocated shares held by the Trust (2,924,775 Shares as at December 31, 2005). In the period from December 31, 2006 to March 16, 2007, a further 1,543,646 shares were released from the Trust. The Directors hold a residual interest to 2,410,526 shares 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.

     Directors’ pensions

      The following information relates to the pension arrangements provided for Messrs Cosslett, Hartman and Solomons under the executive section of the InterContinental Hotels UK Pension Plan (the “IC Plan”) and the unfunded InterContinental Executive Top-Up Scheme (“ICETUS”).

      The executive section of the IC Plan is a funded, registered, final salary, occupational pension scheme. 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’, partners’ and dependants’ pensions on death. When benefits would otherwise exceed a member’s lifetime allowance under the post-April 2006 pensions regime, these benefits are limited in the IC Plan, but the balance is provided instead by ICETUS.

      Richard Hartman, who reached the IC Plan normal pension age of 60 on January 30, 2006, ceased to be an active member of the IC Plan and ICETUS with effect from the date, and instead participates in the InterContinental Hotels Group International Savings and Retirement Plan (“IS&RP”), which is a Jersey-based defined contribution plan to which the Company contributes.

F-40

      Stevan Porter has 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.

Directors’ pension benefits

									Increases in
									transfer value
					Transfer value				over the
			Directors’		of accrued benefits				year, less		Increase		Increase		Accrued
	Age at		contributions						Directors’		in accrued		in accrued		pension at
	12.31.06		in the year		1.1.06		12.31.06		contributions		pension		pension		12.31.06
					£		£		£
			(note 1)								(note 2)		(note 3)		(note 4)
			£								£ pa		£ pa		£ pa
Directors
Andrew Cosslett		51		28,300		266,900		595,300		300,100		24,200		23,600		43,800
Richard Hartman		60		1,300		1,848,200		1,935,400		85,900		8,100		5,600		94,700
Richard Solomons		45		19,500		1,227,100		1,470,200		223,900		24,500		21,000		143,800

note 1:	Contributions paid in the year by the Directors under the terms of the plans. Contributions increased in April 2006 under the new pensions regime, to 5% of full pensionable salary.
note 2:	The absolute increase in accrued pension during the year.
note 3:	The increase in accrued pension during the year 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 December 31, 2006, except that for Richard Hartman the figure shown is the pension at age 60, increase to allow for its late payment.

     The figures shown in the above table relate to the final salary plans only. For defined contribution plans, the contributions made by and in respect of Stevan Porter during the year are:

Director’s contribution to					Company’s contribution to
	DCP		401(k)			DCP		401(k)
	£		£			£		£
Stevan Porter		43,300		6,000	Stevan Porter		80,900		4,900

      The Company contributions made in respect of Richard Hartman to the IS&RP during the year are £183,100. He made no contributions.

Note 4 — Auditor’s Remuneration paid to Ernst & Young LLP

	Year ended		Year ended
	December 31,		December 31,
	2006		2005
	(£ million)
Audit fees		0.9		1.0
Audit fees in respect of subsidiaries		1.4		2.1
Tax fees		0.7		0.6
Fees in respect of reporting under Sarbanes Oxley Act		1.0		—
Interim review fees		0.2		0.2
Other services pursuant to legislation		0.1		0.8
Corporate finance fees		0.1		1.8
Other		0.8		0.7
		5.2		7.2

F-41

      Audit fees in respect of the pension scheme were not material.

      The Audit Committee has a process to ensure that any non-audit services do not compromise the independence and objectivity of the external auditor, and that relevant United Kingdom and United States 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 5 — Special Items

	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2006			2005			2004
	(£ million)
Other operating income and expenses
Gain on sale of investment(i)		25			—			—
Reversal of previously recorded impairment(ii)		2			—			—
Impairment of property, plant and equipment(iii)		—			(7	)		(48	)
Restructuring costs(iv)		—			(13	)		(11	)
Property damage(v)		—			(9	)		—
Employee benefits curtailment gain(vi)		—			7			—
Reversal of previously recorded provisions(vii)		—			—			20
Provision for investment in associates(viii)		—			—			(16	)
Provision for investment in other financial assets		—			—			(2	)
Write back of provision for investment in other financial assets		—			—			8
		27			(22	)		(49	)
Financing
Financial income(ix)		—			—			22
Financial expenses(x)		—			—			(16	)
Financial expense on early settlement of debt(xi)		—			—			(17	)
		—			—			(11	)
Tax
Tax (charge)/credit on other operating income and expenses		(6	)		—			22
Special tax credit(xii)		100			8			161
		94			8			183
Gain on disposal of assets
Gain on disposal of assets		123			349			15
Tax (charge)/credit		(6	)		(38	)		4
		117			311			19

The above items are treated as special by reason of their size or incidence (see Note 9).

(i)	Gain on the sale of the Company’s investment in FelCor Lodging Trust, Inc.
(ii)	Relates to the reversal of impairment in value of an associate investment.

F-42

(iii)	Property, plant and equipment were written down by £7 million in 2005 (2004 £48 million) following an impairment review of the hotel estate.
(iv)	Restructuring costs relate to the delivery of the further restructuring of the Hotels business.
(v)	Damage to properties resulting from fire and natural disasters.
(vi)	A curtailment gain arising as a result of the sale of UK hotel properties.
(vii)	Following adoption of IAS 39 at January 1, 2005, adjustments to market value are recorded directly in equity. In 2004, under UK GAAP, the adjustment is a reversal of previously recorded provisions.
(viii)	Relates to an impairment in value of associate investments.
(ix)	Relates to interest on special tax refunds.
(x)	Relates to costs of closing out currency swaps and costs related to refinancing the Company’s debt.
(xi)	Relates to premiums paid on the repurchase of the Company’s public debt.
(xii)	Represents the release of provisions which are special by reason of their size or incidence relating to tax matters which have been settled or in respect of which the relevant statutory limitation period has expired, principally relating to intra-group financing and internal restructuring, together with, in 2004 and 2006, credit in respect of previously unrecognized losses.

Note 6 — Finance costs

	Year ended		Year ended		Year ended
	December 31,		December 31,		December 31,
	2006		2005		2004
	(£ million)
Financial income
Interest on tax refunds		—		—		22
Interest income		21		28		48
Fair value gains		5		2		—
		26		30		70
Financial expenses
Financial expense on early settlement of debt		—		—		17
Costs of closing out currency swaps and refinancing the Company’s debt		—		—		16
Interest expense — Hotels		33		51		70
Interest expense — Soft Drinks		—		9		—
Finance charge payable under finance leases		4		—		—
		37		60		103
Fair value charge		—		3		—
		37		63		103

      Included within the Hotels interest expense is £10 million (2005 £5 million, 2004 £2 million) payable to the Company’s loyalty program relating to interest paid on the accumulated balance of cash received in advance of the redemption of points awarded.

F-43

Note 7 — Tax

Income tax

				Year ended			Year ended			Year ended
				December 31,			December 31,			December 31,
				2006			2005			2004
				(£ million)
UK corporation tax at 30% (2005 30%: 2004 30%):
	Current period				16			11			23
	Benefit of tax reliefs on which no deferred tax previously recognized				(10	)		—			—
	Adjustments in respect of prior periods				(4	)		(6	)		(48	)
					2			5			(25	)
Foreign tax:
	Current period				72			149			62
	Benefit of tax reliefs on which no deferred tax previously recognized				(1	)		(2	)		(9	)
	Adjustments in respect of prior periods				(94	)		(19	)		(82	)
					(23	)		128			(29	)
Total current tax					(21	)		133			(54	)
Deferred tax:
	Origination and reversal of temporary differences				27			(3	)		18
	Changes in tax rates				(4	)		(2	)		(11	)
	Adjustments to estimated recoverable deferred tax assets				(13	)		1			12
	Adjustments in respect of prior periods				(24	)		(11	)		(96	)
Total deferred tax					(14	)		(15	)		(77	)
Total income tax on profit for the year					(35	)		118			(131	)
Further analyzed as tax relating to:
	Profit before special items				53			88			56
	Special items (Note 5):
		Other operating income and expenses:
			Gain on sale of investment		6			—			—
			Impairment of property, plant and equipment		—			—			(14	)
			Restructuring costs		—			—			(8	)
			Provision for investment in other financial assets		—			—			3
		Financing:
			Financial expense on early settlement of debt		—			—			(5	)
			Other		—			—			2
		Special tax credit(i)			(100	)		(8	)		(161	)
Tax (credit)/charge					(41	)		80			(127	)
Gain on disposal of assets					6			38			(4	)
					(35	)		118			(131	)
The total tax (credit)/charge can be further analyzed as relating to:
	Profit on continuing operations				(50	)		24			(196	)
	Profit on discontinued operations				9			56			69
	Gain on disposal of assets				6			38			(4	)
					(35	)		118			(131	)

(i)  Represents the release of provisions which are special by reason of their size or incidence relating to tax matters which have been settled or in respect of which the relevant statutory limitation period has expired, principally relating to intra-group financing and internal restructuring, together with, in 2004 and 2006, a credit in respect of previously unrecognized losses.

F-44

Tax reconciliations

Reconciliation of tax (credit)/charge on total profit, including gain on disposal of assets

	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2006			2005			2004
				%
UK corporation tax at standard rate		30.0			30.0			30.0
Permanent differences		3.7			1.3			1.5
Net effect of different rates of tax in overseas businesses		3.5			2.9			6.3
Effect of changes in tax rates		(1.0	)		(0.3	)		(3.9	)
Benefit of tax reliefs on which no deferred tax previously recognized		(3.0	)		(0.1	)		(1.1	)
Effect of adjustments to estimated recoverable deferred tax assets		(0.2	)		0.1			4.3
Adjustment to tax charge in respect of prior periods		(6.9	)		(4.5	)		(22.6	)
Other		0.4			(0.1	)		0.6
Special items and gain on disposal of assets		(36.1	)		(10.7	)		(61.9	)
		(9.6	)		18.6			(46.8	)

Note 8 — Dividends paid and proposed

		Year ended		Year ended		Year ended		Year ended		Year ended		Year ended
		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
		2006		2005		2004		2006		2005		2004
		(pence per share)						(£ million)
Paid during the year:
	Final (declared in previous year)		10.70		10.00		9.45		46		61		70
	Interim		5.10		4.60		4.30		18		20		29
	Special interim		118.00		—		72.00		497		—		501
			133.80		14.60		85.75		561		81		600

      Proposed for approval at the Annual General Meeting (not recognized as a liability at December 31):

Final 13.30 10.70 10.00 47 46 62

      The proposed final dividend is payable on the shares in issue at March 23, 2007.

Note 9 — Earnings per ordinary share

      Basic earnings per ordinary share is calculated by dividing the profit for the year available for IHG equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in issue during the year.

      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 year.

      On June 1, 2006, shareholders approved a share capital consolidation on the basis of seven new ordinary shares for every eight existing ordinary shares, together with a special dividend of 118 pence per existing ordinary share. The overall effect of the transaction was that of a share repurchase at fair value, therefore no adjustment has been made to comparative data.

F-45

      Adjusted earnings per ordinary share is disclosed in order to show performance undistorted by special items, to give a more meaningful comparison of the Company’s performance.

	Year ended				Year ended				Year ended
	December 31,				December 31,				December 31,
	2006				2005				2004
	Continuing				Continuing				Continuing
	operations		Total		operations		Total		operations		Total
Basic earnings per share
Profit available for equity holders (£ million)		267		405		103		496		234		383
Basic weighted average number of ordinary shares (millions)		389		389		521		521		710		710
Basic earnings per share (pence)		68.6		104.1		19.8		95.2		32.9		53.9
Diluted earnings per share
Profit available for equity holders (£ million)		267		405		103		496		234		383
Diluted weighted average number of ordinary shares (millions) (see below)		399		399		533		533		718		718
Diluted earnings per share (pence)		66.9		101.5		19.3		93.1		32.6		53.3

		2006		2005		2004
		(millions)
Diluted weighted average of ordinary shares is calculated as:
	Basic weighted average number of ordinary shares		389		521		710
	Dilutive potential ordinary shares — employee share options		10		12		8
			399		533		718

		Year ended						Year ended						Year ended
		December 31,						December 31,						December 31,
		2006						2005						2004
		Continuing						Continuing						Continuing
		operations			Total			operations			Total			operations			Total
		(£ million)
Adjusted earnings per share
Profit available for equity holders			267			405			103			496			234			383
Less adjusting items (Note 5):
	Other operating income and expenses		(27	)		(27	)		22			22			49			49
	Financing		—			—			—			—			11			11
	Tax on other operating income and expenses		6			6			—			—			(22	)		(22	)
	Special tax credit		(100	)		(100	)		(8	)		(8	)		(161	)		(161	)
	Gain on disposal of assets, net of tax		—			(117	)		—			(311	)		—			(19	)
Adjusted earnings			146			167			117			199			111			241
Basic weighted average number of ordinary shares (millions)			389			389			521			521			710			710
Adjusted earnings per share (pence)			37.5			42.9			22.5			38.2			15.6			33.9
Diluted weighted average number of ordinary shares (millions)			399			399			533			533			718			718
Adjusted diluted earnings per share (pence)			36.6			41.8			21.9			37.3			15.5			33.6

F-46

Note 10 — Property, Plant and Equipment

		Land			Fixtures,
		and			fittings and			Plant and
		buildings			equipment			machinery			Total
		(£ million)
Year ended December 31, 2005
Cost:
At January 1, 2005			1,421			985			182			2,588
	Exchange and other adjustments		34			13			—			47
	Additions		15			107			18			140
	Net transfers to non-current assets classified as held for sale		(163	)		(150	)		—			(313	)
	Disposals		(152	)		(333	)		(200	)		(685	)
	Impairment		—			(7	)		—			(7	)
At December 31, 2005			1,155			615			—			1,770
Depreciation:
At January 1, 2005			(132	)		(425	)		(105	)		(662	)
	Exchange and other adjustments		—			(14	)		—			(14	)
	Provided		(11	)		(88	)		(17	)		(116	)
	Net transfers to non-current assets classified as held for sale		10			58			—			68
	On disposals		32			156			122			310
At December 31, 2005			(101	)		(313	)		—			(414	)
Net book value at December 31, 2005			1,054			302			—			1,356
Year ended December 31, 2006
Cost:
At January 1, 2006			1,155			615			—			1,770
	Exchange and other adjustments		(73	)		(42	)		—			(115	)
	Additions		104			82			—			186
	Transfers to non-current assets classified as held for sale		(363	)		(118	)		—			(481	)
	Disposals		(2	)		(31	)		—			(33	)
At December 31, 2006			821			506			—			1,327
Depreciation:
At January 1, 2006			(101	)		(313	)		—			(414	)
	Exchange and other adjustments		7			23			—			30
	Provided		(7	)		(41	)		—			(48	)
	Transfers to non-current assets classified as held for sale		17			55			—			72
	On disposals		2			28			—			30
At December 31, 2006			(82	)		(248	)		—			(330	)
Net book value at December 31, 2006			739			258			—			997

      On adoption of IFRS the Company retained previous revaluations of property, plant and equipment as deemed cost as permitted by IFRS 1 “First-time Adoption of International Financial Reporting Standards.”

      At December 31, 2005 property, plant and equipment was written down by £7 million (2004 £48 million) following an impairment review of hotel assets based on current market trading conditions. No impairment, or subsequent reversal, was required at December 31, 2006.

F-47

      The carrying value of land and buildings held under finance lease at December 31, 2006 is £93 million (2005 £nil).

Note 11 — Held for Sale and Discontinued Operations

Hotels

      During the year ended December 31, 2006, the Company sold 32 hotels (2005 112 hotels, 2004 10 hotels) continuing the asset disposal program commenced in 2003, and an additional 10 hotels and two associates were classified as held for sale. At December 31, 2006, four hotels (2005 26 hotels) and two associates (2005 nil) were classified as held for sale.

      At December 31, 2006, an impairment loss of £3 million has been recognized on the remeasurement of a property that had previously been classified as held for sale. The loss, which reduced the carrying amount of the asset to fair value less costs to sell, has been recognized in the income statement in gain on disposal of assets. Fair value was determined by an independent property valuation.

F-48

		Year ended December 31,
		2006			2005			2004
Net assets of hotels on disposal
		(£ million)
Property, plant and equipment			648			1,961			100
Goodwill			—			20			—
Net working capital			(22	)		1			(1	)
Cash and cash equivalents			31			16			—
Loans and other borrowings			(10	)		—			—
Deferred tax			(117	)		(121	)		(5	)
Minority equity interest			(13	)		—			(11	)
Company’s share of net assets disposed of			517			1,877			83
Consideration
Current year disposals:
	Cash consideration, net of cost paid		628			1,832			101
	Deferred consideration		10			40			—
	Management contract value		30			82			—
	Other		(14	)		(12	)		(3	)
			654			1,942			98
Net assets disposed of			(517	)		(1,877	)		(83	)
Other, including tax and impairment			(20	)		(38	)		4
Gain on disposal of assets, net of tax			117			27			19
Net cash inflow
Current year disposals:
	Cash consideration, net of costs paid		628			1,832			101
	Cash disposed of		(31	)		(16	)		—
	Prior year disposal		23			—			—
			620			1,816			101
Assets and liabilities held for sale
Non-current assets classified as held for sale:
	Property, plant and equipment		40			279			1,826
	Associates		10			—			—
			50			279			1,826
Liabilities classified as held for sale:
	Deferred tax		(2	)		(34	)		(148	)
Cash flows related to discontinued operations
Operating profit before interest, depreciation and amortization			34			124			203
Investing activities			(8	)		(54	)		(78	)
Financing activities			(25	)		(16	)		(3	)

F-49

Soft Drinks

      During December 2005, the Company disposed of all of its interests in the Soft Drinks business with the initial public offering of Britvic plc.

	Year ended
	December 31,
	2005
	(£ million)
Net liabilities of Soft Drinks on disposal
Property, plant and equipment		234
Goodwill		18
Software		25
Inventories		36
Trade and other receivables		141
Cash and cash equivalents		1
Current liabilities		(162	)
Borrowings		(341	)
Employee benefits		(91	)
Deferred tax		8
Minority equity interest		66
Company’s share of net liabilities disposed of		(65	)
Consideration
Cash consideration, net of costs paid		221
Other		(2	)
		219
Net liabilities disposed of		65
Gain on disposal of assets, net of tax		284
Net cash inflow
Cash consideration, net of costs paid		221
Cash disposed of		(1	)
		220

	Year ended
	December 31,
	2006		2005			2004
	(£ million)
Cash flows related to discontinued operations
Operating profit before interest, depreciation and amortization		—		115			123
Investing activities		—		(47	)		(70	)
Financing activities		—		162			(25	)

F-50

Note 12 — Goodwill

		At
		December 31,
		2006			2005
		(£ million)
At January 1			118			152
	Acquisition of subsidiary (note 31)		2			—
	Disposals		—			(44	)
	Exchange and other adjustments		(11	)		10
At December 31			109			118

      Goodwill arising on business combinations that occurred before January 1, 2005 was not restated on adoption of IFRS as permitted by IFRS 1.

      Goodwill has been allocated to cash-generating units (“CGUs”) for impairment testing as follows:

	At December 31,
	2006		2005
	(£ million)
The Americas managed operations		72		82
Asia Pacific managed and franchised operations		37		36
		109		118

      The Company tests goodwill for impairment annually, or more frequently if there are any indications that an impairment may have arisen.

      The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates and growth rates. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Growth rates are based on management expectations and industry growth forecasts. The growth rates used to determine cash flows beyond five years do not exceed the average long-term growth rate for the relevant markets.

The Americas managed operations

      The Company prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next year and extrapolates cash flows for the following four years based on an estimated growth rate of 4% (2005 4%, 2004 5%). After this period, the terminal value of future cash flows is calculated based on a perpetual growth rate of approximately 3% (2005 3%, 2004 3%). The rate used to discount the forecast cash flow is 10.5% (2005 10.5%, 2004 10.5%).

Asia Pacific managed and franchised operations

      The Company prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next year and extrapolates cash flows for the following four years based on an estimated growth rate of 15% (2005 15%, 2004 7%). After this period, the terminal value of future cash flows is calculated based on a perpetual growth rate of approximately 4% (2005 4%, 2004 4%). The rate used to discount the forecast cash flows is 11.0% (2005 11.0%, 2004 11.0%).

      With regard to the assessment of value in use, management believe that the carrying values of the CGUs would only exceed their recoverable amounts in the event of highly unlikely changes in the key assumptions.

F-51

Note 13 — Intangible assets

					Management			Other
		Software			contracts			intangibles			Total
					(£ million)
Year ended December 31, 2005
Cost:
At January 1, 2005			52			—			22			74
	Additions		14			82			5			101
	Disposals		(32	)		—			(1	)		(33	)
	Exchange and other adjustments		4			2			2			8
At December 31, 2005			38			84			28			150
Amortization:
At January 1, 2005			(13	)		—			(7	)		(20	)
	Provided		(9	)		(3	)		(2	)		(14	)
	On disposals		7			—			—			7
	Exchange and other adjustments		(2	)		—			(1	)		(3	)
At December 31, 2005			(17	)		(3	)		(10	)		(30	)
Net book value at December 31, 2005			21			81			18			120
Year ended December 31, 2006
Cost:
At January 1, 2006			38			84			28			150
	Additions		10			30			13			53
	Acquisition of subsidiary (note 32)		1			7			—			8
	Disposals		—			—			(2	)		(2	)
	Exchange and other adjustments		(6	)		(4	)		(3	)		(13	)
At December 31, 2006			43			117			36			196
Amortization:
At January 1, 2006			(17	)		(3	)		(10	)		(30	)
	Provided		(9	)		(4	)		(3	)		(16	)
	Exchange and other adjustments		3			—			1			4
At December 31, 2006			(23	)		(7	)		(12	)		(42	)
Net book value at December 31, 2006			20			110			24			154

F-52

Note 14 — Investments in associates

      The Company holds six (2005 eight) investments accounted for as associates. The following table summarizes the financial information of the associates.

	At			At
	December 31,			December 31,
	2006			2005
	(£ million)
Share of associates’ balance sheet
Current assets		2			4
Non-current assets		50			93
Current liabilities		(5	)		(9	)
Non-current liabilities		(15	)		(46	)
Net assets		32			42
Share of associates’ revenue and profit
Revenue		22			18
Net profit		2			1
Related party transactions
Revenue from related parties		4			3
Amounts owed by related parties		1			2

Note 15 — Other Financial Assets

	At		At
	December 31,		December 31,
	2006		2005
	(£ million)
Non-current
Equity securities available-for-sale		48		41
Other		48		72
		96		113
Current
Equity securities available-for-sale		9		104
Derivatives		4		2
		13		106

      Available-for-sale financial assets, which are held on the balance sheet at fair value, consist of equity investments in listed and unlisted shares. The fair value of unlisted equity shares has been estimated using valuation guidelines issued by the British Venture Capital Association and is based on assumptions regarding expected future earnings. Listed equity share valuation is based on observable market prices.

      Other financial assets consist mainly of trade deposits made in the normal course of business. The deposits have been designated as loans and receivables and are held at amortized cost. Derivatives, including those within trade and other payables, are held on the balance sheet at fair value. The fair value is the estimated amount that the Company could expect to receive on the termination of the agreement, taking into consideration interest and exchange rates prevailing at the balance sheet date.

F-53

Note 16 — Inventories

	At		At
	December 31,		December 31,
	2006		2005
	(£ million)
Finished goods		1		2
Consumable stores		2		1
		3		3

Note 17 — Trade and other receivables

	At		At
	December 31,		December 31,
	2006		2005
	(£ million)
Trade receivables		163		160
Other receivables		51		66
Other prepayments		23		26
		237		252

      An allowance has been made for doubtful amounts of £39 million (2005 £38 million) in respect of trade receivables and £4 million (2005 £9 million) in respect of other receivables.

Note 18 — Cash and cash equivalents

	At		At
	December 31,		December 31,
	2006		2005
	(£ million)
Cash at bank and in hand		30		34
Short-term deposits		149		290
		179		324

      Short-term deposits are highly liquid investments with an original maturity of three months or less, in various currencies.

F-54

Note 19 — Trade and other payables

	At		At
	December 31,		December 31,
	2006		2005
	(£ million)
Current
Trade payables		47		84
Other tax and social security payable		26		12
Other payables		190		174
Accruals		139		186
Derivatives		—		6
Provisions (Note 24)		—		6
		402		468
Non-current
Other payables		109		107
Provisions (Note 24)		—		—
		109		107

      Other payables includes £180 million (2005 £162 million) relating to the future redemption liability of the Company’s loyalty program, of which £83 million (2005 £71 million) is classified as current and £97 million (2005 £91 million) as non-current.

Note 20 — Loans and other borrowings

	At December 31, 2006						At December 31, 2005
	Current		Non-current		Total		Current		Non-current		Total
	(£ million)
Secured bank loans		4		3		7		2		36		38
Finance leases		3		94		97		—		—		—
Unsecured bank loans		3		206		209		—		374		374
Other unsecured borrowings		—		—		—		—		—		—
Total borrowings		10		303		313		2		410		412

Secured bank loans

      These mortgages are secured on the hotel properties to which they relate. The rates of interest and currencies of these loans vary. Non-current amounts include £nil (2005 £15 million) repayable by instalment. Amounts shown as current are the mortgage repayments falling due within one year.

F-55

Finance leases

      Finance lease liabilities, which relate to the 99 year lease on the InterContinental Boston, are payable as follows:

	At
	December 31,
	2006
	Minimum			Present
	lease			value of
	payments			payments
	(£ million)
Less than one year		3			3
Between one and five years		33			24
More than five years		1,745			70
		1,781			97
Less amount representing finance charges		(1,684	)		—
		97			97

      The Company has the option to extend the term of the lease for two additional 20 year terms. Payments under the lease step up at regular intervals over the lease term.

Unsecured bank loans

      Unsecured bank loans are borrowings under the Company’s 2009 £1.1 billion Syndicated Facility and its short-term bilateral loan facilities. Amounts are classified as current where the loan facility expires within one year. These facilities contain financial covenants and as at the balance sheet date the Company was not in breach of the covenants.

Facilities provided by banks

	At December 31, 2006						At December 31, 2005
	Utilized		Unutilized		Total		Utilized		Unutilized		Total
	(£ million)
Committed		213		944		1,157		412		751		1,163
Uncommitted		3		36		39		—		14		14
		216		980		1,196		412		765		1,177

		At December
		31,
		2006		2005
		(£ million)
Unutilized facilities expire:
	within one year		86		39
	after one year but before two years		—		—
	after two years		894		726
			980		765

Note 21 — Financial risk management policies

Financial instruments

      The Company’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.

F-56

      The treasury function seeks to reduce the financial risk of the Company and manages liquidity to meet all foreseeable cash needs. Treasury activities include money market investments, 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 Company’s treasury risk management policy is to mitigate the adverse impact of movements in interest rates and foreign exchange rates.

      The US dollar is the predominant currency of the Company’s revenue and cash flows and movements in foreign exchange rates, particularly the US dollar and euro can affect the Company’s reported profit, net assets and interest cover. To hedge this translation exposure the Company matches the currency of its debt (either directly or via derivatives) to the currency of its net assets, whilst maximising the amount of US dollars borrowed.

      Foreign exchange transaction exposure is managed by the forward purchase or sale of foreign currencies or the use of currency options. Most significant exposures of the Company 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 interest rate swaps and options and forward rate agreements.

      The treasury function ensures that the Company has access to sufficient funds to allow the implementation of the strategy set by the Board. At the year end, the Company had access to £944 million of undrawn committed facilities. Medium and long-term borrowing requirements are met through the £1.1 billion Syndicated Facility and short-term borrowing requirements are met from drawings under bilateral bank facilities. The Company is in compliance with all of the financial covenants in its loan documents, none of which is expected to present a material restriction on funding or investment policy in the near future. In addition, the Company had surplus cash of £179 million which is held in short-term deposits and cash funds which allow daily withdrawals of cash. Most of the Company’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. Credit risk on treasury transactions is minimised by operating a policy on the investment of surplus cash that generally restricts counterparties to those with an A credit rating or better or those providing adequate security.

Sensitivities

      Based on the year-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 would increase the annual net interest charge by approximately £1 million (2005 £1 million, 2004 £2 million).

      A general weakening of the US dollar (specifically a one cent rise in the sterling : US dollar rate) would have reduced the Company’s profit before tax by an estimated £1 million (2005 £1 million).

Hedging

Interest rate risk

      The Company hedges its interest rate risk by taking out interest rate swaps to fix the interest flows on between 25% and 75% of its borrowings in major currencies. At December 31, 2006 the Company held interest rate swaps with notional principals of US $100 million and €80 million (2005 US $200 million, €160 million). The interest rate swaps are designated as cash flow hedges of borrowings under the syndicated loan facility and they are held on the balance sheet at fair value in other financial assets and other payables.

      Changes in cash flow hedge fair values are recognized in the unrealized gains and losses reserve to the extent that the hedges are effective. When the hedged item is recognized, the cumulative gains and losses on the hedging instrument are recycled to the income statement.

F-57

Foreign currency risk

      The Company is exposed to foreign currency risk on income streams denominated in foreign currencies. When appropriate, the Company hedges a portion of forecast foreign currency income and asset disposal proceeds by taking out forward exchange contracts. When hedge accounting is applied, the spot foreign exchange rate is designated as the hedged risk and so the Company takes the forward points on these contracts through financial income or expense.

      Forward contracts are held at fair value on the balance sheet as other financial assets and other payables.

      During the year, a £3 million (2005 £nil, 2004 £nil) foreign exchange gain was recognized in finance income, relating to gains on forward contracts that were not classified as hedging instruments under IAS 39. During 2005, gains of £6 million were recycled to the income statement from the unrealized gains and losses reserve in respect of effective hedges.

Hedge of net investment in a foreign operation

      The Company designates its foreign currency bank borrowings and currency derivatives as net investment hedges of foreign operations. The designated risk is the spot foreign exchange risk; the interest on these financial instruments is taken through financial income or expense and the derivatives are held on the balance sheet at fair value in other financial assets and other payables. Variations in fair value due to changes in the underlying exchange rates are taken to the currency translation reserve until an operation is sold, at which point the cumulative currency gains and losses are recycled against the gain or loss on sale.

Note 22 — Financial Instruments

Interest rate risk

      For each class of interest bearing financial asset and financial liability, the following table indicates the range of interest rates effective at the balance sheet date, the carrying amount on the balance sheet and the periods in which they reprice, if earlier than the maturity date.

								Repricing analysis
					Total
		Effective			carrying			Less than			6 months				More than
As at December 31, 2006		interest rate			amount			6 months			-1 year		1-2 years		5 years
		(%)			(£ million)
Cash and cash equivalents			0.0-5.2			(179	)		(179	)		—		—		—
Secured bank loans (floating)			8.5			7			7			—		—		—
Obligations under finance leases			9.7			97			—			—		—		97
Unsecured bank loans:
	Euro floating rate		4.0			54			54			—		—		—
	— effect of euro interest rate swaps*		(1.0	)					(54	)		—		54		—
	US dollar floating rate		5.7			53			53			—		—		—
	— effect of US dollar interest rate swaps*		(1.2	)					(51	)		—		51		—
	Sterling floating rate		5.6			102			102			—		—		—
Net debt						134			(68	)		—		105		97
Foreign exchange contracts						(4	)		(4	)		—		—		—
						130			(72	)		—		105		97

*  These items bear interest at a fixed rate.

F-58

								Repricing analysis
					Total
		Effective			carrying			Less than			6 months		1–2		More than
As at December 31, 2005		interest rate			amount			6 months			–1 year		years		5 years
		%			(£ million)
Cash and cash equivalents			0.0 – 4.5			(324	)		(324	)		—		—		—
Secured bank loans (fixed)*			6.5 – 7.8			28			—			—		28		—
Secured bank loans (floating)			2.9 – 8.5			10			10			—		—		—
Unsecured bank loans:
	Euro floating rate		2.9			141			141			—		—		—
	— effect of euro interest rate swaps*		(0.4	)					(55	)		—		55		—
	US dollar floating rate		4.7			162			162			—		—		—
	— effect of US dollar interest rate swaps*		0.2						(87	)		87		—		—
	Hong Kong dollar floating rate		4.7			71			71			—		—		—
Net debt						88			(82	)		87		83		—
Effect of currency swaps:
	Receive and pay fixed*		(1.5	)		3			3			—		—		—
	Receive and pay floating		(2.0	)		2			2			—		—		—
						93			(77	)		87		83		—

*  These items bear interest at a fixed rate.

     Interest rate swaps are included in the above tables to the extent that they effect the Company’s interest rate repricing risk. The swaps hedge the floating rate debt by fixing the interest rate, shown above as the effect on the debt’s floating rate, on an amount equal to their notional principal, for a period of time represented by the figures in each column. The fair values of derivatives are recorded in other financial assets and other payables.

      No currency swaps were held at December 31, 2006.

      The future redemption liability relating to the Company’s loyalty program incurs interest at US dollar LIBOR.

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Fair values

      The table below compares carrying amounts and fair values of the Company’s financial instruments.

	At December 31, 2006						At December 31, 2005
	Carrying						Carrying
	value			Fair value			value			Fair value
	(£ million)
Financial assets
Cash and cash equivalents (note 18)		179			179			324			324
Equity securities available-for-sale (note 15)		57			57			145			145
Derivatives (note 15)		4			4			2			2
Other financial assets (note 15)		48			48			72			72
Financial liabilities
Borrowings, excluding finance lease liabilities (note 20)		(216	)		(216	)		(412	)		(412	)
Liabilities under finance leases (note 20)		(97	)		(97	)		—			—
Derivatives (note 19)		—			—			(6	)		(6	)

      The fair value of cash and cash equivalents approximates book value due to the short maturity of the investments and deposits. Equity securities available-for-sale and derivatives are held on the balance sheet at fair value as set out in note 15. The fair value of other financial assets approximates book value based on prevailing market rates. The fair value of borrowings, excluding finance lease liabilities, approximates book value as interest rates reset to market rates on a frequent basis. The fair value of the finance lease liability is deemed to be its carrying value as the inception of the lease was shortly before December 31, 2006.

      Trade and other receivables and trade and other payables are not included in the above tables as their carrying value approximates to their fair value, including the future redemption liability of the Company’s loyalty program.

Note 23 — Share-based payments

Short Term Deferred Incentive Plan

      The IHG Short Term Deferred Incentive Plan (“STDIP”) enables eligible employees, including Executive Directors, to receive all or part of their bonus in the form of shares together with, in certain cases, a matching award of free shares up to half the deferred amount. The bonus and matching shares in the 2004 and 2005 plans are deferred and released in three equal tranches on the first, second and third anniversaries of the award date. The bonus and matching shares in the 2006 plan are released on the third anniversary of the award date. Under the 2006 plan a percentage of the award (Board members — 80%; other eligible employees — 50%) must be taken in shares and deferred. Participants may defer the remaining amount on the same terms or take it in cash. The cash portion is accrued for in liabilities. The awards in all of the plans are conditional on the participants remaining in the employment of a participating company. Participation in the STDIP is at the discretion of the Remuneration Committee. The number of shares is calculated by dividing a specific percentage of the participant’s annual performance related bonus by the middle market quoted prices on the three consecutive dealing days immediately preceding the date of grant. A number of executives participated in the plan during the year and conditional rights over 569,293⁽ⁱ⁾

(2005 624,508) shares were awarded to participants.

Performance Restricted Share Plan

      The Performance Restricted Share Plan (“PRSP”) allows Executive Directors and eligible employees to receive share awards, subject to the satisfaction of a performance condition, set by the Remuneration Committee, which is normally measured over a three year period. Awards are normally made annually and,

(i) Adjusted for the share capital consolidation on June 12, 2006.

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except in exceptional circumstances, will not exceed three times salary for Executive Directors and four times salary in the case of other eligible employees. In determining the level of awards within this maximum limit, the Remuneration Committee takes into account the level of Executive Share Options granted to the same person. During the year, conditional rights over 4,277,550 (2005 5,173,633) shares were awarded to employees under the plan. The plan provides for the grant of ‘nil cost options’ to participants as an alternative to conditional share awards.

Executive Share Option Plan

      For options granted, the option price is not less than the market value of an ordinary share, or the nominal value if higher. The market value is 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. A performance condition has to be met before options can be exercised and is normally measured over a three year period. The performance condition is set by the Remuneration Committee. The plan was not operated in 2006 and no options were granted in the year under the plan. The latest date that any options may be exercised is April 2015.

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 United Kingdom employees (including Executive Directors) employed by participating Group companies provided that 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 preceding the invitation date. The plan was not operated during 2005 or 2006 and no options were granted in the year under the plan. The latest date that any options may be exercised under the three-year plan is February 29, 2008 and under the five-year plan is February 28, 2010.

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 American Depositary Shares (“ADS”s) 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 2005 or 2006 and at December 31, 2006 no options had been granted under the plan.

Former Six Continents Share Schemes

      Under the terms of the Separation in 2003, 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 shares. As a result of this exchange, 23,195,482 shares were put under option at prices ranging from 308.48 pence to 593.29 pence. The exchanged options were immediately exercisable and are not subject to performance conditions. During 2006, 3,678,239 (2005 4,138,482,) such options were exercised, leaving a total of 4,055,674 (2005 7,909,002; 2004 12,568,562) such options outstanding at prices ranging from 308.48 pence to 593.29 pence for 2005 and 2006. The latest date that any options may be exercised is October 2012.

      Under IFRS the Company recognized a cost of £18 million (2005 £17 million, 2004 £12 million) related to equity settled share-based payment transactions during the year. Under US GAAP, the Company recognized a cost of £57 million (2005 £17 million, 2004 £12 million).

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      The aggregate consideration in respect of ordinary shares issued under option schemes during the year was £20 million (2005 £10 million, 2004 £16 million).

      The Company has a policy of repurchasing shares on the open market to satisfy share option exercises. The aim of the policy is to maintain a shareholding of approximately three million shares. All share option exercises are issued from the employee share trust.

      The following table sets forth awards and options granted during 2006. No awards were granted under the Executive Share Option Plan, Sharesave Plan or US Employee Stock Purchase Plan during the year.

	Short Term Deferred		Performance Restricted
	Incentive Plan		Share Plan
Number of shares awarded in 2006		569,293		4,277,550

      In 2006, 2005 and 2004, the Company used separate option pricing models and assumptions for each plan. The following tables set forth information about how the fair value of each option is calculated:

	Short Term Deferred		Performance Restricted
2006	Incentive Plan(iii)		Share Plan
Valuation model	Binomial		Monte Carlo
			Simulation and
			Binomial
Weighted average share price		831.0p		946.0p
Expected dividend yield				2.32%
Risk-free interest rate				4.9%
Volatility(i)				20%
Term (years)(ii)		2.0		3.0

	Short Term Deferred		Performance Restricted		Executive Share
2005	Incentive Plan(iii)		Share Plan		Option Plan
Valuation model	Binomial		Monte Carlo		Binomial
			Simulation and
			Binomial
Weighted average share price		652.8p		702.0p		627.0p
Exercise price						620.0p
Expected dividend yield		2.73%		3.18%		3.62%
Risk-free interest rate				4.10%		4.69%
Volatility(i)				23%		28%
Term (years)(ii)		2.0		3.0		6.5

	Short Term Deferred		Performance Restricted		Executive Share
2004	Incentive Plan(iii)		Share Plan		Option Plan
Valuation model	Binomial		Monte Carlo		Binomial
			Simulation and
			Binomial
Weighted average share price		498.0p		550.0p		494.0p
Exercise price						494.0p
Expected dividend yield		3.74%		3.49%		3.81%
Risk-free interest rate						4.73%
Volatility(i)						31.33%
Term (years)(ii)		2.8		3.0		6.5

(i)	The expected volatility was determined by calculating the historical volatility of the Company’s share price corresponding to the expected life of the option or share award.
(ii)	The expected term of the options is taken to be the mid point between vesting and lapse, as historical exercise patterns have shown this to be appropriate.

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(iii) Awards made under the STDIP are structured as ’nil cost share awards’ and expected volatility and risk free rate do not impact the fair value calculation of these awards. The employees are entitled to receive dividend equivalents over the vesting period and, therefore, the expected dividend yield assumption is not required.

     Movements in the awards and options outstanding under the schemes for the years ended December 31, 2006, December 31, 2005 and December 31, 2004 are as follows:

	Short Term Deferred			Performance Restricted
	Incentive Plan			Share Plan
	Number of shares			Number of shares
	(thousands)
Outstanding at January 1, 2004		107			5,445
Granted		231			2,665
Vested		(47	)		—
Lapsed or canceled		(50	)		(375	)
Outstanding at December 31, 2004		241			7,735
Granted		625			5,174
Vested		(32	)		(1,278	)
Lapsed or canceled		(5	)		(997	)
Outstanding at December 31, 2005		829			10,634
Granted		569			4,277
Vested		(328	)		(1,395	)
Lapsed or canceled		(69	)		(2,191	)
Outstanding at December 31, 2006		1,001			11,325
Fair value of awards granted during the period
At December 31, 2006		894.5	p		287.0	p
At December 31, 2005		649.1	p		117.0	p
At December 31, 2004		448.3	p		125.1	p
Weighted average remaining contract life (years)
At December 31, 2006		1.0			1.3
At December 31, 2005		1.1			1.2
At December 31, 2004		1.7			1.0

      The above awards do not vest until the performance conditions have been met.

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	Sharesave Plan									Executive Share Option Plan
						Weighted		Aggregate							Weighted		Aggregate
	Number of			Range of		average		intrinsic		Number of			Range of		average		intrinsic
	shares			option prices		option price		value		shares			option prices		option price		value
	thousands			pence		pence		£ million		thousands			pence		pence		£ million
Options outstanding at January 1, 2004		1,373			420.5		420.5				27,220			295.3-593.3		424.9
Granted		—			—		—				6,951			494.2		494.2
Exercised		—			—		—				(7,430	)		295.3-593.3		408.2
Lapsed or canceled		(111	)		420.5		420.5				—			—		—
Options outstanding at December 31, 2004		1,262			420.5		420.5		0.3		26,741			308.5-593.3		447.6		5.3
Granted		—			—		—				2,105			619.8		619.8
Exercised		(118	)		420.5		420.5				(4,138	)		308.5-593.3		429.1
Lapsed or canceled		(280	)		420.5		420.5				(2,089	)		345.6-619.8		465.3
Options outstanding at December 31, 2005		864			420.5		420.5		0.4		22,619			308.5-619.8		465.4		8.5
Exercised		(389	)		420.5		420.5				(8,365	)		308.5-619.8		438.7
Lapsed or canceled		(310	)		420.5		420.5				(175	)		345.6-619.8		404.6
Options outstanding at December 31, 2006		165			420.5		420.5		0.1		14,079			308.5-619.8		482.2		11.0
Options exercisable
At December 31, 2006		—			—		—		—		6,002			308.5-619.8		430.2		5.0
At December 31, 2005		—			—		—		—		8,710			308.5-619.8		434.3		3.5
At December 31, 2004		—			—		—		—		12,569			308.5-593.3		426.4		1.7
Fair value of options granted during the period
At December 31, 2005		—									164.0	p
At December 31, 2004		—									136.0	p

Weighted average remaining contract life (years)

	Sharesave Plan				Executive Share Option Plan
	Outstanding		Exercisable		Outstanding		Exercisable
At December 31, 2006		0.8		—		6.4		5.1
At December 31, 2005		1.9		—		6.9		5.2
At December 31, 2004		2.8		—		7.3		4.6

      Included within the options outstanding of the Executive Share Option Plan are options over 4,055,674 (2005 7,909,002; 2004 12,568,562) shares that have not been recognized in accordance with IFRS 2 as the options were granted on or before November 7, 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.

      The weighted average share price at the date of exercise for share options vested during the year was 969.4 pence. The closing share price on December 29, 2006 was 1,262.0 pence and the range during the year was 806.7 pence to 1,265.0 pence per share.

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      Summarized information about options outstanding at December 31, 2006 under the share option schemes is as follows:

		Options outstanding						Options exercisable
				Weighted
				average		Weighted				Weighted
		Number		remaining		average		Number		average
		outstanding		contract life		option price		exercisable		option price
		thousands		years		pence		thousands		pence
Range of exercise prices (pence)
Sharesave Plan
420.5			165		0.8		420.5		—		—
	Executive Share Option Plan
308.5 to 353.8			735		3.5		343.3		734		343.3
353.9 to 498.0			11,396		6.5		468.1		5,033		436.2
498.1 to 619.8			1,948		7.5		616.8		235		595.0
			14,079		6.4		482.2		6,002		430.2

		For the year ended
		December 31,
		2006		2005
		(£ million)
Intrinsic value of options exercised in the year
	Short term deferred incentive plan		5.6		0.2
	Performance restricted share plan		7.2		4.8
	Sharesave plan		1.9		0.3
	Executive share option plan		17.8		8.0
			32.5		13.3
Fair value of shares vested during the year
	Short term deferred incentive plan		1.7		0.2
	Performance restricted share plan		6.2		—
	Sharesave plan		—		—
	Executive share option plan		9.3		—
			17.2		0.2

      As of December 31, 2006, there was £29.8 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2 years.

      Cash received from option exercises under all share-based payment arrangements for the years ended December 31, 2006, 2005 and 2004, was £18.9 million, £11.7 million, and £15.2 million respectively. The actual tax benefit realized for the tax deductions from option exercise of the share-based payment arrangements totaled £12.6 million, £20.7 million and £50.0 million respectively, for the years ended December 31, 2006, 2005 and 2004.

F-65

Note 24 — Provisions

		Hotels			Onerous
		reorganization(a)			contracts(b)			Total
		(£ million)
At January 1, 2005
	Current		4			1			5
	Non-current		4			2			6
			8			3			11
Income statement			—			(1	)		(1	)
Expenditure			(4	)		—			(4	)
At December 31, 2005 — all current			4			2			6
Income statement			(2	)		—			(2	)
Expenditure			(2	)		(2	)		(4	)
At December 31, 2006			—			—			—

(a)	Relates to the Hotels reorganization charged to the non-operating special item in 2003.
(b)	Primarily relates to onerous fixed lease contracts acquired with the InterContinental hotels business.

Note 25 — Deferred tax payable

																Other
	Property,			Deferred												short-term
	plant and			gains on						Employee			Intangible			temporary
	equipment			loan notes			Losses			benefits			assets			differences*			Total
	(£ million)
At January 1, 2004		519			123			(37	)		(42	)		(37	)		(49	)		477
Disposals		(5	)		—			—			—			—			—			(5	)
Income statement		(17	)		—			(77	)		17			5			(5	)		(77	)
Statement of recognized income and expense		—			—			—			(14	)		—			—			(14	)
Exchange and other adjustments		(5	)		(1	)		1			—			2			4			1
At December 31, 2004		492			122			(113	)		(39	)		(30	)		(50	)		382
Disposals		(150	)		—			—			34			—			3			(113	)
Income statement		(87	)		—			(11	)		(5	)		32			56			(15	)
Statement of recognized income and expense		—			—			—			(5	)		—			(2	)		(7	)
Exchange and other adjustments		1			—			1			(1	)		(3	)		(1	)		(3	)
At December 31, 2005		256			122			(123	)		(16	)		(1	)		6			244
Disposals		(126	)		—			2			—			—			7			(117	)
Income statement		(2	)		(26	)		31			(1	)		16			(32	)		(14	)
Statement of recognized income and expense		—			—			—			1			—			(27	)		(26	)
Acquisition of subsidiary (note 31)		—			—			—			—			1			—			1
Exchange and other adjustments		(9	)		(4	)		1			2			1			2			(7	)
At December 31, 2006		119			92			(89	)		(14	)		17			(44	)		81

*  Other short-term temporary differences relate primarily to provisions and accruals and share-based payments.

F-66

		At December 31,
		2006		2005		2004
		(£ million)
Analyzed as:
	Deferred tax payable		79		210		234
	Liabilities classified as held for sale		2		34		148
At December 31			81		244		382

      The deferred tax asset of £89 million (2005 £123 million; 2004 £113 million) recognized in respect of losses includes £64 million (2005 £89 million; 2004 £89 million) of capital losses available to be utilized against the realization of capital gains which are recognized as a deferred tax liability and £25 million (2005 £34 million; 2004 £24 million) in respect of revenue tax losses. Revenue losses include £1 million (2005 £nil; 2004 £nil) in respect of losses which arose during a period of hotel refurbishment and which are expected to be utilized against future operating profit.

      Tax losses with a value of £192 million (2005 £282 million; 2004 £305 million), including capital losses with a value of £87 million (2005 £93 million; 2004 £98 million), have not been recognized as the realization of a benefit from use of these losses is uncertain or not currently anticipated. These losses may be carried forward indefinitely with the exception of £1 million (2005 £nil; 2004 £nil) which expires after seven years and £1 million (2005 £nil; 2004 £nil) which expires after 15 years.

      Deferred tax assets of £6 million (2005 £19 million; 2004 £4 million) in respect of share-based payments, £7 million (2005 £7 million; 2004 £10 million) in respect of employee benefits and £17 million (2005 £11 million; 2004 £nil) in respect of other items have not been recognized as the timing of their realization and consequent use is uncertain or not currently anticipated and, in part, is dependent upon the outcome of European Union (“EU”) case law. Other items include £7 million (2005 £nil; 2004 £nil) which expire after nine years.

      At December 31, 2006 the Company has not provided deferred tax in relation to temporary differences associated with undistributed earnings of subsidiaries. Quantifying the temporary differences is not practical. However, based on current enacted law and on the basis that the Company is in a position to control the timing and manner of realization of these temporary differences, no material additional tax liabilities are expected to arise.

Note 26 — Minority equity interest

	Year ended December 31,
	2006			2005			2004
	(£ million)
At January, 1		20			117			139
Total recognized income and expense in the year		—			15			17
Dividends paid to minority interests		(1	)		(177	)		(26	)
Disposal of hotels (Note 11)		(13	)		—			(11	)
Disposal of Soft Drinks business (Note 11)		—			66			—
Acquisition of subsidiary (Note 31)		3			—			—
Exchange and other adjustments		(1	)		(1	)		(2	)
At December, 31		8			20			117

Note 27 — Operating leases

      During the year ended December 31, 2006, £39 million (2005 £62 million; 2004 £67 million) was recognized as an expense in the income statement in respect of operating leases.

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      Total commitments under non-cancelable operating leases are as follows:

	At December 31,		At December 31,		At December 31,
	2006		2005		2004
	(£ million)
Due within one year		27		36		55
One to two years		21		31		51
Two to three years		19		25		47
Three to four years		14		19		38
Four to five years		9		14		31
More than five years		100		149		884
		190		274		1,106

      The average remaining term of these leases, which generally contain renewal options, is approximately 18 years. No material restrictions or guarantees exist in the Company’s lease obligations.

Note 28 — Capital commitments

	At December 31,		At December 31,		At December 31,
	2006		2005		2004
	(£ million)
Contracts placed for expenditure on property, plant and equipment not provided for in the financial statements		24		76		53

Note 29 — Contingencies

      Contingent liabilities not provided for in the financial statements relate to:

	At December 31,		At December 31,		At December 31,
	2006		2005		2004
	(£ million)
Guarantees		11		20		9

      In limited cases, the Company may provide performance guarantees to third-party owners to secure management contracts. The maximum exposure under such guarantees is £142 million (2005 £134 million; 2004 £115 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 Company.

      As of December 31, 2006, the Company had outstanding letters of credit of £31 million (2005 £18 million) mainly relating to self-insurance programs.

      The Company may guarantee loans made to facilitate third-party ownership of hotels in which the Company has an equity interest and also a management contract. As of December 31, 2006, the Company was a guarantor of loans which could amount to a maximum of £13 million (2005 £15 million).

      The Company has given warranties in respect of the disposal of certain of its former subsidiaries and hotels. 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 Company.

F-68

Note 30 — Related party disclosures

      Key management personnel comprises the Board and Executive Committee.

	Year ended December 31,
	2006		2005		2004
	(£ million)
Total compensation of key management personnel
Short-term employment benefits		9.5		6.5		5.5
Post-employment benefits		0.5		0.2		0.2
Termination benefits		—		0.8		0.8
Equity compensation benefits		7.9		6.9		4.1
		17.9		14.4		10.6

      There were no transactions with key management personnel during the years ended December 31, 2006, 2005 or 2004.

Note 31 — Acquisition of subsidiary

      On December 1, 2006, the Company acquired a 75% interest in ANA Hotels & Resorts Co., Ltd (subsequently renamed IHG ANA Hotels Group Japan LLC), a hotel management company based in Japan.

	Carrying
	values			Fair
	pre-acquisition			value
	(£ million)
Intangible assets		1			8
Current assets (excluding cash and cash equivalents)		4			4
Cash and cash equivalents		4			4
Trade and other payables		(3	)		(3	)
Current tax payable		(1	)		(1	)
Deferred tax payable		—			(1	)
		5			11
Minority interest					(3	)
Net assets acquired					8
Goodwill on acquisition					2
Consideration, satisfied in cash (including costs of £2 million)					10
Cash and cash equivalents acquired					(4	)
Net cash outflow					6

      Management contracts acquired have been recognized as intangible assets at their fair value. The residual excess over the net assets acquired is recognized as goodwill.

      The operating profit of the joint venture from the date of acquisition to the balance sheet date was not material to the Company’s results. If the acquisition had occurred on January 1, 2006, Company revenue would have been £16 million higher and operating profit would have been £2 million higher.

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Note 32 — Differences between International Financial Reporting Standards and United States Generally Accepted Accounting Principles

      From January 1, 2005, as required by the European Union’s IAS Regulation, the Company has prepared its Annual Report and Form 20-F in accordance with IFRS as adopted by the European Union (“EU”), which differ in certain respects from US generally accepted accounting principles (“US GAAP”). These differences relate principally to the following items, and the effect of each of the adjustments to profit for the financial year and net equity that would be required to reconcile to US GAAP is set out below.

      IFRS as adopted by the EU differs in certain respects from IFRS as issued by the International Accounting Standards Board (“IASB”). However, the consolidated financial statements for the periods presented would be no different had the Company applied IFRS as issued by the IASB. References to IFRS hereafter should be construed as references to IFRS as adopted by the EU.

      This US GAAP information provides a reconciliation between profit available for IHG equityholders under IFRS and net income under US GAAP and between IHG shareholders’ equity under IFRS and IHG shareholders’ equity under US GAAP, respectively.

      Under US GAAP, the Company has adopted two new accounting standards during the year: FAS No. 158 “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106 and 132R” and FAS No. 123(R) “Share-Based Payment”. The impact of adopting these standards is described below.

Classification of borrowings

      Under US GAAP, the amounts shown as repayable after one year for unsecured bank loans drawn under or supported by bank facilities with maturities of up to five years and amounting to £206 million (2005 £374 million) would be classified as current liabilities since the drawings on the facilities are repayable within one year.

Pensions and other postretirement benefits

      Under IFRS, the amount charged to the income statement comprises the current service cost, the interest cost of the plan liabilities and the expected return on assets for the period. Any amounts arising from changes in actuarial assumptions and differences between expected and actual return on plan assets are recognized in the Group statement of recognized income and expense. Under US GAAP, a corridor approach to the recognition of actuarial gains and losses is applied, such that only actuarial gains and losses in excess of 10% of the greater of plan assets or obligations is recognized in the income statement and spread over the maximum period of the employees’ remaining service period.

      Under IFRS, any surplus or deficit in the fair value of plan assets over the present value of the benefit obligation is recorded as an asset or liability in the Company’s balance sheet. Under US GAAP, the Company has adopted FAS No. 158 “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106, and 132R” (“FAS 158”) effective December 31, 2006. FAS 158 requires the recognition of the over-funded and under-funded status of a defined benefit postretirement plan as an asset or liability in the balance sheet and the recognition of changes in that funded status in the year in which the changes occur through other comprehensive income. The funded status of a benefit plan is measured as the difference between the fair value of the plan assets and the projected benefit obligation. FAS 158 also requires an employer to measure its defined benefit plan assets and obligations as of the date of the employers’ fiscal year end. Further information on the impact of adopting FAS 158 is given on page F-83. Following the adoption of FAS 158, there is now no difference between the amounts recognized in the balance sheet under IFRS and US GAAP.

      Prior to the adoption of FAS 158, the accumulated benefit obligations of the benefit plans exceeded the fair value of the plans’ assets. Under these circumstances, US GAAP required 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, was

F-70

recognized as an intangible asset with the offsetting balance reported in other comprehensive income as a minimum pension liability adjustment.

Intangible assets

      Under IFRS, goodwill arising on acquisitions prior to October 1, 1998 was eliminated against equity. From October 1, 1998 to December 31, 2003 acquired goodwill was capitalized and amortized over a period not exceeding 20 years. Since January 1, 2004 goodwill has continued to be capitalized but is no longer amortized; instead it is subject to annual impairment testing.

      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. From October 1, 2002 goodwill and indefinite life intangible assets are not amortized but are reviewed annually for impairment.

      Under IFRS, development costs and software are included in intangible assets. Under US GAAP, these assets are included in property, plant and equipment.

      Under IFRS, purchase consideration which is contingent on future events is included in the cost of acquisition when receipt is probable and an amount can be reliably measured. Under US GAAP, contingent consideration is recognized when the related contingencies are resolved.

      Under IFRS, when assets are sold and a purchaser enters into a management or franchise contract with the Company, the Company capitalizes an intangible asset as part of the gain or loss on disposal at an estimate of the fair value of the contract entered into. This value is amortized over the life of the contract. Under US GAAP, an intangible asset is not recognized as there remains continuing involvement in the hotel operations.

Property, plant and equipment

      Under IFRS, the deemed cost at transition from UK GAAP on January 1, 2004 included prior year revaluations. Under US GAAP, property, plant and equipment are carried at historic cost less accumulated depreciation and impairment losses.

      Under IFRS, depreciation is based on the book value of assets, including revaluation where appropriate. Prior to October 1, 1999, freehold hotels were not depreciated, 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. From October 1, 1999, all properties were depreciated. There is now no difference between IFRS and US GAAP with regard to depreciation policies.

      Under IFRS, impairment is measured by comparing the carrying value of property, plant and equipment with the higher of fair value less cost to sell and value in use. Value in use is assessed based on estimated future cash flows discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. Under US GAAP, impairments of long-lived assets are assessed on the basis of undiscounted cash flows. If an impairment charge is required it is measured on the basis of discounted cash flows.

      Under IFRS the Company recognizes a profit on disposal of property, plant and equipment provided substantially all the risks and rewards of ownership have transferred. For the purposes of US GAAP, the Company accounts for sales of real estate in accordance with FAS 66 “Accounting for Sales of Real Estate”. If there is significant continuing involvement with the property, any gain on sale is deferred and is recognized over the life of the long-term management contract retained on the property.

      Prior to the IFRS transition date, cumulative foreign currency exchange gains and losses relating to the disposal of foreign operations were recorded within equity. Since January 1, 2004, foreign currency gains and losses are included in determining the profit or loss on disposal of foreign operations. At that date, the Company opted to set the currency translation reserve to nil. Under US GAAP, such gains and losses are also

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included in determining the profit or loss on disposal but are tracked from the date of acquisition of the foreign operation.

Staff costs

      The Company provides certain compensation arrangements in the US through a Rabbi Trust. Under IFRS, the net deficit is recorded as a provision and the net change in the underlying value of the assets and liabilities is recorded as a charge (or credit) to the income statement. Under US GAAP, the marketable securities held by the Rabbi Trust are accounted for in accordance with FAS 115 “Accounting for certain investments in Debt and Equity Securities”. The trust is shown gross in the balance sheet. The marketable securities held by the trust are recorded at market value and unrealized gains and losses are reported in other comprehensive income except for other than temporary movements which are recognized in the income statement.

     Share-based Compensation

      Under IFRS, the Company’s employee share-based awards are all equity settled and the Company does not recognize a liability within the balance sheet for such arrangements. The IFRS income statement charge is based upon the grant date fair value of the share awards.

      Under US GAAP, prior to January 1, 2006, the Company applied FAS No. 123 “Accounting for Stock-Based Compensation” (“FAS 123”) when accounting for its share-based awards. As applied to the Company there was no difference in the treatment of employee share arrangements between IFRS 2 and FAS 123.

      The Company has adopted FAS 123(R) “Share-Based Payment” (“FAS 123(R)”) effective January 1, 2006. FAS 123(R) revises FAS 123 in a number of respects. Upon adoption of FAS 123(R), for awards which are classified as liability awards (see below), the Company is required to reclassify the FAS 123 historical compensation cost from equity to a balance sheet liability and to recognize the difference between this and the fair value of the liability through the income statement. The resultant cumulative effect of change in accounting principle has reduced net income for 2006 by £19 million (net of a £9 million tax benefit).

      As is common practice in the UK, certain of the Company’s employee share option plans contain inflation indexed earnings growth performance conditions. FAS 123(R) requires such plans to be accounted for under the liability method; under IFRS 2, they are accounted for as equity settled share awards. Under the liability method, in addition to recognizing a balance sheet liability, the income statement charge is based on the remeasurement of the fair value of each award at each reporting date until vesting whereas under IFRS the charge is calculated by reference to the grant date fair value.

      For awards which are classified as equity awards, the cost is recognized from the grant date under FAS 123(R) and from the date of the commencement of the period over which any performance conditions are fulfilled under IFRS 2. Under both FAS 123(R) and IFRS 2 the cost is recognized until the date on which the relevant employees become fully entitled to the award.

      The adoption of FAS 123(R) in 2006 has resulted in the recognition of incremental share-based compensation costs in 2006 of £39 million, a reduction in net income of £26 million (net of tax benefits of £13 million) and a reduction of both basic and diluted earnings per share from continuing operations of 6.7 pence and 6.5 pence respectively.

      Under IFRS, the National Insurance liability payable on gains made by employees on the exercise of share options is accrued during the performance period of the share scheme, calculated using the market price of the Company’s Shares at the balance sheet date. Under US GAAP, an accrual is only be recorded when the shares options are exercised and a liability exists.

Deferred tax

      Under IFRS, the Company provides for deferred tax in respect of temporary differences between the tax base and carrying value of assets and liabilities including accelerated capital allowances, unrelieved tax losses,

F-72

unremitted profits from overseas where the Company does not control remittance, gains rolled over into the replacement assets, gains on previously revalued properties and other short-term temporary differences. Under US GAAP, deferred tax is computed on 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 tax assets under IFRS are recognized to the extent that it is regarded as probable that the deductible temporary differences can be realized. Under US GAAP deferred tax assets are recognized in full and a valuation allowance is made to the extent that it is not more likely than not that they will be realized.

      Under IFRS, a deductible temporary difference arises in respect of estimated future tax deductions on share-based payments based upon the share price at the balance sheet date. Any excess of the asset recognized over the cumulative compensation expense recorded in the income statement multiplied by the statutory tax rate is recorded directly in equity. Under US GAAP, a deferred tax asset in respect of future deductible amounts is calculated only to the extent of the cumulative compensation expense recorded to date in the income statement in accordance with FAS 123(R). Where actual tax deductions received upon exercise exceed the amount of any deferred tax asset the excess is recorded in equity. Where actual tax deductions are less than the deferred tax asset, the write-down of the asset is recorded against equity to the extent of previous tax benefits recorded in this account with any remainder recorded in the income statement. The pool of tax benefits as at January 1, 2006 has been calculated using the ‘short-cut’ method option available under FSP FAS 123(R)-3.

Derivative financial instruments and hedging

      The Company enters into derivative instruments to limit its exposure to interest rate and foreign exchange risk. In 2004 under IFRS transitional provisions, these instruments were measured at cost and accounted for as hedges, whereby gains and losses were deferred until the underlying transaction occurred. 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 are recognized in net income unless specific hedge criteria are met. The Company adopted both IAS 32 “Financial Instruments: Disclosure and Presentation” and IAS 39 “Financial Instruments: Recognition and Measurement” from January 1, 2005. There is now no difference between IFRS and US GAAP with regard to derivatives entered into after January 1, 2005.

Guarantees

      The Company gives guarantees in connection with obtaining long-term management contracts. Under IFRS, a contingent liability is not recognized. For the purposes of US GAAP, under Financial Accounting Standards Board 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 Company records the fair value of such guarantees as an asset and liability, which are amortized over the life of the contract.

Assets and liabilities held for sale

      Under IFRS, assets and liabilities are classified as held for sale when the criteria under IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” are met. Under US GAAP, similar criteria are applied to held for sale assets. However, FAS 66 “Accounting for Sales of Real Estate” excludes any assets from being included as held for sale where there will be a continuing involvement in the asset.

Discontinued operations

      Under IFRS, the results of operations arising from assets classified as held for sale are classified as discontinued operations when the results relate to a separate line of business, or geographical area of operations; or where there is a co-ordinated plan to dispose of a separate line of business or geographical area of operations. Under US GAAP, operations are classified as discontinued when they are classified as held for sale and when the Company no longer believes it will have a significant continuing involvement.

F-73

Net income in accordance with US GAAP

      The significant adjustments required to convert profit available for IHG equity holders in accordance with IFRS to net income in accordance with US GAAP are:

			Year ended			Year ended			Year ended
			December 31,			December 31,			December 31,
			2006			2005			2004
			(£ million)
Profit available for IHG equity holders in accordance with IFRS				405			496			383
Adjustments:
	Amortization of intangible assets			1			(1	)		(3	)
	Impairment of property, plant and equipment			3			(17	)		30
	Disposal of property, plant and equipment			35			(107	)		5
	Depreciation of property, plant and equipment			(20	)		(31	)		(20	)
	Deferred revenue			14			15			5
	Gain on held for sale equity investment			27			—			(28	)
	Pension costs			(6	)		(20	)		(9	)
	Staff costs			(30	)		(1	)		2
	Change in fair value of derivatives(i)			(2	)		6			52
	Provisions			(2	)		(3	)		(5	)
	Impairment of investment in associates			(2	)		—			—
	Current and deferred tax:
		on above adjustments		13			16			4
		methodology		69			(2	)		(79	)
				100			(145	)		(46	)
	Minority share of above adjustments			—			4			3
				100			(141	)		(43	)
Net income in accordance with US GAAP before cumulative effect of change in accounting principle				505			355			340
Cumulative effect of change in accounting principle, net of tax				(19	)		—			—
Net income in accordance with US GAAP				486			355			340

See page F-75 for footnotes.

F-74

      The condensed consolidated income statement presented below reflects the adjustments to attributable profit for the year.

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2006			2005			2004
		(£ million, except per ADS amounts)
Net sales			1,362			1,521			1,606
Operating and administrative expenses			(1,124	)		(1,323	)		(1,374	)
Financial income and financial expenses			(11	)		(24	)		(33	)
Income before income tax expense and minority interest			227			174			199
Income tax credit/(expense)			111			(56	)		79
Gain/(loss) on disposal of assets, net of tax(iv)			167			(14	)		3
Minority interest			—			—			(24	)
Income from continuing operations before cumulative effect of change in accounting principle			505			104			257
Cumulative effect of change in accounting principle, net of tax(v)			(19	)		—			—
Discontinued operations:
Result for period, net of tax(vi)			—			41			62
Surplus on disposal, net of tax(vii)			—			210			21
Net income			486			355			340
Per ordinary share and American Depositary Share
Basic(ii)
	Continuing operations		129.8	p		20.0	p		36.2	p
	Cumulative effect of change in accounting principle		(4.9	)p		—			—
	Discontinued operations		—			48.2	p		11.7	p
Net income			124.9	p		68.2	p		47.9	p
Diluted(iii)
	Continuing operations		127.2	p		19.5	p		35.7	p
	Cumulative effect of change in accounting principle		(4.8	)p		—			—
	Discontinued operations		—			47.1	p		11.5	p
Net income			122.4	p		66.6	p		47.2	p

(i)	Comprises net gains in the fair value of derivatives that do not qualify for hedge accounting of £nil (2005 £6 million, 2004 £50 million) and net losses reclassified from other comprehensive income of £2 million (2005 £nil, 2004 £2 million gain).
(ii)	Calculated by dividing net income in accordance with US GAAP by 389 million (2005 521 million, 2004 710 million) shares, being the weighted average number of ordinary shares in issue during the period. Each American Depositary Share represents one ordinary share.
(iii)	Calculated by adjusting basic net income in accordance with US GAAP to reflect both the future compensation on share-based payments and 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 397 million (2005 533 million, 2004 720 million).
(iv)	Tax credit for the year ended December 31, 2006 of £6 million (2005 £3 million charge, 2004 £2 million credit).
(v)	Arises on the adoption of FAS 123(R) “Share-Based Payment”. Charge of £28 million, net of £9 million tax credit.
(vi)	Tax charge for the year ended December 31, 2006 of £nil (2005 £17 million, 2004 £29 million). Financial expenses for the year ended December 31, 2006 of £nil (2005 £9 million, 2004 £1 million).
(vii)	Tax charge for the year ended December 31, 2006 of £nil (2005 £28 million charge, 2004 £3 million credit).

F-75

Comprehensive Income

      Comprehensive Income under US GAAP is as follows:

	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2006			2005			2004
	(£ million)
Net income in accordance with US GAAP		486			355			340
Other comprehensive income:
Transfer to Britvic of minimum pension liability on December 14, 2005, net of tax of £21 million		—			49			—
Minimum pension liability, net of tax charge of £1 million (2005 £20 million credit, 2004 £1 million charge)		6			(48	)		8
Change in valuation of marketable securities, net of tax credit of £7 million (2005 £6 million charge, 2004 £3 million charge)		(32	)		9			29
Change in fair value of derivatives, net of tax credit of £nil (2005 £2 million credit, 2004 £nil)		3			(4	)		(2	)
Currency translation differences		(157	)		(132	)		83
		(180	)		(126	)		118
Comprehensive income in accordance with US GAAP		306			229			458

      Movements in Accumulated Other Comprehensive Income amounts (net of related tax) are as follows:

	Defined benefit
	pension plans
							Change in			Derivative
	Minimum						valuation of			financial			Currency
	pension			FAS 158			marketable			instruments			translation
	liability			adoption			securities			gains/(losses)			differences			Total
	(£ million)
At January 1, 2004		(72	)		—			2			4			10			(56	)
Movement in the year		8			—			29			(2	)		83			118
At December 31, 2004		(64	)		—			31			2			93			62
Movement in the year		1			—			9			(4	)		(149	)		(143	)
At December 31, 2005		(63	)		—			40			(2	)		(56	)		(81	)
Movement in the year		6			—			(32	)		3			(164	)		(187	)
Adjustment to initially apply FAS 158, net of tax		57			(79	)		—			—			5			(17	)
At December 31, 2006		—			(79	)		8			1			(215	)		(285	)

      Of the £164 million (2005 £149 million) currency translation movement in the year ended December 31, 2006, £7 million (2005 £17 million) has been recorded in net income in accordance with US GAAP.

F-76

Shareholders’ equity in accordance with US GAAP

      The significant adjustments required to convert IHG shareholders’ equity in accordance with IFRS to IHG shareholders’ equity in accordance with US GAAP are:

				At			At
				December 31,			December 31,
				2006			2005
				(£ million)
IHG shareholders’ equity in accordance with IFRS					678			1,084
Adjustments:
	Intangible assets:
		Cost: goodwill			703			761
		other intangible assets			502			655
		Accumulated amortization			(244	)		(260	)
					961			1,156
	Intangible asset — minimum pension liability				—			1
					961			1,157
	Property, plant and equipment:
		Cost			354			327
		Assets classified as held for sale			—			21
		Accumulated depreciation			(23	)		(19	)
					331			329
	Investment in associates				9			—
	Other financial assets				(28	)		(14	)
	Non-current assets classified as held for sale				(7	)		(21	)
	Current assets:
		Other receivables			44			31
	Current liabilities:
		Deferred income on property transactions			(13	)		(15	)
		Other payables			16			8
	Non-current liabilities:
		Deferred income on property transactions			(260	)		(309	)
		Other payables			(98	)		(41	)
		Provisions			—			4
		Accrued pension liability			—			15
		Deferred tax payable:
			on above adjustments		(133	)		(204	)
			methodology		(4	)		(10	)
	Liabilities held for sale				—			1
					818			931
	Minority share of above adjustments				2			—
					820			931
IHG shareholders’ equity in accordance with US GAAP					1,498			2,015

F-77

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:

			Year ended			Year ended		Year ended
			December 31,			December 31,		December 31,
			2006			2005		2004
			(£ million, except per ADS amounts)
Numerator:
	For basic and diluted earnings per ordinary share and ADS
		Before cumulative effect of change in accounting principle		505			104		257
		Cumulative effect of change in accounting principle, net of tax		(19	)		—		—
		After cumulative effect of change in accounting principle		486			104		257
Denominator:
	Denominator for basic earnings per ordinary share and ADS			389			521		710
	Effect of dilutive securities:
	Employee options and restricted stock awards			8			12		10
	Denominator for diluted earnings per ordinary share and ADS			397			533		720
	Basic earnings per ordinary share and ADS from continuing operations:
		Before cumulative effect of change in accounting principle		129.8p			20.0p		36.2p
		Cumulative effect of change in accounting principle		(4.9	)p		—		—
		After cumulative effect of change in accounting principle		124.9p			20.0p		36.2p
	Diluted earnings per ordinary share and ADS from continuing operations:
		Before cumulative effect of change in accounting principle		127.2p			19.5p		35.7p
		Cumulative effect of change in accounting principle		(4.8	)p		—		—
		After cumulative effect in change in accounting principle		122.4p			19.5p		35.7p

Consolidated statement of cash flows

      The consolidated statement of cash flows prepared under IFRS presents substantially the same information as that required under US GAAP but may differ with regard to classification of items within the statements.

      Under IFRS, interest or dividends paid or received are classified as part of operating cash flows unless they are linked directly to specific items and they are then classified as part of either investing or financing

F-78

cash flows to coincide with the specific item. Under US GAAP, all interest or dividends paid or received must be classified as operating activities. Under IFRS, income tax should be classified as operating cash flow unless the tax paid can be specifically identified with financing or investing activities. Under US GAAP, income tax must be classified as an operating cash flow.

      The categories of cash flow activity under US GAAP can be summarized as follows:

		Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,
		2006			2005			2004
		(£ million)
Cash inflow from operating activities			230			302			444
Cash inflow/(outflow) on investing activities			620			1,863			(151	)
Cash outflow from financing activities			(1,002	)		(1,906	)		(631	)
(Decrease)/increase in cash and cash equivalents			(152	)		259			(338	)
Effect of foreign exchange rate changes			7			(7	)		(1	)
Cash and cash equivalents
	At start of the fiscal year		324			72			411
	At end of the fiscal year		179			324			72

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
	Year ended			Year ended			Year ended			Year ended			Year ended			Year ended			Year ended		Year ended		Year ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,		December 31,		December 31,
	2006			2005			2004			2006			2005			2004			2006		2005		2004
	(£ million)
Service cost		5			20			17			—			—			—			—		—		—
Interest cost		13			30			26			5			5			5			1		1		1
Expected return on plan assets		(14	)		(33	)		(25	)		(4	)		(4	)		(4	)		—		—		—
Net amortization and deferral		4			5			7			2			—			—			—		—		—
Recognized net actuarial gain		—			—			—			—			2			2			—		—		—
Net periodic pension cost		8			22			25			3			3			3			1		1		1

      The major assumptions used in computing the pension expense were:

	UK pension benefits						US pension benefits						US postretirement benefits
	Year ended		Year ended		Year ended		Year ended		Year ended		Year ended		Year ended		Year ended		Year ended
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2006		2005		2004		2006		2005		2004		2006		2005		2004
Expected long-term rate of return on plan assets		6.10%		5.80%		6.90%		8.00%		8.00%		8.00%		—		—		—
Discount rate		5.00%		4.70%		5.30%		5.80%		5.50%		5.75%		5.80%		5.50%		5.75%
Expected long-term rate of earnings increases		4.60%		4.30%		4.30%		3.50%		3.50%		3.50%		4.00%		4.00%		4.00%

      The assumed discount rates were determined by reference to published long-term bond indices at a maturity appropriate to the anticipated timing of expected benefit payments.

      The plans’ expected return on assets 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

F-79

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, 2006, 2005 and 2004 are as follows:

	2006			2005			2004
Health care cost trend rate assumed for next year		10.0	%		9.0	%		9.5	%
Rate that the cost trend rate gradually declines to		5.0	%		4.5	%		4.5	%
Year that rate reaches the assumed ultimate rate		2017			2015			2014

      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, 2006, 2005 and 2004, 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.

      The following table sets forth movements in the projected benefit obligation and fair value of plan assets.

		UK pensions benefits						US pensions benefits						US postretirement benefits
		Year ended			Year ended			Year ended			Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
Change in benefit obligation		2006			2005			2006			2005			2006			2005
		(£ million)
Benefit obligation at beginning of year			275			600			102			89			12			11
	Service cost		5			20			—			—			—			—
	Members contributions		1			2			—			—			—			—
	Interest expense		13			30			5			5			1			1
	Benefits paid		(7	)		(11	)		(6	)		(6	)		(1	)		(1	)
	Curtailments		—			(7	)		—			—			—			—
	Actuarial loss arising in the year		12			67			—			3			(1	)		—
	Separation of Britvic		—			(426	)		—			—			—			—
	Exchange and other		(1	)		—			(12	)		11			(1	)		1
Benefit obligation at end of year			298			275			89			102			10			12
Accumulated benefit obligation (all vested)			284			264			88			100			—			—

		UK pensions benefits						US pensions benefits						US postretirement benefits
		Year ended			Year ended			Year ended			Year ended			Year ended			Year ended
		December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
Changes in plan assets		2006			2005			2006			2005			2006			2005
		(£ million)
Fair value of plan assets at beginning of year			251			472			61			55			—			—
	Contributions payable		4			46			2			2			1			1
	Members contributions		1			2			—			—			—			—
	Benefits paid		(7	)		(11	)		(6	)		(6	)		(1	)		(1	)
	Actual return on assets		21			77			6			3			—			—
	Separation of Britvic		—			(335	)		—			—			—			—
	Exchange		(1	)		—			(7	)		7			—			—
Fair value of plan assets at end of year			269			251			56			61			—			—

F-80

	UK pensions benefits						US pensions benefits						US postretirement benefits
	Year ended			Year ended			Year ended			Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
Net amounts recognized	2006			2005			2006			2005			2006			2005
	(£ million)
Fair value of plan assets		269			251			56			61			—			—
Projected benefit obligation		(298	)		(275	)		(89	)		(102	)		(10	)		(12	)
Funded status		(29	)		(24	)		(33	)		(41	)		(10	)		(12	)
Unrecognized prior service cost					1						—						—
Unrecognized net actuarial loss					76						27						3
Net amount recognized					53						(14	)					(9	)
Amounts recognized in the balance sheet consist of:
Accrued pension cost		(29	)		(13	)		(33	)		(39	)		(10	)		(9	)
Intangible asset					1						—						—
Other Comprehensive Income (before tax)					65						25						—
Net amount recognized					53						(14	)					(9	)
Amounts recognized in Accumulated Other Comprehensive Income consist of:
Net actuarial loss		(77	)					(20	)					(2	)
Deferred tax		20						—						—
		(57	)					(20	)					(2	)

      The amount in Accumulated Other Comprehensive Income that is expected to be recognized as a component of the net periodic benefit cost for fiscal 2007 is £6 million, before tax, comprising £4 million in respect of the UK pension plans and £2 million in respect of the US pension plans.

      The following table summarizes the impact of the initial adoption of FAS 158 as at December 31, 2006.

	December 31, 2006
	Before						After
	FAS 158			FAS 158			FAS 158
	adjustments			adjustments			adjustments
	(£ million)
Deferred tax liability		(217	)		1			(218	)
Accrued pension liability		(54	)		(18	)		(72	)
Accumulated Other Comprehensive Income, net of tax		(62	)		(17	)		(79	)
Total shareholders’ equity		1,515			(17	)		1,498

      The following pension benefit payments are expected to be paid:

	UK		US		US
	pensions		pensions		postretirement
	benefits		benefits		benefits
	(£ million)
2007		4.0		5.5		0.5
2008		4.1		5.6		0.5
2009		4.2		5.7		0.5
2010		4.3		5.8		0.6
2011		4.4		5.9		0.6
2012-2016		23.5		31.6		3.3

F-81

Additional information required by US GAAP in respect of accounting for the impairment of property, plant and equipment and assets held for sale.

      A summary of the impairment charges that have been recognized under US GAAP is as follows:

	Year ended			Year ended		Year ended
	December 31,			December 31,		December 31,
	2006			2005		2004
	(£ million)
Assets to be disposed of		—			—		—
Assets to be held and used		—			24		18
Total		—			24		18
Disclosed as:
Impairment charges recognized under IFRS:
(Credit)/charge for the year under IFRS		(3	)		7		48
Adjustment to impairment recognized under US GAAP		3			17		(30	)
		—			24		18
Charged against:
Intangible assets — goodwill		—			—		—
Property, plant and equipment		—			24		18
		—			24		18

      Under IFRS, in the year ended December 31, 2006, assets held for sale have been written down by £3 million to reflect a reduction in the carrying amount of a specific property to fair value less costs to sell as determined by an independent property valuation. Under US GAAP, the impairment was reversed as the book value of the property is lower under US GAAP.

      Under US GAAP, the additional impairment charge of £17 million recognized in 2005 relates to a specific property that historically was not subject to an impairment charge under US GAAP. In 2004, with the exception of the impairment charge of £18 million in respect of short leasehold properties, the IFRS impairment charge was reversed.

      Under US GAAP, the impairment test is first performed using undiscounted cash flows to assess whether an asset has been impaired. If it is determined that an impairment exists the charge is measured by comparing the value calculated using discounted cash flows and carrying value.

      The adjustment to the impairment recognized under IFRS is therefore the difference between the charge under IFRS and US GAAP and is shown in the reconciliation to US GAAP accounting principles.

Additional information required by US GAAP in respect of accounting for deferred gains

      For US GAAP, the Company accounts for sales of real estate in accordance with FAS 66 “Accounting for Sales of Real Estate”. If there is significant continuing involvement with the property, any gain on sale is deferred and is recognized over the life of the continuing involvement, normally a long-term management contract retained on the property. The deferral of gains on such sales totaled £nil in 2006, £5 million in 2005 and £nil in 2004.

F-82

Additional information required by US GAAP in respect of accounting for intangible assets subject to amortization

      Intangible assets subject to amortization consist of:

December 31, 2006

December 31, 2005

Accumulated

Net book

Accumulated

Net book

Cost

amortization

value

Cost

amortization

value

(£ million)

Management & franchise contracts

88

(38

)

50

96

(42

)

54

      The estimated aggregate amortization expense for each of the next five years is £7 million. The weighted average remaining life of intangible assets subject to amortization is 7 years.

Additional information required by US GAAP in respect of accounting for intangible assets not subject to amortization

		December 31,		December 31,
		2006		2005
		(£ million)
Goodwill by reporting unit:
	Americas managed		111		130
	Americas franchised		600		645
	EMEA managed		36		38
	Asia Pacific		65		66
Goodwill			812		879
Trademarks			362		462
Total			1,174		1,341

Additional information required by US GAAP in respect of taxation

Analysis of tax (credit)/charge on continuing operations in accordance with US GAAP

	Year ended			Year ended		Year ended
	December 31,			December 31,		December 31,
	2006			2005		2004
	(£ million)
Current taxes		(25	)		59		(60	)
Deferred taxes		(101	)		—		7
Total		(126	)		59		(53	)

F-83

Reconciliation of UK statutory tax rate to US GAAP tax charge on income from continuing operations

	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2006			2005			2004
	(%)
UK corporate tax standard rate		30.0			30.0			30.0
Permanent differences		2.2			11.1			3.8
Net effect of different rates of tax in overseas business		3.7			10.2			6.7
Adjustment to tax charge in respect of prior periods		(0.7	)		(16.6	)		(20.4	)
Benefit of tax losses not previously recognized		(3.1	)		(0.2	)		(1.0	)
Adjustments to valuation allowance		(22.0	)		0.4			(1.7	)
Other		(0.5	)		(1.4	)		(0.2	)
Impact of disposals, provision releases and one-off items		(44.9	)		3.0			(35.5	)
Effective tax rate on continuing operations		(35.3	)		36.5			(18.3	)

      The tax rate in 2005 compared with 2004 has been impacted primarily by an increased proportion of non UK profits within continuing operations and increases in the valuation allowance against deferred tax assets. The tax rate in 2006 was impacted primarily by releases of provisions, gains on disposal and reduction in valuation allowances.

      The Company operates, manages and franchises hotels in a significant number of countries and consequently a wide range of matters of interpretation of tax law arise in the normal course of business. Although reliance is placed on generally available interpretations in these countries, there is no certainty that the relevant tax authorities will agree with the Company’s interpretation or that the Company’s interpretation will be upheld. Consequently it is possible that certain matters will be resolved adversely resulting in additional liabilities and cash tax settlements. The Company provides against all quantifiable tax exposures based upon best estimates and management’s judgment and total tax provisions of £231 million were held at December 31, 2006 (2005 £328 million). The wide range of potential tax issues which may arise and the related provisions include, in particular, the application of transfer pricing regulations and the allocation of costs and revenues between countries £14 million (2005 £17 million), the deduction of intra-group charges £9 million (2005 £10 million), the scope of controlled foreign company regulations £109 million (2005 £160 million), and the scope and basis of application of tax laws of particular jurisdictions (including whether taxable permanent establishments exist) £32 million (2005 £37 million).

F-84

Deferred tax in accordance with US GAAP

	Deferred tax
	liability
	(£ million)
At January 1, 2004		721
Disposals		(5	)
Exchange and other adjustments		(15	)
Income statement		—
Adjustment to other intangible assets(i)		(110	)
At December 31, 2004		591
Disposals		(132	)
Exchange and other adjustments		27
Income statement		(29	)
At December 31, 2005		457
Disposals		(92	)
Exchange and other adjustments		(46	)
Income statement		(101	)
At December 31, 2006		218

(i) In 2004, the adjustment to other intangible assets relates to the recognition of pre-acquisition losses in respect of which a valuation allowance had previously been made.

     The analysis of the deferred tax liability required by US GAAP is as follows:

		December 31,			December 31,
		2006			2005
		(£ million)
Deferred tax liabilities:
	Excess of book value over taxation value of property, plant and equipment		138			242
	Taxation effect of deferred gains		92			122
	Intangible assets		127			163
	Investments in associates, joint ventures and partnerships		29			41
	Other temporary differences		105			96
			491			664
Deferred tax assets:
	Taxation effect of losses carried forward		(167	)		(123	)
	Taxation effect of employee benefits		(14	)		(14	)
	Taxation effect of share based payments		(25	)		(1	)
	Other temporary differences		(67	)		(69	)
			(273	)		(207	)
			218			457
Of which:
	Current		(58	)		(40	)
	Non-current		276			497
			218			457

F-85

      The taxation effect of losses carried forward is stated net of a valuation allowance of £114 million (2005 £282 million, 2004 £305 million). The tax effect of employee benefits and other temporary differences are stated net of valuation allowances of £7 million (2005 £3 million, 2004 £nil) and £22 million (2005 £nil, 2004 £nil), respectively.

      On release, £7 million (2005 £18 million, 2004 £16 million) of the valuation allowances would be recognized in goodwill. A reduction of £91 million (2005 increase of £1 million, 2004 reduction of £88 million) has been made to the opening valuation allowances in respect of a change in judgment regarding the realizability of deferred tax assets. These losses may be carried forward indefinitely with the exception of £1 million (2005 £nil, 2004 £nil) which expires after seven years and £1 million (2005 £nil, 2004 £nil) which expires after 15 years.

      No deferred tax is provided in respect of the unremitted earnings of overseas subsidiaries and joint ventures which the Company controls where the differences are permanent in nature. It is not practicable to determine the amounts unprovided. For those entities where unremitted earnings are not permanently reinvested, no material additional tax is expected to arise upon remittance.

Additional information required under US GAAP in respect of restructuring provisions

	Employee			Facilities			Other			IHG
	costs			costs			costs			total
	(£ million)
Balance at January 1, 2004		7			7			4			18
Expenditure		(7	)		(3	)		(4	)		(14	)
Balance at December 31, 2004		—			4			—			4
Expenditure		—			(1	)		—			(1	)
Balance at December 31, 2005		—			3			—			3
Expenditure		—			(3	)		—			(3	)
Balance at December 31, 2006		—			—			—			—

Variable Interest Entities

      FIN 46, “Consolidation of Variable Interest Entities” (“the Interpretation”), was effective for all enterprises with variable interest in variable interest entities created after January 31, 2003. FIN 46(R), which was revised in December 2003, was effective for all entities to which the provisions of FIN 46 were not applied as of December 24, 2003. The provisions of FIN 46(R) were applied to all entities subject to the Interpretation as of December 31, 2004. Under FIN 46(R), if an entity is determined to be a variable interest entity (“VIE”), it must be consolidated by the enterprise that absorbs the majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, the “primary beneficiary”.

      The Group’s evaluation of the provisions of FIN 46 as it relates to its various forms of arrangements focuses primarily on a review of the key terms of its equity investment agreements, management contracts and franchise agreements against the criteria in FIN 46 to determine if any of these arrangements qualify as VIEs. In general, a VIE represents a structure used for business purposes that either does not have equity investors with voting rights or that has equity investors that do not provide sufficient financial resources for the entity to support its activities. However, other contractual arrangements could qualify an entity as a VIE and designate which party to the contract is the primary beneficiary.

      The Group’s evaluation of its equity investments, management contracts and franchise agreements has identified one management contract, due to the terms of performance guarantees, and one equity investment, in which it has variable interests. For those entities in which the Group holds a variable interest, it is determined that it is not the primary beneficiary and as such is not required to consolidate the VIEs. The performance guarantee associated with the management contracts with HPT does not expose the Group to the majority of expected cash flow variability and therefore those hotels have not been consolidated. As of

F-86

December 31, 2006, the maximum exposure to loss on these contracts, consisting of future management fees and the potential obligation to fund the performance guarantee, totaled an aggregate amount of approximately £64 million over the life of the contracts. The Group also has one significant equity interest in an entity that is a VIE. In November 2003, the Group purchased a one-third share of an equity venture that owns the InterContinental Warsaw which is managed by the Group. The equity investment in the VIE totaled £12 million at December 31, 2006 and £13 million at December 31, 2005.

New Accounting Standards

      In December 2004, the FASB issued FAS No. 123(revised 2004), “Share-Based Payment” (“FAS 123(R)”), which is a revision of FAS No. 123, (“FAS 123”) “Accounting for Stock-Based Compensation”. The Group adopted FAS 123(R) using the modified prospective transition method at January 1, 2006. See Note 23, “Share-based payments” of Notes to the Consolidated Financial Statements for additional information.

      In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”) which prescribes criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Upon adoption of FIN 48, from January 1, 2007, benefits resulting from uncertain tax positions that meet a “more likely than not” threshold at the effective date may be recognized, based on measurement as the largest benefit which has a greater than fifty per cent. likelihood of being sustained upon examination by the tax authorities. The cumulative effect of applying FIN 48, if any, is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The Group is evaluating the impact that FIN 48 will have on its financial statements.

      In September 2006, the FASB issued FAS 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, provides a framework for measuring fair value, and expands the disclosures required for fair value measurements. FAS 157 applies to other accounting pronouncements that require fair value measurements; it does not require any new fair value measurements. FAS 157 is effective for financial statements for fiscal years beginning after November 15, 2007. We do not expect this statement will have a material impact on our results of operations or financial position.

      In September 2006, the FASB issued FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“FAS 158”). FAS 158 requires an employer to recognize the over-funded or under-funded status of defined benefit postretirement plan as an asset or liability, respectively, in its balance sheet and to recognize changes in that funded status as unrealized gain or loss through accumulated Other Comprehensive Income when the changes occur. FAS 158 also requires an employer to measure its defined benefit plan assets and obligations as of the date of the employer’s fiscal year end. FAS 158 is effective for our fiscal year ending December 31, 2006. See pages F-90 to F-91 for additional information.

      In February 2007, the FASB issued FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”). FAS 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. FAS 159 is effective for fiscal years beginning after November 15, 2007. The Group does not currently plan to expand the use of fair values.

F-87

INTERCONTINENTAL HOTELS GROUP PLC

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

			Additions
	Balance at		charged to								Balance at
	beginning		costs and		Exchange						end of
	of period		expenses		differences			Deductions			period
Year ended December 31, 2006
Provisions for bad and doubtful debts		47		16		(5	)		(15	)		43
Year ended December 31, 2005
Provisions for bad and doubtful debts		43		14		4			(14	)		47
Year ended December 31, 2004
Provisions for bad and doubtful debts		45		20		(3	)		(19	)		43

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: March 30, 2007

EX-4.B.VI

Exhibit 4 (b)(vi)

CONFORMED COPY

DATED 8 September 2005

BHR Holdings BV

— and —

DABICAM SAS

— and —

Six Continents Limited

Agreement as amended by a Letter dated 7 October 2005 and a Deed of
Amendment dated 27 October 2005

— RELATING TO —

the sale and purchase of the entire share capital of

Hotel Inter-Continental Paris SAS

P1999.00024
Ref: C3/NPLR/1551393.3

Contents

Clause		Page no
1.	Interpretation		1
2.	Sale and Purchase of Shares		12
3.	Consideration		13
4.	Pre-Completion Matters		13
5.	Completion		19
6.	Net Current Assets Amount		23
7.	Post Completion Undertakings		24
8.	Warranties		25
9.	Limitation on Claims		28
10.	Indemnities		35
11.	Insurance		39
12.	Purchaser Warranties		39
13.	Seller’s Intellectual Property		40
14.	Non-Solicitation		41
15.	Purchaser’s Rights to Terminate		43
16.	Announcements and Confidential Information		44
17.	Effect of Termination		45
18.	Interest and Payments		45
19.	Costs		47
20.	Notices		47
21.	Severability		49
22.	Entire Agreement		49
23.	Variation		49
24.	Remedies and Waivers		50
25.	Successors and Assignment		50
26.	Guarantee		51
27.	Counterparts		53
28.	Invalidity		53
29.	Further Assurance		53
30.	Rights of Third Parties		53
31.	Purchaser’s Rights and Remedies		53
32.	Rate of Exchange		54
33.	Governing Law and Jurisdiction		54
Schedule 1			56
	Part A — The Company		56
	Part B — The Subsidiaries		57
Schedule 2			59
	Part A — The Property		59

ii

Clause		Page no
	Part B — Fiche D’immeuble		60
	Part C — The Leases		61
Schedule 3 — Warranties			62
Schedule 4 — Purchaser’s Warranties			94
Schedule 5			95
	Part 1 — Determination and Confirmation of Net Current Assets Amount, Long Term Liabilities and Provisions		95
	Part 2 — Accounting Policies to be Adopted in the Net Current Assets Statement		99
	Part 3 — Pro Forma Net Current Asset Statement in respect of the Net Current Assets Amount		103
Schedule 6 — Tax Covenant			104

CONFORMED COPY

This Agreement is made the 8^th day of September 2005

Between:

(1)	BHR Holdings BV, a company registered in The Netherlands, under number 3322083, whose registered office is at Professor Tulpplein 1, 1018 GX Amsterdam (the “Seller”);
(2)	DABICAM SAS, a French simplified joint-stock company (société anonyme simplifiée) registered in France with the Commercial Court Registry of Paris (with a provisional registration number noo 2005B15946), with a share capital of €100,000 whose registered office is at 95 rue de la Boétie 75008 Paris (the “Purchaser”); and
(3)	Six Continents Limited, a company registered in England, under number 00913450, whose registered office is at 67 Alma Road, Windsor, Berkshire SL4 3HD (the “Guarantor”).

Recitals:

(A)	Hôtel Inter-Continental Paris SAS is a limited liability company registered in France under number 652 029 125 RCS Paris, whose registered office is at 3 rue de Castiglione, 75001 Paris, France (the “Company”). Particulars of the Company are set out in schedule 1.
(B)	The Seller is the owner of and is entitled to transfer the title to the Shares.
(C)	The Seller has agreed to sell and the Purchaser has agreed to purchase all of the Shares on and subject to the terms of this Agreement.

It Is Agreed:

1.	Interpretation
1.1	In this Agreement:

“Accounts” means the audited balance sheet, profit and loss account and related notes to the financial statements of each Group Member as at and for the 12 month period ended on the Accounts Date;

“Accounts Date” means 31 December 2004;

“Accruals” means the monetary value of goods and services received by a Group Member before the Completion Date which have not been paid for by that Group Member as at the Completion Date, including an amount for accrued Retirement Indemnities, social charges, 13th and 14th month payments, bonus payments and any wages and employee participation and intéressement and other contractual and statutory payments

-2-

to or in respect of employees, holiday pay and overtime, all of which will be apportioned on a pro-rata basis for the year in question;

“Accrued Income” means the monetary value of goods and services provided by a Group Member before the Completion Date for which no invoice has been issued by that Group Member as at the Completion Date;

“Agreement” means this agreement;

“Business” means the business of the Group at the date of this Agreement;

“Business Day” means any day (except any Saturday or Sunday) on which banks in Paris are open for business;

“Carry-back Receivable” means the receivable of €3,637,069 as at 31 December 2004 owed by the French Treasury to the Company under article 220 Quinquies of the French Tax Code;

“Carry-back Receivable Proceeds” means the net cash proceeds of sale of the Carry-back Receivable pursuant to the Carry-back Receivable Sale Contract;

“Carry-back Receivable Sale Contract” means a contract between the Company and Société Générale for the sale and purchase of the Carry-back Receivable in the agreed form to be executed on or after the date of this Agreement;

“Cash” means balances in the cash books of Group Members including cash at the Property but excludes the Carry-back Receivable Proceeds amount of the asset required to be included in the Net Current Assets Statement in respect of the Carry-back Receivable;

“Claim” means any General Claim, Indemnity Claim or Tax Claim;

“Condition” means the condition set out in clause 5.2(a);

“Companies Act” means the Companies Act 1985;

“Company” has the meaning given in Recital (A);

“Company Systems” means the computer and data processing systems, information and communication technologies solely used in or solely for the Business, which systems include the property management system and yield management systems, including hardware, Software, networks, data storage devices, printers, firmware, dedicated power supplies, cabling, peripherals and associated documentation, but excluding the Holidex System, the payroll systems and software and the PeopleSoft systems and software and any other proprietary systems or proprietary Software of the Seller or the Seller’s Group;

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“Completion” means completion of the sale and purchase of the Shares (including transfer of ownership of the Shares) on the Completion Date pursuant to clause 5 of this Agreement in accordance with its terms;

“Completion Date” means 11.00 am on 11 October 2005 and the date which is 7 Business Days after the date on which the Condition is satisfied, or on such other date as may be determined pursuant to clause 5.8(a)(i) means 1 November 2005 or such date as may be agreed between the parties or determined pursuant to clause 5.8(a)(i);

“Confidential Information” means Know-How, trade secrets and other information of a confidential nature (including, without limitation, all proprietary technical and commercial information and techniques in whatever form held, such as paper, electronically stored data, magnetic media film and microfilm or orally which solely relates to a Group Member);

“Consideration” means the sum of the Initial Consideration and the Net Current Assets Amount;

“Creditors” means all indebtedness of the Group as at the Completion Date including, without limitation, creditors, provisions pour risques et charges as determined under French GAAP as at the Completion Date, overdrafts, monies held on account, bills of exchange, Accruals and Deferred Income, Indebtedness (to the extent not already included in this definition), but excluding Tax and Deferred Tax;

“Current Guest Accounts” means uninvoiced accounts of guests staying at the Hotel as at Completion who are booked to remain at the Hotel after Completion, and uninvoiced or invoiced but unpaid accounts of corporate clients in respect of guests who have stayed at the Hotel prior to Completion;

“Current Guest Deposits” means advance deposits and receipts of guests who will be staying at or using the services provided at the Hotel following the Completion Date and any sums credited to corporate client accounts in respect of guests who will be staying at or using the services provided at the Hotel following the Completion Date;

“Data Room” means the data room in the agreed form, a copy of which is held in escrow by Maître Frédéric Martin, Notaire in Paris (25 avenue George V, 75008 Paris), pursuant to and in accordance with the terms of an escrow agreement subject to French law entered on or around the date hereof between Maître Frédéric Martin, the Seller and the Purchaser;

“Deferred Income” means any payments received by a Group Member before the Completion Date relating to a service to be provided by a Group Member after the Completion Date including any Current Guest Deposits;

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“Deferred Tax” means a provision which deals with the timing differences in the accounting for and tax treatment of any allowable deductions and/or payment of Tax;

“Disclosed” means fully, fairly, accurately and clearly disclosed by the Disclosure Letter with sufficient details to enable the Purchaser to have a reasonable understanding of the nature and scope of the matters disclosed and “Disclosure” and “Disclose” shall be construed accordingly;

“Disclosure Letter” means the letter of the same date as this Agreement from the Seller to the Purchaser in the agreed form;

“Employee Loans” means any loan made to an employee, consultant or officer of a Group Member or any other person who provides services to a Group Member by any Group Member;

“Employees” means the employees of the Group Members as at the Completion Date;

“Employment Warranties” means those Warranties set out in paragraphs M and N of schedule 3;

“Encumbrance” means a charge, debenture, mortgage, pledge, lien, hypothecation, security interest, title retention, assignment, restriction or any other agreement or arrangement the effect of which is the creation of security, or any other interest, equity or other right of any person (including any right of first refusal, right of control, option, right of pre-emption) or other third party right or interest of any kind, whether granted for the purpose of security or not, or any agreement or arrangement to create any of the same and “Unencumbered” and “Encumber” shall be construed accordingly;

“Environment” means all organisms (including man), ecosystems, property and the following media: air (including the air within buildings and the air within other natural or man-made structures, whether above or below ground); water (including water under or within land or in drains or sewers and coastal and in-land waters); and land (including land under water);

“Environmental Laws” means any and all laws in force in France at the date of this Agreement, whether civil or criminal applicable to the Property and/or the conduct of the Business and/or the Group and which have as a purpose or effect the protection of the Environment, including: European Community or European Union regulations, directives and decisions; statutes and subordinate legislation; regulations, orders and ordinances; Codes of Practice having the force of law; common-law, local laws and by-laws; and judgments, notices, orders, directions, instructions or awards of any Competent Authority;

“Environmental Matters” means any and all matters affecting the status, condition or quality of the Environment, at, on, under or about the Property;

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“EONIA” means Euro Over-Night Index Average;

“Excluded Assets” means those assets, contracts and rights (including any assets on loan and assets bearing Protected Names and Protected Badges) which are referred to in paragraph H of the Disclosure Letter and generally any other assets bearing Protected Names and Protected Badges;

“French Corporate Income Tax” (Impôt sur les sociétés) means corporate income tax as defined in articles 205 and seq. of the French Tax Code;

“French GAAP” means the French accounting principles generally applied for the preparation of statutory accounts;

“French Tax Code” has the meaning set out in the Tax Covenant;

“French Tax Group” has the meaning set out in the Tax Covenant;

“General Claim” means any claim made under the General Warranties;

“General Warranties” means those Warranties set out in schedule 3 other than the Tax Warranties;

“Group” means the Company and the Subsidiaries, and “Group Member” shall be construed accordingly;

“Group Scheme” means each retirement plan, saving plan, mandatory or voluntary profit sharing agreement, incentive agreement or other collective scheme granting financial benefits to existing or previous employees of any Group Member;

“Group Undertaking” has the meaning set out in section 259 of the Companies Act;

“Hazardous Matter” means any substance, material, liquid, solid, gas or other matter of whatsoever nature, which is an actual or likely cause of, or is otherwise capable of causing significant harm or damage to the Environment or is regulated under Environmental Laws;

“Health & Safety Legislation” means applicable French legislation concerning health and safety matters and conditions of work and all and any regulations or orders made or issued under such legislation and any relevant codes of practice guidance notes and the like issued by government agencies having force of law;

“Holidex System” means the global reservation system used by the Seller’s Group (and, prior to Completion, the Company and its subsidiaries) for reservations;

“Hotel” means the hotel situated on the Property;

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“Hôtel Inter-Continental London (Holdings) SAS” means the subsidiary undertaking in respect of which the Company is a parent undertaking, particulars of which are set out in schedule 1 part B;

“Indebtedness” means, in respect of any company or other entity, any borrowing or indebtedness in the nature of borrowing (including any indebtedness for monies borrowed or raised under any bank or third party guarantee, acceptance credit, bond, note, bill of exchange or commercial paper, letter of credit, finance lease, hire purchase agreement, forward sale or purchase agreement or conditional sale agreement or other transaction having the commercial effect of a borrowing and all finance, loan and other obligations of a kind required to be included in the balance sheet of a company or other entity but excluding (1) any trade creditor liabilities (including inter-company trading liabilities) incurred in the ordinary and usual course of business and reflected in the Net Current Asset Statement; and (2) the Revolving Facility Loan);

“Indemnities” means the indemnities in clause 10;

“Indemnity Claim” means any claim pursuant to the Indemnities and any claim pursuant to clause 11.3, which, for the avoidance of doubt, shall not include Claims under the Tax Covenant;

“Initial Consideration” means €315,000,000;

“Insurance Policies” means each current insurance and indemnity policy in respect of which each Group Member has an interest (including any active historic policies which provide cover on a losses occurring basis);

“Intellectual Property” means rights in and in relation to: Know-How, trade marks, service marks, trade and business names, logos, get up, (including any and all goodwill associated with or attached to the same), domain names, patents, inventions (whether or not patentable), registered designs, design rights, copyrights (including, without limitation, rights in software) and moral rights, database rights, semi-conductor topography rights, utility models and all rights or forms of protection having an equivalent or similar nature or effect anywhere in the world, whether enforceable, registered, unregistered or registrable (including all renewals, extensions and applications for registration); and the right to sue for damages for past and current infringement (including passing off and unfair competition) in respect of the same;

“Interim Accounts” means the unaudited balance sheet and profit and loss account of the Company for the seven months ended 31 July 2005;

“Know-How” means all know-how, expertise, technical or other information developed or acquired by the Group including, without limitation, all related ideas, concepts, methods,

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inventions, discoveries, data, formulae, processes, methods, techniques and specifications which solely relates to a Group Member;

“Licence” means any licence, consent, approval, permit or other authorisation held by a Group Member as at the date of Completion relating to the operation of the Business;

“Licences In” means the licences of Intellectual Property which have been granted to a Group Member;

“Licences Out” means the licences of Intellectual Property which have been granted by a Group Member to third parties;

“Long Term Liabilities” means any long-term liabilities of any Group Member as at Completion (as determined in accordance with French GAAP as at the Completion Date);

“Losses” includes, in respect of any matter, event or circumstance, all demands, claims, actions, proceedings, damages, payments, fines, penalties, losses, costs (including reasonable legal costs), reasonable expenses (including taxation), reasonable disbursements or other liabilities, in each case whether direct or indirect;

“Material Effect” means in the context of clause 15, any fact, matter, circumstance or event which results in or is likely to result in, a cost to the Company or a loss to the Purchaser of at least €35.0 million after accounting for insurance proceeds, if any;

“Net Current Assets Amount” means the sum, on an aggregated basis for the Group, representing the value of Stock, Trade Debtors, 50% of the Carry-back Receivable Proceeds the amount of the asset required to be included in the Net Current Assets Statement in respect of the Carry-back Receivable and Cash minus Creditors, Tax, Long Term Liabilities and Provisions as at the Completion Date as set out in the Net Current Assets Statement;

“Net Current Assets Estimate” means the sum of €550,000 being a realistic estimate of Stock, Trade Debtors, 50% of the Carry-back Receivable Proceeds the amount of the asset required to be included in the Net Current Asset Statement in respect of the Carry-back Receivable and Cash minus Creditors, Tax, Long Term Liabilities and Provisions as at the Completion Date;

“Net Current Assets Statement” means the statement setting out the calculation of the Net Current Assets Amount prepared in accordance with schedule 5;

“Pension Plan” means the supplementary defined benefit pension scheme established by SNC de L’Hôtel Inter-Continental Paris for staff between 1995 and 1999 and managed by Zurich Assurance (retraite-chapeau);

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“Powers of Attorney” means the powers of attorney granted by Mrs Marie-Béatrice Lallemand and Mr Laurent Turping, acting respectively as chairman of the board of directors of the Company and as chief executive officer of the Company, in favour of InterContinental Hotels Group Plc enabling it to conduct, on behalf of the Company, the claims against the Commissioners of Inland Revenue brought in the High Court of England and Wales with claim numbers HC03C00857 and HC03C03431, or any other claim arising out of substantially the same facts or matters, whether commenced in the High Court of England and Wales or made to, or determinable by, any Tax Authority of the United Kingdom;

“Pre-sale Reorganisation” means the corporate restructuring which occurred in December 2004 comprising (i) the sale of the entire issued share capital of Hôtel InterContinental London Limited by Hôtel InterContinental London (Holdings) SAS and (ii) the Revolving Facility Loan;

“Prepayments” means all prepayments made by a Group Member before the Completion Date which relate to a supply to a Group Member of goods and/or services to be provided after the Completion Date;

“Property” means the property brief particulars of which are set out in schedule 2;

“Protected Badges” means the Protected Names or any reference to the name of or any logo mark or symbol incorporating or using any of the Protected Names used by the Seller or the Company or any member of the Seller’s Group as at the Completion Date in relation to the Property;

“Protected Names” means the names “Posthouse”, “Holiday Inn”, “Express by Holiday Inn”, “Crowne Plaza”, “InterContinental”, “Indigo”, “Spirit”, “Staybridge Suites”, “Prestige Reservations” and “Candlewood Suites” or any other trade name(s) or trade or service mark (a) owned by or exclusively licensed to any of the Seller’s Group or any member thereof or (b) associated with or at any time used in connection with the “Posthouse”, “Holiday Inn”, “Express by Holiday Inn”, “Crowne Plaza”, “InterContinental”, “Indigo”, “Spirit”, “Staybridge Suites”, “Prestige Reservations” and “Candlewood Suites” brands or any combination or colourable imitation thereof in either case in all cases as registered or used at the Completion Date;

“Provisions” means any provision of a Group Member which is required to be made at Completion in accordance with the policies set out in Part 2 of schedule 5;

“Purchaser’s Group” means the Purchaser and its Group Undertakings from time to time and “Purchaser’s Group Member” shall be construed accordingly;

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“Purchaser’s Solicitors” means Baker & McKenzie of 32 Avenue Kléber, BP 2112, 75771 Paris Cedex 16;

“Purchaser’s Warranties” means the warranties set out in schedule 4;

“Real Estate Company” has the meaning set out in the Tax Covenant;

“Relief” has the meaning set out in the Tax Covenant;

“Retained Employees” means Dagmar Woodward and each president (président), managing director (directeurs généraux) and SNC Manager who resigns pursuant to clause 5.4(c) including, for the avoidance of doubt, Mr. Gill and Ms. Maillot;

“Retirement Indemnities” means all rights, whether statutory or contractual, of employees to receive a lump sum payment upon retirement;

“Revolving Facility Loan” means the revolving facility loan amounting up to €315,000,000 advanced by Hôtel InterContinental London (Holdings) SAS to the Company;

“Seller’s Group” means the Seller and its Group Undertakings from time to time, excluding the Company and the Subsidiaries;

“Seller’s Solicitors” means Lovells of Atlantic House, Holborn Viaduct, London, EC1A 2FG;

“Service Agreements” means:

(a)	a service agreement between SNC de l’Hôtel Inter-Continental Paris and Inter-Continental Hotels Corporation, dated 2 January 1992, concerning reservation, financial and accounting, legal, insurance, recruitment and system services;
(b)	a regional services agreement between SNC de l’Hôtel Inter-Continental Paris, among others, and Société des Hôtels Inter-Continental France, dated 15 January 1993, concerning supervision and coordination of the operational decisions and their implementation, coordination of all local financial aspects, fiscal and tax matters, and supervision and coordination of all sales and marketing efforts;
(c)	a centralised services agreement between SNC de l’Hôtel Inter-Continental Paris and Société des Hôtels Inter-Continental France, dated 15 January 1993, concerning paralegal, software, French accounting and Asian commercial representation services;
(d)	the trademark license agreement between SNC de l’Hôtel Inter-Continental Paris and InterContinental Hotel Corporation, dated 2 January 1992; and

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(e) a domiciliation agreement between Societe Nouvelle du Grand Hotel and Hotel Inter-Continental London (Holdings), dated 5 September 2001;

“Shares” means entire issued and paid up share capital of the Company;

“SNC de l’Hôtel Inter-Continental Paris” means the subsidiary undertaking in respect of which the Company is a parent undertaking, brief particulars of which are set out in schedule 1 part B;

“SNC Manager” means a manager of SNC de l’Hôtel Inter-Continental Paris as set out in Schedule 1, Part B;

“Software” means all forms of computer program, including without limitation, the applications and operating systems and in each case, whether in source, object or machine form, used by any Group Member in the carrying on of the Business;

“Stock” means all stock of unconsumed beers, wines, spirits and other alcohol and tobacco products which are unused, owned beneficially by a Group Member and held at the Property in connection with the Business as at the Completion Date;

“Subsidiaries” means Hôtel Inter-Continental London (Holdings) SAS and SNC de l’Hôtel Inter-Continental Paris;

“Tax” or “Taxation” has the meaning set out in the Tax Covenant;

“Tax Authority” has the meaning set out in the Tax Covenant;

“Tax Claim” means any claim under the Tax Warranties or the Tax Covenant;

“Tax Covenant” means the tax covenant set out in schedule 6;

“Tax Warranties” means those Warranties set out in paragraph O of schedule 3;

“Termination Event” has the meaning contained in clause 15.1;

“Trade Debtors” means all receivables arising out of or attributable to the operations of the Group as at the Completion Date including Accrued Income, Employee Loans, Prepayments and the right to receive payment for services rendered before Completion but not invoiced before such date which shall include that portion of Current Guest Accounts relating to the period prior to Completion but excluding Deferred Tax;

“Transfer Tax” has the meaning set out in the Tax Covenant;

“Transfer Tax Demand” has the meaning set out in the Tax Covenant; and

“Warranties” means the warranties set out in schedule 3.

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1.2 In this Agreement, unless the context otherwise requires:

(a)	references to “this Agreement” or any other document include this Agreement or such other document as varied, modified or supplemented in any manner from time to time;
(b)	references to recitals, clauses and schedules and sub-divisions of them are references to the recitals and clauses of, and schedules to, this Agreement and sub-divisions of them respectively;
(c)	references to any enactment include references to such enactment as re-enacted, amended or extended on or before the date of this Agreement and any subordinate legislation made from time to time under it;
(d)	references to a “person” include any individual, company, corporation, firm, partnership, joint venture, association, organisation, institution, trust or agency, whether or not having a separate legal personality;
(e)	headings are inserted for convenience only and shall be ignored in construing this Agreement;
(f)	general words shall not be given a restrictive meaning by reason of their being preceded or followed by words indicating a particular class or examples of acts matters or things;
(g)	the word “material” shall mean material in the context of the Group as a whole;
(h)	a reference to a time of day is to Paris time;
(i)	references to the singular shall include the plural and vice versa;
(j)	any reference to “writing” or “written” includes any method of reproducing words or text in a legible and non-transitory form but, for the avoidance of doubt, shall not include e-mail; and
(k)	references to “indemnify” and to “indemnifying” any person against any Losses by reference to any matter, event or circumstance includes indemnifying and keeping that person indemnified against all Losses from time to time made, suffered or incurred as a consequence of or which would not have arisen but for that matter, event or circumstance.

1.3	The recitals and schedules to this Agreement form part of it.
1.4	In this Agreement “subsidiary undertakings” and “parent undertakings” have the meanings set out respectively in section 258 of the Companies Act 1985

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1.5	Any reference in this Agreement to a document being “in the agreed terms” or “in the agreed form” is to a document being in the terms agreed between the parties and for identification purposes only signed or initialled by them or on their behalf on, before or after the date of this Agreement.
1.6	References to any English legal term for any action, remedy, method of judicial proceeding, regulation, rule, legal document, legal status, court, official or any other legal concept shall, in respect of any jurisdiction other than England, be deemed to include the legal concept which most nearly approximates in that jurisdiction to the English legal term and to any English statute shall be construed so as to include equivalent or analogous laws of any other jurisdiction, provided that where reference is expressly made to any French legal term then such term shall prevail and shall be construed in accordance with the laws of France.
2.	Sale and Purchase of Shares
2.1	In accordance with this Agreement, with effect at Completion the Seller agrees to sell and the Purchaser agrees to purchase the entire legal and beneficial title in the Shares, free from all Encumbrances and together with all rights attaching to the Shares on or after Completion, including all rights to any dividend or other distribution declared, made or paid after the date of this Agreement.
2.2	The Seller covenants with the Purchaser that at Completion it shall have full power and the right to sell and transfer the Shares on the terms set out in this Agreement.
2.3	The Seller irrevocably waives, and undertakes to procure on or before Completion the waiver of, any restrictions on transfer (including rights of pre-emption) which may exist in relation to the Shares, whether under the articles of association of the Company or otherwise.
2.4	The Purchaser shall not be obliged to complete the purchase of any of the Shares unless the purchase of all the Shares is completed simultaneously.
2.5	The Seller covenants with the Purchaser that at Completion:

(a)	the Company will be the sole legal and beneficial owner of the entire issued and paid up share capital in Hotel Inter Continental London (Holdings) SAS free from all Encumbrances; and
(b)	the Company and Hotel Inter Continental London (Holdings) SAS will be the sole legal and beneficial owners of the entire issued and paid up share capital in SNC de L’Hotel Inter-Continental Paris free from all Encumbrances.

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3.	Consideration
3.1	The Purchaser will pay the Consideration to the Seller for the purchase of the Shares in accordance with this Agreement.
3.2	The Initial Consideration and the Net Current Assets Estimate shall be payable on Completion pursuant to clause 5.
4.	Pre-Completion Matters
4.1	As from the date of this Agreement until Completion, the Seller (without prejudice to the operation of paragraph 10 of the Tax Covenant or to the Carry-back Receivable Sale Contract) shall procure that:

(a)	the businesses of each Group Member will be carried on as going concerns in the ordinary and usual course as carried on over the 12 months prior to the date of this Agreement including payment of Taxes and management of Tax affairs in compliance in all material respects with all applicable legal and regulatory provisions and without material interruption or alteration in the nature, scope or manner of such businesses but only to the extent that avoiding such interruption or alteration is within the control of the Seller and is not as a result of a fact, matter, circumstance or event affecting similar businesses in Paris;
(b)	as soon as reasonably practicable the Seller shall notify the Purchaser of all material matters relating to businesses, assets and affairs of each Group Member (having regard to the Purchaser’s interest as the prospective owner of each Group Member) and provide to the Purchaser reasonable details of any material change in the Business or the Company or Group’s financial position or assets;
(c)	each Group Member will enforce, or procure to be enforced the obligations of employees and directors under their respective employment contracts and of other employees under their terms of employment with a Group Member;
(d)	each Group Member will keep proper accounting records of all dealings and transactions in relation to its and their businesses and will afford to the Purchaser and any representative of the Purchaser full access thereto;
(e)	the Purchaser, and such employees, agents, sub-contractors, representatives (including representatives of the proposed post-Completion operator of the Hotel) or advisers as the Purchaser reasonably requests, will be afforded reasonable access reasonably required by the Purchaser for the purposes of planning for the operation of the Business after Completion which shall include access to: (i) the Property (including, with the Seller’s prior consent (not to be unreasonably withheld or delayed), for the purpose of planning repair, safety or replacement

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	works or planning the installation of replacement fixtures, fittings or equipment at the Property); (ii) the Company Systems; (iii) all documents, books and records held or maintained by or on behalf of each Group Member or held or maintained by or on behalf of the Seller or any of its advisers relating thereto; (iv) the directors, officers (mandataires sociaux) executives and advisers of each Group Member; and (v) the General Manager and all department heads (including Finance, Human Resources, Revenue, Sales and Marketing, Engineering and Purchasing) of the Hotel;
(f)	it maintains in force policies of insurance for full reinstatement value but otherwise with limits of indemnity at least equal to, and otherwise on terms no less favourable than, those policies of insurance currently maintained by it and not do anything to permit any of its insurances to lapse or do anything which would make any policy of insurance void or voidable and any insurance proceeds that are received by any Group Member in relation to any damage or loss affecting the assets of any Group Member shall be paid to such Group Member as soon as practicable;
(g)	the Seller’s Group removes from the Property none of the physical assets (other than the Excluded Assets which are to be removed from the Property prior to Completion), fixtures, fittings and equipment and operating supplies and equipment used in the Business or otherwise dispose of any such physical assets, fixtures, fittings and equipment and operating supplies and equipment save in the ordinary and usual course of business and continues to take such steps as are currently taken to endeavour to prevent the hotel staff and guests removing any such physical assets, fixtures, fittings and equipment and operating supplies and equipment;
(h)	there is no material change in the manner or time of payment of creditors, or the issue of invoices or collection of debts, or policy of reserving for debtors or in the amount of stock bought or agreed to be bought (subject to clause 4.2(z)) or in stock which, taking the net effect of all such changes, would have a material adverse effect on the business of the Group;
(i)	no transaction is entered into between the Company or any other Group Member and the Seller or any member of the Seller’s Group which would continue in effect or take effect on or after Completion save for transactions in the ordinary and usual course of business which are recognised in the Net Current Assets Statement; and

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(j) procure that no member of the Seller’s Group (including any officers, employees or contractors thereof):

(i)	changes the manner in which reservations have been taken for the Hotel in the previous 12 months such that either: (A) the rates for accommodation offered by the Seller’s Group for the Hotel for the period following Completion are materially below the average room rate for the previous 12 months; or (B) the number of Priority Club® Reward redemption bookings or any other loyalty scheme or discounted staff bookings for the Hotel in any given month following Completion is materially higher than the average number of such bookings per month over the previous 12 months;
(ii)	instructs any member of its reservation centre to deflect bookings for the Hotel to any other hotel property; or
(iii)	effects any change to the manner in which proposal requests sent to paris.sales@ichotelsgroup.com, paris.reservations@ichotelsgroup.com and paris.prestigee@ichotelsgroup.com are currently handled, including enabling the marketing departments of both the Hotel and the Inter- Continental Le Grand Hôtel to receive a copy of the request and provide the requestor with a proposal; and

(k) as soon as reasonably practicable, the Seller shall prepare and provide the Purchaser with an asbestos technical file for the Property (dossier technique amiante) which complies with article R.1334-26 of the French Public Health Code (Code de la Santé Publique).

4.2 Without prejudice to clause 4.1, or paragraph 10 of the Tax Covenant, or the Carry -back Receivable Sale Contract, pending Completion, the Seller shall procure that none of the following matters will occur or be undertaken without the prior written consent of the Purchaser:

(a) the modification of any of the rights attached to any shares in a Group Member (including the Shares), the allotment or issue of or agreement to allot or issue any shares (parts sociales ou valeurs mobilières) or loan capital of a Group Member, the grant or agreement to grant any option or right over any shares (parts sociales ou valeurs mobilières) or loan capital of a Group Member, the issue of any obligations convertible into shares of a Group Member, the repayment in whole or in part of any loan, loan capital or preference capital of any Group Member or the issue of any profit sharing bonds or grant of any rights to third parties to share in

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the past, present or future income or profits, reserves or liquidation surpluses of any Group Member;

(b)	the capitalisation or repayment of any amount standing to the credit of any reserve of a Group Member or the redemption or purchase of any shares or any other reorganisation of the share capital of a Group Member;
(c)	the transfer (under any form) or approval of the transfer to any third party of any shares of a Group Member (including the Shares);
(d)	whether in the ordinary and usual course of business or otherwise:

(i)	the sale or disposal of, or the grant or termination of any rights in respect of, any part of the undertaking or the assets of a Group Member having a value in excess of €50,000 per transaction or €200,000 in aggregate; or
(ii)	the acquisition of, or the agreement to acquire, any business or any asset having a value in excess of €50,000 per transaction or €200,000 in aggregate, or the receipt of any service otherwise than at market value;

(e)	the entry into any leasing, hire purchase or other agreement or arrangement for payment on deferred terms;
(f)	the effecting of any material change in the practices of ordering supplies and raw materials, invoicing customers or collecting debts from those practices adopted at the date of this Agreement;
(g)	the declaration, payment or other making by a Group Member of any dividend or other distribution;
(h)	the passing of any resolution or decision by the shareholders of a Group Member, (including any alteration to the Articles of Association of a Group Member), except for the purpose of the sale and purchase of the Shares as contemplated herein;
(i)	the giving by a Group Member of any guarantee, indemnity or surety;
(j)	the increase or extension of the liability of a Group Member under any intra-group guarantees existing at the date of this Agreement or the entry into any new intra- group guarantees;
(k)	the acquisition by a Group Member of any shares of any other company, or the acquisition of the whole or any substantial part of the undertaking, assets or business of any other company or any firm or person, or the participation by a Group Member in any partnership, consortium, association or joint venture;

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(l)	the borrowing of any money or acceptance of any financial facility by a Group Member or the making, granting, accepting or incurring of any loan, financial facility, material or unusual undertakings or liabilities (actual or contingent) including any off-balance sheet commitments;
(m)	the creation or issue or allowing to come into being of any Encumbrance upon or over any part of the property or assets or uncalled capital of a Group Member or the creation or issue of any debenture or debenture stock or the obtaining of any advance or credit in any form, other than normal trade credit;
(n)	the appointment of, or the issue of an offer of employment to, any new director or officer (mandataire social ) of a Group Member or any employees or consultants of a Group Member who would receive an annual remuneration of €60,000 or more (whether under fixed-term or indefinite term employment contracts);
(o)	save as contemplated by this Agreement, the entry into or modification of any agreement, arrangement or understanding with any trade union, works council, staff association or other employee representative body which would be binding upon the Purchaser post-Completion, save that the Purchaser shall have 3 Business Days from receipt of written notification from the Seller that an issue has arisen for which it requires the Purchaser’s consent under this clause 4.2(o) in order to provide its consent, such consent not to be unreasonably withheld. In the event that the Purchaser fails to respond within the 3 Business Day period the Purchaser shall be deemed to have consented to the matter for which consent was requested;
(p)	the making of, or announcing any proposal to make, any change or addition (whether immediate, conditional or prospective) to any terms and conditions of or in respect of employment of its directors or employees or to any arrangement with any consultants other than those required by law and which are set out in the Disclosure Letter which could increase the total staff costs of the Company or the Group (including any change or addition affecting former directors, employees or consultants or their dependants) by more than €200,000 per annum or the remuneration of any one director or employee by more than €10,000 per annum or dismiss except for good cause any of its directors, employees or consultants or induce any such directors, employees or consultants to terminate their employment;
(q)	the making of, or announcing any proposal to make, any material change (whether immediate, conditional or prospective) to any, or grant or create any additional, retirement, health insurance, death or disability benefits scheme (including any change or addition affecting former directors, employees or

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consultants or their dependants) other than those required by law and which are set out in the Disclosure Letter or take or fail to take any action or allow any action to be taken in relation to any such scheme other than in the ordinary and usual course of administering any such scheme or which is necessary or prudent for the proper operation of any such scheme; 

(r)	the incurring or payment of any management charges or other payments to the Seller or any other member of the Seller’s Group in the period prior to Completion, save for any inter-company trading liabilities incurred in the ordinary and usual course of business and reflected in the Net Current Asset Statement;
(s)	the entry into, termination, amendment, variation or assignment of any material contract, transactions or arrangements (including finance leases) by a Group Member to which it is a party, whether or not legally binding, or the assumption of any liability otherwise than in the ordinary and usual course of business, or having a value of or involving expenditure in excess of €50,000 per event or €200,000 in aggregate or which is of a long term, onerous or unusual nature or which could involve an obligation of a material nature or which may result in any material change in the nature or scope of its operations;
(t)	the commencement of any litigation by a Group Member other than for the collection of debts not exceeding €15,000;
(u)	the authorising of capital expenditure by a Group Member exceeding €50,000 in the aggregate other than in an emergency;
(v)	the alteration of any of the Group Members insurance policies from their current form;
(w)	the performance of any act or the entry into any transaction or arrangement which may result in the Company or any other Group Member being resident for Tax purposes in a jurisdiction other than its country of incorporation or subject to Tax in such jurisdiction;
(x)	the amendment, variation or withdrawal of an existing VAT registration or the election to waive any exemption from VAT;
(y)	the acquisition or disposal of, or agreement to acquire or dispose of, any freehold or leasehold property or the grant of any lease or third party right or providing or granting any consent, including any consent concerning the duration of a tenancy referred to in Schedule 2 or the rental payments for such tenancy but excluding day to day consents given under the terms of such tenancies;

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(z)	the purchase of any items branded with the Protected Badges which are not reasonably likely to be utilised or required for the Hotel in the ordinary and usual course of business prior to Completion; or
(aa)	agree, conditionally or otherwise, to do any of the foregoing.

4.3 On or before Completion the Seller shall procure that:

(a)	all loans due from the Group Members to any of the Seller’s Group shall be repaid;
(b)	each member of the Seller’s Group shall irrevocably waive, with effect from Completion, any liabilities owed by any Group Member to any member of the Seller’s Group, save for any inter-company trading liabilities incurred in the ordinary and usual course of business and reflected in the Net Current Asset Statement, by execution of a document in the agreed form;
(c)	all loans due from the Seller’s Group to any Group Member shall be repaid;
(d)	the agency relationship between the Company and InterContinental Hôtels Corporation for the purposes of French value added tax is terminated;
(e)	each Group Member is released from all guarantees and indemnities given by that Group Member in respect of any liability or obligation of the Seller or any other member of the Seller’s Group;
(f)	it provides to the Purchaser an inventory of the operating equipment (being glassware, silverware, china and uniforms) in the Hotel as at Completion; and
(g)	at the Purchaser’s request it provides the Purchaser with access to an electronic copy of PeopleSoft so as to permit the Purchaser to transfer the information contained on PeopleSoft relating to the Hotel and/or the Group to the Purchaser’s (or it’s nominee’s) systems.

4.4 As from the date of this Agreement until Completion, the Seller and the Purchaser undertake to cooperate to ensure a smooth transition of the change of control of the Company.

5. COMPLETION

5.1 Completion shall take place at the Paris office of the Seller’s Solicitors on the Completion Date or at such other place and/or on such other date as may be agreed between the parties.

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5.2 (a) Completion is conditional upon the passing at an extraordinary general meeting of InterContinental Hotels Group PLC of a resolution to approve the transaction contemplated by this Agreement.

(b)	The Seller will use all reasonable endeavours to ensure the satisfaction of the Condition on or before 5.00 p.m. on 30 November 2005.
(c)	The Seller may at any time before 5.00 p.m. on 30 November 2005 waive the Condition by notice in writing to the Purchaser.
(d)	If the Condition has not been satisfied or waived by 5.00 p.m. on 30 November 2005, this Agreement automatically terminates and each party’s rights and obligations under this Agreement cease immediately on termination except that termination of this Agreement does not affect a party’s right to claim for breach of any other party’s obligations in relation to this Agreement if that breach occurred before termination and each party must continue to comply with each provision of this Agreement necessary for a party to enforce such a right.

5.3	On Completion, the Seller shall deliver to the Purchaser a duly executed share transfer form for the Shares (ordre de mouvement) in favour of the Purchaser, and the related executed CERFA declaration.
5.4	On Completion, the Seller shall deliver to the Purchaser:

(a)	the updated shareholder registers (registres des mouvements de titres and comptes d’actionnaires) of the Company and Hôtel Inter-Continental London (Holdings) SAS and the updated Articles of Association of SNC de l’Hôtel Inter- Continental Paris;
(b)	the shareholders’ meeting registers of each Group Member and the board meeting registers for the Company and Hôtel Inter-Continental London (Holdings) SAS, in each case updated to Completion;
(c)	written resignations of the president and managing directors (président et directeurs généraux) of the Company and Hôtel Inter -Continental London (Holdings) SAS and of the SNC Managers, each in the agreed form, duly executed;
(d)	written instructions from the president of the Company to the Company’s bankers amending, or if not possible, revoking all existing instructions, mandates and authorities;
(e)	documents in the agreed form (i) evidencing the withdrawal of the Company and SNC de l’Hôtel Inter-Continental Paris, prior to or on the Completion Date, from

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the intra-group cash management agreement dated 2 December 1996 (as amended) and the “Sogecash Pooling” centralised management of group cash positions service agreement dated 2 December 1996 (as amended), (ii) certifying that all sums due by or owed to, the Company and SNC de l’Hôtel Inter- Continental Paris thereunder have been duly paid on or prior to the Completion Date and (iii) releasing all Group Members from all liabilities arising under such agreements save only for those liabilities incurred in the ordinary and usual course of business and reflected in the Net Current Assets Statement;

(f)	documents from the relevant contractors in the agreed form (i) evidencing the termination of the Service Agreements, (ii) certifying that all sums due by or owed to, the Group Members under the Service Agreements have been duly paid on or prior to the Completion Date and (iii) releasing all Group Members from all liabilities arising under such agreements save only for those liabilities incurred in the ordinary and usual course of business and reflected in the Net Current Assets Statement;
(g)	written revocation in the agreed form of the Powers of Attorney by the Company and InterContinental Hotels Group Plc;
(h)	all original deeds and documents of title relating to the Property listed in schedule 2, and will make available at the Property fire and health and safety compliance certificates, Licences and any documents required by law to be maintained at the Property;
(i)	copies of all existing bank mandates and statements of the balances of any bank accounts in the name of the Company, as at the close of business on the second Business Day before the Completion Date;
(j)	evidence satisfactory to the Purchaser that the relevant Group Member has, on the Business Day following the date of this Agreement, issued a letter in the agreed form on that Group Member’s letterhead notifying the Global Distribution System that with effect from the Completion Date, or such later date as may be notified by the Seller, the Hotel will change from being branded as an “InterContinental” hotel to a “Westin” hotel; and
(k)	vacant possession of the spa centre at the Hotel which was immediately prior to the date hereof, or continues to be at the date hereof, operated by JJJ Marignan.

5.5 On Completion, the Seller shall:

(a) cause shareholder’s decisions of the Company and Hôtel Inter-Continental London (Holdings) SAS whereby such persons as may be nominated by the

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Purchaser shall be appointed president and/or managing directors of the Company and Hôtel Inter-Continental London (Holdings) SAS (within the maximum number, if any, permitted under their respective Articles of Association);

(b)	cause a shareholders’ meeting of SNC de l’Hôtel Inter-Continental Paris to be duly convened and held at which such persons as may be nominated by the Purchaser shall be appointed managers of SNC de l’Hôtel Inter-Continental Paris (within the maximum number, if any, permitted under its Articles of Association);
(c)	cause shareholders’ meetings of the Group Members to be duly convened for the purpose of the decisions to be procured by the Purchaser pursuant to clauses 5.6(b), (c) and (d) below; and
(d)	ensure that all Licences and Company Systems are at the Property and all reservations on the books as at Completion are recorded on the Company Systems with sufficient details so as to permit an incoming operator to manage those reservations.

5.6 On Completion, the Purchaser shall:

(a)	pay the sum of €315,550,000 being the Initial Consideration plus the Net Current Assets Estimate in accordance with clause 3.1 on account of the Consideration by telegraphic transfer into the account notified by the Seller to the Purchaser not less than two Business Days prior to Completion and the transfer shall be treated as received only when credited thereto;
(b)	procure shareholder’s decisions of the Company to change its company name to a name not including the Protected Names or any word confusingly similar thereto;
(c)	procure shareholder’s decisions of Hôtel Inter -Continental London (Holdings) SAS to:

(i)	change its company name to a name not including the Protected Names or any word confusingly similar thereto; and
(ii)	transfer its registered office;

(d)	procure a shareholders’ meeting of SNC de l’Hôtel Inter-Continental Paris to change its company name to a name not including the Protected Names or any word confusingly similar thereto; and
(e)	procure an updated certificate of incorporation (KBis) of the Purchaser with definitive number of incorporation.

5.7 The Tax Covenant shall take effect from Completion.

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5.8 Without prejudice to any other remedies available to the Purchaser:

(a) if the provisions of clauses 5.3 or 5.4(a) are not complied with in any respect on the Completion Date, the Purchaser shall not be obliged to complete the purchase of the Shares or pay any sum to the Seller and may in its absolute discretion (in addition and without prejudice to any other rights or remedies available to it) by written notice to the Seller:

(i)	defer Completion by a period of not more than 28 days to such other date as it may specify in such notice (and so that the provisions of this clause 5.8 shall apply to Completion as so deferred);
(ii)	waive all or any of the requirements contained or referred to in clause 5.3 at its discretion (and without prejudice to its rights under this Agreement) proceed to Completion so far as practicable; or
(iii)	terminate this Agreement without liability on its part; and

(b) without limiting the Purchaser’s rights pursuant to clause 5.8(a) in respect of non-compliance with clause 5.3 or 5.4(a), if the provisions of clause 5.4 or 5.5 are not complied with in any respect on the Completion Date (or such other date to which Completion may be deferred pursuant to clause 5.8(a)(i)) the Seller shall be required to provide to the Purchaser on the Completion Date (or such other date to which Completion may be deferred pursuant to clause 5.8(a)(i)):

(i)	a written undertaking, in a form reasonably acceptable to the Purchaser, to take all steps required post -Completion to comply with such provision and provide the Purchaser with evidence of such compliance; and
(ii)	in addition to the requirement in clause 5.8(b)(i), a written indemnity, in a form reasonably acceptable to the Purchaser, in relation to all Losses
	incurred by the Purchaser, the Purchaser’s Group or a Group Member as a result of the Seller failing to comply with clause 5.4 or 5.5.

6. NET CURRENT ASSETS AMOUNT

6.1	The Net Current Assets Statement setting out the calculation of the Net Current Assets Amount shall be prepared in accordance with schedule 5.
6.2	If the Net Current Assets Amount as shown in the Net Current Assets Statement exceeds the Net Current Assets Estimate, the Purchaser shall, subject to schedule 5, part 2, paragraph 2.7, pay to the Seller within five Business Days of the date of agreement or deemed acceptance (in accordance with part 1 of schedule 5) by the Purchaser of the Net

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Current Assets Statement in cleared funds the difference between the Net Current Assets Amount and the Net Current Assets Estimate.

6.3

If the Net Current Assets Amount as shown in the Net Current Assets Statement is less than the Net Current Assets Estimate, the Seller shall, subject to schedule 5, part 2, paragraph 2.7, refund to the Purchaser within five Business Days of agreement or deemed acceptance (in accordance with part 1 of schedule 5) by the Purchaser of the Net Current Assets Statement the difference between the Net Current Assets Estimate and the Net Current Assets Amount.

7. POST COMPLETION UNDERTAKINGS

7.1 The Purchaser undertakes, without prejudice to the provisions of the Tax Covenant, to procure (or, in the case of any information to be provided by the auditors of any Group Member, to use its reasonable endeavours to procure) that, following Completion, the Seller, and its respective duly authorised agents are provided with any financial information of each Group Member relating to the period prior to Completion as it or they may reasonably require to enable the Seller and/or any member of the Seller’s Group:

(a)	to prepare their respective statutory or management accounts; or
(b)	for any other accounting or taxation purpose required by applicable law or court of competent jurisdiction, recognised stock exchange, or regulatory authority to whose rules the Seller (or, as the case may be, other member of the same group of companies as the Seller) is subject.

7.2	The Purchaser shall as soon as reasonably practicable after Completion register the change of company name of each Group Member to be made pursuant to clause 5.6 with the companies’ registry of Paris and deliver to the Seller an original Extrait K-bis for each Group Member evidencing such change so as to eliminate any reference to the Seller’s Group Trademarks.
7.3	For:

(a)	a period of six months following Completion, the Seller shall, give such reasonable assistance as can be provided by the Seller as the Purchaser reasonably requires to answer such queries concerning the Business or the Property or the Company as the Purchaser may reasonably request that cannot be answered by any other means reasonably available to the Purchaser or the Company; and
(b)	a period of two months following Completion, the Seller shall, at the Purchaser’s request, procure that payroll services in relation to the Employees are provided to each Group Member for a fee of €8,000 per month, plus a further fee of approximately €4,000 per month in respect of services provided by ADP (it being

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specified that this amount may vary monthly depending on the number of pay slips issued by ADP), both of which will be payable by the relevant Group member, (the “Payroll Services”) provided however that:

(i)	the Payroll Services shall be provided according to those standards provided before Completion; and
(ii)	the Purchaser shall indemnify and keep indemnified all members of the Seller’s Group against any Losses by any third parties (including the Group Members) which they may incur in connection with the provision of the Payroll Services to the Group Members but excluding Losses arising from the negligence of any members of the Seller’s Group.

7.4

In the event that the Purchaser is unable, or it is not possible, to transfer any Licence which is in the name of a Retained Employee, into the name of a nominee of the Purchaser or a Group Member prior to the Completion Date, the Seller shall provide and procure that there is provided to the Purchaser or the Group at the cost of the Purchaser or the relevant Group Member, all such assistance as is reasonably required to maintain such Licence in full force and effect until such time as the Purchaser, acting in a timely manner, has effected the transfer.

7.5

If pursuant to paragraph 2.7 of Part 2 of Schedule 5 this clause is applied then:

(a)	the Purchaser shall be free to deal with the Carry-back Receivable as it sees fit; and
(b)	if the Purchaser, a Group Member or any member of the Purchaser’s Group obtains an ascertained benefit from utilisation or sale of the Carry -back Receivable,

then the Purchaser shall pay to the Seller a sum equal to 50% of each benefit obtained within 30 Business Days of receipt of such benefit, by way of increased consideration for the sale and purchase of the Shares pursuant to this Agreement.

For the avoidance of doubt, the Purchaser shall (without prejudice to the Seller’s rights under the Tax Covenant) be free to deal with the Carry-back Receivable as it sees fit and shall not be required to account to the Seller for any benefit received by any member of the Purchaser’s Group from the utilisation or sale of the carry-back Receivable.

8. WARRANTIES

8.1 The Seller hereby warrants to the Purchaser:

(a) as at the date of this Agreement in the terms of the Warranties;

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(b) as at the Completion Date by reference to the facts and circumstances existing at the relevant time in the terms of Warranties B.1(a), C.1, C.2, C.3, C.5, C.8, D.1, D.2, D.3, D.10, E.3, E.4, F.1(b), F.3, F.6, G.1, G.2, G.3, G.6 (but excluding from “and the Seller has not received notice” onwards), G.12 (first sentence only), G.14(a), G.15, G.16(a), G.16(c), G.16(d), G.16(g), G.16(h), H.2(a), J.2, K.4, K.5, K.8, K.10, L.1(a)(i) (but excluding from “and copies of all such licences” onwards), L.1(b), L.2, M.4(a) (but excluding from “and so far as the Seller is aware”), M.4(b), M.6(c), M.7, M.8, M.10 (commencing from “and other than the Group Schemes”), M.11, M.13, M.18, M.19, N.2, N.4, N.5, N.6, O.1(b), O.1(d), O.1(f), O.2, P.1, P.7, S.1, S.2, T.1, T.2 and U.1,

except as Disclosed.

8.2	No letter, document or other communication (whether or not in writing) shall be deemed to constitute a Disclosure against a Warranty unless it is expressly incorporated in the Disclosure Letter.
8.3	Without limiting clause 22.2(a), the Purchaser confirms that it has not relied on, has not been induced to enter into this Agreement by, and will make no claim against the Seller or any other person whatsoever in respect of any budget, forecast or other projection of any nature made or supplied by or on behalf of the Seller including those which are Disclosed. The Seller acknowledges that the Purchaser has entered into this Agreement on the basis of and in reliance upon the Warranties and the Tax Covenant and has been induced by them to enter into this Agreement.
8.4	Each of the Warranties shall be separate and independent and, save as expressly provided to the contrary in this Agreement, shall not be limited by reference to or inference from any other Warranty or by anything in this Agreement or in the Tax Covenant.
8.5	Where any Warranty or any statement in the Disclosure Letter is qualified by the expression “to the best of the Seller’s knowledge, information and belief” or any similar expression, such statement shall, unless otherwise stated, be deemed to refer to the actual knowledge of those persons set out below whose position is stated in column (2) below opposite his or her name, such persons having made all reasonable and careful enquiries, in each case in relation to those Warranties set out against each such person’s name in column (3) below:

Name	Position	Warranties
Marten Foxon	SVP Transactions	General Warranties

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Name	Position	Warranties
Denise Grant	Director Transactions & Asset Management	General Warranties
Jean-Charles Denis	Finance Director — France	General Warranties
Gilles Goic	Regional Human Resource Director	General Warranties
Mark Hanlon	VP Engineering — Europe	General Warranties
Dagmar Woodward	General Manager	General Warranties
Colin Garwood	VP Tax	Tax Warranties

8.6 The Seller undertakes to the Purchaser:

(a)

not to initiate or pursue proceedings of any kind against any Group Member or (except in the case of fraud or criminal offence) any present or former director, officer or partner of any Group Member arising out of a claim under this Agreement in respect of any conduct, default, omission or negligence of any such person or in respect of any warranty, any representation or statement made to the Purchaser (or any member of the Purchaser’s Group) or any Group Member, or in relation to the Disclosure Letter or howsoever otherwise in connection with the transactions contemplated by this Agreement; and

(b)

in the event that the Seller initiates or pursues proceedings of any kind against any present or former employee of any Group Member for fraud or criminal offence or any adviser of a member of the Purchaser’s Group arising out of a claim under this Agreement in respect of any conduct, default, omission or negligence of any such person or in respect of any warranty, any representation or statement made to the Purchaser (or any member of the Purchaser’s Group or any of their respective advisers) or any Group Member, or in relation to the Disclosure Letter or howsoever otherwise in connection with the transactions contemplated by this Agreement, the Seller shall indemnify the Purchaser and the Purchaser’s Group against any Losses incurred by any member of the Purchaser’s Group arising from such proceedings.

8.7 The Seller will not be entitled to raise as a defence to a claim by the Purchaser under this Agreement that it had relied on information provided to it by the Company or a Group Member, or any of their officers, employees or advisors. For the avoidance of doubt this clause will not prevent any information which is Disclosed qualifying the Warranties.

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8.8 The Seller agrees to disclose promptly to the Purchaser in writing as soon as practicable upon becoming aware of the same, any matter, event or circumstance (including any omission to act) which may arise or become known to it after the date of this Agreement and before Completion which:

(a)	constitutes a breach of any of the Warranties; or
(b)	has, or is likely to have, a material adverse effect on the financial position of the Company or any other Group Member.

9. LIMITATION ON CLAIMS

9.1 The Seller shall have no liability in respect of any breach or non-fulfilment of:

(a)	any of the General Warranties (save for Employment Warranties) unless the Purchaser has served on the Seller a written notice of such Claim on or before the date falling 18 months after the Completion Date; or
(b)	any of the Employment Warranties unless the Purchaser has served on the Seller a written notice of such Claim on or before the date falling 36 months after the Completion Date;

	giving such details of such General Claim as the Purchaser then has including the Purchaser’s reasonable estimate at that time of the amount of the liability of the Seller in respect thereof but any failure to satisfy its obligations as to the content of the notice shall not limit its ability to bring a claim nor shall it reduce the Seller’s liability for such claim (if any) in any way whatsoever save to the extent that such failure results in an increase in the Seller’s liability for such claim.
9.2	Any General Claim shall (if it has not previously been satisfied, settled or withdrawn) be deemed to have been withdrawn unless applicable contractual, legal or formal (judiciaires ou extra-judiciaires) proceedings or actions in respect of the matter referred to in any relevant notification given under clause 9.1 have been commenced within six months of notification to the Seller pursuant to clause 9.1.
9.3	The Seller shall have no liability in respect of any General Claim unless:

(a) subject to the provision below, the aggregate liability of the Seller to the Purchaser in respect of such General Claim exceeds €125,000 (including interest, costs and expenses), it being understood that damages or losses having one and the same source or of the same nature would be considered at their aggregate amount as one General Claim; and

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(b) the aggregate amount of all such General Claims which exceed €125,000 is equal to or greater than €1,750,000, in which event the Seller’s liability should be for the whole of such aggregate amount and not just the excess,

provided that once the aggregate amount of all General Claims which exceed €125,000 (including interest, costs and expenses) is equal to or greater than €1,750,000 then the Seller shall be liable for all General Claims, irrespective of the amount, save that where a General Claim is equal to or less than €125,000 (including interest, costs and expenses) (“De Minimus General Claim”), the Seller shall only be liable in relation to such De Minimus General Claim where the aggregate amount of De Minimus General Claims is in excess of €500,000, in which event the Seller’s liability for De Minimus General Claims shall be for the excess over €500,000.

9.4

Without prejudice to any other provisions of this Agreement, the total aggregate liability of the Seller in respect of all General Claims and Indemnity Claims shall:

(a)	in respect of General Claims relating to title to the Shares and Indebtedness, be unlimited;
(b)	in respect of General Claims and Indemnity Claims other than those to which clauses 9.4(a) and 9.4(c) apply, not exceed €100,000,000; and
(c)	in respect of General Claims relating to title to the Property, not exceed the Consideration, save that such amount shall be deemed to be reduced by the amount successfully claimed by the Purchaser from the Seller in respect of the General Claims and Indemnity Claims referred to in clause 9.4(b).

9.5

For the avoidance of doubt, amounts for which the Seller has no liability, or by which the Seller’s liability is reduced due to the provisions of this Agreement, shall not be capable of being aggregated as a claim or part thereof with other claims for the purpose of clause 9.3.

9.6

If the Purchaser becomes aware of any fact, matter or circumstance which gives rise or is reasonably likely to give rise to a General Claim and the Purchaser is aware that it gives rise to a General Claim, the Purchaser shall, within 30 Business Days of becoming so aware give notice to the Seller of that fact, matter or circumstance (including reasonable details thereof, the due date for any payment and so far as practicable the amount in respect of which such Claim may be made), provided that failure to notify or to satisfy its obligations as to the content of the notice shall not limit its ability to bring a claim nor shall it reduce the Seller’s liability for such claim (if any) in any way whatsoever save to the extent that such failure to notify within the 30 Business Day period results in an increase in the Seller’s liability for such claim.

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9.7 Subject to the Seller not having rejected any Claim notified by the Purchaser to the Seller in accordance with clause 9.6, the Seller shall be entitled, by a notice in writing addressed to the Purchaser and acting reasonably, to require the Purchaser to take or to procure that any and each Group Member takes all such steps and proceedings as the Seller may consider necessary in order to prevent a claim arising or to obtain any payment or relief in respect of or in connection with any matter giving rise to any General Claim or an Indemnity Claim, subject to the Purchaser and the relevant Group Member being indemnified against Losses incurred by them as a result of so acting and save that neither the Purchaser, a member of the Purchaser’s Group nor a Group Member is obliged to take any action to commence proceedings unless the Seller furnishes the Purchaser with the written opinion of a leading counsel, being a Q.C. and a recognised expert in relation to the subject matter of the Claim, to the effect that commencing proceedings in respect of the subject matter of the Claim against the person nominated by the Seller will, on the balance of probabilities, be won, provided however that neither the Purchaser, a member of the Purchaser’s Group nor a Group Member is obliged to take any steps or commence any proceedings if, in the opinion of the Purchaser (acting reasonably), to do so might be prejudicial to it, the Purchaser’s Group or the Group. Without limiting clause 9.13, the Seller may thereafter, acting reasonably, require any and each Group Member or the Purchaser to take all such steps or proceedings as it may consider necessary in order to remedy a breach or to mitigate any loss giving rise to any General Claim and the Purchaser undertakes to procure that each Group Member shall so act, subject to the Purchaser and the relevant Group Member being indemnified against Losses incurred by them as a result of so acting and save that neither the Purchaser, a member of the Purchaser’s Group nor a Group Member is obliged to take any action to commence proceedings unless the Seller furnishes the Purchaser with the written opinion of a leading counsel, being a Q.C. and a recognised expert in relation to the subject matter of the Claim, to the effect that commencing proceedings in respect of the subject matter of the Claim against the person nominated by the Seller will, on the balance of probabilities, be won, provided however that neither the Purchaser, a member of the Purchaser’s Group nor a Group Member is obliged to take any steps or commence any proceedings if, in the opinion of the Purchaser (acting reasonably), to do so might be prejudicial to it, the Purchaser’s Group or the Group. For the purpose of enabling the Seller to exercise its rights under this clause 9.7, the Purchaser shall:

(a) upon reasonable notice, make or procure to be made available to the Seller, and (if so requested by the Seller) provide copies of, all relevant books of account, records and correspondence of any Group Member in respect of the period up to Completion reasonably requested by the Seller and permit the Seller and its representatives and advisers to ascertain or extract any relevant information reasonably requested therefrom in respect of the period up to Completion, save

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that the Purchaser shall not be required to provide to the Seller any information which is subject to legal professional privilege; and

(b) not admit any liability or agree or compromise any claim and shall procure that no Group Member admits any liability or agrees or compromises any claim which may give rise or has given rise to a General Claim without the prior written consent of the Seller not to be unreasonably withheld or delayed (taking into account only the interests of the Purchaser’s Group or the Group).

9.8 The Seller shall not be liable in respect of a General Claim to the extent of:

(a)	any amount which is included as a liability in, or is otherwise allowed, accrued or provided for in the Net Current Assets Amount in respect of such Claim; or
(b)	any amount by which the valuation of any asset has been reduced in the Net Current Assets Amount to take account of such Claim.

9.9 The Seller shall not have any liability in respect of any General Claim to the extent that such Claim is attributable to, or arises, or is increased by:

(a)	anything expressly provided to be done or omitted to be done pursuant to this Agreement or any document referred to herein; or
(b)	any change in law, regulation or rule (or change in the interpretation of law, regulation or rule) or in administrative practice or doctrine of any government, governmental department, agency or regulated body or any judgment delivered or occurring after the date of this Agreement (whether or not retrospective);
(c)	any change after Completion in the accounting bases, policies, practices or methods applied in preparing any accounts or valuing any assets of the Group from those used in preparing the Accounts unless such change aims at complying, in respect of the period preceding this Agreement, with French GAAP; or
(d)	the winding-up of any Group Member or any winding -up or cessation after Completion of any trade or business carried on by any Group Member.

9.10 If any General Claim is made by the Purchaser, then, for the purpose of determining the amount for which the Seller is liable in respect of such Claim, there shall be taken into account and credit given for the amount by which at the date of such Claim any direct corresponding Taxation savings or net quantifiable Taxation benefit is received or realised by the Purchaser, any Group member or any company controlled by the Purchaser by reason of any of the matters giving rise to such Claim, provided that such matters have not been taken into account under paragraph 9 of the Tax Covenant and relate directly to the matters giving rise to such Claim.

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9.11 Except as set out in this Agreement:

(a)	the sole remedy of the Purchaser for any breach of Warranties or other provision of this Agreement shall be an action for damages and proceedings for injunctive relief; and
(b)	the Purchaser shall not be entitled to rescind or repudiate this Agreement before, at or after Completion or to recover damages in tort or for misrepresentation (other than fraudulent misrepresentation).

9.12 Where the Purchaser or any Group Member is or may be entitled (whether by reason of insurance payment, discount, relief or otherwise) to recover from some other person any sum in respect of any liability, loss or damage the subject of a General Claim against the Seller or which is reasonably likely to give rise to a General Claim (and whether before or after the Seller has made payment hereunder), the Purchaser shall within 30 Business Days notify the Seller and provide such information as it may reasonably require relating to such entitlement and the steps taken or to be taken by the Purchaser or the Group Member in connection with it and, if so required by the Seller, and, provided first that the Seller shall not have rejected liability in relation to the Claim the Purchaser shall, and shall procure that Group Member shall, take all reasonable steps (whether by way of a claim against its insurers or otherwise) including, but without limitation, such proceedings as the Seller may reasonably require to enforce such recovery and shall keep the Seller informed of the progress of any action taken, subject to the Purchaser and the relevant Group Member being indemnified against Losses incurred by them as a result of so acting and save that neither the Purchaser, a member of the Purchaser’s Group nor a Group Member is obliged to take any action to commence proceedings unless the Seller furnishes the Purchaser with the written opinion of a leading counsel, being a Q.C. and a recognised expert in relation to the subject matter of the Claim, to the effect that commencing proceedings in respect of the subject matter of the Claim against the person nominated by the Seller will, on the balance of probabilities, be won, provided however that neither the Purchaser, a member of the Purchaser’s Group nor a Group Member is obliged to take any steps or commence any proceedings if, in the opinion of the Purchaser (acting reasonably), to do so might be prejudicial to it, the Purchaser’s Group or the Group. Thereafter, any claim against the Seller shall be limited (in addition to the limitations on the liability of the Seller referred to in this clause 9.12) to the amount by which the loss or damage suffered by the Purchaser as a result of such breach shall exceed the amount so recovered net of any irrecoverable Tax and costs. If the Seller pays to the Purchaser an amount in full discharge of a General Claim and the Purchaser or any Group Member subsequently recovers (whether by payment, discount, credit, relief or otherwise) from a third party (including any Tax Authority) a sum which would have reduced the relevant Claim, the Purchaser shall (or, as appropriate, shall procure that

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such Group Member shall) forthwith repay to the Seller an amount equal to the sum recovered from the third party net of irrecoverable Tax and costs, or, if less, the amount paid by the Seller.

9.13	The Seller shall not be liable to make any payment in respect of any General Claim unless and until the Purchaser or any Group Member (as the case may be) has suffered the damage or loss or has become liable to make payment in respect of any corresponding liability. Unless otherwise stated, all sums for which the Seller has become so liable shall be payable within five Business Days following the receipt of a request for payment by the Purchaser.
9.14	If the Seller pays any sum in respect of any Claim the amount of the Consideration shall be reduced by the amount of any such payment.
9.15	The Seller shall not be liable in respect of any Claim which arises in respect of any breach of Warranty which is capable of remedy except to the extent that the relevant breach remains unremedied and except to the extent of any Loss suffered by the Purchaser or relevant Group Member in respect of matters prior to remediation after the expiry of 30 days following receipt by the Seller of a written notice pursuant to clause 9.1 or 9.6.
9.16	Nothing in this Agreement shall affect the application of the common law rules on mitigation in respect of any Claim.
9.17	If the Purchaser makes any Claim or gives notice of any Claim to the Seller the Purchaser shall, and shall procure that any Group Member shall, subject to providing a confidentiality undertaking reasonably acceptable to the Purchaser and providing the Seller shall not have rejected liability in relation to the Claim solely for the purpose of enabling the Seller to assess the Claim or potential Claim:

(a)

make available to the Seller and its representatives or advisers such reasonable access to the personnel of any relevant Group Member and to any relevant records and information relating to the period prior to Completion as the Seller may reasonably request in connection with such Claim or potential Claim, save that the Purchaser shall not be required to provide to the Seller any information which is subject to legal professional privilege; and

(b)

use reasonable endeavours to procure (but without being required to provide any undertakings or indemnities) that the auditors (past and present) of any relevant Group Member make available their audit working papers in respect of audits of the relevant Group Member’s accounts for any relevant accounting period in connection with such Claim or potential Claim.

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9.18	The Purchaser undertakes to the Seller that it will effect and maintain insurance for the Property and the Business in accordance with normal commercial practice.
9.19	The Purchaser shall not be entitled to recover damages or obtain payment, reimbursement, restitution or indemnity more than once for the same Loss.
9.20	No liability shall attach to the Seller in respect of any Claim to the extent that the Claim is based upon a liability which is contingent only or is otherwise not capable of being quantified unless and until such liability ceases to be contingent and becomes an actual liability or becomes capable of being quantified, as the case may be, provided that this paragraph shall not operate to avoid a Claim made in respect of a contingent or unquantifiable liability within the applicable time limits specified in clause 9.1 or 9.2 if the notice of such claim has been served before the expiry of the relevant period (even if such liability does not become an actual or quantifiable liability, as the case may be, until after the expiry of such period).
9.21	Subject to the terms of any applicable insurance policy which may prohibit the waiver of rights to which the insurers may otherwise be subrogated, if, in respect of any matter which would otherwise give rise to a breach of this Agreement, one of the Group Members or the Purchaser is entitled to claim under any policy of insurance, the amount of insurance monies received by the Purchaser or that Group Member pursuant to any such insurance claim shall reduce pro tanto or extinguish the Claim for breach of this Agreement.
9.22	None of the limitations on the liability of the Seller set out in this clause 9 (whether as to the quantum of the claim, the time limit for notification of the claim, the procedures or requirements for making a claim or otherwise) shall apply to any Claim to the extent that the liability of the Seller in respect of that Claim arises from fraud, wilful misconduct or criminal offence on the part of the Seller.
9.23	The Seller shall have no liability for a breach of either of the warranties appearing at paragraphs O.1 (g) and O.1 (h) of Schedule 3 except to the extent that the breach of those warranties or either of them has resulted in a successful claim for Transfer Tax by the relevant Tax Authority (after all available appeals have been exhausted) on the basis that the Company is at Completion or has during the twelve months preceding Completion been a Real Estate Company.
9.24	Save as set out in clauses 9.11, 9.14, 9.15, 9.16, 9.17, 9.19, 9.20, 9.21, 9.22 and 9.23, the provisions of this clause 9 do not apply to claims under the Tax Covenant or the Tax Warranties.

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10. Indemnities

10.1 The Seller shall indemnify and keep indemnified the Purchaser and each Group Member on demand from and against any Losses which they may incur in connection with:

(a)	any claim by any person in relation to any change, attempt to change or failure to change such person’s terms of employment to the effect that such person’s employment activities relate solely to the business of the Hotel or solely to the Inter-Continental Le Grand Hôtel or any other business of the Seller’s Group excluding any change to such terms proposed by the Purchaser;
(b)	any claim by a Retained Employee (excluding Pierre-Olivier Lauriol);
(c)	the Pre-sale Reorganisation to the extent that the Losses do not relate to Tax;
(d)	the litigation involving the Company and four other members of the Seller’s Group (including Société Nouvelle du Grand Hôtel SA SNGH) in which judgment was rendered on 29 April 2004 by the Tribunal de Grande Instance de Paris;
(e)	the litigation involving the Company concerning Société Immobilière de l’Industrie Hôtelière de Paris (SIIHP) in which judgment was delivered by the Court of Appeal of Paris on 26 June 2001;
(f)	any Indebtedness of any Group Member at Completion which is not provided for in the Net Current Assets Statement;
(g)	a claim by any person, other than an employee first engaged after Completion, to be entitled to a lump sum payment upon retirement under the “Hotel (chains)” collective bargaining agreement in addition to such person’s entitlement under the agreement concluded on 15 June 1994 between the trade union delegates and the Group;
(h)	any claim by any person who claims to have contracted legionella at the Property in the period prior to Completion;
(i)	any underfunding of the Pension Plan;
(j)	the failure of the retail unit at the Hotel currently rented to Stern to meet the fire protection requirements of the applicable regulatory authority;
(k)	any requirement by a regulatory authority or insurance provider that the entry doors to the rooms of the Hotel be fire rated and/or fully self-closing (€575,790);

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(l)	any requirement by a regulatory authority or insurance provider that, on the basis of a maximum occupancy level of 2,500, additional escape stairs and additional fire exits be installed at the Hotel (€175,000);
(m)	any amount required to be paid by any Group Member as a result of the ongoing audit by, or the failure to disclose something in connection with the ongoing audit by, the French Social Security Authority (URSSAF) to the extent not recovered under the Tax Covenant;
(n)	the litigation relating to the claim filed by JJJ Marignan to re-characterize the 4-year renewable “business sub-lease” agreement (contrat de sous-location gérance) entered into by SNC de l’Hôtel Inter-Continental Paris and JJJ Marignan for the operation of the spa centre at the hotel into a commercial lease and the claim for early termination of the business sub -lease by SNC de l’Hôtel InterContinental Paris on the grounds of breach by JJJ Marignan and any Loss suffered by a Group Member arising from a claim by any member of staff of JJJ Marignan to be reintegrated with the staff at the Hotel,;
(o)	the pending (as at the date of this Agreement) employment -related dispute relating to the following persons:

(i)	Ms. Suzanne Gryner;
(ii)	Ms. Gisèle Clauzet;
(iii)	Mr. José Noll;
(iv)	Mr. François Thaveau;
(v)	Mr. Jean-Pierre Garat;
(vi)	Mr. Adel Bouthegmes;
(vii)	Ms. Beatrice Ceppini;
(viii)	Mr. Bratislav Milutinovic; and
(ix)	Ms. Lolita Lepine.

(p) any claim for underpaid or unpaid overtime, non compliance with working time legislation, concealment of labour (travail dissimulé), illegal lending of labour (prêt de main d’oeuvre illicit / délit de marchandage), discrimination of staff or that a Group Member is considered a joint employer of any employees of the Seller’s Group; and

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(q)	any claim by the General Manager, any member of the Hotel’s management committee or any member of the Hotel’s sales department to be entitled to receive a payment under their short term incentive plan, notwithstanding that they have failed to achieve the required objectives on the basis that the incentive schemes are drafted in English and therefore the objectives are not binding on them; and
(r)	any claim by Pierre-Olivier Lauriol against a Group Member relating to the period prior to Completion.

10.2	The Purchaser acknowledges that the common law rules on mitigation shall apply to any Losses to which an indemnity in this clause 10 relates.
10.3	The maximum amount recoverable under each of the indemnities in clause 10.1(k) and (l ) is the amount set out in brackets in each such clause.
10.4	The Purchaser acknowledges that the Seller shall have no liability in relation to an Indemnity Claim pursuant to clause 10.1(k) or clause 10.1(l) in the event that the Indemnity Claim arises as a result of:

(a)	in relation to clause 10.1(k) only, any visit by fire, health or safety authorities at the specific request of the Purchaser or any Group Member for the purpose of considering the entry doors or the Hotel generally, where such authority subsequently serves notice on the Purchaser that it is in breach of the requirement that the entry doors to the rooms of the Hotel be fire rated and/or fully self-closing;
(b)	in relation to clause 10.1(l) only, the Purchaser filing an application to increase the capacity of the Property, where such application results in the relevant authority serving notice on the Purchaser that it is in breach of the maximum occupancy level of 2,500, and as a result, additional escape stairs and additional fire exits must be installed at the Hotel; or
(c)	in relation to clause 10.1(l) only, any breach of the maximum occupancy level of 2,500, which breach results in the relevant authority serving notice on the Purchaser that it is in breach of the maximum occupancy level of 2,500, and as a result, additional escape stairs and additional fire exits must be installed at the Hotel.

10.5 The Seller shall have no liability in relation to an Indemnity Claim:

(a) unless the Purchaser has served on the Seller a written notice on or before the date listed in the table below (save as provided in clause 10.4) giving such details of the Indemnity Claim as the Purchaser then has including the Purchaser’s reasonable estimate at that time of the amount of the liability of the Seller in

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respect thereof, but any failure to satisfy its obligations as to the content of the notice shall not limit its ability to bring a claim nor shall it reduce the Seller’s liability for such claim (if any) in any way whatsoever save to the extent that such failure results in an increase in the Seller’s liability for such claim:

Indemnity	Relevant Date
10.1(a)	7 years after the Completion Date
10.1(b)	3 years after the Completion Date
10.1(c)	3 years after the Completion Date
10.1(d)	3 years after the Completion Date
10.1(e)	3 years after the Completion Date
10.1(f)	18 months after the Completion Date
10.1(g)	7 years after the Completion Date
10.1(h)	12 months after the Completion Date
10.1(i)	25 years after the Completion Date
10.1(j)	3 years after the Completion Date
10.1(k)	5 years after the Completion Date
10.1(l)	5 years after the Completion Date
10.1(m)	3 years after the Completion Date
10.1(n)	3 years after the Completion Date
10.1(o)	(i) — 5 years after 31 March 2006;
	(ii) — 5 years after 30 April 2005;
	(iii) — 8 years after 30 November 2005;
	(iv) — 8 years after 30 September 2005
	(v) — 8 years after 31 October 2005;
	(vi) — 8 years after 30 September 2005;
	(vii) — 13 years after 30 September 2005;
	(viii) — 8 years after 31 October 2005;
	and
	(ix) — 8 years after 30 November 2005.
10.1(p)	3 years after the Completion Date
10.1(q)	7 years after the Completion Date
10.1(r)	3 years after the Completion Date

          ; and

(b) to the extent of:

(i) any amount which is included as a liability in, or is otherwise allowed, accrued or provided for in the Net Current Assets Amount in respect of such Indemnity Claim; or

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(ii) any amount by which the valuation of any asset has been reduced in the Net Current Assets Amount to take account of such Indemnity Claim.

10.6

For the purpose of determining the amount for which the Seller is liable in respect of any Indemnity Claim, the provisions of clause 9.10 shall apply.

10.7

None of the limitations on the liability of the Seller set out in clauses 9 and 10 (whether as to the quantum of the claim, the time limit for notification of the claim, the procedures or requirements for making a claim or otherwise) shall apply to any Indemnity Claim to the extent that the liability of the Seller in respect of that Indemnity Claim arises from fraud, wilful misconduct or criminal offence on the part of the Seller.

11. Insurance

11.1	The risk of loss or damage to the assets of the Company or any member of the Group remains with the Group Member or the Seller (as appropriate) prior to Completion.
11.2	The Seller shall ensure, or shall procure, that any event or circumstance which gives rise to an insurance claim under any policy of insurance providing cover for the Company or any member of the Group or any of their assets and which occurs at any time prior to Completion is the subject of a claim prior to Completion, or is permitted to be the subject of a claim after Completion, and is otherwise dealt with in a timely manner and the Seller shall account to the Company or other relevant member of the Group, as the case may be in full for the proceeds of any claim which should properly be received by the Company or other relevant member of the Group, as the case may be as soon as reasonably practicable after receipt less any costs of recovery.
11.3	The Seller undertakes to the Purchaser to keep the Company or other relevant member of the Group, as the case may be indemnified and held harmless from and against any part of any such claim as is referred to in clause 11.2 which is not paid by the insurer to the extent that the insurer would have been liable to pay such claim had it not been entitled to avoid the claim as a result of an act or omission by or on behalf of the Company or any member of the Group or any other member of the Seller’s Group prior to Completion.

12. Purchaser Warranties

12.1 The Purchaser hereby warrants to the Seller:

(a)	as at the date of this Agreement in the terms of the Purchaser Warranties; and
(b)	as at the Completion Date by reference to the facts and circumstances existing at the relevant time in the terms of paragraphs 1 and 2 of the Purchaser Warranties.

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12.2	Each of the Purchaser Warranties shall be separate and independent and shall continue in full force and effect notwithstanding Completion.
12.3	The Purchaser acknowledges that the Seller has entered into this Agreement on the basis of the Purchaser Warranties and in reliance on them, and liability under the Purchaser Warranties or otherwise under this Agreement shall not in any way be modified or discharged by Completion.

13. Seller’s Intellectual Property

13.1 Subject to clause 13.2, the Purchaser hereby covenants with the Seller (and also separately covenants with each and every member of the Seller’s Group for the time being and from time to time) that (save with the prior written consent of the Seller and to the extent permitted by the Seller who shall in its absolute discretion determine whether or not consent may be given) the Purchaser will not by itself or with any other person and shall procure that no other person shall, following the expiration of the period of 90 days from the Completion Date in the cases of clauses 13(a), 13(b), 13(d) and 13(e) below and, from the Completion Date in the case of clauses 13(c) below:

(a)	save to the extent embedded within the fabric of the Property such that it is not feasible to cover or remove such Protected Name, use or permit the use of any of the Protected Names or any abbreviation thereof or any word colourably resembling or likely to be confused or associated with any of the same (including without limitation permitting the same to appear on any signage, invoice, label, correspondence, bill or advertisement or on any other document or paper or on any glassware, crockery or cutlery or any similar item);
(b)	save to the extent embedded within the fabric of the Property such that it is not feasible to cover or remove such Protected Name, use or permit the use of any of the Protected Badges or any logo colourably resembling the same or likely to be confused or associated with the same (including without limitation permitting the same to appear or any signage, invoice, label, correspondence, bill or advertisement or any other document or paper or on any glassware, crockery or cutlery or any similar item);
(c)	pass off or attempt to pass off any goods or business not being the goods or business of the Seller or any other member of the Seller’s Group as or for the goods or business of or connected with the Seller or any other member of the Seller’s Group;
(d)	erect, display or use any sign which it is reasonable to anticipate is likely to be taken as associated with or confused with the Seller or any other member of the Seller’s Group or any business carried on by any of them; or

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(e) knowingly cause, enable or assist any of the aforementioned acts,

and the aforesaid covenants shall apply to the Purchaser acting for itself or through its servants, agents or otherwise or through any person, firm or company in which at any time and in any way howsoever it may interested whether such person, firm or company is acting itself or through its servants, agents or otherwise and provided further that all references in such covenants to the Seller and any other member of the Seller’s Group and to the Purchaser shall, to the fullest extent permitted by law, include their respective successors in title.

13.2 The Purchaser hereby undertakes to the Seller within 30 Business Days following the Completion Date:

(a)	to cause all advertisements, brochures, advertising material, business stationery and websites issued or caused to be issued by or in relation to the Company, the Subsidiaries, the Hotel, or the Property after the Completion Date to be worded so as to eliminate any reference to the Protected Names or any name or word confusingly similar thereto; and
(b)	to change, remove or cover up all internal and external facia and signage on or over the Property which includes reference to the Protected Names, other than any Protected Names that are embedded within the fabric of the Property which are addressed in clauses 13.1(a) and (b).

13.3 The Purchaser further undertakes that it shall not, and that with effect from Completion any Group Member shall not, hold itself out in such a way that a person might believe that there is an association or connection between the Purchaser or any Group Member and the Seller’s Group.

14. Non-Solicitation

14.1 The Seller hereby undertakes to the Purchaser for itself and each Group Member:

(a)

for a period of 18 months after Completion it will not, and will procure that the Seller’s Group will not, either alone or jointly with others, whether as principal or agent or in any other capacity, directly or indirectly solicit or entice away or knowingly encourage any of the Group Member’s senior management team earning in excess of €60,000 per annum to leave the employment of the Company and or any Group Member save that this clause 14.1(a) shall not apply to the soliciting, enticing or encouraging of any person who responds to a general advertisement placed by or on behalf of the Sellers Group;

(b)

on and from the date of this Agreement and for a period of 24 months following the Completion Date, no member of the Seller’s Group will, either on its own

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account or in conjunction with or on behalf of any other person solicit, approach or induce any person who, at the date of this Agreement, has a reservation at the Hotel (whether for accommodation or a conference or otherwise) to cancel such reservation and/or make an alternative reservation at other properties of any member of the Seller’s Group;

(c) it will not at any time hereafter make use of or disclose or divulge to any person (other than to officers or employees of any Group Member whose province it is to know the same) any Confidential Information (other than any information properly available to the public (otherwise than, directly or indirectly, as a result of a breach of this clause 14.1(c)) or disclosed or divulged pursuant to an order of a court of competent jurisdiction) relating to a Group Member.

14.2	The Purchaser hereby undertakes to the Seller that for a period of 18 months after Completion it will not, and will procure that any Group Member and any other member of the Purchaser’s Group will not, either alone or jointly with others, whether as principal or agent or in any other capacity, directly or indirectly solicit or entice away or knowingly encourage any member of the senior management team employed at the InterContinental Le Grand Hôtel Paris earning in excess of €60,000 per annum to leave the employment of such hotel save that this clause 14.2 shall not apply to the soliciting, enticing or encouraging of any person who responds to a general advertisement placed by or on behalf of the Purchaser’s Group or a Group Member.
14.3	Each of the restrictions contained in clauses 14.1(a) to 14.1(c) is separate and severable and in the event of any such restriction being determined to be unenforceable in whole or in part for any reason, that unenforceability shall not affect the enforceability of the remaining restrictions or (in the case of restrictions unenforceable in part) the remainder of that restriction.
14.4	While the restrictions contained in this clause 14 are considered by the parties to be reasonable in all the circumstances, it is recognised that restrictions of the nature in question may fail for technical reasons and accordingly it is hereby agreed and declared that if any of such restrictions are judged by an independent third party to be void as going beyond what is reasonable in all the circumstances for the protection of the interests of the Purchaser but would be valid if part of the wording thereof were deleted or the periods thereof reduced or the range of activities or area dealt with thereby reduced in scope, the said restriction shall apply with such modifications as may be necessary to make it valid and effective.
14.5	The Seller shall procure that each member of the Seller’s Group shall be bound by and observe the provisions of this clause 14 as if they were parties covenanting with the Purchaser in the same terms.

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15. Purchaser‘s Rights to Terminate

15.1 Subject to clause 15.2, the Purchaser may by written notice given to the Seller at Completion or any time prior to Completion terminate this Agreement if:

(a)	the Hotel is destroyed or damaged such that the Hotel is not able to be operated, or there is a complete closure of the Hotel due to a fact, matter, circumstances or event affecting only the Hotel and not affecting similar businesses in Paris in a similar way; or
(b)	any fact, matter or event (whether existing or occurring on or before the date of this Agreement or arising or occurring afterwards) comes to the notice of the Purchaser at Completion or any time prior to Completion which has a Material Effect and which:

(i)

constitutes a breach by the Seller or a member of the Seller’s Group of clause 2, clause 4.1(a), 4.1(f), 4.1(g) or 4.1(i), or clause 4.2(a), 4.2(b), 4.2(c), 4.2(d), 4.2(g), 4.2(h), 4.2(i), 4.2(j), 4.2(k), 4.2(l), 4.2(m), 4.2(o), 4.2(p), 4.2(q), 4.2(s), 4.2(y) or 4.2(aa) (to the extent that it applies to any of the foregoing provisions of clause 4.2) of this Agreement; or

(ii)

would constitute a breach of any of the following Warranties: B.1(f) (to the extent that there is an operating agreement relating to the Hotel), C.1, C.3, C.6 (to the extent that a third party has rights to share in past, present or future income or profits, reserves or liquidation surpluses of the Company), C.7, C.8, D.1, D.3, D.9, D.10, E.2, E.3, E.4, G.2, G.3, G.14(a), G.16(a) (excluding last sentence), S, T and U (to the extent that the description of the Shares in Schedule 1 Part A is incorrect or the description of the Property in Schedule 2 Part A is incorrect), in which case:

(1) the Purchaser shall issue a written notice to the Seller (which notice shall only be issued on one occasion) stating that Completion shall be deferred by a period of not less than 30 days to such other date as the Purchaser may specify in such notice (“Deferred Date”) and that the Seller shall have a period expiring on the Deferred Date within which to remedy such breach(es) of Warranty or provide a substitute contracting party reasonably acceptable to the Purchaser (as appropriate); and

(2) in the event that the Seller is unable to remedy such breach(es) of Warranty or provide a substitute contracting party reasonably acceptable to the Purchaser (as appropriate) by the Deferred Date, the Purchaser shall be entitled to terminate the Agreement;

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(each of the events referred to in clauses 15.1(a), 15.1(b)(i) and 15.1(b)(ii) being a “Termination Event”).

15.2 If the Seller becomes aware of a Termination Event, it shall as soon as reasonably practicable and in any event prior to the Completion Date give written notice to the Purchaser giving such details concerning such fact, matter, circumstance, event or breach as it has available to it.

15.3 If, notwithstanding the occurrence of any fact, matter or event which would otherwise give rise to a right to terminate this Agreement under this clause 15, the Purchaser proceeds to Completion, the fact that the Purchaser has proceeded to Completion shall not constitute a waiver of any right or entitlement of the Purchaser to make any claim under this Agreement.

16. Announcements and Confidential Information

16.1 No announcement or statement about this Agreement or the subject matter of, or any matter referred to in, this Agreement shall be made or issued before, on or after Completion by or on behalf of any of the parties without the prior written approval of the Seller and the Purchaser provided that nothing shall restrict the making by any party (even in the absence of agreement by the other parties) of any statement or disclosure:

(a)	which may be required by law or called for by the requirements of any Stock Exchange or regulatory authority;
(b)	of information on a need-to-know basis by a party to a member of the same group of companies as that party or such party’s or member’s directors, officers, employees, partners or professionals or other advisers;
(c)	of information to any Tax Authority for registration of this Agreement or to the extent reasonably required for the purposes of the tax affairs of the party concerned or of any member of the same group of companies as that party, in the case of the Seller, of any person who directly or indirectly has an interest in the Seller;
(d)	information that is or comes within the public domain through no fault of that party; or
(e)	any announcement or disclosure made or issued by or on behalf of any of the parties with the prior written approval of the Purchaser and the Seller as applicable (such approval not to be unreasonably withheld or delayed).

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16.2	Nothing in this Agreement will prohibit the Purchaser from making or sending after Completion any announcement to a customer, client or supplier of any Group Member informing it that the Purchaser has purchased the Shares.
16.3	Each of the Seller and the Purchaser undertakes to the other that it shall treat as strictly confidential all Confidential Information about the other received or obtained by it or its employees, agents or advisers as a result of entering into or performing this Agreement including information relating to the provisions of this Agreement, the negotiations leading up to this Agreement, the subject matter of this Agreement and the business or affairs of the other Party and subject to the provisions of clause 16.4 or as otherwise permitted under this Agreement that it will not at any time hereafter make use of or disclose or divulge to any person any such information.
16.4	The restrictions contained in clause 16.3 shall not apply so as to prevent a party from making any disclosure, announcement or communication which is permitted by clause 16.1, or from making any disclosure to (i) any professional adviser for the purposes of obtaining advice (provided always that the provisions of this clause 16 shall apply to and the relevant party shall use reasonable endeavours to procure that they apply to, and are observed in relation to, the use or disclosure by such professional adviser of the information provided to him) or (ii) any party to whom a party assigns or intends to assign its rights under this Agreement pursuant to clause 25.
17.	Effect of Termination

 If the Purchaser terminates this Agreement pursuant to clause 5.8(c) or clause 15.1 then:

(a)	this Agreement shall terminate and have no further effect (subject only to clause 16 (Announcements and Confidential Information), 19 (Costs) and 33 (Governing Law and Jurisdiction) which shall continue in force); and
(b)	the parties shall be released from all liabilities and obligations hereunder.

18. Interest and Payments

18.1 If any amount required to be paid under this Agreement is not paid when it is due, such amount shall bear interest at the rate of 2% per annum over the base lending rate of EONIA from time to time, calculated on a daily basis for the period from and including the relevant due date for payment to (but excluding) the date of actual payment, as well after as before any judgement.

18.2 Unless expressly provided otherwise, where any payment is required under the terms of this Agreement to be made by the Purchaser to the Seller, such payment shall be made by telegraphic transfer into the account notified by the Seller to the Purchaser not less than two Business Days prior to the date that such payment is due, and payment of the

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relevant amount so made shall constitute a good and absolute discharge for the Purchaser of the relevant obligation, and the Purchaser shall not be concerned to see to the application of such funds thereafter.

18.3 Unless expressly provided otherwise, where any payment is required under the terms of this Agreement to be made by the Seller to the Purchaser, such payment shall be made to the bank account of the Purchaser, as notified to the Seller seven Business Days prior to the date the payment is to be made, and payment of the relevant amount so made shall constitute a good and absolute discharge for the Seller of the relevant obligation, and the Seller shall not be concerned to see to the application of such funds thereafter.

18.4 Subject to clause 18.7, all sums payable by any party under this Agreement shall be paid free of and without any rights of counterclaim or set off, and without deduction or withholding on any ground whatsoever, save only as may be required by law. Subject to clause 18.7, if any such deduction or withholding is required by law, the payer shall (i) provide such evidence of the relevant withholding as the payee may reasonably require and (ii) be obliged to pay to the payee such amount as will ensure that, after any such deduction or withholding has been made, the payee shall have received a sum equal to the amount that the payee would otherwise have received in the absence of any such deduction or withholding.

18.5 To the extent that any deduction or withholding in respect of which an additional amount has been paid under clause 18.4 results in the payee obtaining a Relief, the payee shall pay to the payer, within ten Business Days of the use or set off of the Relief, an amount equal to the lesser of the Tax saved as a result of such use or set off and the additional sum paid under clause 18.4 provided that the payee shall not be obliged to pay to the payer an amount in excess of the amount which will leave it (after that payment) in the same after Tax position as it would have been in had there been no payment under this Agreement in respect of which such deduction or withholding arose.

18.6 If any competent authority for Tax purposes charges to Tax any sum paid pursuant to a claim (the “original payment”) to the payee under this Agreement the payer shall be obliged to pay to the payee such additional amount (the “additional payment”) as will ensure that, after the payment of the Tax so charged on the original payment and any Tax chargeable on the additional payment, there shall remain a net sum equal to the amount of the original payment, such additional payment to be paid three Business Days after the payee has served notice that Tax on the original payment has become due and payable, or would have become due and payable but for the availability of, in the case of a payment by the Seller, a Purchaser’s Relief or, in the case of a payment by the Purchaser, any Relief.

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18.7 No payer for the purposes of clauses 18.4, 18.5 or 18.6 shall be liable to make any payment under these clauses to the extent that the payment exceeds that which would have been payable if the payee were the original Seller or Purchaser (as applicable) as at Completion.

18.8 Clauses 18.4 to 18.6 above shall not apply to any payments made by the Purchaser to the Seller pursuant to paragraph 8.2 of the Tax Covenant.

19. Costs

19.1 Except as otherwise provided in this Agreement, each party shall pay its own costs and expenses in relation to the negotiation, preparation, and implementation of this Agreement (and the documents referred to herein), including the fees and disbursements of their respective legal, accountancy and other advisers.

19.2 All Transfer Tax shall be borne by the Purchaser.

19.3 The Purchaser shall, promptly after Completion, apply for registration of the Shares and pay all Transfer Tax. For this purpose, the Seller and the Purchaser will execute on Completion a short agreement in agreed form and in French for French registration purposes. This agreement will describe the purpose of the transaction, the Consideration and the amount of Transfer Tax to be paid.

20. Notices

20.1 Any notice or other communication to be given under this Agreement shall be in writing and shall be deemed to have been duly served on, given to or made in relation to a party if it is left at the authorised address of that party or posted by registered post addressed to that party at such address or by fax to that party’s authorised fax number and shall if:

(a)	personally delivered, be deemed to have been received at the time of delivery; or
(b)	posted to an inland address in the United Kingdom, be deemed to have been received on the second Business Day after the date of posting and if posted to an overseas address, be deemed to have been received on the fifth Business Day after the date of posting; or
(c)	faxed, be deemed to have been delivered, at the time of transmission;
	provided that where, in the case of delivery by hand or by fax delivery or transmission occurs after 6 pm on a Business Day or on a day which is not a Business Day, receipt shall be deemed to occur at 9 am on the next following Business Day.

20.2 For the purposes of this clause 20 the authorised address and fax number of the parties are as follows:

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(a)	Seller:
	Name:	BHR Holdings BV c/o Nauta Dutilh
	Address:	Strawinskylaan 1999
		1077 XV Amsterdam
		PO Box 7113
		1007 JC Amsterdam
		The Netherlands
	Fax:	31 20 71 71 111
	For the attention of:	Wijnand Bossenbroek
	With a copy to the Guarantor as detailed below.
(b)	Purchaser:
	Name:	DABICAM SAS
	Address:	95 rue de la Boetie
		75008 Paris
	Fax:	+44 20 7495 4041
	For the attention of:	The President
	With a copy to:
	Name:	GIC Real Estate Pte Limited
		C/o Government of Singapore Investment Corporation
		(London Office Pte Ltd)
	Address:	3rd Floor, 105 Wigmore Street
		London W1U 1QY
	Fax:	+44 20 7495 4041
	For the attention of:	Andy Fish
(c)	Guarantor:
	Name:	Six Continents Limited
	Address:	67 Alma Road
		Windsor

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	Berkshire SL4 3HD
	United Kingdom
Fax:	+44 207 355 31 33
For the attention of:	Head of Legal Services

21. Severability

If any provision of this Agreement (or of any document referred to herein) is held to be illegal, invalid or unenforceable in whole or in part in any relevant jurisdiction the legality, validity and enforceability of the remaining provisions of this Agreement (or such document) shall not in any way be affected or impaired thereby.

22. Entire Agreement

22.1 This Agreement and any documents executed in accordance with this Agreement and documents in the agreed form contain the entire agreement and understanding of the parties and supersede all prior agreements, understandings or arrangements (both oral and written) relating to the subject matter of this Agreement (and any such document).

22.2 Each of the parties acknowledges and agrees that:

(a) it does not enter into this Agreement or the documents referred to herein on the basis of and does not rely, and has not relied, upon any statement or representation (whether negligent or innocent) or warranty or other provision (in any case whether oral, written, express or implied) made, given or agreed to by any person (whether a party to this agreement or not) except those expressly set out or referred to in this Agreement and the documents referred to herein (as being in the agreed form) and, subject to clause 22.2(b), will make no claim in respect of any such representation, warranty or undertaking made or supplied by or on behalf of the Seller or any other person whatsoever; and

(b) clause 22.2(a) shall not apply to any statement, representation, warranty or undertaking made fraudulently or as a result of wilful misconduct or to any provision of this Agreement which was induced by, or otherwise entered into as a result of fraud or wilful misconduct for which the remedies shall be all those available under the law governing this Agreement.

23. Variation

No variation, amendment, supplement, deletion or replacement of or from this Agreement or any of its terms shall be effective unless made in writing and signed by or on behalf of each party.

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24. Remedies and Waivers

24.1	No delay or omission on the part of any party to this Agreement in exercising any right, power or remedy provided under this Agreement or any other documents referred to in it shall impair such right, power or remedy or operate as a waiver thereof.
24.2	The single or partial exercise of any right, power or remedy provided under this Agreement shall not preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
25.	Successors and Assignment
25.1	This Agreement shall be binding upon and continue for the benefit of each party’s personal representatives and successors in title and save as provided in clause 25.2 or with the prior written consent of the other party (being either the Purchaser or the Seller) shall not be assignable by the Seller or the Purchaser and the Seller shall not be required to transfer the Shares to any person other than the Purchaser for the Consideration.
25.2	Either the Seller or the Purchaser may assign all or any of its rights under this Agreement (including, without limitation, in respect of the Warranties) and (notwithstanding any other provisions contained in this Agreement) such rights may be assigned or transferred by that party to, or made the subject of a trust created in favour of:

(a)	any other member of the Seller’s Group or Purchaser’s Group, as appropriate (or by any such member to or in favour of any other member of the Seller’s Group or Purchaser’s Group, as appropriate) provided that if such assignee company leaves the Seller’s Group or Purchaser’s Group, as appropriate, such rights are assigned or transferred to or made the subject of a trust in favour of another member of the Seller’s Group or Purchaser’s Group, as appropriate; and/or
(b)	by the Seller, to any person by way of security for borrowings of the Seller’s Group; and/or
(c)	by the Purchaser, to the first lead funder providing funding to the Purchaser’s Group for the purposes of the transaction contemplated by this Agreement by way of security for borrowings of the Purchaser’s Group.

25.3 In the case of any assignment of rights under this clause 25 in each such case:

(a)	the assignor shall remain liable for its obligations under this Agreement; and
(b)	the liability of the parties under this Agreement shall be no greater than such liabilities would have been had any such assignment not occurred.

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26.	Guarantee
26.1	In consideration of the Purchaser entering into this Agreement with the Seller at the request of the Guarantor, the Guarantor irrevocably and unconditionally:

(a) guarantees to the Purchaser the full, prompt and complete performance by the Seller of all its obligations under this Agreement and the due and punctual payment on demand of all sums now or subsequently due and payable by the Seller to the Purchaser under or pursuant to this Agreement so that the same benefits are conferred on the Purchaser as it would have received if such obligation had been performed and satisfied by the Seller; and

(b) agrees as primary obligor to indemnify the Purchaser on demand from and against any Losses incurred by the Purchaser as a result of the Seller’s failure to perform any of its obligations under this Agreement or any of the obligations of the Seller under or pursuant to this Agreement being or becoming void, voidable, unenforceable or ineffective as against the Seller for any reason whatsoever, whether or not known to the Purchaser, the amount of such Loss being the amount which the Purchaser would otherwise have been entitled to recover from the Seller.

26.2 The guarantee contained in this clause is a continuing guarantee and shall remain in force until all the obligations of the Seller under this Agreement have been fully performed and all sums payable by the Seller have been fully paid. It is independent of every other security which the Purchaser may at any time hold for the obligations of the Seller under this Agreement.

26.3 If any payment by the Seller or any discharge given by the Purchaser (whether in respect of the obligations of the Seller 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 the Guarantor shall continue as if the avoidance or reduction had not occurred;

(b) the Purchaser shall be entitled to recover the value or amount of that security or payment from the Guarantor, as if the payment or discharge had not occurred to the extent that it has been avoided or reduced.

26.4 The obligations of the Guarantor shall not be affected by any act, omission, matter or thing which, but for this provision, might operate to release or otherwise exonerate the Guarantor from its obligations or affect such obligations, including without limitation and whether or not known to the Guarantor:

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(a)	any variation or amendment or restatement or replacement of this Agreement or any time, indulgence, waiver or consent at any time given to the Seller or any other person;
(b)	any compromise or release of, or abstention from obtaining, perfecting or enforcing any security or other right or remedy whatsoever from or against, the Seller or any other person;
(c)	any legal limitation, disability, incapacity or other circumstance relating to the Seller or any other person;
(d)	any irregularity, unenforceability or invalidity of any obligations of the Seller under this Agreement; or
(e)	the dissolution, amalgamation, reconstruction or insolvency of the Seller.

26.5 The obligations of the Guarantor under this clause 26 will remain binding upon it notwithstanding any change in the constitution of any of the Seller, the Purchaser or the Guarantor or their absorption in, amalgamation with or merger into, or the acquisition of all or part of its or their undertaking by any other person.

26.6 This guarantee may be enforced by the Purchaser without the Purchaser first taking any steps or proceedings against the Seller. This waiver applies irrespective of any law or any provision of the Agreement to the contrary.

26.7 The Guarantor agrees that until the obligations of the Seller under this Agreement have been fully and completely performed and all sums payable by the Seller to the Purchaser under or pursuant to this Agreement have been paid, it shall not exercise any rights which it might have by reason of the performance of its obligations under this guarantee:

(a)	to be indemnified by the Seller; and/or
(b)	to claim any contribution from any other guarantor of the Seller’s obligations under this Agreement; 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 Purchaser under this Agreement or any other security taken by the Purchaser pursuant to, or in connection with, this Agreement.

26.8 The Guarantor shall be entitled to transfer its obligations under this clause 26 to another Group Undertaking with the prior written consent of the Purchaser, which consent may be withheld in the Purchaser’s absolute discretion.

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27. Counterparts

This Agreement may be executed in the form of one or more counterparts in like form each of which shall be deemed to be an original when taken together and shall constitute one and the same document.

28.	Invalidity
	If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction that shall not affect or impair:

(a) the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

(b) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement.

29. Further Assurance

The Seller agrees (at its own cost) to perform (or procure the performance of) all further acts and things, and execute and deliver (or procure the execution and delivery of) such further documents, as may be required by law or as the Purchaser may reasonably require, whether on or after Completion, for the purpose of vesting in the Purchaser the full benefit of the assets, rights and benefits to be transferred to the Purchaser under or pursuant to this Agreement including, without limitation, the legal and beneficial ownership of the Shares.

30. Rights of Third Parties

30.1 A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of it except that each of clauses 8.6, 9.7, 9.13, 10, 11 and 14.1 confers a benefit on each Group Member or any present and former director, officer, employee and partner of any Group Member, as appropriate, and each of clauses 8.6, 9.7 and 9.13 confers a benefit on each member of the Purchaser’s Group, and such clauses are intended to be enforceable by them.

30.2 Without prejudice to clause 21, the parties to this Agreement may, together, amend the terms of this Agreement without the consent of any other person.

31. Purchaser‘s Rights and Remedies

The rights and remedies of the Purchaser under this Agreement shall not be affected, and the Seller’s liabilities under this Agreement shall not be released, discharged or impaired, by:

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(a)	Completion;
(b)	any investigation made or to be made by or on behalf of the Purchaser into the affairs of the Group save in relation to the Warranties as to matters Disclosed;
(c)	the failure to terminate this Agreement where it has the right to do so;
(d)	any event or matter whatsoever which otherwise might have affected such rights and remedies other than a specific written waiver or release by the Purchaser; or
(e)	any information relating to any Group Member of which the Purchaser has knowledge (actual, imputed or constructive) (other than, in respect only of the Warranties, by reason of it being Disclosed) and no such information shall prejudice any claim which the Purchaser shall be entitled to bring or shall operate to reduce any amount recoverable by the Purchaser under this Agreement.

32. Rate of Exchange

For the purpose of converting amounts specified in one currency into another currency where required, the rate of exchange to be used in converting amounts specified in one currency into another currency shall be the closing mid-point rate for exchanges between those currencies quoted in the Financial Times (London edition) for the nearest Business Day for which that rate is so quoted on or prior to the date of the conversion.

33.	Governing Law and Jurisdiction
33.1	This Agreement (together with all documents to be entered into pursuant to it which are not expressed to be governed by another law) shall be governed by, construed and take effect in accordance with English law.
33.2	The courts of England shall have non-exclusive jurisdiction to settle any claim, dispute or matter or difference which may arise out of or in connection with this Agreement (including without limitation claims for set-off or counterclaim) or the legal relationships established by this Agreement.
33.3	Each of the parties hereto agrees that in the event of any action between any of the parties hereto being commenced in respect of this Agreement or any matters arising under it, the process by which it is commenced, (where consistent with the applicable court rules) may be served on them in accordance with clause 20.

As Witness the hands of the parties or their duly authorised representatives the day and year first above written.

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Executed by the parties:
Signed by	/s/ Corinne Knopp
For and on behalf of
BHR Holdings BV
Signed by	/s/ Chris Morrish
For and on behalf of
DABICAM SAS
Signed by	/s/ Marten Foxon
	Marten Foxon
For and on behalf of
Six Continents Limited

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Schedule 1

Part A

The Company

HÔtel Inter-Continental Paris SAS

1.	Date of incorporation:	22 June 1955
2.	Place of incorporation:	Paris, France
3.	Registered number:	652 029 125 RCS Paris
4.	Registered office:	3 rue de Castiglione, 75001 Paris, France
5.	President:	Dagmar Frank
6.	Managing directors:	Andrew Gill, Pierre-Olivier Lauriol
7.	Issued share capital:	€3,614,400 divided into 150,600 ordinary
		shares of €24 each
8.	Accounting reference date:	31 December
9.	Auditors:	Ernst & Young SA (principal auditor)
		Thierry Aymonier (deputy auditor)
10.	Shareholder:	BHR Holdings BV
11.	Issued loan capital:	Nil
12.	Charges:	None

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Schedule 1

Part B

The Subsidiaries

HÔtel Inter Continental London (Holdings) SAS

1.	Date of incorporation:	21 September 2001
2.	Place of incorporation:	Paris, France
3.	Registered number:	439 278 938 RCS Paris
4.	Registered office:	5 place de l’Opéra, 75009 Paris
5.	President:	Andrew Gill
6.	Managing directors:	Pierre-Olivier Lauriol, Gisèle Maillot
7.	Issued share capital:	€100,000 divided into 100,000 ordinary shares
		of €1 each
8.	Accounting reference date:	31 December
9.	Auditors:	Ernst & Young Audit SA (principal auditor)
		Patrick Lhomme (deputy auditor)
10.	Shareholder:	The Company
11.	Issued loan capital:	Nil
12.	Charges:	None

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Snc De L’hotel Inter-Continental Paris

1.	Date of incorporation:	20 January 1988
2.	Place of incorporation:	Paris, France
3.	Registered number:	343 485 116 RCS Paris
4.	Registered office:	3 rue de Castiglione, 75001, Paris
5.	Managers:	Dagmar Frank, Pierre-Olivier Lauriol, Arie van der Spek
6.	Issued share capital:	€8,000 divided into 500 ordinary shares of €16 each
7.	Accounting reference date:	31 December
8.	Auditors:	Ernst & Young Audit SA (principal auditor) Thierry
		Aymonier (deputy auditor)
9.	Shareholders:	The Company (498 shares)
		Hôtel Inter-Continental London (Holdings) SAS (2 shares)
10.	Issued loan capital:	Nil
11.	Charges:	None

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Schedule 2

Part A

The Property

Property means the real estate property erected onto the parcels of land of a cadastral surface of approximately 6,162 sqm (cadastral sections BD n° 56 and 37), located 1 and 3 rue de Castiglione, 75001 Paris.

The Property was acquired under the terms of two deeds respectively of 30 January 1884 (rue de Castiglione n°3 rue de Rivoli n°236 et 238, rue Rouget de l’Isle n°2 et 4 et rue du Mont Thabor n°19) and 17 June 1964 (rue de Castiglione n°1 et rue de Rivoli n°234).

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Schedule 2

Part B

Fiche D’immeuble

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Schedule 2

Part C

The Leases

Shop Name	Company Name	Shop Address	Type of Shop	Lot No
STERN	STERN	3 rue de Castiglione, 75001 Paris	Jewellery and watches		1
STERN	STERN	3 rue de Castiglione, 75001 Paris	Jewellery, watches and precious stones		2
LE MINOTAURE	Promotion d’Oeuvres Modernes	3 rue de Castiglione, 75001 Paris	Art gallery		4
LIBRAIRIE INTERCONTINENTAL	LIBRAIRIE INTERCONTINENTAL	3 rue de Castiglione, 75001 Paris	Bookshop		5
CYRENE	CYRENE	1 rue de Castiglione, 75001 Paris	Crystal and porcelain goods		10
CYRENE	CYRENE	1 rue de Castiglione, 75001 Paris	Crystal and porcelain goods		11
SELECTION PRIVEE	SELECTION PRIVEE	234 rue de Rivoli, 75001 Paris	Ready to wear clothes, perfumes, leather goods		15
INDIAMO (ART ATTACK)	INDIAMO	238 rue de Rivoli, 75001 Paris	Clothes		16
DJULA	DJULA	234 rue de Rivoli, 75001 Paris	Jewellery, leather goods		17
SODICOFI	SODICOFI	234 rue de Rivoli, 75001 Paris	Chocolate shop		18
Mme RAILLARD		238 rue de Rivoli, 75001 Paris	Fine jewellery, perfumes		23
WOLFONI’S	WOLFONI’S	238 rue de Rivoli, 75001 Paris	Shoes		26
ISANIC	ISANIC	238 rue de Rivoli, 75001 Paris	Ready to wear clothes, cosmetics		19, 20, 21  &  22
LA VIE EN ROSE	TETE DANS LES ETOILES	238 rue de Rivoli, 75001 Paris	Art gallery		24 & 25
CASTY	CASTY DELPHES	3 rue de Castiglione, 75001 Paris	Watches, jewellery, leather goods, cosmetics	6, 7, 8 & 9  (single lot)

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Schedule 3

Warranties

A. The Accounts

A.1 The copy of the Accounts annexed to the Disclosure Letter is a true and complete copy. The Accounts:

(a)	give a true and fair view (image sincère et fidèle) of the financial position and state of affairs of each Group Member as at the Accounts Date and of its profit or loss for the financial year ended on the Accounts Date;
(b)	have been prepared in accordance with the French accounting principles, standards and practices generally applied for the preparation of statutory accounts at the Accounts Date;
(c)	disclose and make adequate and proper provision or reserve in accordance with (and to the extent required by) French GAAP for (or note in accordance with France GAAP) all contingent, unquantified or disputed liabilities, all capital commitments and deferred Tax;
(d)	have been prepared, unless otherwise expressly stated therein, on a basis consistent with the basis applied in preparing the corresponding accounts for each of the three financial years preceding the financial year ended on the Accounts Date; and
(e)	dealt with the state of affairs and results only of the Company and the Group and did not deal with the state of affairs or results of any other undertaking.

A.2 In respect of each Group Member, for each of the financial year ended on the Accounts Date and the two financial years preceding the financial year ended on the Accounts Date:

(a)	the audited accounts have been prepared in accordance with French GAAP;
(b)	the profits for such three year period as shown by the audited accounts and the Accounts and the trend of profits thereby shown have not been affected to a material extent by any extraordinary, exceptional or non-recurring item, by inconsistencies of accounting practices, by the inclusion of non-recurring items of income or expenditure or by transactions entered into otherwise than on normal commercial terms; and
(c)	the audited accounts have been prepared under the historical cost convention and no changes in the bases or policies of accounting have been made to those audited accounts.

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A.3 No Group Member is or has, during the three years prior to the Accounts Date, been a party to any agreement, arrangement or transaction pursuant to which that Group Member is or was entitled to receive a financial advantage or is or was obliged to incur or bear any costs, liabilities (whether contingent or otherwise) risks or other expenditure of any nature (including, but not limited to, any “off-balance sheet” financing arrangements), which is not reflected in the Accounts.

A.4 The Interim Accounts have been diligently prepared and properly extracted from accounting records in accordance with the accounting policies of the Company and the Group and on a basis consistent with each other and that adopted in the Accounts and in a format that corresponds to the Accounts’ format (excluding however any notes to the financial statements) and give a reasonable view in all material respects of the assets and liabilities, and profits and losses, of the Group Member for the period to which they relate.

A.5 No Group Member has incurred or will incur any cost or liability in connection with its shareholding, prior to Completion, in Société Immobilière de l’Industrie Hôtelière de Paris or with the ownership, prior to Completion, of shares, securities or participating interest in any other company or entity.

A.6 Debts

The Accounts make provision for doubtful debts in accordance with French GAAP and bad debts have been written off in accordance with French GAAP.

B.	Business since the Accounts Date
B.1	Since the Accounts Date:

(a)	there has been no material adverse change in the financial or trading position of the Group, save to the extent that the same would be likely to affect to a similar extent generally all companies carrying on the same businesses in Paris, and so far as the Seller is aware there is no event, fact or matter has occurred which will give rise to such a change, and there has been no damage, destruction or loss (whether or not covered by insurance) affecting the same;
(b)	the Group has carried on its businesses in the ordinary and usual course so as to maintain them as a going concern and without any material interruption or material alteration in the nature, scope or manner of the Group’s businesses which businesses have been carried on lawfully in all material respects;
(c)	no Group Member has, otherwise than in the ordinary and usual course of its business, acquired, sold, transferred or otherwise disposed of, or agreed to acquire, sell, transfer or otherwise dispose of, any assets of whatsoever nature or assumed or incurred or agreed to assume or incur any material liabilities

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	(including contingent liabilities) otherwise than in the ordinary and usual course of its business and (in the case of a disposal of the assets) for an amount which is lower than book value or an open market arm’s length value whichever is the higher;
(d)	there have been no material changes to the current assets or the long term and current liabilities (including contingent liabilities) of the Group other than in the case of current assets and current liabilities in the ordinary and usual course of business;
(e)	there has been no material change in the manner or time of payment of creditors, or the issue of invoices or collection of debts, or policy of reserving for debtors or in the amount of stock bought or agreed to be bought or in stock which, taking the net effect of all such changes, would have a material adverse effect on the business of the Group;
(f)	no Group Member has entered into, or agreed to enter into, any commitments, including finance leases (according to French GAAP for consolidated accounts), involving capital expenditure which when aggregated with existing commitments for capital expenditure would exceed €200,000 in the aggregate nor entered into, or agreed to enter into, any operating agreement which could not be terminated before the expiry date without indemnity, involving a total commitment which when aggregated with existing commitments for operating agreements would exceed €500,000 in the aggregate;
(g)	no Group Member has engaged or dismissed any employee earning a rate of remuneration, including benefits and bonuses, in excess of €60,000 per annum and no Group Member is under any contractual or other obligation to change the terms of service of any director, executive or employee;
(h)	no sum or benefit has been paid or granted or agreed to be paid or granted to any executive director or employee of any Group Member by way of remuneration, bonus, incentive or otherwise in excess of the amounts paid or granted to them by the relevant Group Member at the Accounts Date so as to increase their total emoluments;
(i)	except for any dividends provided for in the Accounts, no dividends, bonuses or other distributions (including any repayment of capital or other distribution of reserves or capital or profit) have been declared, paid or made by any Group Member and no resolution has been passed to declare, pay or make such dividend, bonus or other distribution;

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(j)	other than creditors and trade debtors (including intra group creditors and debtors), no Group Member has borrowed or lent or agreed to borrow or lend any money and no share or loan capital of any Group Member has been allotted or issued or agreed to be allotted or issued nor has any option or right thereover been granted and no loan or loan capital or preference capital of any Group Member has been repaid in whole or part or has become liable to be repaid;
(k)	no Group Member has undergone any capital reorganisation or change in its capital structure, capitalisation or repayment of any amount standing to the credit of any reserve of a Group Member or the redemption or purchase of any shares or any other reorganisation of the share capital of a Group Member and, without limiting the foregoing, the Company has taken no steps to reduce its distributable reserves to a level below that shown in the Accounts;
(l)	no resolution of the members of any Group Company has been passed (whether in general meeting or otherwise);
(m)	no Group Member has written up any stocks;
(n)	there have been no capital injections from or forgiveness of debt by the Seller or any member of the Seller’s Group;
(o)	no substantial supplier to or customer of the Group (being a supplier or customer accounting for more than 10% of the Group’s purchases or sales in the 12 months immediately prior to Completion (as the case may be)) has ceased or substantially reduced its trade with any Group Member and no unusual trade discounts have been incorporated in any contract entered into by a Group Member which will continue in effect after Completion; and
(p)	no Group Member has incurred any off-balance sheet commitments, as determined under French GAAP.

C. The Company

C.1 The Company is a French société par actions simplifiée whose registered office is located at 3 rue de Castiglione 75001 Paris, France, is properly incorporated and validly existing under the laws of France and is duly registered with the companies’ registry of Paris, under number 652 029 125 RCS Paris.

C.2 The Company has full power and authority, and has obtained or satisfied, in all material respects, all applicable governmental, statutory, regulatory or other consents, licences, waivers or exemptions required to empower it to carry on the Business.

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C.3 The Company is not insolvent, has not been dissolved or declared insolvent. So far as the Seller is aware, no action or request is pending to declare the Company insolvent and the Company has not filed a request for, nor has been granted, a moratorium or a suspension of payments, or is not subject to any bankruptcy proceedings under French law or similar procedures nor, so far as the Seller is aware, is under threat of such proceedings.

C.4 Articles of Association:

(a)	Attached to the Disclosure Letter is a true copy of the current articles of association of the Company, which copy has attached to it copies of all resolutions and agreements which are required to be so attached.
(b)	During the last six years, the Company has complied with its articles of association in all material respects and none of the activities, agreements, commitments or rights of the Company is ultra vires or unauthorised.

C.5 The Shares as described in Schedule 1 Part A:

(a)	comprise all the issued and outstanding share capital of the Company;
(b)	are duly authorised;
(c)	have been properly issued;
(d)	are fully paid;
(e)	are free and clear of any Encumbrances and there is no arrangement or obligation binding the Company that could result in the creation of any Encumbrance affecting any of the Shares, including without limitation any share options, warrants or convertible debentures.

C.6 The Company has not issued any profit sharing bonds or otherwise attributed rights to third parties to share in past, present or future income or profits, reserves or liquidation surpluses of the Company.

C.7 No person has or claims to have:

(a) the right (actual or contingent) to require the issue, transfer, conversion or redemption, of any:

(i)	share of the Company; or
(ii)	other securities giving rise to a right over the share capital of the Company; or

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(b) any other rights relating to any of the:

(i)	Shares; or
(ii)	rights attaching to the Shares; or
(iii)	profits of the Company;

and there is no arrangement or obligation binding on the Company to create any rights of the type mentioned in paragraph C.7(a) or C.7(b).

C.8   (a)   No resolution has been passed in relation to the Company;

(b)	no step has been taken by the Seller in relation to the Company; and
(c)	so far as the Seller is aware, no legal proceedings have been started, or threatened, against the Company,

for its winding up or dissolution, or for the appointment of a liquidator, administrator (administrateur judiciare), or a mandataire ad hoc.

C.9 The Company is not party to a merger, spin off or share-for-share exchange.

C.10 The Company does not exercise any duties as legal representative of a company (“mandataire social”) or any other legal entity and is not likely to be qualified as a de facto manager of another company or legal entity.

D. The Subsidiaries

D.1 Subsidiaries

(a)	Hôtel Inter-Continental London (Holdings) SAS is a French société par actions simplifiée whose registered office is located at 5 place de l’Opéra, 75009 Paris, France, is properly incorporated and validly existing under the laws of France and is duly registered with the companies’ registry of Paris, under number 439 278 938 RCS Paris;
(b)	SNC de l’Hôtel Inter-Continental Paris is a French société en nom collectif whose registered office is located at 3 rue de Castiglione, 75001 Paris, France, is properly incorporated and validly existing under the laws of France and is duly registered with the companies’ registry of Paris, under number 343 485 116 RCS Paris.

D.2 Each Subsidiary has full power and authority, and has obtained or satisfied in all material respects all applicable governmental, statutory, regulatory or other consents, licences, waivers or exemptions required to empower it to carry on the Business.

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D.3 The Subsidiaries are not insolvent, have not been dissolved or declared insolvent. No action or request is pending to declare a Subsidiary insolvent and the Subsidiaries have not filed a request for, nor have been granted, a moratorium or a suspension of payments and are not subject to any bankruptcy proceedings under French law or similar procedures nor, so far as the Seller is aware, are under threat of such proceedings.

D.4 Articles of Association

(a)	Attached to the Disclosure Letter is a true copy of the articles of association of each of the Subsidiaries, and each copy has attached to it copies of all resolutions and agreements which are required to be so attached.
(b)	During the last six years each Subsidiary has complied with its articles of association in all material respects and none of the activities, agreements, commitments or rights of either Subsidiary is ultra vires or unauthorised.

D.5 Neither Subsidiary exercises any duties as legal representative of a company (mandataire socia”) or any other legal entity and is not likely to be qualified as de facto managers of another company or legal entity.

D.6 The shares of each Subsidiary have been duly authorised, properly issued and fully paid up.

D.7 The shares in each Subsidiary are not affected by any Encumbrances and there is no arrangement or obligation binding on a Subsidiary that could result in the creation of any Encumbrance affecting any of the shares in a Subsidiary or any future shares in the capital of the Subsidiary, including without limitation any share options, warrants or convertible debentures.

D.8 Neither Subsidiary has issued any profit sharing bonds or otherwise attributed rights to third parties to share in past, present or future income or profits, reserves or liquidation surpluses of that Subsidiary.

D.9 No person has or claims to have:

(a) the right (actual or contingent) to require the issue, transfer, conversion, or redemption, of:

(i)	any share of a Subsidiary; or
(ii)	other securities giving rise to a right over the share capital of a Subsidiary; or

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(b) any other rights relating to any of the:

(i)	shares in the capital of a Subsidiary;
(ii)	rights attaching to those shares; or
(iii)	profits of a Subsidiary;

and there is no arrangement or obligation binding on a Subsidiary or to create any rights of the type mentioned in paragraph D.9(a) or D.9(b).

D.10 (a) No resolution has been passed in relation to a Subsidiary;

(b)	no step has been taken by the Seller or the Company in relation to a Subsidiary; or
(c)	so far as the Seller is aware, no legal proceedings have been started, or threatened, against a Subsidiary,

for its winding up or dissolution, or for the appointment of a liquidator, administrator (administrateur judiciare), or a mandataire ad hoc.

D.11 Neither Subsidiary is party to a merger, spin off or share-for-share-exchange.

E. Other investments and associated businesses

E.1 Except for the shares in the Subsidiaries, no Group Member is the legal owner of any shares or securities issued by any person and is not obliged to acquire any shares or other securities in any person.

E.2 No Group Member is or has agreed to become:

(a)	a member of, or a party to, any joint venture, consortium, partnership, association or agency or any licensing, marketing, distributorship, purchasing or manufacturing agreement or arrangement (other than a recognised trade association in relation to which the Group Company has no liability or obligation except for the payment of annual subscription or membership fees); or
(b)	a party to any profit or loss sharing arrangement.

E.3 No Group Member has a branch, agency, place of business (whether or not amounting to a permanent establishment under a relevant double taxation treaty) or assets outside of its jurisdiction of incorporation.

E.4 No Group Member is under any obligation to purchase a fonds de commerce.

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E.5 No Group Member is a party to any shareholders’ agreement or similar arrangement or agreement which purports to regulate, control or otherwise affect the voting or disposition of its shares.

F. Records and registration matters

F.1   (a)  Each Group Member has properly kept and maintained each shareholder register, minute book and other record, account, ledger, other financial record and report that it is required by law to keep and each of them is in all material respects up-to-date and contains an accurate record of the matters to which it relates as required by French Corporate law;

(b)

All registers of members, minute books and other statutory books, records, accounts, ledgers, financial records and reports referred to in paragraph F.1(a) and all other records, deeds and documents relating to each Group Member’s affairs and assets (including title deeds relating to the Property, executed originals of all material agreements to which a Group Member is a party and all the accounts, ledgers and other records of each Group Member) are in the possession of the Group Members or the Group Members have the right to call for such documents; and

(c)

No person has sought rectification of a register kept by a Group Member or made an allegation that a register kept by a Group Member is incorrect.

F.2 Since 1 April 1998, each filing, return, resolution and other document required by law to be delivered on behalf of a Group Member to the competent company register (registre du commerce et des sociétés) has been properly made and delivered and no Group Member is liable to pay any fine for breach of that requirement.

F.3 The Company System:

(a)	contains the records and information required for the existing property management function and existing yield management function of the Hotel, such records and information being in the form of data files including the Fidelio property management system and a hard copy of the PeopleSoft accounting records maintained by the relevant Group Member; and
(b)	is in the possession of and under the exclusive ownership and direct control of the Group.

F.4 The Schedule of Priority Club^® Rewards redemption bookings or any other redemption bookings Disclosed is complete and accurate as at the date it was provided and prior to Completion such bookings shall continue to be taken in the ordinary and usual course.

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F.5 All Encumbrances granted to a Group Member have (if appropriate) been registered in accordance with the applicable law or complied with all necessary formalities as to registration or otherwise in any foreign jurisdiction.

F.6 The only presidents, managing directors or managers (as appropriate) of each Group Member are the persons listed as such in that part of schedule 1 that relates to the relevant Group Member and no person is a shadow, alternate or de facto president, managing director or manager.

G. Property

G.1 The Property comprises all the land and premises owned leased or occupied or otherwise used by the Group in the conduct of the Business. No Group Member has any other interest in any other land or buildings other than the Property and no Group Member has entered into any legally binding agreement for the purchase of any such interest.

G.2 The Company has full and valid (valide) title to the Property as described in schedule 2. The deeds of acquisition concerned are listed in schedule 2 and there is no contractual document which modifies the provisions set out in these deeds of acquisition. There is no pending dispute or proceedings relating to the ownership of the Property by the Company.

The Company is under no obligation to purchase any other real -estate assets or lease rights.

G.3 The Company has not granted any pre-emption right, preference agreement, option or any other right to acquire all or part of the Property in favour of any third party.

G.4 The Property is located within the perimeter of protection of historical monuments (périmètre de protection des monuments historiques).

G.5 The Property has been used (i) as retail premises for the part of Property currently let by the Company as indicated in the Disclosure Letter and, (ii) as hotel for the other part of the Property since the acquisition of the Company by the Seller’s Group in 1998 and to the Seller’s knowledge the Property has been used as hotel since at least 1936 (other than during the Second World War). The Hotel is classified as tourist hotel in a 4 star category and the relevant classification decision has been duly obtained.

G.6 Save for the areas occupied pursuant to the leases listed in Schedule 2 the Property complies with French fire, health and safety regulations with respect to the different activities carried out therein as well as with the French regulations relating to buildings receiving the public (établissement recevant du public) and the French commercial town planning regulations and the Seller has not received notice that:

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(a)	nor is aware that any necessary authorisations to operate the business in any part of the Property have not been obtained;
(b)	the Property does not comply with French fire, health and safety regulations with respect to the different activities carried out in the Property;
(c)	the Property does not comply with the French regulations relating to buildings receiving the public (établissement recevant du public) and the French commercial town planning regulations; and
(d)	nor is aware that the 4 star category classification has been withdrawn.

G.7 Since 1995 the Company has carried out all measures and verifications that it was required to carry out by the sous-commission technique de sécurité de la Préfecture de Police de Paris.

G.8 The Company has never received any dangerous structure notice (arrêté de péril) from the relevant authorities with respect to the Property under Articles L.511-1 and seq. of the French construction and dwelling code, nor any related document or letter and, so far as the Seller is aware, there is no reason to think that any such notice may be given.

G.9 So far as the Seller is aware, the Property has not been, is not, and is not expected to be subject to any expropriation or similar procedure.

G.10 The Seller is not aware of the Company or any other Group Member having in relation to the Property received any written notice from any statutory authority not referred to in paragraphs G.6 and G.7 alleging any material non-compliance with any statutes, regulations or bye-laws, including any such relating to fire precautions, means of escape in case of fire and any fire certificate held by the Company or any other Group Member, in respect of which works and/or actions remain to be carried out by the Company or any other Group Member to remedy such non-compliance.

G.11 The Company is not subject to an order to perform any works in connection with health, fire and security requirements imposed by any relevant authority which could have a material effect on the Property and its use as an Hotel of the star category set out in paragraph G.5 above and for the part of the Property let by the Company as retail premises.

G.12 The Seller complies with the provisions of the French public health code (code de la santé publique) regarding the preparation and sale of food and beverages, and the liquor licence (licence de débit de boisson à consommer sur place de 4ème catégorie n° 2339) has been duly obtained. The Company has not received notice from any competent authorities that any obligations resulting from the French public health code (code de la santé publique) have not been duly fulfilled regarding the preparation and sale of food and

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beverages or that the liquor licence is or has been subject to any withdrawal or third party recourse and so far as the Seller is aware there is no reason why such notice should be given nor will the liquor licence be withdrawn or subject to third party recourse.

G.13 Construction

(a)	No work requiring planning permission, fitting-out permits (permis d’aménagement) or compulsory construction works insurance policy have been carried out over the last ten years except for the works carried out for the renovation of the Property and its technical installations between 1994 and 1998 and the works carried out at the spa at the Property as Disclosed. All demolition permits, planning permissions, fitting -out permits (permis d’aménagement) and/or and other requisite declarations, authorisations and approvals and any related transfer orders and/or modifying permits have been filed, obtained and displayed as regards the works carried out for the renovation of the Property and its technical installations between 1994 and 1998 and the works carried out at the spa at the Property as Disclosed. The Company has made the corresponding declarations of opening of the site and of completion of works within the applicable time periods.
(b)	There has never been nor is there any pending dispute, litigation, withdrawal of permits or legal action pertaining to these works and/or the above mentioned permits.
(c)	The Company has not carried out any extension or transformation of hotel facilities which require authorization as provided for in article L.720-5 7°) of the French commercial code without such prior authorization.

G.14 Encumbrances

(a)	There is no Encumbrance over the Property and there is no obligation binding on the Company or any other Group Member to create any Encumbrance over the Property.
(b)	So far as the Seller is aware, there are no disputes, notices or complaints which affect or might in the future affect the Property for the purposes for which it is now used and which would prevent or impede the Company or any other Group Member from operating and carrying on the business currently carried out at the Property.

G.15 Easements

The Company has not granted any easement over the Property to the benefit of a third party and, to the Seller’s knowledge, the Property is not subject to any easement other than those arising from its natural position and from planning rules, environmental rules

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and/or rules applying thereto and those which are set out in the deeds listed in schedule 2. The designated legal use (destination) and the allocation (affectation) of the Property comply with such easements.

G.16 Leasehold Status

(a)	The Company and the SNC de l’Hôtel Inter-Continental Paris have only granted titles to occupation over the Property pursuant to the leases listed in schedule 2 true, complete and accurate copies of which have been Disclosed. There are no other agreements for lease, leases, tenancies, licences, management agreements or other similar documents to which the Property is currently subject other than those set out in schedule 2 and there are no agreements or arrangements granting to a third party the right to conduct property management activities on behalf of a Group Member in respect of all or part of the Property. The Company and SNC de l’Hôtel Inter-Continental Paris have complied with all material obligations under such leases.
(b)	The lessees have complied in due time with any and all of their obligations in all material respects under the leases set out in schedule 2 and neither the Company nor SNC de l’Hôtel Inter -Continental Paris has served upon any tenant, licensee or occupier pursuant to any such leases any written notice of any alleged breach of any covenants, obligations, terms, conditions and restrictions therein nor is the Seller aware of the same.
(c)	There is no housing allowance granted by the Company or any other Group Member to any of its employees.
(d)	Any occupation rights relating to the services provided by external suppliers have been granted on a precarious basis, and other than such occupancy rights, neither the Company nor any other Group Member has granted any occupation rights on a precarious basis to contractors or third parties, and all occupation rights granted on a precarious basis have been Disclosed.
(e)	The spa located at the Property is run by JJJ Marignan under a sub - -operating agreement (sous -location-gérance) granted by SNC de l’Hôtel Inter-Continental Paris a true, complete and accurate copy of which has been Disclosed.
(f)	Except as Disclosed, there are no pending disputes or complaints concerning any of the leases set out in schedule 2 and/or sub-operating agreements and neither the Company nor any other Group Member has received from any tenant, licensee or occupier any written notice of any alleged breach of its obligations as landlord or licensor.

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(g)	The rents paid under the leases set out in schedule 2 and any occupancy rights referred to in paragraph G.16(d) are not the subject of any Encumbrance and, so far as the Seller is aware, no rents have been commuted or waived and there are no outstanding negotiations for the review of any receivable rents or licence fees.
(h)	The rental deposits relating to the leases set out in schedule 2 have been duly received by and are in the possession of the Company, have been duly indexed pursuant to the terms and conditions of these leases and have not been drawn and there are no rent deposits other than as Disclosed.
(i)	Neither the Seller nor any Group Member has received any written notice that any of the tenants under the leases set out in schedule 2 are not in compliance with any applicable laws or regulations in respect of the part of the Property occupied them nor is it aware of any such non-compliance.

H. Assets

H.1 Each Group Member is the absolute owner of all the assets it uses in the course of its business (including without limitation fixtures and fittings, articles of personal property and standard operating equipment):

(a)	free and clear of all Encumbrances save for any assets held under lease or hire purchase agreements which are Disclosed; and
(b)	all such assets, together with the facilities and services to which the Group has a contractual right, include all rights, properties, assets, facilities and services used in the carrying on of the business of the Group in the manner in which it is currently carried on, save for the Excluded Assets.

H.2 Possession

(a)

All of the assets owned by the Group, or in respect of which the Group has a right of use, are in the possession or under the control of the Group.

(b)

Where any assets are used but not owned by the Group or any facilities or services are provided to the Group by any third party, so far as the Seller is aware there has not occurred any event of default or any other event or circumstance which may entitle any third party to terminate any agreement or licence in respect of the provision of such facilities or services (or any event or circumstance which with the giving of notice and/or the lapse of time and/or a relevant determination would constitute such an event or circumstance).

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H.3 Of the plant, machinery, equipment and vehicles included in the Accounts or acquired by the Group since the Accounts Date none has been sold or disposed of other than on open market arm’s length terms.

I. Environmental

I.1 No Group Member has received any notice from any relevant authority to the effect that it is in breach of any Environmental Laws.

I.2 No Group Member has received any notice from any relevant authority to the effect that it is in breach of any law relating to pollution or the protection of the environment.

I.3 So far as the Seller is aware it has Disclosed to the Purchaser and/or its professional advisers all written reports in the possession, custody or control of the Group or its agents or advisers or the Seller or any member of the Seller’s Group or their respective agents or advisers relating to compliance or non-compliance with Environmental Laws, the state and condition of the Environment at or about the Property and which were prepared for the Group or the Seller or any member of the Seller’s Group in the last six years and the Seller is not aware of any material issue in respect of Environmental Matters other than any such issues referred to in such reports..

I.4 So far as the Seller is aware no Group Member is in a state of, nor has received any written notice, claim, demand or other communication from any relevant regulatory body alleging any non-compliance by any Group Member of Health & Safety Legislation, in respect of which works and/or actions remain to be carried out by the relevant Group Member to remedy such non-compliance.

I.5 The Seller has Disclosed all reports which have been provided in the last six years to a Group Member, the Seller or a member of the Seller’s Group relating to asbestos at or around the Property and so far as the Seller is aware none of the Group Members, the Seller or a member of the Seller’s Group has in its possession any other such report made prior to that period. In the last six years, so far as the Seller is aware, each Group Member has complied in all material respects with all legal and regulatory requirements applicable to that Group Member in connection with asbestos at the Property and the Seller is not aware of any material issue in respect of asbestos in or around the Property other than any such issues referred to in such reports.

I.6 In the last six years, so far as the Seller is aware, each Group Member has conducted its business and corporate affairs in all material respects in compliance with Environmental Laws.

I.7 The Property, its fittings and equipment have never been subject to legislation relating to classified installations.

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I.8 No claim has been made against any Group Member by any person regarding Hazardous Materials.

J. Insurance

J.1 All assets of the Group of an insurable nature have at all times in the last three years been and are insured in amounts equal to the full replacement value of those assets against such risks as are in accordance with good commercial practice normally insured against. Each Group Member has insured against such other risks as are in accordance with good commercial practice normally insured against. All premiums due in respect of the Insurance Policies have been paid and the representations made and information furnished at the time of the taking out or the renewal of the Insurance Policies were correct, full and accurate and any change in the information required to be given was correctly given. No action has been undertaken by any of the Group Members and, so far as the Seller is aware, there exists no event or situation which could lead to the putting into issue of the coverage provided by these policies and no premium has been increased during the last three years due to a particular claim. In the last three years no Group Member has made any insurance claims, suffered any uninsured losses, waived any rights of material or substantial value or allowed any insurances to lapse.

J.2 No Group Member is in default under any Insurance Policy and, so far as the Seller is aware, each Insurance Policy is in full force and effect.

J.3 The Company and all building contractors, architects and technical advisers (within the meaning of article 1792 of the French civil code) employed by it for the works carried out for the renovation of the Property and its technical installations in 1995/1998 as Disclosed have respected their obligations to take out insurance policies in relation to such works in accordance with articles L.241-1 and L.242-1 of the French insurance code. These policies are in force (all premiums having been duly paid and the obligations to notify the relevant insurance companies of the delivery dates of the said works having been duly complied with). The delivery dates (dates de réception) of these works constituting the commencement date of the legal guarantees are set out in the Disclosure Letter.

J.4 There is no insurance policy with respect to structural damage to construction (Dommage ouvrages) in connection with the works carried out at the spa at the Property. The insurance policies taken out by the building contractor, architect and the subcontractors are set out in the Disclosure Letter.

J.5 Any event which has occurred and which could constitute a claim covered by any of the insurance policies referred to in paragraph J.1 has been duly declared to the insurance companies. There is no pending claim under the Insurance Policies and the Seller is not aware of anything that may lead to a claim.

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K. Commercial agreements and arrangements

K.1 The execution of and compliance with the terms of this Agreement will not:

(a)	conflict with or result in a breach of the terms of any subsisting agreement, arrangement or instrument binding on any Group Member;
(b)	cause any Group member to lose the benefit of any right, licence or privilege it enjoys at present;
(c)	relieve any person of any contractual obligation to any Group Member or enable any person to determine such obligation or any right or benefit enjoyed by any Group Member or to exercise any right whether under an agreement with or otherwise in respect of that Group Member; or
(d)	result in any liability of any Group Member being created or increased, including by way of a contribution under a Group Scheme.

K.2 No Group Company is a party to or subject to any contract, transaction, arrangement, understanding or obligation (other than in relation to any contract of employment) which is material to the business of the Group and which:

(a)	is not in the ordinary and usual course of business of the Group;
(b)	is not on an arm’s length basis;
(c)	is of a long-term nature, that is unlikely to have been fully performed, in accordance with its terms, more than 12 months after the date on which it was entered into or undertaken;
(d)	is of an onerous nature or cannot be duly performed by the relevant Group Member without an unusual commitment of money or resources in the context of the business of the Group;
(e)	is one pursuant to which a Group Member has sold or otherwise disposed of any company or business in circumstances such that it remains subject to any liability (whether contingent or otherwise);
(f)	is a currency and/or interest rate swap agreement, asset swap, future rate or forward rate agreement, interest cap, collar and/or floor agreement or other exchange or rate protection transaction or combination thereof or any option with respect to any such transaction or any other similar transaction to which a Group Member is a party;

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(g)	is any other agreement or arrangement having or likely to have a material adverse effect on the financial or trading position of the Group;
(h)	is a bid, tender, proposal or offer which, if accepted, would result in a Group Member becoming a party to any agreement or arrangement of a kind described in any of paragraphs (a) to (g) above and (i) below; or
(i)	may only be terminated upon six months notice or more whether or not compensation is payable;

(the “Material Contracts”).

K.3 With respect to each Material Contract:

(a)	it was entered into by the relevant Group Member in the ordinary and usual course of its business;
(b)	the Group Member that is party to the Material Contract has not received any notice of any claim for material breach in relation to it which remains outstanding; and
(c)	so far as the Seller is aware, neither the Group Member that is party to the Material Contract nor the other parties thereto is in material breach of the Material Contract or, so far as the Seller is aware, is likely to become in material default thereunder.

K.4 Offers and Tenders

No tender, quotation or offer issued by any Group Member and which is still outstanding and is not in the ordinary and usual course of business is or will be capable of giving rise to a contract merely by an order, acceptance or other action by another party.

K.5 No Group Member is a party to any arrangement or agreement or has given any covenants pursuant to which a Group Member’s freedom of action in relation to its normal business activities (including its freedom to purchase and supply goods and services from and to any person) and/or freedom to complete in any area or field with any other person is in any way affected or restricted.

K.6 The Disclosure Letter contains full details of each Group Member’s obligations with respect to the offer or grant to any of its customers otherwise in the ordinary and usual course of business of discounts, overrides, rebates, allowances, reductions, incentives and other special terms or similar arrangements.

K.7 No Group Member nor so far as the Seller is aware, any other party to any agreement or arrangement with any Group Member is in default to any material extent thereunder.

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K.8 There are in force no powers of attorney given by any Group Member and no person is entitled or authorised (whether as agent or otherwise) to bind or commit any Group Member to any obligations outside the ordinary course of business.

K.9 There are no contracts between any Group Member and any member of the Seller’s Group other than the Service Agreements which will be terminated on Completion.

     Compliance with Contracts

K.10 The terms of all Material Contracts have been complied with in all material respects by the relevant Group Companies.

K.11 As at the date hereof, no notice of termination or of intention to terminate has been received in respect of any Material Contract and, so far as the Seller is aware, there are no grounds for termination, recession, avoidance or repudiation of any such contract.

K.12 There have been no acquisitions or disposals of business or undertakings or shares by any Group Company in the last three years.

     Agreements with Connected Parties

K.13 There are no existing contracts or arrangements material to the business of the Group between, on the one hand, any Group Company and, on the other hand, any Seller or any other member of the Seller’s Group other than on normal commercial terms in the ordinary course of business.

K.14 No Group Company is party to any contract nor is there any outstanding indebtedness (actual or contingent) material to the business of the Group with any current or former employee or current or former director or officer of any such Group Company or any person connected (within the meaning of section 839 of the Income and Corporation Taxes Act 1988) with any of such persons, or in which any such person as aforesaid is interested (whether directly or indirectly), other than on normal commercial terms in the ordinary course of business.

L. Compliance and litigation

L.1 Compliance

(a) Licences

(i) Each Group Member has obtained and is in possession of all licences, permissions, authorisations and consents required for carrying on its business in the places and in the manner in which such business is now carried on and copies of all such licences, permissions, authorisations and consents have been Disclosed.

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(ii) The licences, permissions, authorisations and consents referred to in paragraph L.1(a)(i) are in full force and effect, are not subject to any unusual or onerous conditions save as stated in such documents, each Group Member conducts its business in compliance with all such licences, permissions, authorisations and consents and so far as the Seller is aware, all such licenses, permits, authorisations and consents have been complied with in all material respects. So far as the Seller is aware, there are no circumstances which indicate that any of such licenses, permits, authorisations or consents referred to in paragraph L.1(a)(i) will or is likely to be suspended, cancelled or revoked or not renewed.

(b) Compliance with laws

(i)	In the last six years, the Group has conducted its business and corporate affairs in all material respects in compliance with all applicable laws and regulations of France.
(ii)	In the last six years, no Group Member has been in breach of any order, decree or judgement of any court or any governmental or regulatory authority of France.
(iii)	So far as the Seller is aware, in the last six years no commissions, discounts, rebates or other inducements, whether of cash or in kind, have been given by any Group Member or its officers or employees where the same are capable of forming the basis of criminal prosecution of, or civil action against a Group Member or any of its officers or employees.

L.2 Litigation

No Group Member is engaged, either on its own account or vicariously, in any suit, action, litigation, arbitration or tribunal proceedings or any governmental investigations and no injunction has been granted against any Group Member and no Group Member has given any such undertaking to any court or to any third party arising out of any legal proceedings. In addition, so far as the Seller is aware, no such suit, action, litigation, arbitration, tribunal proceedings, governmental investigations or injunctions are pending or threatened, by or against any Group Member, nor is the Seller aware of any circumstances likely to lead to any such suit, action, litigation, arbitration, tribunal proceeding, governmental investigations or injunction.

M. Employees

M.1 The basis of the remuneration payable to Employees and officers (mandataires sociaux) of the Group Members at the date of this Agreement is the same as that in force at the

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Accounts Date and the Group Members are not under any contractual or other obligation (other than any legal obligation, in particular regarding annual salary negotiations) to increase the rates of remuneration of or make any bonus or incentive or other similar payments to any of its Employees at any future date.

M.2 There are no Employees whose termination would require payment of an amount exceeding that provided by law or by the National collective bargaining agreement.

M.3 Accurate particulars of the terms of the contracts of all Employees earning in excess of €75,000 per annum have been disclosed to the Purchaser; a list of such Employees is set out in the Disclosure Letter.

M.4 Disputes and litigation

(a)

The Group Members are not engaged or involved in any current labour or union dispute or litigation (whether individual or collective) arising out of, affected by or otherwise relating to the provisions of any employment legislation or employment contract with an Employee and so far as the Seller is aware, the Group Members have not received written notice of any circumstances which could reasonably be expected to give rise to any such dispute.

(b)

No Employee or former employee of a Group Member has a claim for unfair dismissal or breach of contract.

M.5	There has not during the past two years been any actual or threatened strike, work stoppage, work to rule, lock out or overtime ban which has materially disrupted the business of a Group Member.
M.6	(a) Since 2002-2003, the Group Members and the Inter -Continental Le Grand Hôtel have shared services which have involved 121 staff in the following areas: commercial relations (public relations, reservations, banquets, external sales, sales for receptions, seminars), financial duties (accounting, pay), personnel (training, recruitment) administration (purchasing, security, revenues, management).

(b)	62 employees are on the pay roll of SNC de l’Hôtel Inter-Continental Paris and 59 employees are on the pay roll of the Inter-Continental Le Grand Hôtel. All Employees have accepted in writing a modification of their employment terms such that they are employees only of SNC de l’Hôtel Inter -Continental Paris or another Group Member.
(c)	No other persons have been put at the disposal of the Group Members or the Inter-Continental Le Grand Hôtel at any time prior to Completion such that they

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may be regarded as employees or have any employment-related claim against any Group Member.

M.7 Since 1 April 1998, each Group Member has complied with all applicable laws, regulations (including in respect of personnel representation, immigration law and working time), collective bargaining agreements, customary practices, unilateral commitments and contracts of employment with respect to the Employees and to former employees employed by the Group Members since 1 April 1998.

M.8 No services provider, the agreement of which has expired or been terminated or is currently in force, may claim to be an employee of a Group Member or request to be integrated as an employee in a Group Member.

M.9 The works council of SNC de l’Hôtel Inter-Continental Paris has been duly informed and consulted in connection with the transaction contemplated herein in accordance with applicable law. A copy of the minutes of the works council meeting, in which it has rendered its opinion with respect to this transaction, is provided in the Disclosure Letter.

M.10 The transaction contemplated in this Agreement will not modify the rights of the Employees under the Group Schemes and other than the Group Schemes Disclosed, there is no scheme, arrangement or agreement to which any Group Member is a party or by which it is bound or under which it has an obligation or liability (whether actual, contingent or prospective) to contribute or to provide funding for the provision of life assurance, retirement, death, disability or other like benefits (in the form of a pension, lump sum, gratuity or otherwise) in respect of any person.

M.11 There are no Employees who benefit from a “protected” status.

M.12 There are no on-going negotiations or discussions or commitments with Employees and/or works council or trade union or any employee representative body of a material or unusual nature.

M.13 There is currently no fixed-term or part -time employment contract or temporary contract under which any Employee could validly allege that it could be converted into an employment of indefinite duration or full-time status.

M.14 Any minutes of the visits or investigations carried out by the labour inspection having jurisdiction over the Group Members during the last two years, and the letters before action (mise en demeure within the meaning of the French labour code), sent by such labour inspection during the last two years have been Disclosed.

M.15 There is no collective redundancy or social plan (plan de sauvegarde de l’emploi) in the Group Members and there have been no collective redundancies during the previous twenty four months.

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M.16 The Group Members have not undertaken to pay a bonus or remuneration of any nature to any Employee or officer (mandataire social) of a Group Member (or former employee or officer of a Group Member) which is linked to the sale of the Shares taking place.

M.17 The Seller has Disclosed:

(a)

a true and complete list of all permanent Employees as at 30 June 2005 showing, for each Employee, the following: name, job title, position, date of birth, length of service, present rate of compensation paid and part-time and/or fixed term status; and

(b)

true and complete copies of all collective employment agreements and all agreements including without limitation any agreement with trade unions or other bodies representing such employees, and of all pension or retirement benefit plans, bonus plans, additional insurance, health insurance plan, supplemental sickness or disability benefit plan, profit or growth sharing plans, stock purchase or stock option plans, company saving plans or employee funds or other employee benefits applicable to the Employees.

M.18 There are no agreements or arrangements binding upon a Group Member which could, following Completion, increase the total cost to the Group of salaries, benefits or any other social charges.

M.19 Each Group Company has paid all contributions due to the State Authority (AGEFIPH) in relation to the requirement that at least 6% of each Group Member’s workforce (where a Group Member has at least 20 employees) must be disabled persons.

M.20 No officer of any Group Member receives or is entitled to receive from a Group Member any remuneration, compensation, retirement benefit, private insurance or other benefit in kind.

M.21 All Employee Loans have been Disclosed.

N. Pensions, Group Schemes and Social Security

N.1 Material and accurate particulars of all Group Schemes have been Disclosed, including (without limitation) true copies or particulars of the following:

(a)	all rules relating to the Group Schemes containing provisions applicable to its employees or the benefits payable to or in respect of any of them;
(b)	all explanatory booklets and announcements currently in force;

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(c)	any benefit improvement or other amendment which at the date of this Agreement is either treated as in force or is proposed or under consideration but is not incorporated by the Group Schemes; and
(d)	a list of those of the Employees and officers of the SNC de l’Hôtel InterContinental Paris who are members of or have any rights to benefits under the Group Schemes.

N.2 All returns with the social security and related organisations and authorities have been duly and timely filed by the Group Members. All payments of social security contributions and contributions to the various social security authority, the unemployment authority and retirement and related organisations relating to the amounts indicated on such returns have been duly and timely made by the Group Members.

N.3 The SNC de l’Hôtel Inter-Continental Paris has fully complied with its obligations, in particular regarding the actual reduction of working time, in order to benefit, between 1 March 1998 and 28 February 2005, from the reductions of social security contributions provided for by the laws n° 96-502 dated 11 June 1996, n° 98-461 dated June 13, 1998 and n° 2000-37 dated January 19, 2000. No notice has been received by the Seller that SNC de l’Hôtel Inter-Continental Paris has not at all times complied with its obligations, in particular as regards the actual reduction of working time, in order to benefit from such reductions.

N.4 Each Group Member and any persons having legal ownership of the Pension Plan and the Group Schemes have complied with their respective obligations under the governing documentation of the relevant Pension Plan and Group Schemes. The Pension Plan and the Group Schemes comply with and have at all times complied with the provisions of the relevant legislation and tax requirements governing or applicable to that Group Scheme and Pension Plan.

N.5 No Group Member is nor is the Pension Plan a party to any mediation, litigation or arbitration proceedings in respect of the Pension Plan or the Group Schemes or benefits provided under the Pension Plan or Group Schemes and no such ombudsman, litigation or arbitration proceedings are pending or threatened by or against any Group Member or the Pension Plan and, so far as the Seller is aware, there are no facts likely to give rise to any mediation, litigation or arbitration proceedings in respect of any of the Employees with respect to the Pension Plan or Group Schemes.

N.6 Each of the Group Schemes which are pre-funded (whether by means of a book reserve or otherwise) have been funded to the extent recommended by the relevant actuarial person appointed in respect of the Group Scheme and all amounts due to or payable in

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respect of each of the Group Schemes or to any insurance company or other relevant third party in connection with each of the Group Schemes have been paid.

N.7 No plan, proposal or intention to amend or discontinue (in whole or in part) any of the Group Schemes has been communicated to any Employee nor has any act or event occurred which could give rise to a full or partial discontinuance of any of the Group Schemes under applicable law.

N.8 There is no voluntary profit sharing (intéressement) paid or payable by any Group Member to any person in relation to the Hotel.

O. Taxation

O.1 Accounts, Payment of Tax and Compliance

(a)	The Accounts of each Group Member make full provision or reserve within French GAAP in respect of any period ended on or before the Accounts Date for all Tax assessed or liable to be assessed on any Group Member or for which it is accountable at the Accounts Date whether or not the Group Member has or may have any right of reimbursement against any other person.
(b)	Since the Accounts Date, no Group Member has been involved in any transaction which has given or may give rise to a liability to Tax on any Group Member (or would have given or might give rise to such a liability but for the availability of any Relief) other than Tax in respect of normal trading income or receipts of the Group Member concerned arising from transactions entered into by it in the ordinary and usual course of business.
(c)	Each Group Member has paid all Tax which it has become liable to pay and is not, and has not in the three years ending on the date of this Agreement been, liable to pay a penalty, surcharge, fine or interest in connection with Tax and, so far as the Seller is aware, there are no circumstances by reason of which any Group Member may become liable to pay any penalty, surcharge, fine or interest in connection with Tax.
(d)	Each Group Member has within applicable time limits made all returns, provided all information, given all notices and maintained all records in relation to Tax as it is required to make, provide, give or maintain and all such returns, information and notices are correct and accurate in all material respects, so far as the Seller is aware, and are not the subject of any dispute and each Group Member has fully complied on a timely basis with all notices served on it and any other requirements lawfully made of it by any Tax Authority.

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(e)	The Company and its subsidiary Hôtel Inter-Continental London (Holdings) SAS have always been subject to French Corporate Income Tax. SNC de l’Hôtel InterContinental Paris has never elected for French Corporate Income Tax regime.
(f)	No Group Member is involved in any dispute in relation to Tax with any Tax Authority and, so far as the Seller is aware, no Tax Authority has investigated or indicated that it intends to investigate the Tax affairs of any Group Member other than under the normal tax audit procedures of the relevant Tax Authority and there are no facts which might cause such an investigation to be instituted.
(g)	A valid carry back election was made by the Company in March 2005 in conformity with article 220 Quinquies of the French Tax Code.
(h)	No Group Member has, during the 12 months preceding the date of this Agreement, held any real estate asset located in France other than the Property.
(i)	The sale of the entire issued share capital of Hotel Inter-Continental London Limited by Hotel Inter-Continental (Holdings) SAS as part of the Pre-sale Reorganisation was effected at fair market value.

O.2 French registration tax

French registration tax arising on all documents which are necessary to establish the title of any Group Member to any asset or to enforce any rights and in respect of which any French registration tax or other similar tax is payable (whether as a result of an obligation to pay such registration tax under French law or as a result of the necessity to register a document to ensure its validity) has been paid.

O.3 Residence

(a)	No Group Member is liable to Tax in any jurisdiction other than the jurisdiction in which it is incorporated nor does any Group Member have or has ever had a permanent establishment in a jurisdiction other than the jurisdiction of incorporation.
(b)	No Group Member is an agent or permanent establishment of another company, person, business, or enterprise for the purpose of assessing the company, person, business or enterprise to Tax in the country of residence of the first company.

O.4 Groups

The Company and Hôtel Inter-Continental London (Holdings) SAS have been members of the French Tax Group established in accordance with the provisions of Articles 223 A and seq. of the French Tax Code (régime d’intégration fiscale) since January 1st 2004. The

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Company has regularly sent to the Tax Authority a letter referring to such election and Hôtel Inter-Continental London (Holdings) SAS has in accordance with relevant procedures sent to the Tax Authority a letter referring to its acceptance for such tax consolidated regime.

O.5 Keeping of Accounting documents requirements

The Company and its Subsidiaries duly fulfil their respective obligations regarding the period of retention of formal documents as is required under French Corporate and Tax Law (including without limitation the requirements of Article L 102 B of the French book of Tax procedures (livre des procedures fiscals)).

P. Finance

P.1 No Group Member has any Indebtedness.

P.2 Details of all overdrafts, loans or other financial facilities available to the Group Members are Disclosed.

P.3   There are no debts owing to any Group Member other than trade debts incurred in the ordinary and usual course of business.

P.4 There is no outstanding liability (actual or contingent) between any Group Member and any directors, officers or employees of a Group Member or of the Seller or any member of the Seller’s Group (save for accrued salary and expenses claims) or so far as the Seller is aware, any relatives or controlled companies of any such persons.

P.5 Since 1 April 1998, all dividends and distributions declared, made or paid by each Group Member at any time were, when declared, made or paid, in accordance with the requirements of general law and the articles of association of the relevant Group Member.

P.6 There is not outstanding any agreement or arrangement which establishes any guarantee, indemnity, suretyship, form of comfort or support (whether or not legally binding):

(a)	given by any Group Member in respect of the obligations or solvency of any third party;
(b)	given by any third party in respect of the obligations or solvency of any Group Member; or
(c)	given by the Seller or any member of the Seller’s Group in respect of any liability of any Group Member.

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P.7	There are no loans, material undertakings, material commitments or unusual liabilities, actual or contingent, made, given, entered into or incurred by or on behalf of the Company or any other Group Member.
P.8	The entry into the Revolving Facility Loan was in the corporate interest of both Hotel InterContinental London (Holdings) SAS and the Company.
Q.	Information Technology, Data Protection and Intellectual Property
Q.1	For the purposes of this paragraph Q:

“Data Protection Legislation” means the Data Processing, Data Files and Individual Liberties Act of 6 January 1978 (Loi Informatique et Libertés) and any subordinate legislation or orders made under that Act;

“Group IT” means all Information Technology which is owned by any Group Company or which has in the last two years been used in connection with the business of any Group Company other than Retained IT;

“Information Technology” means computer systems, communication systems, software and hardware;

“Material Intellectual Property” means all rights and interests held by any of the Group Companies in Intellectual Property (whether as owner, licensee or otherwise) which at or immediately before Completion is used in relation to the Group and which is material to the business of the Group other than the Retained Intellectual Property;

“Retained Intellectual Property” means Intellectual Property owned by, or licensed to, the Seller’s Group; and

“Retained IT” means Information Technology included in Excluded Assets.

Information Technology

Q.2	Each of the Group IT is owned by or licensed to the relevant Group Company.
Q.3	All arrangements relating to, and licences of, Group IT are Disclosed and:

(a)	are in full force and effect, no notice having been given by either side to terminate them;
(b)	no circumstances exist or have existed which would entitle a party to terminate them, vary them and/or make a claim for money or a money equivalent in respect of them; and

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(c) so far as the Seller is aware the obligations of the parties thereto have been fully complied with,

	and no disputes, claims or proceedings have arisen or are foreseeable in respect of those arrangements and licences.
Q.4	There are, and in the past two years there have been, no performance reductions or breakdowns of, or logical or physical instructions to, any Information Technology or loss of data which have had (or are having) a material adverse effect on the business of the Group and the Seller is not aware of any fact or matter (including, but not limited to, a change of control of any of the Group Companies) which may give rise to such a material adverse effect.
Q.5	The Group Companies have in place procedures which are in accordance with current good industry practice:

(a)	to prevent unauthorised access to and the introduction of viruses and other contaminants into the Group IT;
(b)	to take and store back-up copies of the software and data in the Group IT; and
(c)	to ensure that the business of the Group Companies can continue without material disruption in the event of breakdown or performance reduction of the Group IT or loss of data, whether due to natural disaster, power failure or otherwise.

Q.6 No written claim has been made by a third party which:

(a)	alleges that the operations of any Group Member infringe or are likely to infringe, the Intellectual Property of a third party; or
(b)	disputes the right of any Group Member to use the Group IT;

and so far as the Seller is aware, no circumstances exist which are likely to give rise to such a claim.

Data Protection

Q.7	In the last two years each Group Company has complied in all material respects with all applicable requirements of any Data Protection Legislation.
Q.8	In the last two years no notice alleging non-compliance with the Data Protection Legislation (including any enforcement notice, deregistration notice or transfer prohibition notice) has been received by any of the Group Companies from any relevant regulator.
Q.9	In the last two years no undertaking has been made in relation to Data Protection Legislation by any Group Company to any relevant regulator.

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Q.10	In the last two years so far as the Seller is aware, no correspondence, dispute, enquiry or information notice has been made or audit undertaken or proposed by any relevant regulator under Data Protection Legislation in relation to any Group Company.
	Intellectual Property
Q.11	So far as the Seller is aware, all the Material Intellectual Property (whether registered or not) and all pending applications therefore are (or where appropriate in the case of pending applications, will upon registration be) legally owned by, licensed to or used under the authority of the owner by the Group Companies.
Q.12	The Company Systems are the subject of current maintenance and support agreements, complete and accurate copies of which are Disclosed.

R.	Grants
R.1	No Group Member is subject to any arrangement for the receipt, reduction or repayment of any grant, subsidy or financial assistance from any government department or agency or any local or other authority.
S.	The Seller
S.1	The Seller is a company duly incorporated and organised and validly existing under the laws of The Netherlands.
S.2	The Seller has full power and authority, and has obtained or satisfied all applicable governmental, statutory, regulatory or other consents, licences, waivers or exemptions required to empower it to enter into and to perform its obligations under this Agreement and each of the other agreements to be entered into by it pursuant to, or otherwise in connection with, this Agreement in accordance with their respective terms.
S.3	The entry into, and the implementation of the transactions contemplated by, this Agreement and each of the other agreements to be entered into by the Seller pursuant to, or otherwise in connection with, this Agreement will not result in:

(a)	a violation or breach of any provision of the memorandum and articles of association or equivalent constitutional documents of the Seller;
(b)	a breach of, or give rise to a default under, any contract or other instrument to which the Seller is a party or by which it is bound;
(c)	a violation or breach of any applicable laws or regulations or of any order, decree or judgment of any court, governmental agency or regulatory authority applicable to the Seller or any of its assets; or

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(d) a requirement for the Seller to obtain any consent or approval of, or give any notice to or make any registration with, any governmental, regulatory or other authority which has not been obtained or made at the date of this Agreement on a basis which is both unconditional and cannot be revoked.

S.4	This Agreement and each of the other agreements to be entered into by the Seller pursuant to, or otherwise in connection with, this Agreement constitute valid and legally binding obligations of the Seller enforceable in accordance with their respective terms.
T.	The Guarantor
T.1	The Guarantor is a company duly incorporated and organised and validly existing under the laws of England and Wales.
T.2	The Guarantor has full power and authority, and has obtained or satisfied all applicable governmental, statutory, regulatory or other consents, licences, waivers or exemptions required to empower it to enter into and to perform its obligations under this Agreement in accordance with its terms.
T.3	The entry into, and the implementation of the transactions contemplated by, this Agreement will not result in:

(a)	a violation or breach of any provision of the memorandum and articles of association or equivalent constitutional documents of the Guarantor;
(b)	a breach of, or give rise to a default under, any contract or other instrument to which the Guarantor is a party or by which it is bound;
(c)	a violation or breach of any applicable laws or regulations or of any order, decree or judgment of any court, governmental agency or regulatory authority applicable to the Guarantor or any of its assets; or
(d)	a requirement for the Guarantor to obtain any consent or approval of, or give any notice to or make any registration with, any governmental, regulatory or other authority which has not been obtained or made at the date of this Agreement on a basis which is both unconditional and cannot be revoked.

T.4 This Agreement constitutes valid and legally binding obligations of the Guarantor enforceable in accordance with its terms.

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U.	General
U.1	Quality of Information
	All information contained in the recitals and in schedules 1 and 2 and the following disclosures contained in the Disclosure Letter: the first paragraph of the disclosure against Warranty M.1 and the disclosure against Warranty M.16 is true, complete and accurate and not misleading in any respect.

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Schedule 4

Purchaser’s Warranties

1. The Purchaser is a company duly incorporated and organised and validly existing under the laws of France.

2. The Purchaser has full power and authority, and has obtained or satisfied all applicable governmental, statutory, regulatory or other consents, licences, waivers or exemptions required to empower it to enter into and to perform its obligations under this Agreement and each of the other agreements to be entered into by it pursuant to, or otherwise in connection with, this Agreement in accordance with their respective terms.

3. The entry into, and the implementation of the transactions contemplated by, this Agreement and each of the other agreements to be entered into by the Purchaser pursuant to, or otherwise in connection with, this Agreement will not result in:

(a)	a violation or breach of any provision of the memorandum and articles of association or equivalent constitutional documents of the Purchaser;
(b)	a breach of, or give rise to a default under, any contract or other instrument to which the Purchaser is a party or by which it is bound;
(c)	a violation or breach of any applicable laws or regulations or of any order, decree or judgment of any court, governmental agents or regulatory authority applicable to the Purchaser or any of its assets; or
(d)	a requirement for the Purchaser to obtain any consent or approval of, or give any notice to or make any registration with, any governmental, regulatory or other authority which has not been obtained or made at the date of this Agreement on a basis which is both unconditional and cannot be revoked.

4. This Agreement and each of the other agreements to be entered into by the Purchaser pursuant to, or otherwise in connection with, this Agreement constitutes valid and legally binding obligations of the Purchaser enforceable in accordance with their respective terms.

5. The Purchaser has no intention as at the date of this Agreement of making a Claim for breach of any of the Warranties.

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Schedule 5

Part 1

Determination and Confirmation of Net Current Assets Amount, Long Term Liabilities
and Provisions

1.	Stock Value and Closing Procedure
1.1	Agreement of Stock. The Seller and the Purchaser shall, on the day before the Completion Date, agree the value of the Stock as at the Completion Date.
1.2	Closing Procedure. To establish the Net Current Assets Amount a closing year end procedure shall be undertaken at Completion which conforms to the closing year end procedure undertaken with respect to the Accounts in relation to those items to be included in the determination of the Net Current Assets Statement.
2.	Submission of the Net Current Assets Statement
2.1	Net Current Assets Statement. The Seller must as soon as reasonably possible, and in any event on or before the day that is 30 Business Days following the Completion Date prepare and deliver to the Purchaser the Net Current Assets Statement which shall:

(a)	be prepared in accordance with the principles and methodology set out in part 2 of this schedule 5;
(b)	be in the format of the pro forma Net Current Assets Statement set out in part 3 of this schedule 5; and
(c)	include any Long Term Liabilities and Provisions.

Within 30 Business Days following receipt of the Net Current Assets Statement the Purchaser may notify the Seller if it disagrees with the Net Current Assets Statement and specify the items and/or amounts challenged. The Seller and the Purchaser shall then, within 30 Business Days following such notice, attempt to reach agreement. In the absence of notice of objection at the expiry of the above -mentioned 30 Business Days period, the Purchaser shall be deemed to have accepted the content of the Net Current Assets Statement.

3.	Access to Information
3.1	Access to information. The Purchaser and the Seller must, in connection with the preparation and review of the Net Current Assets Statement or any dispute or Expert determination:

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(a)	provide or ensure the provision of all information and assistance which may reasonably be requested by the Seller or the Purchaser or the Expert, as the case may be; and
(b)	permit representatives of the Seller or the Purchaser or the Expert to have access to and take extracts from or copies of any books, correspondence, accounts or other records relating to the Group or the Property for the period prior to Completion in the Purchaser’s or Seller’s possession or control or that of any member of their respective groups or the possession or control of the Group.

3.2	Working papers and files. The Seller shall procure that all working papers and files within its possession or control as may be reasonably required by the Purchaser which are relevant to the preparation of the Net Current Assets Statement shall be made available upon a request for them. If requested the Seller shall also provide the Purchaser with access to the personnel who are relevant to the preparation of the Net Current Assets Statement.
4.	Disputes
4.1	Disputes. If no agreement is reached in the 30 Business Days mentioned in paragraph 2.1 above (the “Period”) the Seller and the Purchaser shall refer the matters in dispute in relation to the Net Current Assets Statement to a partner, of at least 10 years qualified experience as an expert comptable in France, at an independent firm of chartered accountants agreed by the parties, in writing or failing such agreement within five Business Days of the end of the Period, a similarly—qualified accountant appointed, on the application of either party, by the President of the Tribunal de Commerce de Paris (the “Expert”).
4.2	Basis. The Expert shall act on the following basis:

(a)	the Expert shall act as an expert and not as an arbitrator;
(b)	the Expert’s terms of reference shall be to determine only the matters in dispute in relation to the Net Current Assets Statement as soon as is reasonably practicable following his appointment and in accordance with any procedure established by him for doing so;
(c)	the decision of the Expert is, in the absence of fraud or manifest error, final and binding on the Seller and the Purchaser unless in the case of manifest error either party challenges the decision before an arbitration tribunal on the grounds of manifest error, in accordance with clause 33.2 of the Agreement, within 14 Business Days of the Expert delivering his decision. There is no limitation period in the case of fraud;

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(d)	applying the accounting policies, principles, procedures, practices, terms and conditions, methods and bases referred to in this Schedule 5 and in the manner prescribed herein;
(e)	the decision of the Expert shall be in writing and in the English language; and
(f)	the Seller and the Purchaser shall each pay one half of the Expert’s costs or as the Expert may determine.

4.3 Procedure. The procedure of the Expert shall:-

(a)	give the parties a reasonable opportunity to make written and oral representations to him;
(b)	require that the parties supply each other with a copy of any written representations at the same time as they are made to the Expert; and
(c)	permit each party to be present while oral submissions are being made by any other party.

4.4	Expert’s Jurisdiction. For the avoidance of doubt, the Expert shall only address and resolve differences of the parties and shall not otherwise be entitled to determine the scope of his own jurisdiction.
4.5	No Presumption. There is no presumption that the treatment of any matter in dispute should or should not be changed from that in the Net Current Assets Statement and no objection should be made to any matter raised by the Purchaser on the grounds that the matter in respect of which such notice is raised is below any materiality level which might otherwise apply.
4.6	Determination. The determination of the Expert shall (i) be made in writing and sent to the parties and (ii) unless otherwise agreed by the parties, include reasons for each relevant determination.
4.7	Privilege. Subject to paragraph 4.9, nothing in this paragraph 4 shall entitle a party or the Expert access to any information or document which is protected by legal professional privilege, or which has been prepared by the other party or its accountants and other professional advisers with a view to assessing the merits of any claim or argument.
4.8	Refusal to Supply. A party shall not be entitled by reason of paragraph 4.9 to refuse to supply such part or parts of documents as contain only the facts on which the relevant claim or argument is based.
4.9	Confidentiality. Each party shall, and shall procure that its accountants and other advisers shall, instruct the Expert to keep all information and documents provided to them

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pursuant to this paragraph 4 confidential and shall not use the same for any purpose, except for disclosure or use in connection with the preparation of the Net Current Assets Statement, the proceedings of the Expert or another matter arising out of this Agreement or in defending any claim or argument or alleged claim or argument relating to this Agreement or its subject matter.

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Schedule 5

Part 2

Accounting Policies to be Adopted in the Net Current Assets Statement

1.	Preparation of Valuation
1.1	The Net Current Assets Statement and any element of it shall be prepared and all assets and liabilities relevant to the preparation of the Net Current Assets Statement valued and determined in accordance with the policies that are referred to, and in the order of priority shown, in this paragraph 1:

(a)	in accordance with the specific accounting policies set out in paragraphs 2, 3, 4 and 5 of this part 2 of schedule 5;
(b)	save to the extent inconsistent with or contradictory to paragraph 1.1(a) of this part 2, on a basis consistent with the principles, policies, procedures, methods, bases and practices used in the preparation of the Accounts to the extent consistent with French GAAP as at the Accounts Date as if they were statutory accounts required to be prepared under applicable French legislation; and
(c)	save to the extent inconsistent with or contradictory to paragraphs 1.1(a) and 1.1(b) of this part 2, in accordance with French GAAP as at the Completion Date.

2.	Specific Accounting Policies
2.1	Doubtful debts. Doubtful debt provisions will be included applying consistent principles to those used in the Accounts.
2.2	Judgement. Where judgement is required in determining the value of assets and liabilities, save as expressly provided in this Schedule 5, the Net Current Assets Statement should reflect the normal practices adopted in the Accounts and subject thereto will reflect reasonable judgement.
2.3	Trade Debtors. Subject to paragraphs 2.1 and 2.2 in this Part 2, all Trade Debtors of the Group as at the Completion Date shall be included.
2.4	Stock. Any items of Stock which are unsaleable, unusable, spoilt or out of date shall be excluded from Stock and Stock will be valued at the lower of cost and net realisable value.
2.5	Deferred Income and Prepayments. Deferred Income and Prepayments will be apportioned on a time basis in relation to the period to which the Deferred Income or the Prepayment relates, as at the Completion Date or, in the case of pre-paid block bookings, on the number of rooms not yet used. Prepayments which are in respect of goods or

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services which will not be provided following Completion or are for goods which bear a Protected Name shall be disregarded.

2.6	Cash. Cash shall be determined by reference to the cash book balance used by the Group as opposed to the Group’s bank statement balance and shall include any Cash held at the Property.
2.7	Carry-back Receivable.

(a)

Subject to 2.7(b) below, 50% of the Carry-back Receivable Proceeds shall be included as an asset.

(b)

If the Company does not enter into a Carry -back Receivable Sale Contract or the Company enters into a Carry-back Receivable Sale Contract but does not receive Carry -back Receivable Proceeds by the time the Net Current Assets Statement is agreed between the Purchaser and the Seller, then the provisions of 2.7(a) above shall not apply and instead the provisions of clause 7.5 of this Agreement shall apply.

An amount of €1,300,000 shall be included as an asset in respect of the Carry -back Receivable.

2.8	Provisions. Provisions shall not be taken into account in the Net Current Assets Statement to the extent that they have otherwise been taken into account in the Net Current Assets Statement.
2.9	Middle Eastern Debts. A full provision shall be made in respect of the debts owing on Completion by Al Gawhara and by VIP Company.
3.	Current Liabilities and Provisions
3.1	To recognise liability for Taxation (if any) provision shall be made to reflect liability for Taxation (if any) arising on profits generated during the current tax year up to the Completion Date plus any Taxation liability undischarged from previous periods of account as if Completion was the end of a tax accounting period and calculating profits for that deemed period consistently with all the provisions of this schedule including, without limitation, taking into account expenditure provided for in paragraph 3.6.
3.2	Such adjustment shall be calculated on the basis of French GAAP as at Completion and, except in relation to French Corporate Income Tax, on the basis of the tax rules and practices applied to each Group Member on a stand alone basis. In relation to French Corporate Income Tax, the adjustment shall be calculated with regard to the provisions of Article 223A to 223U of the French Tax Code which are applicable to the Group. The

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parties agree that, for Corporate Income Tax purposes, the current tax consolidated group will not cease as a result of Completion.

3.3	All Creditors of the Company as at the Completion Date shall be included.
3.4	There shall be no provision for Deferred Tax liabilities.
3.5	Inter-company trading amounts so far as they are solely between Group Members shall be treated as reconciled to zero.
3.6	The following liabilities are to be provided for at the following amounts:

(a)	Chimneys — €390,000
(b)	Internet access — €172,500
(c)	in respect of Retirement Indemnity accruals — €1,550,000
(d)	No balancing of hot and chilled water to rooms FCU’s — €50,625
(e)	Hot Water Treatment Problems — €88,152
(f)	Rectify Poor Chilled Water Treatment — €104,618
(g)	Water Flooding inside AHUs — potential leakage, damage and legionella — €30,960
(h)	Toilet odour problem in rooms and corridors — €96,788
(i)	Lack of proper Hot Water Supply to Guest Rooms — €428,102
(j)	Basement Leakage — €28,125

3.7 Disregarding all amounts owed to a Group Member by any member of the Seller’s Group save for trade debt in the ordinary and usual course.

4.	Aggregation
	Each entry shall be the aggregate of the separate amounts in respect of any heading for each Group Member.
5.	Issues of Judgement
5.1	General

(a) Materiality

In preparing the Net Current Assets Statement no minimum materiality limits shall be applied.

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(b) Cut-off date for post balance sheet events.

In preparing and agreeing the Net Current Assets Statement, account shall only be taken of post balance sheet events known to either party during the period ending on the date on which the Net Current Assets Statement is delivered pursuant to paragraph 2.1 of part 1 of this schedule 5.

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SCHEDULE 5

PART 3

PRO FORMA NET CURRENT ASSET STATEMENT IN RESPECT OF THE NET CURRENT ASSETS AMOUNT

Asset / Liability	Amount (€)			Amount (€)
Current Assets
Trade Debtors		·			·
Stock		·			·
Cash		·			·
50% of the Carry-back Receivable Proceeds
Amount included in respect of the Carry-back Receivable		·			·
Less		(     ·	)
Current Liabilities
Creditors					(     ·	)
Tax
Less
Long-Term Liabilities (if any)					·
Provisions (if any)					·
Net Current Assets/(Liabilities) Amount					·

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SCHEDULE 6

TAX COVENANT

1.	DEFINITIONS
1.1	In this Schedule:

“Accounts Relief” means a Relief, the availability of which has been shown as an asset in the Net Current Assets Statement (but which shall not include the amount of the asset required to be included in the Net Current Assets Statement in respect of the Carry -back Receivable or the Carry-back Receivable itself);

“Actual Tax Liability” means any liability of any Group Member to make actual payments of Tax (or payments on account of Tax) to a Tax Authority;

“Cross Border Claim” means:

(a)	the claims instituted before the High Court of England and Wales with Claim Number HC03C00857 and HC03C03431 in relation to the transfer or surrender of any Relief from a Group Member to any member of the Seller’s Tax Group;
(b)	any appeal of such claim to any court of appellate jurisdiction in the UK, to the Court of Justice of the European Communities or to such other body which it may be determined has jurisdiction over the matter dealt with by such claim;
(c)	the remittance of such claim by any court referred to in (b) above to any other court referred to in (b) above or to such other body which it may be determined has jurisdiction over the matter dealt with by such claim;
(d)	the appeal of any claim for group relief made under Chapter 4 of Part X of the Income and Corporation Taxes Act 1988 relating to such claim;

“Deemed Tax Liability” means:

(a)	the loss of or failure to obtain an Accounts Relief;
(b)	the use or set off of a Purchaser’s Relief in circumstances where, but for such use or set off, the Group Member utilising such Purchaser’s Relief would have had an Actual Tax Liability in respect of which the Seller would have had a liability under this schedule;
(c)	an obligation on the Company to repay any amount to the purchaser of the Carry- back Receivable pursuant to the terms of the Carry-back Receivable Sale Contract

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the reduction of the undiscounted value of the Carry -back Receivable below €3,637,069 as a result of a Tax adjustment confirmed by the French Tax Authorities by means of a formal reply to the taxpayer’s comments (Réponse aux observations de contribuable);

“Demand” means

(a)

the issuance of any notice, demand, assessment, letter or other document by or on behalf of any Tax Authority (including any document referring to the intention of any Tax Authority to implement a Tax adjustment or a Tax audit in respect of a Group Member) or the taking of any other action by or on behalf of any Tax Authority (including the imposition, or any document referring to the possible imposition, of any withholding of or on account of Tax); or

(b)

the preparation or submission to a Tax Authority of any notice, return, assessment, letter or other document by the Purchaser, any Group Member or any other person;

from which it appears that a Tax Liability may be incurred by or may be imposed on any Group Member (including for the avoidance of doubt as a result of obligations of the Company pursuant to the Carry-back Receivable Sale Contract a reduction in the undiscounted amount of the Carry-back Receivable below €3,637,069);

“Event” means any transaction (including the transaction contemplated by this Agreement), act, event, circumstance, state of affairs or omission, (including any change in the residence of any person for the purposes of any Tax, the death of any person, a failure to take any action which would avoid an apportionment or deemed distribution of income regardless of whether the taking of any such action after Completion could have avoided such apportionment or deemed distribution);

“French Corporate Income Tax” (“Impôt sur les sociétés”) means corporate income tax as defined in Articles 205 and seq. of the French Tax Code;

“French Tax Code” means the Code Général des Impôts;

“French Tax Group” means a group formed between Hotel Inter -Continental Paris SAS and Hotel Inter-Continental London (Holdings) SAS for French Corporate Income Tax purposes under Article 223 A and seq. of the French Tax Code;

“Group Member” means Hotel Inter-Continental Paris SAS, Hotel Inter-Continental London (Holdings) SAS and SNC de l’Hotel Inter-Continental Paris taken individually or together (referred to as “Group Members”);

“Group Undertaking” means as defined in section 259 of the Companies Act 1985;

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“Income, Profits or Gains” means income, profits, gains or any other standard or measure for the purposes of any Tax and references to Income, Profits or Gains earned, accrued or received on or before a particular date (including, without limitation, Completion) shall include Income, Profits or Gains deemed or treated for Tax purposes as earned, accrued or received on or before that date;

“Post-Completion Relief” means any Relief which arises to any Group Member as a consequence of any Event occurring (or being treated for Tax purposes as occurring) after Completion, or from Income, Profits or Gains earned, accrued or received, after Completion;

“Purchaser’s Group” means the Purchaser and any other company or companies which either are or become after Completion members of the same group as the Purchaser;

“Purchaser’s Relief” means:

(a)	any Accounts Relief;
(b)	any Post-Completion Relief;
(c)	any Relief arising to any member of the Purchaser’s Group (other than any Group Member);
(d)	the Carry-back Receivable;

“Real Estate Company” means a real estate predominant company (“Société a preponderance immobilière”) for the purposes of Article 726 of the French Tax Code;

“Relief” means any relief, allowance, credit, deduction, exemption or set off in respect of any Tax or relevant to the computation of any Income, Profits or Gains (which for the avoidance of doubt shall include any losses for Tax purposes carried forward), or any right to repayment of or saving of Tax and any reference to the use or set off of a Relief shall be construed accordingly;

“Seller’s Tax Group” means the Seller and any other company or companies (other than the Group Members) which either are or become after Completion, or have within the six years ending at Completion been treated as, members of the same group as, or otherwise connected or associated in any way with, the Seller for any Tax purpose;

“Surrender” means the surrender of any Relief which may become eligible for transfer by Group Members to the Seller’s Tax Group as a result of or in consequence of any Cross Border Claim;

“Tax” or “Taxation” means any and all forms of taxes, levies, social security contributions, stamp or registration duties, fiscal or specific taxes, duties and charges of a tax nature

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and all withholdings or deductions in respect thereof of whatever nature including, but not limited to, income tax, corporation tax, withholding taxes, indirect taxes, local taxes, transfer tax, value added tax payable by any of the Group Members, irrespective of the assessment basis or the body responsible for its recovery or the status of the entity in whose name they are collected and generally any duties and levy assessed in whole or in part on the income, including any interest, penalties, fines and other related costs.

“Tax Authority” means any taxing or other governmental (local or central), state or municipal authority (whether within or outside the Republic of France) competent to impose any liability for or to collect Tax;

“Tax Group Agreement” (“convention d’intégration fiscale”) means the agreement, if any, that has been concluded between each of the Group Members belonging to the French Tax Group and that provides for the sharing out of the global Tax burden incurred by the French Tax Group between each of the companies belonging to this French Tax Group;

“Tax Liability” means an Actual Tax Liability or a Deemed Tax Liability;

“Transfer Tax” means all transfer tax, registration tax or any other similar tax whether of the Republic of France or elsewhere payable in relation to the transfer of the Shares pursuant to this Agreement;

“Transfer Tax Demand” means an assertion by a Tax Authority that the Company was, at Completion or during the twelve months preceding Completion a Real Estate Company, in circumstances which could give rise to a liability for the Seller for breach of the warranties appearing at paragraphs O.1(h) and O.1(i) of schedule 3 to this Agreement;

“VAT” means value added tax imposed in the Republic of France or equivalent tax in any other jurisdiction;

1.2	References in this schedule to paragraphs are to paragraphs of this schedule unless otherwise stated.
2.	Covenant
2.1	Subject to the other provisions of the Agreement and the provisions of paragraph 3, the Seller covenants with the Purchaser to pay to the Purchaser by way of repayment of the consideration payable for the Shares under this Agreement an amount equal to:

(a) any Actual Tax Liability arising (i) as a consequence of or by reference to any Event which occurred (or is treated for Tax purposes as occurring) on or before Completion (including for the avoidance of doubt, Completion itself); or (ii) in respect of or by reference to any Income, Profits or Gains earned, accrued or received on or before Completion;

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(b)	any Deemed Tax Liability;
(c)	any net Tax Liability of the Group Members taken together arising directly on the transactions constituting the Pre-sale Reorganisation;
(d)	any Actual Tax Liability which any Group Member is required to pay to a Tax Authority as a result of a failure by any member of the Seller’s Tax Group to discharge that Tax where such Tax was primarily chargeable against any member of the Seller’s Tax Group;
(e)	any costs and expenses reasonably and properly incurred by the Purchaser, any Group Member or any other member of the Purchaser’s Group in connection with:

(i)	any Tax Liability referred to in paragraph 2.1(a) to (d) above; or
(ii)	any Demand from which it appears to the Purchaser that any such Tax Liability may arise or has arisen to the extent that such Demand gives rise to a liability under paragraph 2.1(a) to (d); or
(iii)	any action successfully taken or defended under paragraph 5.2(a) of this schedule.

2.2 For the purposes of this schedule, the amount of a Deemed Tax Liability of a Group Member shall be determined as follows:

(a) in the case of a Deemed Tax Liability within paragraph (c) of the definition of Deemed Tax Liability, 50% of the amount (including interest if applicable) which the Company is obliged to pay to the purchaser of the Carry -back Receivable pursuant to the Carry-back Receivable Sale Contract

50% of the amount given by the formula:

x

(1.075)^T

Where:

x is equal to the amount in Euros by which the undiscounted value of the Carry- back Receivable has been reduced below €3,637,069 by the French Tax Authorities by means of a formal reply to the taxpayer’s comments (Réponse aux observations de contribuable); and

T is equal to the period, expressed in years and (if appropriate) fractions of years between the date of the reduction in the undiscounted value of the Carry -back Receivable implemented by the French Tax Authorities by means of a formal reply

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to the taxpayer’s comments (Réponse aux observations de contribuable) and 30 June 2010;

(b) in the case of a loss of or failure to obtain an Accounts Relief:

(i)	where such Accounts Relief is a right to repayment of Tax, the amount of the Relief lost or not obtained;
(ii)	in any other case, the amount of Tax which is payable by such Group Member which would not have been payable but for the loss or failure to obtain such Accounts Relief;

(c) in the case of a use or set off of a Purchaser’s Relief, the amount of Tax which would have been payable but for the use or set off of the Purchaser’s Relief, and, for the purposes of paragraphs 2.2(b) and 2.2(c) it shall be assumed that Reliefs which are not Purchaser’s Reliefs are used (so far as legally possible) or treated as lost or not obtained in priority to Purchaser’s Reliefs.

3. Limitations And Exclusions

3.1 The Seller shall not be liable under the covenant contained in paragraph 2.1 or for a breach of the Tax Warranties in respect of any Tax Liability of a Group Member (or in respect of any costs and expenses relating thereto):

(a)	(a) unless the Purchaser has served on the Seller a written notice on or before the fourth anniversary of the end of the accounting period in which the Completion Date falls plus one (1) month giving such details of the claim as the Purchaser then has; or
(b)	to the extent that the Tax Liability has been fully recovered under a claim made in respect of another Tax Liability; or
(c)	to the extent that the Tax Liability results from a legislative or regulatory change, or from a change in the published tax administrative guidelines of the French Tax Authorities or from a change in a recognised interpretation by the courts (“jurisprudence constante”) of existing laws or regulations, regardless of whether or not retroactive in effect; or
(d)	to the extent that the Tax Liability results from a change in the accounting principles and methods or the length of any accounting period of the Purchaser or a Group Member introduced after the Completion Date unless introduced to comply with any requirement of law which was not being properly complied with by a Group Member on or prior to Completion; or

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(e)	to the extent that the Tax Liability is increased by any change in Tax rates applicable on the Completion Date, even if such change in Tax rates has retroactive effect; or
(f)	to the extent that provision or reserve was made in the Net Current Assets Statement in respect of such Tax Liability, or to the extent that such Tax Liability or payment or discharge thereof was otherwise taken into account in computing such reserve or provision; or
(g)	to the extent that the Tax Liability would not have arisen but for a voluntary act of the Purchaser or a Group Member or any other member of the Purchaser’s Group after Completion unless such act was carried out:

(i)	pursuant to an obligation of the Purchaser, a Group Member or any other member of the Purchaser’s Group incurred on or prior to the Completion Date; or
(ii)	with the written agreement or at the written request of the Seller; or
(iii)	in the ordinary course of the business of a Group Member as carried on at Completion and, for this purpose, but without limitation, the following shall not be regarded as being in the ordinary course of business:

(1)	any transaction entered into by a Group Member in circumstances where the consideration (if any) received by or, as the case may be, paid by such Group Member in respect thereof is less than (in the case of consideration received or receivable by it) or more than (in the case of consideration paid or payable by it) the consideration deemed to have been received (or receivable) by it or paid (or payable) by it for Tax purposes but to the extent only of the liability for Tax arising in respect of the amount by which the deemed consideration exceeds or is less than the actual consideration; or
(2)	any failure by a Group Member to comply with the provisions of any Tax legislation (including regulations);
(3)	the entry into any scheme or arrangement for which the main purpose, or one of the main purposes, was the avoidance or reduction of a liability to Tax,

provided that this paragraph shall not apply to Tax Liabilities falling solely within paragraph 2.1(c) above unless the relevant voluntary act had as its main purpose

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or one of its main purposes the generation or crystallisation of a liability to which paragraph 2.1(c) above could apply;

(h)

to the extent that the Tax Liability would not have arisen or would have been reduced or eliminated but for the failure or omission on the part of a Group Member to make any valid claim, election, surrender or disclaimer, to give any valid notice or consent, or to do any other thing under the provisions of any enactment or regulation relating to Tax after Completion, the making, giving or doing of which was either (i) taken into account in the Net Current Assets Statement and full details of which are included in notes to the Net Current Assets Statement delivered to the Purchaser at the same time that the Net Current Assets Statement is delivered to the Purchaser pursuant to Schedule 5 to this Agreement or (ii) requested by the Seller pursuant to and within the terms of paragraph 7; or

(i)

to the extent that the Tax Liability arises as a result of transactions concluded after Completion between Group Members forming part of the French Tax Group which become taxable either:

(i)	because a Group Member exits the French Tax Group; or
(ii)	because the French Tax Group of which a Group Member is a member is terminated.

(j)	to the extent that any Relief (other than a Purchaser’s Relief) is available to a Group Member (or would have been available but for the use of the Relief to set against or mitigate a liability of any company for which the Seller is not liable under this schedule or the Tax Warranties) to set against or otherwise mitigate the Tax Liability provided it has not already been taken into account under paragraph 8 and is not a Relief in respect of which credit has been given under paragraph 9; or
(k)	to the extent that the Tax Liability would not have arisen or would have been reduced or eliminated but for any claim, election, surrender or disclaimer made or notice or consent given after Completion by the Purchaser, a Group Member or any other member of the Purchaser’s Group under the provisions of any enactment or regulation relating to Tax other than any claim, election, surrender, disclaimer, notice or consent assumed to have been made, given or done in the Net Current Assets Statement; or
(l)	to the extent that the Tax Liability relates to Income, Profits or Gains actually earned, accrued or received before Completion and not taken into account in the Net Current Assets Statement; or

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(m)	to the extent that the amount of the Tax Liability has been recovered from any person (excluding the Purchaser, a Group Member or any other member of the Purchaser’s Group but including a Tax Authority); or
(n)	to the extent that the Tax Liability would not have arisen or been increased but for the failure of the Purchaser to comply with its obligations contained in paragraphs 5 or 7; or
(o)	to the extent that the Tax Liability arises as a result of changes in the value of an asset at any time after Completion; or
(p)	to the extent that the Tax Liability (with the exception of interest or late payment penalties (if any) paid) arises because a Tax Authority makes an adjustment to the Tax affairs of a Group Member the sole effect of which is the transfer of expense, income or liability to account for value added tax from one financial year to another; or
(q)	to the extent that the Tax Liability would not have arisen but for the declaration by a Group Member of any dividend or other distribution of profit after Completion and on or before 31 December 2005.

4.	Further Limitations
4.1	Subject to paragraph 4.2 below, the maximum aggregate liability of the Seller in respect of claims for breach of the Tax Warranties and claims under the covenant contained in paragraph 2.1 above shall not exceed €150,000,000.
4.2	The amount in paragraph 4.1 above shall be increased by the amount of any liability of the Seller arising under paragraph 2.1(d) of this Tax Covenant.
4.3	The Seller shall have no liability for breach of the warranties set out at paragraphs O.1(h) and O.1(i) of Schedule 3 in the absence of compliance by the Purchaser with the obligations specified in paragraph 5 below, to the extent that such obligations relate to a Transfer Tax Demand.
5.	Manner of Making And Conduct of Claims
5.1	If the Purchaser or a Group Member becomes aware of any Demand which could give rise to a liability for the Seller under this Tax Covenant or for breach of any of the Tax Warranties (including a Transfer Tax Demand), the Purchaser, any Group Member or any member of the Purchaser’s Group becoming aware of such Demand shall give notice to the Seller of that Demand (including reasonably sufficient details of such Demand or if relevant full details of a Transfer Tax Demand) as soon as reasonably practicable (and in any event not less than twenty-one (21) Business Days before the expiry of any

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applicable legal deadline to respond to the Demand) in order to ascertain the Seller’s intentions as to the conduct of any relevant action.

5.2 Subject to paragraph 5.3, in such case as mentioned in paragraph 5.1, the Seller will be entitled to:

(a)	either request the Purchaser to take (or procure that a Group Member or a member of the Purchaser’s Group takes) such action as the Seller may reasonably request to avoid, dispute, resist, appeal, compromise or defend such Demand or any matter relating to such Demand; or
(b)	notify to the Purchaser its intention to participate in the conduct of such action as the Seller may reasonably request to avoid, dispute, resist, appeal, compromise or defend such Demand or any matter relating to such Demand.

5.3 If a Tax Authority has made a Transfer Tax Demand, then the provisions of paragraph 5.2 shall not apply and instead the Seller shall be entitled to:

(a)	either require the Purchaser to take (or procure that a Group Member or a member of the Purchaser’s Group takes) such action as the Seller may request in its absolute discretion to avoid, dispute, resist, appeal, compromise or defend the Transfer Tax Demand or any matter relating to the Transfer Tax Demand; or
(b)	notify to the Purchaser its intention to participate in the conduct of such action as the Seller may request in its absolute discretion to avoid, dispute, resist, appeal compromise or defend the Transfer Tax Demand or any matter relating to the Transfer Tax Demand.

5.4 The Purchaser shall have no obligation to comply with the Seller’s requests made pursuant to 5.2 if such requests:

(a)	are illegal under any relevant legislation; or
(b)	would require the Purchaser or any member of the Purchaser’s Group to act in a way which, in its reasonable opinion, is not in accordance with normal commercial practice (such as it applies to the conduct of proceedings relating to disputes with a Tax Authority),

but it is agreed (for the avoidance of doubt) that where the dispute with the Tax Authority takes the form of a Transfer Tax Demand, the Purchaser shall be obliged to comply with each of the Seller’s requests pursuant to paragraph 5.3 unless such requests are illegal under relevant legislation.

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5.5 Subject at all times to paragraph 5.4 above, in the event that the Seller requests that the Purchaser takes (or procure that a Group Member or a member of the Purchaser’s Group takes) such action as mentioned in paragraph 5.2(a) or paragraph 5.3(a):

(a)

the Seller shall have the right (if it wishes) to control any proceedings taken in connection with such action, and shall in any event be kept fully informed of any actual or proposed developments (including any meetings) and shall be provided with copies of all correspondence and documentation relating to such Demand or action, and such other information, assistance and access to records and personnel as it reasonably requires; and

(b)

the Seller shall indemnify the Purchaser, the Group Members and any other member of the Purchaser’s Group to the Purchaser’s reasonable satisfaction against all costs or expenses reasonably and properly incurred as a result of such action.

5.6 Subject at all times to paragraph 5.4 above, in the event that the Seller participates in the conduct of such action as mentioned in paragraph 5.2(b) or paragraph 5.3(b):

(a) the Seller will:

(i)	be entitled to freely organise, at its own expense, the defence of its interests and the interests of the Group Members or any member of the Purchaser’s Group;
(ii)	be authorised, after having consulted with the Purchaser, to settle, compromise, accept any liability or withdraw;
(iii)	act at all times with a view to mitigating the Tax Liability ;
(iv)	keep the Purchaser informed on a regular basis as to developments in the proceedings;
(v)	submit to the Purchaser any communication (written or email) or discuss in advance any prepared oral communication relating to the claim which is to be transmitted to the relevant Tax Authority and shall consider the reasonable comments of the Purchaser with regard to the communication;
(vi)	not settle o r compromise the claim or agree any matter in the conduct of the claim in a manner which will affect the conduct of the Tax affairs of a Group Company, and/or the Purchaser and/or (provided the impact on the relevant member of the Purchaser’s Group has been explicitly notified to the Seller) any other member of the Purchaser’s Group for a period ending

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after Completion without the Purchaser’s prior written approval (not to be unreasonably withheld or delayed); and

(b) Subject to paragraph 5.7, the Purchaser will, and procures that the Group Members and other members of the Purchaser’s Group will, co-operate with and provide the Seller with any assistance the Seller may reasonably require, and give the Seller reasonable access to any information and any person as the Seller may reasonably require, including copies of all information and documents necessary for the defence of the Seller’s interests and the interests of the Group Members or members of the Purchaser’s Group, provided that (except in relation to action taken under paragraph 5.3 in relation to a Transfer Tax Demand) the Purchaser shall be entitled to delete or redact from such information or documents any information which in its reasonable opinion is not necessary for such defence.

5.7	Subject to paragraph 5.8 and 5.9, in both of the cases referred to in paragraph 5.2 and paragraph 5.3, the Purchaser shall procure that no matter relating to such Demand as is referred to in paragraph 5.1 or to a Transfer Tax Demand is settled or otherwise compromised without the Seller’s prior written consent and the Purchaser shall, and shall procure that each other member of the Purchaser’s Group and their advisers shall, not submit any correspondence or return or send any other document to any Tax Authority where the Purchaser or any such person is aware or could reasonably be expected to be aware that the effect of submitting such correspondence or return or sending such document would or could be to put such Tax Authority on notice of any matter which could give rise to, or could increase, a claim under this Tax Covenant or for breach of any of the Tax Warranties, without first affording the Seller a reasonable opportunity to comment thereon and without taking account of such comments so far as it is reasonable to do so.
5.8	If the Seller does not inform in writing the Purchaser of its intentions as to the conduct of such action as mentioned in paragraph 5.2 by the date which is 10 Business Days prior to any deadline for action in connection with a Demand, or if the Seller requires the Purchaser to take (or procure that a Group Member or a member of the Purchaser’s Group takes) such action as mentioned in paragraph 5.2 (a) and does not indemnify the Purchaser, the Group Members and any other member of the Purchaser’s Group as stated in paragraph 5.5 (b), the Purchaser shall be free to satisfy or settle the relevant Tax Liability on such terms as it may reasonably think fit.
5.9	If the Seller does not inform in writing the Purchaser of its intentions as to the conduct of such action as mentioned in paragraph 5.3 by the date which is 10 Business Days prior to any deadline for action in connection with the Transfer Tax Demand, then:

(a) the Purchaser will take all action necessary in the first instance to defer the need for action in response to the Transfer Tax Demand while seeking confirmation

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from the Seller that it has received notice under paragraph 5.1 above and as to the Seller’s instructions pursuant to paragraph 5.3; and

(b) if it becomes necessary to formally appeal against the Transfer Tax Demand in order to afford the Purchaser sufficient time to carry out its obligations under (a) above then the Purchaser shall take all steps necessary to formally appeal the Transfer Tax Demand,

but if after ninety (90) Business Days of the date of the notice given to the Seller by the Purchaser under paragraph 5.1 the Seller has not required the Purchaser to take (or procure that a Group Member or a member of the Purchaser’s Group takes) such action as mentioned in paragraph 5.3 or if the Seller requires the Purchaser to take (or procure that a Group Member or a member of the Purchaser’s Group takes) such action as mentioned in paragraph 5.3(a) and does not indemnify the Purchaser, the Group Members and any other member of the Purchaser’s Group as stated in paragraph 5.5(b) the Purchaser shall be free to satisfy or settle the Transfer Tax Demand on such terms as it may reasonably think fit.

5.10 The preceding provisions of this paragraph 5 (except paragraphs 5.3 and 5.9) shall apply, as they apply to a Demand, to any document issued or action taken by a Tax Authority and the preparation or submission of any document to a Tax Authority from which it appears that any Surrender pursuant to paragraph 10 by a Group Member to any member of the Seller’s Tax Group is or may be reduced or eliminated, and so that:

(a)	references to claims under, amounts due, or payments to be made under this Tax Covenant shall be replaced by appropriate references to such reduction or elimination;
(b)	the reference to the relevant Tax Liability in paragraph 5.8 shall be replaced by a reference to such reduction or elimination being accepted without any appeal being pursued; and
(c)	the rights of the Seller under paragraph 5.2 shall extend to requiring Group Members to reduce or withdraw notices of consent or give new notices of consent on such terms as the Seller thinks fit.

6.	Payment Of Claims
6.1	Payments by the Seller of any liability under paragraph 2 shall be made in cleared and immediately available funds on the days specified in paragraph 6.2.

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6.2 The days referred to in paragraph 6.1 are as follows:

(a)	in a case that involves an actual payment of Tax, five Business Days before the last date on which the relevant Group Member would have had to pay to the relevant Tax Authority the Tax that has given rise to the Seller’s liability under the Tax Covenant or for a breach of the Tax Warranties in order to avoid incurring a liability to interest or a charge or penalty in respect of that Tax.
(b)	in the case of a Deemed Tax Liability, the later of five Business Days after demand is made therefor by or on behalf of the Purchaser and:

(i)	in the case of a Deemed Tax Liability within paragraph (c) of the definition of Deemed Tax Liability, the day on which the Company is obliged to make a payment pursuant to the Carry -back Receivable Sale Contract French Tax Authorities confirm in their formal reply to the taxpayer’s comments (Réponse aux observations de contribuable) that the undiscounted value of the Carry-back Receivable is reduced below €3,637,069;
(ii)	in the case of the loss of or failure to obtain an Accounts Relief which is a right to repayment of Tax, the day on which such Tax would otherwise have been repaid by the relevant Tax Authority;
(iii)	in the case of the loss of or failure to obtain any other Accounts Relief, three Business Days before Tax which would otherwise have been saved becomes due and payable to the relevant Tax Authority;
(iv)	in the case of the use or set-off of a Purchaser’s Relief, the day on which Tax would have been due and payable to the relevant Tax Authority but for the use or set -off of the Purchaser’s Relief;

(c) in any other case, five Business Days after the date on which demand is made therefore by or on behalf of the Purchaser.

7. Tax Returns And Computations

7.1 Without prejudice to paragraph 5, the Seller or its duly authorised agents shall be responsible for, and have the conduct of preparing, submitting to and agreeing with the relevant Tax Authorities all Tax returns and computations of each Group Member including (without limitation and subject to paragraph 10) claims, elections, surrenders, notices or consents in respect of any Surrender under paragraph 10, for all Tax accounting periods of such Group Members ending on or before Completion and in connection therewith:

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(a)	all returns, computations, documents and substantive correspondence relating thereto shall be submitted in draft form by the Seller to the Purchaser or its duly authorised agents for comment;
(b)	the Purchaser or its duly authorised agent shall comment within 21 days of such submission but if the Seller has not received any comments within 21 days, the Purchaser and its duly authorised agents shall be deemed to have approved such draft documents;
(c)	the Seller shall take into account all reasonable comments and suggestions made by the Purchaser or its duly authorised agents;
(d)	the Seller and the Purchaser shall each respectively afford (or procure the affordance) to the other or their duly authorised agents of information and assistance which may reasonably be required to prepare, submit and agree all such outstanding Tax returns and computations;
(e)	the Seller and the Purchaser shall as soon as practicable deliver to each other copies of all correspondence sent to or received from any Tax Authority;
(f)	the Purchaser undertakes to procure that each Group Member shall at the request of the Seller sign and submit to the relevant Tax Authority all such notices of claim, surrender or consent to surrender (including provisional or protective notices of claim, surrender or consent to surrender in cases where any relevant Tax computations have not yet been agreed) and all such other documents and returns as the Seller shall reasonably request to give effect to the foregoing provisions provided that the Purchaser shall not be obliged to procure that a Group Member signs and submits any document which in its reasonable opinion it considers to be wrong, misleading or inaccurate in any material respects.

7.2	The provisions of paragraph 7.1 (other than paragraph 7.1(f)) shall apply in respect of the Tax accounting period of the Group Members in which Completion falls as if the word “Seller” reads “Purchaser” and the word “Purchaser” reads “Seller” PROVIDED THAT the Seller shall not have any right to comment on or to receive copies of correspondence in relation to any matter which relates solely to an Event or Events occurring (or treated as occurring) after Completion.
8.	Corresponding Savings And Third Party Recovery
8.1	If any Tax Liability which has resulted in a payment having been made by the Seller under this Tax Covenant or for breach of any of the Tax Warranties has given rise to a Relief (other than a Purchaser’s Relief) which would not otherwise have arisen, then:

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(a)

the Purchaser shall procure that full details of such Relief are given to the Seller as soon as reasonably practicable; and

(b)

to the extent that a liability to make an actual payment of Tax is reduced as a result of the use or set off of such Relief, the Purchaser shall pay to the Seller on the date when the Purchaser or any Group Member would have been under an obligation to make the payment so reduced an amount equal to the lower of the amount by which such liability is so reduced and the amount of the payment previously made by the Seller in respect of the Tax Liability giving rise to the Relief, and, for these purposes, any such Relief as is referred to in this paragraph 8.1 shall, insofar as legally possible, be used in priority to any other Relief (provided that the use of such Relief does not restrict the future availability of a Purchaser’s Relief) and the Seller shall be entitled, at its own expense, to require that the relevant Group Member’s auditors (acting as experts and not arbitrators) shall certify the amount and date of use of such Relief, which certification shall, in the absence of manifest error, be final and binding on the parties.

8.2 If the Seller at any time pays to the Purchaser an amount under this Tax Covenant or for breach of the Tax Warranties and the Purchaser or a Group Member or any other member of the Purchaser’s Group is or becomes entitled to recover from some other person (other than a member of the Purchaser’s Group but including any Tax Authority) any sum in respect of the matter giving rise to such payment (other than by reason of the use or set off of a Purchaser’s Relief), the Purchaser, if so required by the Seller, will (and will procure that the relevant Group Member or member of the Purchaser’s Group will), at the cost of the Seller and upon the Seller providing security to the reasonable satisfaction of the Purchaser against all costs, expenses, losses or damages which may thereby be incurred, take all reasonable steps to enforce such recovery (provided that neither the relevant Group Member nor the Purchaser nor the relevant member of the Purchaser’s Group shall be obliged to take any action which it reasonably considers to be prejudicial to its interests), and the Purchaser shall within 2 Business Days of such recovery, pay to the Seller the lesser of:

(a)	the sum so recovered by the Purchaser or the Group Member or the member of the Purchaser’s Group (as applicable) from such other person (including sums recovered in respect of costs and any interest or repayment supplement received in respect of the sum recovered, but less any costs of recovery not previously reimbursed and less any Tax chargeable on the sum recovered); and
(b)	the amount paid by the Seller to the Purchaser as referred to in paragraph 8.1 above plus any interest or repayment supplement received in respect of the sum recovered, less any Tax chargeable thereon, to the extent such interest or

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repayment supplement is attributable to any period following the payment by the Seller to the Purchaser as referred to above.

8.3	Any amounts paid by the Seller under this Tax Covenant or for breach of the Tax Warranties and subsequently refunded and/or set -off under this paragraph 8 shall be disregarded to the extent of the refund and/or set -off for the purpose of paragraph 4.1 above in the event of any further claim under this Tax Covenant or for breach of the Tax Warranties.
9.	Over Provisions
9.1	If the Seller shall become liable in respect of any claim arising under this Tax Covenant or for breach of any of the Tax Warranties credit shall be given to the Seller against such liability for any amount referred to in paragraph 9.2 (a “Relevant Amount”) which shall be dealt with in accordance with paragraph 9.4.
9.2	A Relevant Amount for the purposes of paragraph 9.1 shall be:

(a)	the amount by which any provision for Tax contained in the Net Current Assets Statement proves to be an over provision (otherwise than by reason of the use or set off of any Purchaser’s Relief); or
(b)	the amount of any right to repayment of Tax owed to a Group Member by a Tax Authority which:

(i)	arises as a consequence of or by reference to any Event which occurred (or is treated for Tax purposes as occurring) on or before Completion or in respect of or by reference to any Income, Profits or Gains earned, accrued or received on or before Completion;
(ii)	is not reflected in the Net Current Assets Statement;
(iii)	does not arise from the use of a Purchaser’s Relief; and
(iv)	is not a Relief to which paragraph 8 applies, which has been taken into account in paragraph 3.1(j) or in respect of which credit has been given under any other provision of paragraph 9; or

(c) the amount of any Tax saved by the Purchaser, a Group Member or any other member of the Purchaser’s Group for which the Seller is not liable under this Tax Covenant or for breach of the Tax Warranties as a result of the use or set off of a Relief arising to a Group Member on or prior to Completion (other than a Purchaser’s Relief, a Relief which has been taken into account in paragraph 3.1(j),

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a Relief to which paragraph 8 applies or a Relief in respect of which credit has been given under any other provision of paragraph 9).

9.3

If the Purchaser becomes aware that there are or may be such amounts as are referred to in paragraph 9.2, it shall (or shall procure that the relevant Group Member or a member of the Purchaser’s Group shall) promptly inform the Seller of that fact. If the auditors for the time being of a Group Member or any member of the Purchaser’s Group are requested by either of the parties hereto to certify any of such amounts as are referred to above the relevant party shall procure that the auditors are instructed to give and shall (at the expense of the party requesting) give as soon as practicable such certificate and in so doing they shall act as experts and not as arbitrators and (in the absence of manifest error) their decision shall be final and binding on the parties hereto.

9.4

Each Relevant Amount is to be dealt with as follows:

(a)	the Relevant Amount shall first be set off against any payment then due from the Seller under this Tax Covenant or for breach of the Tax Warranties; and
(b)	to the extent there is an excess of the Relevant Amount after any amounts have been set off under paragraph 9.4(a) a refund shall be made to the Seller of any previous payment or payments made by the Seller under this Tax Covenant or for breach of the Tax Warranties and which have not previously been refunded under this paragraph 9.4(b), up to the amount of such excess; and
(c)	to the extent that the excess referred to in paragraph 9.4(b) is not exhausted under that paragraph, the remainder of that excess shall be carried forward and set off against any future payment or payments which become due from the Sellers under this Tax Covenant or for breach of the Tax Warranties.

9.5

Where any such certification as is mentioned in paragraph 9.3 has been made, the Seller or the Purchaser may (at its own expense) request the auditors to review such certification in the light of all relevant circumstances, including any facts which have become known only since such certification, and to certify whether such certification remains correct or whether, in the light of those circumstances, the amount that was the subject of such certification should be amended.

9.6

If the auditors certify under paragraph 9.5 that an amount previously certified should be amended, that amended amount shall be substituted for the purposes of paragraph 9.4 as the Relevant Amount in respect of the certification in question in place of the amount originally certified, and such adjusting payment (if any) as may be required by virtue of the above mentioned substitution shall be made as soon as practicable by the Seller or the Purchaser, as the case may be.

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10. Cross -Border Surrenders

10.1	Subject to the following provisions of this paragraph, and without prejudice to the generality of paragraph 7, the Purchaser shall procure after Completion that the Group Members shall (so far as legally possible), in respect of any time or period falling on or prior to the Completion Date, make, give or enter into such claims, elections, surrenders, notices or consents (whether unconditional or conditional, whether or not forming part of any other return or tax document, whether provisional or final, and including amendments to or withdrawals of earlier claims, elections, surrenders, notices or consents, whether or not made before or after Completion) as the Seller shall direct in connection with any Surrender to any member of the Seller’s Tax Group by a Group Member and shall not, otherwise than directed pursuant to this paragraph, make Surrenders or withdraw Surrenders previously made. No payment shall be made in respect of any Surrender.
10.2	The Purchaser shall, or shall procure that the Group Members shall, at the request of the Seller, take all actions within their power necessary or desirable to facilitate the continuation and successful conclusion of all legal proceedings relating to Surrenders falling within paragraph 10.1.
10.3	Neither the Purchaser nor any of the Group Members shall be obliged to comply with requests made under paragraphs 10.1 and 10.2 above to the extent that the effect of so doing would be either: (i) to increase a liability to Tax of the Purchaser or any of the Group Members; or (ii) result in the loss of any Relief which could be used by the Purchaser or any of the Group Members to reduce a liability to Tax.
10.4	If, upon conclusion of the legal proceedings referred to in paragraph 10.2 or any successor legal proceedings which take place either in the European Court of Justice, or in the national courts, tax tribunal or similar forum of any member state of the European Union, it is determined that damages or any other monetary consideration shall be paid to any Group Member or any other member of the Purchaser’s Group by any third party, the Purchaser shall, or shall procure that the relevant Group Member or member of the Purchaser’s Group shall, by way of repayment of the consideration given for the Shares, pay to the Seller an amount equal to the damages or other monetary consideration which it is ordered should be paid to that Group Member or other member of the Purchaser’s Group.
10.5	The payment envisaged by paragraph 10.4 shall be made by the Group Member or, as the case may be, other member of the Purchaser’s Group, within 30 days of receipt of the damages or other monetary consideration which give rise to the obligation to make a payment or payments under paragraph 10.4.

EX-4.B.IX

Exhibit 4(b)(ix)

Dated 13 JULY 2006

BHR Holdings BV

and

Others

and

MSREF VI Danube BV

SHARE PURCHASE AGREEMENT

relating to a portfolio of companies in continental Europe

Linklaters

One Silk Street
London EC2Y 8HQ

Telephone (44-20) 7456 2000
Facsimile (44-20) 7456 2222
Ref: N Mayo

Share Purchase Agreement

This Agreement is made on 13 July 2006

between:

(1)	BHR Holdings BV a company incorporated in The Netherlands whose registered office is at Strawinskylaan 3105, 7th Floor, 1077 ZX Amsterdam, The Netherlands (the “Principal Seller”);
(2)	Each of the other Share Sellers whose names are set out in Schedule 1 (together with the Principal Seller, the “Sellers”) ; and
(3)	MSREF VI Danube BV a company incorporated in The Netherlands whose registered no. is 34251220 registered office is at Kabelweg 37, 1014 BA, Amsterdam (the “Purchaser”).

Whereas:

(A)

The Share Sellers (as to the Shares set out against their respective names in Schedule 1) have agreed to sell the Shares and the Principal Seller has agreed to transfer, or procure the transfer, of certain rights of the Sellers’ Group arising under the Sellers’ Group Contracts, in each case, on and in accordance with the terms of this Agreement and to assume the respective obligations imposed on them under this Agreement.

(B)

The Purchaser has agreed to purchase, or procure the purchase by its nominee(s), of the Assets on and in accordance with the terms of this Agreement and to assume the obligations imposed on the Purchaser under this Agreement.

It is agreed as follows:

1	Interpretation
	In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:

1.1	Definitions
	“Accounts Date” means, in respect of each of Société des Hôtels Reunis SAS, SCH Résidence (France) SNC and SNC Carlton Inter-Continental Cannes, 30 September 2005 and, in respect of each other Group Company, 31 December 2005;
	“Actual Inter-Group Debt” means all indebtedness in respect or in the nature of cash borrowings due as at 2400 hours (CET) at the end of the Completion Date from the Group Companies to the Sellers’ Group;
	“Actual Inter-Group Credit” means all indebtedness in respect or in the nature of cash borrowings due as at 2400 hours (CET) at the end of the Completion Date from the Sellers’ Group to the Group Companies, including any amounts due under any discount notes issued by Six Continents Limited to any Group Company;
	“Actual Inter-Group Debt Balance” means the aggregate amount of all Actual Inter-Group Debt less the aggregate amount of all Actual Inter-Group Credit, which balance may (accordingly) be either a positive or negative figure;

“Aggregated Financial Summary” means the pro-forma aggregated financial summary of the profit and loss accounts derived from the management accounts of the Hotels for the 5 years commencing 1 January 2001 and ended 31 December 2005;

“Agreed Terms” means, in relation to a document, such document in the terms agreed between the Sellers and the Purchaser and signed for identification by the Sellers’ Lawyers and the Purchaser’s Lawyers with such alterations as may be agreed in writing between the Sellers and the Purchaser from time to time and, for ease of reference, a list of documents in the agreed terms is set out at Schedule 4;

“Applicable GAAP” means, in respect of each Group Company, generally accepted accounting standards, legal principles, guidelines, conventions, rules and procedures of accounting practice applicable in the jurisdiction of incorporation of the relevant Group Company;

“Assets” means the Shares, rights and other assets agreed to be sold pursuant to Clause 2.1.

“Audited Accounts” means, in relation to any Group Company, other than IHGG and SCHRF, the audited accounts of that Group Company for the period ended on the relevant Accounts Date, including the directors’ and auditors’ reports, relevant balance sheets and profit and loss accounts and related notes thereto and all other documents which are, or are required by law to be, annexed to such audited accounts;

“Athenaeum” means Athenaeum Hotel and Touristic Enterprises S.A.;

“Athenaeum Agreement” means the Investment and Cooperation Agreement between Athenaeum, BOEBV and Ter-Ellen S.A dated 4 October 1989;

“Beach Concession Agreement” means the beach concession agreement between the town of Cannes and SNC Carlton Inter-Continental Cannes dated 3 April 2003;

“BOEBV” means BHR (Overseas) Europe B.V.;

“Business Day” means a day which is not a Saturday, Sunday or a public holiday in England;

“Companies” means the companies details of which are set out in Part 1 of Schedule 2 and “Company” means any one of them;

“Completion” means the completion of the sale of the Assets pursuant to Clauses 6.1, 6.2 and 6.3 of this Agreement;

“Completion Amount” means the Initial Share Consideration plus the Estimated Net Current Assets;

“Completion Date” means the date on which Completion takes place;

“Completion Inter-Group Credit” means a reasonable estimate of all indebtedness in respect or in the nature of cash borrowings due as at 2400 hours (CET) at the end of the Completion Date from the Sellers’ Group to the Group Companies, as specified in Part 2 of Schedule 11;

“Completion Inter-Group Debt” means a reasonable estimate of all indebtedness in respect or in the nature of cash borrowings due as at 2400 hours (CET) at the end of the Completion Date from the Group Companies to the Sellers’ Group, as specified in Part 1 of Schedule 11;

“Completion Inter-Group Debt Balance” means the aggregate amount of all Completion Inter-Group Debt less the aggregate amount of all Completion Inter-Group Credit, being an aggregate positive amount of €84,390,000 owing from the Group Companies to members of the Sellers’Group;

“Confidentiality Agreement” means the confidentiality agreement dated 16 February 2006 between MSREF V International-GP, L.L.C. and InterContinental Hotels Group PLC pursuant to which the Sellers made available to the Purchaser certain confidential information relating to the Group Companies and the Properties;

“Consultancy Agreement” means an agreement other than a contract of employment between a Consultant and a Group Company, pursuant to which such Consultant provides personal services for a term of more than three months;

“Consultant” means an individual who undertakes to perform personally any services to a Group Company pursuant to a Consultancy Agreement on an annual fee (on the basis of a full time consultancy) in excess of €75,000 (excluding VAT);

“Contracts” means the Sellers’ Group Contracts and the Split Contracts;

“Corporate Income Tax” has the meaning given to it in Part 1 of Schedule 6;

“Data Room” means the on-line data room at http://www.datasite.com codenamed Cayman Data Room containing documents and information relating to the Group Companies and the Properties made available by the Sellers, the contents of which are listed in the Schedule to the Disclosure Letter;

“Disclosure Letter” means the disclosure letter dated on the same date as this Agreement from the Sellers to the Purchaser including:

(i)	information constituting exceptions to the Sellers’ Warranties; and
(ii)	details of other matters referred to in this Agreement;

“ECS Agreements” means the respective individual electronic commission services agreements to be entered into on Completion by Six Continents Hotels, Inc. and the relevant Group Company for each of the Hotels in the Agreed Terms;

“ECS and Holidex Access and Systems Agreement Termination Agreements” means the respective individual agreements to be entered into on Completion by Six Continents Hotels, Inc. and the relevant Group Company in connection with the termination of certain existing electronic commission services agreements and, in respect of the IC Carlton Cannes Hotel and the IC Rome Hotel, certain existing Holidex access and systems agreements, in each case, in the Agreed Terms;

“Eligible Deferred Tax Assets” has the meaning given to it in Part 1 of Schedule 6;

“Eligible Deferred Tax Liabilities” has the meaning given to it in Part 1 of Schedule 6;

“Encumbrance” means any claim, charge, mortgage, lien, option, equity, power of sale, hypothecation, retention of title, right of pre-emption, right of first refusal or other third party right or security interest of any kind with the exception of liens arising by operation of law in the ordinary course of business of any Group Company;

“Environment” and “Environmental Law” have the meanings given to them in paragraph 10.1 of Schedule 7;

“EONIA” means the Euro Overnight Index Average calculated by the European Central Bank;

“Estimated Net Current Assets” means the negative sum of €17,109,000, being a realistic estimate of the sum of all Stock, Debtors, Cash and Eligible Deferred Tax Assets minus the sum of all Creditors, Corporate Income Tax and Eligible Deferred Tax Liabilities, in each case, of the Group Companies as at 2400 hours (CET) at the end of the Completion Date, in each case, as such items are defined in Part 1 of Schedule 6;

“Excluded Rights” means all subsisting rights of any Group Company as at Completion arising under the Split Contracts to the Relevant Extent;

“Event” means any act, omission, event or transaction, accrual of income or gains, distribution, acquisition, disposal, transfer, payment, loan or advance;

“FIH” means Frankfurt Intercontinental Hotels Gesellschaft mit beschränkter Haftung;

“Group Companies” means the Companies and the Subsidiaries, “Group Company” means any one of them and “Group” shall be construed accordingly;

“Hazardous Substances” has the meaning given to it in paragraph 10.1 of Schedule 7;

“Hofburg” means Hofburg Redoutensäle Wien Betriebsgesellschaft m.b.H.;

“Holidex Access and Systems Agreements” means the respective Holidex access and systems agreements to be entered into on Completion between Six Continents Hotels, Inc. and the relevant Group Company for each of the Hotels in the Agreed Terms;

“Hotel Agreement Deeds of Termination” means the respective individual hotel agreement deeds of termination to be entered into on Completion by the relevant members of Sellers’ Group and the relevant Group Company in connection with the termination of certain agreements in the Agreed Terms;

“Hotel Trade Mark Agreements” means the respective individual trade mark agreements to be entered into on Completion between the relevant member of the Seller’s Group and the relevant Group Company primarily in respect of the IC Amstel Hotel, the IC Carlton Cannes Hotel and the IC Madrid Hotel, in each case, in the Agreed Terms;

“Hotels” means the hotel businesses as operated at or from the Properties as at the date hereof and “Hotel” means any one of them;

“IC Dublin Agreement” means the agreement for the sale of the entire issued share capital of International Airport Hotel Limited dated 10 August 2005 entered into between BOEBV and Adelphi Way Developments and Investments Limited;

“IC Amstel Hotel” means the Property listed in Schedule 3 which is located in Amsterdam, The Netherlands;

“IC Budapest Hotel” means the Property listed in Schedule 3 which is located in Budapest, Hungary;

“IC Carlton Cannes Hotel” means the Property listed in Schedule 3 which is located in Cannes, France;

“IC Frankfurt Hotel” means the Property listed in Schedule 3 which is located in Frankfurt, Germany;

“IC Frankfurt Subsidiary HMA” means the German law governed hotel management agreement to be entered into on Completion between IHM and the relevant Group Companies in the Agreed Terms;

“IC Madrid Hotel” means the Property listed in Schedule 3 which is located in Madrid, Spain;

“IC Rome Hotel” means the Property listed in Schedule 3 which is located in Rome, Italy;

“IC Szálloda” means Inter-Continental Szálloda Budapest Zártkörüen Müködö Részvénytársaság “átalakulás alatt” registered in Hungary with registration number Cg. 01-10-042995 and its legal successor following its conversion, Inter-Continental Szálloda Budapest Korlátolt Felelõsségü Társasag, to be registered in Hungary with registration number Cg. 01-09-872343;

“IC Vienna Hotel” means the Property listed in Schedule 3 which is located in Vienna, Austria;

“IFRS” means International Financial Reporting Standards;

“IHB Germany” means Intercontinental Hotels Betriebsgesellschaft mit beschränkter Haftung;

“IHGG” means Inter-Continental Holding (Germany) GmbH;

“IHM” means Intercontinental Hotels Managementgesellschaft mbH;

“Individual Hotel Management Agreements” means the respective individual hotel management agreements to be entered into on Completion between the relevant member of the Sellers’ Group and the relevant Group Company for each of the Hotels substantially in the form of the Pro Forma Individual Hotel Management Agreements;

“Initial Share Consideration” means €539,710,000;

“Intellectual Property” means trade marks, service marks, trade names, domain names, logos, get-up, patents, inventions, registered and unregistered design rights, copyrights, semi-conductor topography rights, database rights and all other similar rights in any part of the world (including Know-how) including, where such rights are obtained or enhanced by registration, any registration of such rights and applications and rights to apply for such registrations together with the right to sue for past infringements;

“Inter-Group Payables” has the meaning given to it in Part 1 of Schedule 6;

“Inter-Group Receivables” has the meaning given to it in Part 1 of Schedule 6;

“Know-how” means confidential and proprietary industrial and commercial information and techniques in any form including (without limitation) drawings, formulae, test results, reports, project reports and testing procedures, instruction and training manuals, tables of operating conditions, market forecasts and lists and particulars of customers and suppliers;

“Lease” means in relation to each Property which is leasehold, the lease(s) or underlease(s) or licence(s) under which the relevant Group Company holds such Property and includes the other documents supplemental thereto;

“Letting Document’ means any lease, underlease, tenancy, licence or other agreement or arrangement (in each case as amended) giving rise to third party rights of occupation to which any Property is subject;

“Local Transfer Documents” has the meaning given to it in paragraph 2.1 of Schedule 5;

“Losses” means all losses, liabilities, costs (including, without limitation, legal costs and experts’ and consultants’ fees), charges, expenses, actions, proceedings, claims and demands;

“Material Adverse Change” means the destruction, closure or other inability to use guest rooms or other material facilities at any of the Hotels, other than for routine maintenance, which together result in: (i) all of the guest rooms of any Hotel being reasonably likely to be so destroyed, closed or unable to be used for a period of 3 months or more; or (ii) the aggregate value of the Hotels, taken as a whole, being reduced by €63.38 million or more, and, in each case, which destruction, closure or inability to use occurs or commences on or after the day falling 4 Business Days prior to the date of this Agreement, but excluding the closure of any guest rooms and/or office facilities at the IC Rome Hotel which have a ceiling height of less than the minimum height requirements imposed under applicable Italian health and safety regulations as at the date of this Agreement as a result of enforcement action taken by the relevant health and safety authorities in connection with such fact;

“Material Intellectual Property” has the meaning given to it in paragraph 6 of Schedule 7;

“Material Issues Reports on Title” means the reports on title covering material issues only in relation to the Properties prepared by the Sellers’ Property Lawyers each dated 29 June 2006 and addressed to the Purchaser and its funders;

“Material Letting Document’ means a Letting Document under which at the date of this Agreement the basic rent or other principal fee payable is equivalent to €75,000 per annum or more;

“Management Accounts” means the unaudited balance sheet and profit and loss account of each of the Hotels respectively for the 5 months ended 31 May 2006;

“Net Current Asset Adjustment” means the amount by which the Net Current Assets are greater than the Estimated Net Current Assets and payable pursuant to Clause 8.2.1(i) (such amount being expressed as a positive figure) or the amount by which the Net Current Assets are less than the Estimated Net Current Assets and payable pursuant to Clause 8.2.1 (ii) (such amount being expressed as a negative figure);

“Net Current Assets” means the amount (being either a positive or negative figure, as the case may be) equal to the sum of all Stock, Debtors, Cash, Eligible Deferred Tax Assets and, if it is to be treated as an asset, in accordance with part 1 of Schedule 6, the Inter-Group Debt Balance Balancing Item, minus the sum of all Creditors, Corporate Income Tax, Eligible Deferred Tax Liabilities and, if it is to be treated as a liability, in accordance with part 1 of Schedule 6, the Inter-Group Debt Balance Balancing Item, in each case, of the Group Companies as at 2400 hours (CET) at the end of the Completion Date, in each case, as defined and as agreed or determined in accordance with Clause 8 and Schedule 6;

“Net Current Asset Statement” means the statements of Net Current Assets to be prepared, agreed and determined, in each case, in accordance with Clause 8.1 and Schedule 6;

“Non-Disturbance Agreements” means the respective individual non-disturbance agreements in the Agreed Terms to be entered into on Completion by, amongst others, the

relevant member of the Sellers’ Group, the relevant Group Company and Barclays Banks PLC;

“Omega Litigation” means the litigation initiated by IHGG as plaintiff against OMEGA Hotels GmbH regarding the payment of outstanding marketing fees in which respect a first instance judgement has been given by the regional court (Landgericht) of Frankfurt am Main, Germany, on 27 April 2006 (reference number 2-27 O 115/05) to which both parties have appealed to the higher regional court (Oberlandesgericht) of Frankfurt am Main, Germany, any appeal, enforcement or other proceedings relating thereto, and any other future dispute (including any enforcement measures) relating to the same subject matter as the pending litigation, appeal and enforcement proceedings;

“Pre-Sale Reorganisation” means the pre-sale reorganisation of the Sellers’ Group and parts of the Group Companies in accordance with the pre-sale reorganisation paper in the Agreed Terms (the “Pre-Sale Reorganisation Paper”);

“Pre-Sale Reorganisation Documents” means the documents included in Section 0.48 of the Data Room and the documents listed at items Group 0.48_25 to 0.48_82 and at BHRO(Eur)BV 02.009.026 in Schedule 3 of the Disclosure Letter, pursuant to which the Pre-Sale Reorganisation has been implemented;

“Pro Forma Individual Hotel Management Agreements” means the pro forma Individual Hotel Management Agreements, including the commercial provisions applicable to all the Individual Hotel Management Agreements and the specific provisions relating to each of the Individual Hotel Management Agreements, in each case, in the Agreed Terms;

“Properties” means the properties set out in Schedule 3 and “Property” means any one of them;

“Purchaser’s Group” means the Purchaser and its subsidiaries from time to time;

“Purchaser’s Lawyers” means Clifford Chance LLP of 10 Upper Bank Street, London E14 5JJ;

“Purchasing Agreements” means the purchasing agreements to be entered into on Completion by Six Continents Limited and the relevant Group Company for each of the Hotels in the Agreed Terms;

“Relevant Employees” means those employees of the Group Companies who are, immediately prior to the date of this Agreement and/or Completion, as the context may require, employed by a Group Company;

“Relevant Extent” means: (i) in respect of any right or obligation of any member of the Sellers’ Group pursuant to Clause 13.3 in respect of a Split Contract or a Sellers’ Group Contract, solely to the extent the rights and obligations under such contract relate to any property or other asset owned by any member of the Sellers’ Group which is not being transferred to the Purchaser pursuant to this Agreement; and (ii) in respect of any right or obligation of any member of the Purchaser’s Group pursuant to Clause 13.3 in respect of a Split Contract or a Sellers’ Group Contract, solely to the extent the rights and obligations under such contract relate to any of the Properties or other assets being transferred to the Purchaser pursuant to this Agreement;

“Relief ”means any loss, relief, allowance, credit, deduction, exemption or set-off in each case in respect of Tax, or the computation of income, profits or gains for the purpose of any Tax, and any right to the repayment of Tax;

“Retirement Benefit Arrangements” has the meaning given in paragraph 8.8.1 of Schedule 7;

“Rome Lease Agreement” means the lease agreement dated 17 January 1996 between Delaville SpA and Reale Immobili SpA relating to the IC Rome Hotel;

“SCHRF” means SCH Résidence (France) SNC;

“Sellers’ Group” means InterContinental Hotels Group PLC and its subsidiaries from time to time but excluding the Group Companies and “Sellers’ Group Companies” shall be construed accordingly;

“Sellers’ Group Contracts” means those agreements listed in Part 2 of Schedule 10, being agreements to which a member of the Sellers’ Group is a party which relate partly but not exclusively to one or more of the Hotels or the Group Companies, to the extent that at Completion the same remain to be completed or performed or remain in force;

“Sellers’ Lawyers” means Linklaters of One Silk Street, London EC2Y 8HQ;

“Sellers’ Property Lawyers” means Linklaters, Chiomenti Studio Legale, Gassauer-Fleissner Rechtsanwalte GmbH and Nauta Dutilh NV;

“Sellers’ Warranties” means the warranties given by the Principal Seller pursuant to Clause 9 and Schedule 7 and “Sellers’ Warranty” means any one of them;

“Senior Employee” means any employee employed or engaged by a Group Company on an annual base salary (on the basis of full-time employment) in excess of €100,000 and the general manager of each Hotel;

“Service Agreement Termination Agreements” means the respective individual service agreement termination agreements to be entered into on Completion by Six Continents Limited and the relevant Group Company for each of the Hotels in the Agreed Terms;

“Shares” means all the shares in the capital of the Companies specified in Part 1 of Schedule 1;

“Share Sellers” means each of the Companies listed in Schedule 1 as a seller of shares in the capital of one or more of the Companies;

“SHIF” means Société Des Hotels InterContinental France SNC;

“Side Letters” means the side letters, in the Agreed Terms, relating to the following matters relevant to the Individual Hotel Management Agreements:

(a)	Section 7.1 of the Individual Hotel Management Agreements (Meetings);
(b)	Section 9.3.3 of the Individual Hotel Management Agreements (Area Employees);
(c)	Section 6 and Section 11.6.1 of the Individual Hotel Management Agreements (Cash Pooling/Business Service Centre and PeopleSoft);
(d)	Section 20.13 of the Individual Hotel Management Agreements (Minimum Net Assets);
(e)	each side letter in respect of matters requiring action for Hotel compliance with “Brand Standards” following Completion and/or compliance/non compliance with operational licences of each of the Hotels in Frankfurt, Rome and Madrid; and

(f) the side letter relating to the personal easement in connection with the Individual Hotel Management Agreement relating to the IC Frankfurt Hotel;

“Sienna Hotel PSPA” means the preliminary share purchase agreement for the purchase of shares in Sienna Hotel dated 17 May 2001 between BOEBV and BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Ôsterreichische Postsparkasse Aktiengesellschaft;

“Sienna Hotel Security Agreements” means the agreements listed in Schedule 15 and “Sienna Hotel Security Agreement” means any one of them;

“Split Contracts” means those agreements listed in Part 1 of Schedule 10, being agreements to which a Group Company is a party which relate partly but not exclusively to one or more of the Hotels or the Group Companies, to the extent that at Completion the same remain to be completed or performed or remain in force;

“Subsidiaries” means the subsidiaries listed in Part 2 of Schedule 2 and “Subsidiary” means any one of them;

“Taxation” or “Tax” means any form of taxation and duty, impost or tariff in each case in the nature of taxation, whether chargeable directly or primarily against or attributable directly or primarily to the Group Companies or any other person, and including all interest and penalties thereon (save to the extent such penalties or interest are attributable to unreasonable delay by the Purchaser or by any member of the Purchaser’s Group after Completion), but excluding the uniform business rates, water rates, property rates, council taxes and all other similar rates and charges and other local (including for the avoidance of doubt regional) authority rates or charges and also excluding Deferred Tax (as defined in Schedule 6). For the purposes of the Tax Deed of Covenant only, “Taxation” or “Tax” includes any payment due from any Group Company pursuant to the TCA (other than a payment due to or by one Group Company from or to another Group Company);

“Tax Authority” or “Taxation Authority” means any taxing or other authority competent to impose any liability in respect of Taxation or responsible for the administration and/or collection of Taxation;

“Tax Deed of Covenant” means the deed of covenant against Taxation in the Agreed Terms;

‘Tax Statute” means any primary or secondary statute, instrument, enactment, order, law, by law or regulation making any provision for or in relation to Tax;

“Tax Warranties” means those of the Sellers’ Warranties which relate to Tax being contained in paragraph 13 of Schedule 7 to this Agreement and ‘Tax Warranty” means any one of them;

“TCA” means the tax consolidation agreement dated 18 August 2003 between SHIF, Société Nouvelle du Grand Hotel, BHR Services (France), Société des Hôtéls Réunis and SCH Résidence (France) as amended by a side letter relating thereto dated 6 July 2006 between the same parties;

“Transaction” means the transactions contemplated by the Transaction Documents;

“Transaction Documents” means this Agreement, the Disclosure Letter, each document referred to in Schedule 4 (other than the Pro Forma Individual Hotel Management Agreements), the Individual Hotel Management Agreements and each document entered into or to be entered into pursuant to any of the foregoing documents;

“Transferring Budapest Employees” means Bettina Haeberle (Director of Sales, IC Budapest Hotel), Dietmar Trimmel (Director of Finance, IC Budapest Hotel) and Carlo Cirone (Executive Chef, IC Budapest Hotel);

“Transferring Employees” means the general managers of IC Madrid Hotel, IC Frankfurt Hotel, IC Amstel Hotel, IC Rome Hotel, those thirty-two corporate employees transferred from IHGG to InterContinental Hotels Managementgesellschaft mbH on 1 June 2006, the convention sales manager currently seconded by InterContinental Hotel-Betriebsgesellschaft m.b.H. (Austria) to the IC Prague Hotel, and any other employee transferred from a Group Company to a member of the Sellers’ Group in accordance with the relevant Pre-Sale Reorganisation Documents and “Transferring Employee” means any one of them;

“Unaudited Accounts” means the unaudited balance sheet and profit and loss account of each of IHGG and SCHRF respectively as at and for the 12 months ended on the relevant Accounts Date and the related notes thereto and all other documents which are, or are required by law to be, annexed to such accounts;

“USALI” means the Uniform System of Accounts for the Lodging Industry (9th revised edition) published by the American Hotel and Lodging Association;

“VAT” means value added tax which may be levied in accordance with, but subject to permitted derogations from, EU Directive 77/388/EEC; and

“Wiener” means Wiener Kongresszentrum Hofburg Betriebsgesellschaft m.b.H.

1.2	Modification etc. of Statutes
	References to a statute or statutory provision include:

1.2.1	that statute or provision as from time to time modified, re-enacted or consolidated whether before or after the date of this Agreement;
1.2.2	any past statute or statutory provision (as from time to time modified, re-enacted or consolidated) which that statute or provision has directly or indirectly replaced; and
1.2.3	any subordinate legislation made from time to time under that statute or statutory provision,

except to the extent that any statute, statutory provision or subordinate legislation made or enacted after the date of this Agreement would create or increase a liability of the Sellers under this Agreement or the Tax Deed of Covenant.

1.3	Singular, plural, gender
	References to one gender include all genders and references to the singular include the plural and vice versa.

1.4	References to persons and companies
	References to:

1.4.1 a person shall include any company, partnership or unincorporated association (whether or not having separate legal personality); and

1.4.2 a company shall include any company, corporation or any body corporate, wherever incorporated.

1.5 References to subsidiaries and holding companies

The words “holding company” and “subsidiary” shall have the same meaning in this Agreement as their respective definitions in the Companies Act 1985.

1.6 Schedules etc.

References to this Agreement shall include any Recitals and Schedules to it and references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement. References to paragraphs and Parts are to paragraphs and Parts of the Schedules.

1.7	Headings
	Headings shall be ignored in interpreting this Agreement.
1.8	Information
	References to books, records or other information mean books, records or other information in any form including paper, electronically stored data, magnetic media, film and microfilm.
1.9	Legal Terms
	References to any English law legal term shall in respect of any jurisdiction other than England, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction.
1.10	Including
	References to “includes”, “include”, “including” or similar are to be construed without limitation.
1.11	Business
	References to “in the ordinary course of business”, “business of the Hotels”, “conduct of the Hotels”, “business of the Group Companies” or similar shall (other than in the case of this Clause 1.11 and Schedule 7) include a reference to (i) such staff accommodation and/or storage facilities as at the date of this Agreement and/or which may be owned or leased by any Group Company after the date of this Agreement, provided and to the extent that the same are ancillary to the conduct of the business of the Hotels as carried on at the date of this Agreement and (ii) the catering activities carried on by the IC Vienna Hotel in so far as they relate to Wiener and/or Hofburg as at the date of this Agreement.

2 Agreement to Sell

2.1 Sale of Shares

2.1.1 On and subject to the terms of this Agreement the Share Sellers (as to the Shares set out against its name in Schedule 1) agree to sell, and the Purchaser agrees to purchase, or procure the purchase by its nominee(s) of, the Shares and the Principal Seller agrees to transfer, or to procure the transfer, to the Purchaser and/or its relevant nominee(s) (as the case may be) the rights of the Sellers’ Group arising under the Sellers’ Group Contracts to the Relevant Extent, in each case on the terms set out in Clause 13.3.

2.1.2 Subject to Clause 2.2, the Assets shall be sold by the Share Sellers and the Principal Seller and purchased by the Purchaser (and/or its nominee(s)) free from Encumbrance and together with all rights and advantages attaching and/or accrued to them as at Completion (including, without limitation, the right to receive all dividends or distributions declared, made or paid on or after Completion).

2.2	Excluded Rights
	There shall be excluded from the sale under this Agreement of the Assets (other than the Shares) the Excluded Rights, which shall be retained by the Sellers.
3	Consideration
3.1	Amount

3.1.1 The consideration for the purchase of the Shares under this Agreement which shall be divisible among the Sellers as set out against each of their names in column 3 of Schedule 1 shall be an amount in cash equal to the sum of:

(i)	the Initial Share Consideration;
(ii)	the Estimated Net Current Assets; and
(iii)	the Net Current Asset Adjustment.

3.1.2 The consideration for the purchase of the Shares shall be allocated as set out in Schedule 1 (subject to the Net Current Asset Adjustment attributable to the particular Shares) and paid by the Purchaser to the Principal Seller in accordance with Clauses 6.3 and 8.2.

3.1.3 The consideration for the transfer or the procurement of the transfer of the other Assets (other than the Shares) under this Agreement by the Principal Seller to the Purchaser (or as directed by the Purchaser) under and on the terms set out in Clause 13.3 shall be the procurement by the Purchaser of the transfer to the Principal Seller (or as it may direct) of the rights and assets in respect of the Split Contracts to be transferred to the Principal Seller under and on the terms set out in Clause 13.3.

3.2 Reduction of Consideration

3.2.1 If any payment is made by the Sellers to the Purchaser in respect of any claim for any breach of this Agreement or pursuant to an indemnity under this Agreement (or any agreement entered into under this Agreement), the payment shall, to the extent possible, be treated as an adjustment to the consideration paid by the Purchaser for the particular Shares to which the payment and/or claim relates under this Agreement and the consideration shall be deemed to have been reduced by the amount of such payment.

3.2.2 If:

(i) the payment and/or claim relates to the shares in more than one Group Company, it shall be allocated in a manner which reflects the impact of the matter to which the payment and/or claim relates, failing which it shall be allocated rateably to the shares in the Group Companies concerned by reference to the proportions in which the consideration is allocated in accordance with Clause 3.1.2; or

(ii) the payment and/or claim relates to no particular part of the Shares, it shall be allocated rateably to all the shares in the Group Companies by reference to the proportions in which the consideration is allocated in accordance with Clause 3.1.2,

and in each case the consideration shall be deemed to have been reduced by the amount of such payment.

3.2.3 For the purposes of this Clause 3.2, “this Agreement” includes the Tax Deed of Covenant.

4 Conditions

4.1	Condition Precedent
	The agreement to sell and purchase the Assets under this Agreement is conditional upon:

4.1.1	the European Commission issuing a decision under Article 6(1 )(b) of Council Regulation (EC) 139/2004 (the “Regulation”) (or being deemed to have done so under Article 10(6) of the Regulation) declaring the acquisitions by the Purchaser pursuant to this Agreement (the “Acquisition”) compatible with the Common Market without attaching to its decision any conditions or obligations that are not on terms reasonably satisfactory to both the Principal Seller and Purchaser; or
4.1.2	the European Commission taking a decision, not to refer the whole or any part of the Acquisition to the competent anti-trust authorities of one or more Member States, in the event that a request under Article 9(2) of the Regulation has been made by a Member State; or
4.1.3	in the event of the European Commission issuing a decision under Article 6(1)(a) of the Regulation or otherwise indicating that it does not have jurisdiction under the Regulation to review the Acquisition, pursuant to any obligation to notify under the national competition legislation of Austria and Germany, each of the authorities in those two EU Member States adopting a decision of equivalent effect to any of

those set out in Clause 4.1.1 (this Clause 4.1.3 being interpreted mutatis mutandis).

4.2 Co-operation

4.2.1	The parties hereby undertake to use all reasonable endeavours to ensure the satisfaction of the condition set out in Clause 4.1 as soon as possible after the date of this Agreement.
4.2.2	Subject to Clause 4.2.3, the Purchaser shall make any anti-trust filing required pursuant to Clause 4.1 on the date of this Agreement or as soon as reasonably practicable thereafter, but in any event no later than ten Business Days after the date of this Agreement.
4.2.3	The Principal Seller shall promptly provide the Purchaser with all reasonable assistance, co-operation and information as the Purchaser may reasonably require and/or request for the purposes of Clauses 4.1 and 4.2.1.
4.2.4	Each Party shall consult with the other throughout any anti-trust process to be followed pursuant to Clause 4.1 and to the extent possible taking into account any applicable confidentiality obligations shall:

(i)	provide the other with drafts of any anti-trust filings or related submissions to be submitted to any anti-trust authority upon reasonable request and, to the extent reasonably practicable, consult on the contents of such filings and submissions;
(ii)	as soon as is reasonably practicable provide the other with copies of all material relevant correspondence, documents or other communications received from or sent to any anti-trust authority relating to Clause 4.1; and
(iii)	as soon as is reasonably practicable, inform the other of the content of any meeting or material conversation which takes place between any anti-trust authority and it or any of its employees, directors, officers or advisers in relation to Clause 4.1 and shall, if requested by the other, provide a written summary thereof.

4.2.5 Without prejudice to the foregoing, all requests and enquiries from any competition or anti-trust authority shall be dealt with by the Purchaser and the Principal Seller in consultation with each other, and the Purchaser and the Principal Seller shall promptly co-operate with and provide all necessary information and assistance reasonably required by such competition or anti-trust authority and/or, in connection therewith, each other upon being reasonably requested to do so.

4.3 Non-Satisfaction/Waiver

4.3.1 The Purchaser shall give notice to the Sellers of the satisfaction of the condition set out in Clause 4.1 within two Business Days of becoming aware of the same.

4.3.2 If the condition set out in Clause 4.1 is not satisfied on or before 4 October 2006 save as expressly provided, this Agreement (other than this Clause and Clauses 1, 12, and 13.6 to 13.24) shall lapse and neither the Sellers nor the Purchaser shall have any claim against the other(s) under it, save for any claim arising under such Clauses or from breach of any obligation contained in Clause 4.2.

4.4 Termination for Material Adverse Change

4.4.1	If, at any time before Completion, the Purchaser is or becomes aware of any fact, matter or circumstance and concludes that such fact, matter or circumstance would or would be reasonably likely to give rise to or result in a Material Adverse Change, then the Purchaser shall promptly notify the Principal Seller in writing of such fact, matter or circumstance, giving particulars, in reasonable detail, of the same.
4.4.2	If, at any time before Completion, a Seller is or becomes aware of any fact, matter or circumstance which in its reasonable opinion would or would be reasonably likely to give rise to or result in a Material Adverse Change, then such Seller shall promptly notify the Purchaser in writing of such fact, matter or circumstance, giving particulars, in reasonable detail, of the same.
4.4.3	If prior to Completion a Material Adverse Change occurs, the Purchaser may (in its sole and absolute discretion) terminate this Agreement with immediate effect by notice in writing to the Principal Seller, in which event (other than this Clause 4.4 and Clauses 1, 5.3.5, 12 and 13.5 to 13.24 which shall survive such termination) this Agreement shall terminate with immediate effect and the Material Adverse Change, the facts, matters and circumstances giving rise thereto and the termination resulting therefrom shall not give rise to any right to damages or compensation.
4.4.4	If, less than 10 Business Days before any proposed Completion Date, the Purchaser is notified of any fact, matter or circumstance pursuant to Clause 4.4.2 or otherwise becomes aware of any fact, matter or circumstance which in each case the Purchaser considers, in its reasonable opinion, may constitute, give rise to or indicate the occurrence of a Material Adverse Change, then the Purchaser may, by written notice to the Principal Seller, elect to defer Completion to a date not more than 4 Business Days from the proposed Completion Date (in which event the provisions of Clauses 4.4.3 and 6 shall apply to the deferred date of Completion with all necessary modifications) and each Seller shall, in the period up to the deferred date of Completion, promptly provide to the Purchaser such access and information as is in its possession and/or control and as is reasonably requested by the Purchaser to enable the Purchaser to assess whether such facts, matters and/or circumstances constitute, give rise to or otherwise indicate the occurrence of a Material Adverse Change.

5 Pre-Completion

5.1

The Sellers’ Obligations in Relation to the Conduct of Business

Except (a) as may be required (i) to give effect to and comply with this Agreement or any law or regulation; or (ii) to implement or complete the Pre-Sale Reorganisation; or (iii) to implement any permitted action set out in Schedule 14; or (iv) to comply with the provisions of the TCA or, if Completion does not occur prior to 1 October 2006, to amend the provisions of the TCA to reflect such fact; or (v) to respond to a genuine emergency in circumstances where the prior written consent of the Purchaser cannot reasonably be obtained, or (b) in so far as the Purchaser has given its written consent (such consent not to be unreasonably withheld or delayed), each of the Sellers undertakes to procure that between the date of this Agreement and Completion, each Group Company:

5.1.1	shall carry on, and only carry on, the business of the Hotels as a going concern, in the ordinary course and in all material respects as carried on prior to the date of this Agreement;
5.1.2	shall maintain in force all existing insurance policies in all material respects on the same terms and substantially similar or better level of cover prevailing at the date of this Agreement for the benefit of the Group Companies and shall notify the Purchaser of any individual claims made in excess of €100,000 and of any claims which, in aggregate, exceed €1,000,000;
5.1.3	shall not act or omit to act so as to give rise to (a) any material breach of its obligations under any Lease or Letting Document or (b) any breach of its obligations under any Lease or Letting Document which would have a material adverse effect thereon, save that, for the purposes of this Clause 5.1.3, existing breaches which are disclosed in the Disclosure Letter in the section headed “Specific Disclosures” shall, to such extent, be disregarded;
5.1.4	shall ensure that the Hotels and the Group Companies are operated in compliance, in all material respects, with the laws applicable to the operation of the Hotels and/or the Group Companies, save that, for the purposes of this Clause 5.1.4, existing non-compliance disclosed in the Disclosure Letter in the section headed “Specific Disclosures” shall, to such extent, be disregarded;
5.1.5	shall not undertake (or agree to undertake) any act or omission which would result in any of the statements made in paragraphs 1.1.11 and/or 1.1.12 of Schedule 7 being or becoming untrue or inaccurate at any time between the date of this Agreement and Completion;
5.1.6	shall use all reasonable endeavours to progress the works in respect of the IC Madrid Hotel restaurant extension in a timely manner, in accordance with the plans contained at item IC Mad 4.1 17 of the Data Room and in line with, and utilising (to the extent not already utilised) as far as is reasonably possible, the capex budget for such works of €490,361 in respect of the period from 1 June 2006 to Completion;
5.1.7	shall not:

(i)	enter into any agreement or incur any commitment involving any capital expenditure in excess of €100,000 per item, exclusive of VAT, except to the extent that such expenditure would be consistent with the relevant Group Company or Hotel’s capital budget as contained at item 0.13_4 in the Group Information Section in the Data Room;
(ii)	enter into or amend any agreement or incur any commitment which is not capable of being terminated without compensation at any time or with 12 months’ notice or less and which, in each case, involves or may involve total annual expenditure in excess of €200,000 for each of the IC Carlton Cannes Hotel and the IC Frankfurt Hotel and €100,000 for each of the other Hotels, or €600,000 in aggregate for all Hotels, in each case, exclusive of VAT;
(iii)	acquire or dispose of, or agree to acquire or dispose of, any asset, or enter into or amend any agreement or incur any commitment to do so, in each case involving consideration, expenditure or liabilities in excess of

€200,000 for each of the IC Carlton Cannes Hotel and the IC Frankfurt Hotel and €100,000 for each of the other Hotels, or €600,000 in aggregate for all Hotels, in each case, exclusive of VAT, other than in the ordinary course of operating a hotel;

(iv)	acquire or agree to acquire any share, shares or other interest in any company, partnership or other venture or merge or consolidate with a corporate body or any other person, enter into any demerger transaction or participate in any other type of corporate reconstruction;
(v)	other than in the ordinary course of business, incur any additional borrowings or incur any other indebtedness, other than with another member of the Sellers’ Group or the Group;
(vi)	create, allot, acquire, reduce, issue or redeem, repurchase or repay any share, security or loan capital of any Group Company or grant or create any right or option to call for or require the allotment, issue or transfer of any share, security or loan capital of any Group Company;
(vii)	declare, pay or make a dividend or distribution;
(viii)	amend, to any material adverse extent, any of the terms on which material goods, facilities or services are supplied;
(ix)	assign, license, charge or otherwise dispose of any Material Intellectual Property;
(x)	in relation to any Property:

(a)	carry out any material structural alteration or addition to, or materially effect any change of use of, such Property other than as disclosed in the Data Room or apply for planning or building consent to make such alteration, addition or change of use, save that nothing in this sub-paragraph (a) shall prevent any Group Company from maintaining or protecting any such planning or building application or consent as has already been made or granted prior to the date of this Agreement or from erecting temporary structures in the ordinary course of business;
(b)	terminate or serve any notice to terminate, surrender or accept any surrender of or waive the terms of any material lease, tenancy or licence;
(c)	agree any material new rent or fee payable under any lease, tenancy or licence, provided that no such consent shall be required in respect of any increase in rent payable in respect of any Property pursuant to a rent review in accordance with the terms of the existing lease;
(d)	enter into or terminate any material agreement, lease, tenancy, licence or other similar commitment, or vary or amend in any material respect any material agreement, lease, tenancy, licence or other similar commitment;
(e)	apply for consent under a Lease nor grant consent (except where the relevant Group Company is under a contractual obligation as at the

date of this Agreement or is under another legal obligation to do so) following an application by a tenant, licensee or occupier under a Material Letting Document, in each case where the action requiring consent is material; or

(f) sell, convey, transfer, assign or charge any Property or grant any rights or easements over any Property or enter into any material covenants affecting any Property or agree to do any of the foregoing;

(xi) save as required by law or as disclosed in the Data Room;

(a)	make any material amendment to the terms and conditions of employment (including, without limitation, remuneration, pension entitlements and other benefits) of any Relevant Employee (other than minor increases in the ordinary course of business which the Sellers shall notify to the Purchaser as soon as reasonably possible);
(b)	provide or agree to provide any gratuitous payment or benefit to any such person or any of his dependants (other than a gratuitous payment or benefit provided in the context of a settlement or termination of employment not exceeding €30,000 in each case);
(c)	dismiss any Senior Employee (other than in accordance with normal disciplinary procedures);
(d)	engage or appoint any additional Senior Employee (other than to replace any vacancy); or
(e)	admit any Relevant Employee to membership of a defined benefit scheme operated by a Group Company;

(xii)	settle an insurance claim in excess of €100,000 materially below the amount claimed;
(xiii)	enter into any guarantee, indemnity or other agreement to secure any obligation of a third party (excluding obligations of any Group Company) or create or amend, any Encumbrance over any of its assets or undertaking in any such case other than in the ordinary course of business;
(xiv)	make any material change to its accounting practices or policies (except to the extent required to comply with any changes in Applicable GAAP) or amend its constitutional documents;
(xv)	establish a new pension scheme for or in respect of any Relevant Employee or (save as required by law) amend, exercise a discretion which increases or may increase pension scheme liabilities or employer costs in relation to or discontinue (wholly or partly), any pension scheme applying to any Relevant Employee or announce any intention to do any of the foregoing;
(xvi)	commence litigation or arbitration proceedings other than debt collection proceedings in the ordinary course of business;
(xvii)	compromise or settle litigation or arbitration proceedings or waive a right in relation to litigation or arbitration proceedings (other than in respect of debt collection proceedings in the ordinary course of business and other than in

respect of any Relevant Employee where such settlement or compromise does not exceed €30,000 in each case); or

(xviii) agree to do, authorise any person to do or agree to, or propose or indicate to any person that it will do or agree to, any of the matters set out in this Clause 5.1.7.

5.1.8 Without prejudice to the generality of Clause 5.1.1, prior to Completion the Sellers shall:

(i)	at the Purchaser’s sole cost and expense, allow the Purchaser and its agents reasonable access to, and provide the Purchaser and its agents with reasonable information relating to the conduct of the business and/or management of each Hotel during such period and to take copies of such information, provided that the obligations of the Sellers under this Clause shall not extend to allowing access to information which is reasonably regarded as confidential to those activities of the Sellers which are not being transferred to the Purchaser (or its nominee(s)) pursuant to this Agreement;
(ii)	allow the Purchaser and its agents reasonable access to and dialogue with the management of IHG and of the Hotels;
(iii)	provide the Purchaser with copies of such management accounts of the Group Companies as become available during such period; and
(iv)	shall notify the Purchaser as soon as reasonably possible of any fact or circumstance of which it becomes aware which constitutes a breach of any of Clauses 5.1.1 to 5.1.7 inclusive.

5.2 Sellers’ Obligations in Relation to Financing

5.2.1 Save as contemplated pursuant to Clause 5.2.2, each of the Sellers undertakes that, between the date of this Agreement and Completion, it will:

(i)	not lend any money or offer any form of financing to any Group Company which is not a trading debt or liability arising in the ordinary course of conduct of the Hotels nor incur borrowings (or indebtedness in the nature of borrowings) in a manner which would result in the amount of Actual Inter-Group Debt or Actual Inter-Group Credit being materially different from the amount of Completion Inter-Group Debt and/or Completion Inter-Group Credit;
(ii)	procure that no Group Company borrows any money from, nor lends any money to, nor incurs any other financing liabilities or obligations to the Sellers’ Group (other than a trading debt or liability arising in the ordinary course of conduct of the Hotels), or otherwise incur borrowings (or indebtedness in the nature of borrowings) in a manner which would result in the amount of Actual-Inter Group Debt and/or Actual Inter-Group Credit being materially different from the amount of Completion Inter-Group Debt and/or Completion Inter-Group Credit; and
(iii)	not, and procure that no member of the Sellers’ Group shall, borrow any money from, nor lend any money to, nor incur any other financing liabilities

or obligations to the Group Companies (other than a trading debt or liability arising in the ordinary course of conduct of the Hotels), or otherwise incur borrowings (or indebtedness in the nature of borrowings) in a manner which would result in the amount of Actual-Inter Group Debt and/or Actual Inter-Group Credit being materially different from the amount of Completion Inter-Group Debt and/or Completion Inter-Group Credit,

unless the Purchaser has agreed to this in writing, such consent not to be unreasonably withheld or delayed.
5.2.2	The Principal Seller undertakes to procure that, to the extent that such has not already occurred as at the date of this Agreement, by Completion:

(i)	all borrowings (and indebtedness in the nature of borrowings) (excluding trading debt arising in the ordinary course of business) and all accrued interest thereon owed by members of the Group to persons other than members of the Sellers’ Group and/or the Group are paid and/or repaid in full together with all commissions, fees (including break fees), penalties and other charges and interest, as are payable in respect thereof. Such payments and repayments shall be funded either from the Group’s existing cash resources or, to the extent such are insufficient for such purpose, by cash loans from members of the Sellers’ Group;
(ii)	all cash pooling arrangements relating to the Group Companies are terminated; and
(iii)	all security interests and/or other arrangements of any Group Company relating to any borrowings, indebtedness in the nature of borrowings, cash pooling arrangements and/or other bank facilities are released and discharged in full.

5.3 CTB Election

5.3.1	The parties acknowledge that the Sellers have, prior to the date of this Agreement, at the request of the Purchaser procured the conversion of Delaville S.p.A. from S.p.A. (società per azioni) to S.r.l. (società a responsabilità limitata).
5.3.2	The Sellers shall use their reasonable endeavours to procure that prior to Completion:

(i)	Hotelera el Carmen, S.A. is converted from S.A. (sociedad anónima) to S.L. (sociedad de responsabilidad limitada); and
(ii)	Inter-Continental Budapest Szálloda Zártkörüen Müködö Részvénytársaság “átalakulás alatt” is converted from Rt. (részvénytársaság) to Kft (korlátolt felelösségü társaság) and that such conversion shall be registered by the competent court of registration.

      5.3.3 The Sellers shall (i) cause an IRS Form 8832 for each of the Group Companies to be duly executed by the Relevant Parties (as defined in Clause 5.3.4) who are members of the Sellers’ Group or the Group and (ii) use their reasonable endeavours to procure the signatures of the other Relevant Parties for each Group Company on the IRS Form 8832 for each of the Group Companies. The IRS Forms 8832 shall elect to treat the Group Company to which it relates as either a

partnership or disregarded entity (as designated by the Purchaser), such election to be effective from the Completion Date, or such earlier date specified by the Purchaser, (the “Effective Date”) but in no event prior to the date the condition set forth in Clause 4.1 is satisfied and shall provide each such completed IRS Form 8832 to the Purchaser at Completion (for the avoidance of doubt, the Sellers shall not be required to file any such elections, and shall not be responsible for ensuring that any such elections are valid once filed); provided, however, that no such Form 8832 shall be required for any of the companies referred to in Clause 5.3.2, if the relevant conversion referred to in Clause 5.3.2 has not been effected for such company by the Completion Date.

5.3.4

For the purposes of Clause 5.3.3, “Relevant Parties” with respect to each Group Company means (i) the owners of the shares of such Group Company on any of the following dates (the “Specified Dates”): the date immediately preceding the Effective Date, the Completion Date, and any date between the date immediately preceding the Effective Date and the Completion Date, and (ii) any person within the Sellers’ Group or that is a Group Company that is a creditor of the relevant Group Company on any of the Specified Dates.

5.3.5

The Purchaser shall:

(i)

reimburse the Sellers for any reasonable fees and expenses incurred by the Sellers in connection with the conversions and elections referred to in Clauses 5.3.1, 5.3.2 and 5.3.3 up to a maximum amount of £75,000 (exclusive of VAT); and

(ii)

subject to Clause 5.3.5(i), indemnify the Sellers (for themselves and as trustees for and on behalf of the other members of the Sellers’ Group and the Relevant Parties against any Losses (including for the avoidance of doubt any reasonable fees and expenses) incurred by any member of the Sellers’ Group or any such Relevant Party arising or resulting solely from the conversions referred to in Clauses 5.3.1 and 5.3.2 (including any Taxes that would not have been suffered but for the conversions described in Clauses 5.3.1 and 5.3.2 above).

5.3.6 For the purposes of Clause 5.3.5, in the event that this Agreement is terminated, “Sellers’ Group” shall be deemed to also refer to the Group Companies and, in the event Completion occurs, “Relevant Parties” shall be deemed to exclude all of the Group Companies.

5.4

Security

Between the date of this Agreement and Completion, the Sellers shall provide, and procure that each member of the Group provides, such reasonable information and, in the Sellers’ absolute discretion, such other assistance as is necessary in connection with the financing of the Transaction by the Purchaser and/or to enable the funders to the Purchaser to take security over the shares, assets and undertaking of the Group with effect on or as soon as reasonably practicable after Completion.

6	Completion
6.1	Date and Place
	Subject to Clause 4, Completion shall take place at the offices of the Sellers’ Solicitors on the fifth Business Day following fulfilment of the condition set out in Clause 4.1 or at such other location, time or date as may be agreed in writing between the Principal Seller and the Purchaser.

6.2	Completion Obligations
	On Completion, each of the Sellers and the Purchaser shall comply with their respective obligations specified in Schedule 5.

6.3	Payment on Completion
	On Completion, the Purchaser shall pay the Completion Amount to the Principal Seller.

6.4	Repayment of Completion Inter-Group Debt
	On Completion the Purchaser shall procure repayment by the relevant Group Companies of all of the Completion Inter-Group Debts and the Principal Seller shall procure repayment by the relevant members of the Sellers’ Group of all of the Completion Inter-Group Credits, in each case, such repayment to be capable of being satisfied and discharged in full by:

     6.4.1 if the Completion Inter-Group Debt Balance (based on the figures in Schedule 11) is a positive figure, the Purchaser (for and on behalf of the relevant Group Companies) paying such Completion Inter-Group Debt Balance to the Principal Seller (for and on behalf of the relevant members of the Sellers’ Group); and

     6.4.2 if the Completion Inter-Group Debt Balance (based on the figures in Schedule 11) is a negative figure, the Principal Seller (for and on behalf of the relevant members of the Sellers’ Group) paying such Completion Inter-Group Debt Balance to the Purchaser (for and on behalf of the relevant Group Companies).

6.5	Repayment of Certain Inter-Group Payables and Receivables
	On or before the fifth Business Day after Completion:

     6.5.1 the Purchaser shall procure that each Group Company pays to the relevant member(s) of the Sellers’ Group any individual Inter-Group Payable with a value as at 24:00 hours (CET) at the end of the Completion Date of €5,000,000 or more due from such Group Company to a member of the Sellers’ Group; and

     6.5.2 the Principal Seller shall procure that each relevant member of the Sellers’ Group pays to the relevant Group Company(ies) any individual Inter-Group Receivable with a value as at 24:00 hours (CET) at the end of the Completion Date of €5,000,000 or more due from such member of the Sellers’ Group to a Group Company.

6.6

Breach of Completion Obligations

If any of the Sellers fails to comply with any of their material obligations in paragraphs 1.1, 2 or 3 of Schedule 5 or any of their obligations in Clause 6.4, or the Purchaser fails to comply with its obligations in Clauses 6.3 or 6.4 or its material obligations in paragraphs 1.2, 2 or 3 of Schedule 5, then Completion shall not occur and the Purchaser, in the case of non-compliance by the Sellers, or the Principal Seller, in the case of non-compliance by the Purchaser, shall be entitled (in addition to and without prejudice to all other rights or remedies available, including the right to claim damages) by written notice to the Principal Seller or the Purchaser, as the case may be, served on the Completion Date:

6.6.1	to terminate this Agreement (other than this Clause and Clauses 1, 5.3.5, 12 and 13.5 to 13.24) without liability on its part; or
6.6.2	to effect Completion so far as practicable having regard to the defaults which have occurred (provided that (unless otherwise agreed by the Principal Seller and the Purchaser) Completion must take place in respect of all the Shares at the same time); or
6.6.3	to fix a new date for Completion (not being more than 20 Business Days after the agreed date for Completion) in which case the provisions of this Clause 6 and Schedule 5 shall apply to Completion as so deferred but provided such deferral may only occur once.

7       Employment and Pensions

7.1.1	The Principal Seller agrees to procure that each relevant member of the Sellers’ Group will, between the date hereof and Completion, comply with and respond to such requests of a trade union, works council or other representative body in respect of the Hotels which have been, or are required to be, consulted or notified of the arrangements contemplated by this Agreement as it considers reasonable (acting in good faith) and the Purchaser agrees to provide such assistance as the Principal Seller may reasonably request in connection with any such compliance and/or response.
7.1.2	The Sellers and the Purchaser shall cooperate together and each use their respective best endeavours to ensure that, following Completion, they each comply with all notification and other legal requirements triggered on Completion in respect of the pension rights of Relevant Employees.
7.1.3	The Purchaser confirms that following Completion the Transferring Budapest Employees will be offered:

(i)

membership of a defined contribution pension arrangement in respect of their future service to which the rate of employer contributions payable will be no lower than their current entitlement to 5 per cent. or 10 per cent. (as appropriate) of basic salary excluding bonuses, incentives and overtime pay, being the contribution rates that are paid by and in respect of the Transferring Budapest Employees to the IHG International Savings and Retirement Plan immediately prior to Completion; and

(ii)

ancillary benefits that are broadly equivalent in value overall to the following benefits provided to the Transferring Budapest Employees immediately prior to Completion:

(a)	life insurance providing death in service lump sum benefits of two times Salary on death and three times Salary on accidental death based on a notional “Salary” of net salary increased by 40 per cent.; and
(b)	membership of the International Healthcare Trust Scheme for employees of the Intercontinental Hotels Group, a copy of the terms of which are included in the Data Room at ICBud.8.15_2.

     7.1.4 The Sellers agree to transfer the employment of the convention sales manager currently seconded by Intercontinental Hotel-Betriebsgesellschaft m.b.H (Austria) to the IC Prague Hotel to a member of the Sellers’ Group on or before Completion.

8     Post-Completion Adjustments

8.1	Net Current Asset Statement
	The Principal Seller shall procure that as soon as practicable, but in any event within 90 days following Completion, it shall draw up the Net Current Asset Statement in accordance with Schedule 6.

8.2 Adjustment to Consideration

8.2.1	Net Current Assets
(i)	If the Net Current Assets exceed the Estimated Net Current Assets, the Purchaser shall pay to the Principal Seller an additional amount equal to the excess of the Net Current Assets over the Estimated Net Current Assets as an increase in the consideration for the Shares.
(ii)	If the Net Current Assets are less than the Estimated Net Current Assets, the Principal Seller shall repay to the Purchaser an amount equal to such deficit as a reduction in the consideration for the Shares.
(iii)	Any payments pursuant to this Clause 8.2.1 shall be made on or before five Business Days after the date on which the process described in Part 2 of Schedule 6 for the preparation, agreement and/or determination of the Net Current Asset Statement is complete.

8.2.1   Payment

	Where any payment is required to be made pursuant to this Clause 8.2, the amount of the consideration payable for the Shares pursuant to this Agreement shall be deemed to have been reduced or increased accordingly.
8.2.3	Interest

If, as a result of the application of Clause 8.2.1(ii), the Principal Seller is required to repay the Purchaser a sum in excess of €7.5 million, then an amount equivalent to interest at a rate of 9 per cent, per annum shall accrue daily on the amount of such excess from the Completion Date to the date of payment of such sum in accordance with Clause 8.2.1(ii) and shall be paid by the Principal Seller to the Purchaser on the same date as payment under Clause 8.2.1(ii) is made.

8.3 Adjustment to Completion Inter-Group Debt Balance

     8.3.1 If the amount of any Actual Inter-Group Debt exceeds the corresponding Completion Inter-Group Debt (if any) or, if the amount of any Actual Inter-Group Credit is less than the corresponding Completion Inter-Group Credit (if any), then, as an adjustment to the repayments made pursuant to Clause 6.4, the Purchaser shall procure that the relevant Group Companies pay or repay to the relevant members of the Sellers’ Group the relevant amount of such excess and/or shortfall, as the case may be, on the same date as payments under Clause 8.2.1 are made.

     8.3.2 If the amount of any Actual Inter-Group Debt is less than the corresponding Completion Inter-Group Debt (if any) or if the amount of any Actual Inter-Group Credit exceeds the corresponding Completion Inter-Group Credit (if any), then, as an adjustment to the repayments made pursuant to Clause 6.4, the Principal Seller shall procure that the relevant members of the Sellers’ Group pay or repay to the relevant Group Companies the relevant amount of such shortfall and/or excess, as the case may be, on the same date as payments under Clause 8.2.1 are made.

8.4 Settlement and Discharge

On payment of all amounts due under Clauses 6.3, 6.4, 8.2 and 8.3, all Actual Inter-Group Debts and Actual Inter-Group Credits shall be and be treated as having been irrevocably satisfied and discharged in full and no member of the Group or of the Sellers’ Group shall thereafter claim or be entitled to claim otherwise.

9      Warranties and Indemnities

9.1 Sellers’ Warranties

     9.1.1 Subject to Clause 9.2, the Principal Seller (for itself and on behalf of each other Seller), warrants to the Purchaser that the statements set out in:

(i)	Schedule 7 are true and accurate as of the date of this Agreement; and
(ii)	paragraphs 1 (other than 1.1.11, 1.1.12 and 1.1.14), 4.1.1, 4.1.2, 4.3.2, 4.3.3 and 14 of Schedule 7 will be true and accurate, in each case, as if they had been repeated at Completion having regard to the facts and circumstances existing at Completion.

     9.1.2 Subject to Clause 9.1.3, the only Sellers’ Warranties given:

(i)

in respect of the Properties are those contained in paragraph 4 of Schedule 7 and each of the other Sellers’ Warranties shall not to be given in respect of the Properties;

(ii)

in respect of (a) protection or prevention of pollution of or harm to the Environment; (b) Environmental Law; and/or (c) Environmental Permits, are those contained in paragraph 10 of Schedule 7 and each of the other Sellers’ Warranties shall be deemed not to be given in respect of the protection or prevention of pollution of or harm to the Environment, Environmental Law and Environmental Permits; and

     (iii) in respect of Tax are those contained in paragraph 13 of Schedule 7 and each of the other Sellers’ Warranties shall be deemed not to be given in respect of Tax.

9.1.3	Clause 9.1.2 shall not apply to, and nothing in Clause 9.1.2 shall prevent or limit any claim or proceeding by the Purchaser in respect of a breach of, any of the Sellers’ Warranties in paragraphs 2,11 or 12 of Schedule 7.
9.1.4	The Sellers acknowledge that the Purchaser has entered into this Agreement in reliance upon the Sellers’ Warranties.
9.1.5	Any Sellers’ Warranty qualified by the expression “so far as the Sellers are aware” or any similar expression shall, unless otherwise stated, be deemed to refer to the actual knowledge, after having made reasonable enquiry, of those persons set out in column (1) of Schedule 9, in each case in relation to those Sellers’ Warranties set out against each such person’s name in column (3) of Schedule 9 and having regard to any other qualifications (if any) referred to in such column (3) against each such person’s name.

9.2 Sellers’ Disclosures

      9.2.1 The Sellers’ Warranties are subject to:

(i)	the matters which are fairly disclosed in this Agreement or the Disclosure Letter (including the Schedules thereto) or expressly provided for under the terms of this Agreement;
(ii)	any information which is fairly disclosed in any document in the Data Room which is listed in Schedule 1 to, or in any document listed in Schedule 3 to, the Disclosure Letter; and
(iii)	the limitations of liability set out in Clause 10, in accordance with their terms.

      9.2.2 Each Sellers’ Warranty is to be construed independently and (except where this Agreement expressly provides otherwise) is not limited by a provision of this Agreement or another Sellers’ Warranty.

9.3 Sellers’ Indemnities and Undertakings

      9.3.1 The Principal Seller shall indemnify and hold harmless the Purchaser (for itself and as agent for any other member of the Purchaser’s Group) against all Losses which any member of the Purchaser’s Group incurs to the extent such Losses arise or result from:

     (i) the Pre-Sale Reorganisation including any failure to implement the Pre-Sale Reorganisation in accordance with the provisions of the Pre-Sale Reorganisation Documents or as a result of or in connection with any failure to execute, deliver, perform or comply with the Pre-Sale Reorganisation Documents or to the extent such Losses:

(a) constitute a loss, liability, cost or expense of implementing the Pre-Sale Reorganisation;

(b)	relate to any claim arising or resulting from the implementation of the Pre-Sale Reorganisation which would not have arisen but for such implementation; or
(c)	arise or result from the Pre-Sale Reorganisation not having been implemented and completed in full prior to Completion,

but excluding, in each such case, to the extent only insofar as they arise during and in respect of the period up to and including Completion, such Losses as arise as a direct result of the transfer of any asset or liability pursuant to the Pre-Sale Reorganisation at a price which is more or less than the book or market value of such asset or liability;

(ii)	any warranty, indemnity, undertaking or covenant which was or is given by any Group Company in connection with the disposal, pursuant to an agreement entered into prior to Completion, of any interest in a company or business;
(iii)	any Group Company being or becoming liable for any unpaid or deferred consideration in connection with the acquisition, pursuant to any agreement entered into prior to Completion, of any interest in a company or business;
(iv)	any Group Company having, prior to Completion:

(a)

(i) disposed or agreed to dispose of any interest in any business and/or company (disregarding for these purposes any disposals to other members of the Group); (ii) closed or run down, or ceased trading in respect of, any business; (iii) owned, held, managed, operated, carried on or been otherwise involved in, in each case, directly or indirectly and in any capacity, any business or part thereof other than the business of any of the Hotels as operated and carried on as at the date of the Agreement; or

(b)

owned, held or managed any interest in any asset other than (i) an asset used, as at the date of this Agreement, by any of the Group Companies in the ordinary course of business of any of the Hotels or of any of the Group Companies as carried on as at the date of this Agreement or (ii) any share interest of a Group Company referred to in paragraphs 1.1.10, 1.1.11 and/or 1.1.14 of Schedule 7. For the purposes of this Clause 9.3.1 (iv)(b), in determining the quantum of any Losses, the market value of the asset giving rise to such Losses and any delay which may be experienced in realising such market value shall be taken into account;

(v) the closure of any guest rooms and office facilities at the IC Rome Hotel which have a ceiling height of less than the minimum height requirements imposed under applicable Italian health and safety regulations as a result of enforcement action taken by the relevant health and safety authorities in connection with such fact to the extent such Losses are incurred in relation or by reference to the period prior to the earlier of (i) expiry or earlier termination of or (ii) renewal or extension of the Rome Lease Agreement. For the purposes of this Clause 9.3.1 (v), Losses shall, for the avoidance of doubt, be deemed to include loss of profit (net of Taxation) arising as a

direct result of the inability to use or let such guest rooms and any reasonable relocation costs and/or reasonable expenses arising as a result of the inability to use such offices, and shall take into account any reduction in rental payments to the landlord of the IC Rome Hotel as a result of such inability to use or let such rooms and any other costs savings which result from the closure of such rooms;

(vi)	any claim brought against any Group Company to the extent such claim arises or results from the lease agreement dated 30 December 1993 between Intercontinental Hotel Stuttgart Betriebs GmbH & Co. KG (now merged into IHGG) and Aachener und Munchener Lebensversicherung AG or any other interest in the property the subject of such lease;
(vii)	any claim brought against BOEBV under or in connection with the letter of guarantee dated 11 December 2000 granted by BOEBV in favour of IZD Hotel Betriebs GmbH in relation to Holiday Inn BV’s obligations under the operating management agreement relating to the Crowne Plaza Vienna hotel dated 29 September 2000 between IZD Hotel Betriebs GmbH and Holiday Inns BV (Austria branch);
(viii)	any claim by, in respect of or in relation to any Transferring Employee to the extent such Losses are referable to the period prior to Completion including, without limitation, any claim, brought by any employee representative, works council or other collective body on behalf of any such Transferring Employee;
(ix)	from the transfer of any such Transferring Employee (whether pursuant to the Pre-Sale Reorganisation or otherwise); or
(x)	any of the facts, matters or circumstances referred to in Schedule 17,

including each Loss arising as a result of conducting, defending and/or settling any claims in respect of any of the above matters, provided that:

(a)	the Purchaser shall not be entitled to make a claim pursuant to this Clause 9.3.1 (i) to the extent that such claim is in respect of Taxation, and such claim shall, to such extent, be dealt with instead subject to and in accordance with Clause 2.9 and the other provisions of the Tax Deed of Covenant (as applicable); and
(b)	to the extent that a claim under any of Clauses 9.3.1 (ii) to (x) above is in respect of Taxation, such claim shall, to such extent, be treated as a Tax Claim (as defined in the Tax Deed of Covenant) and shall be dealt with as such subject to and in accordance with the terms of the Tax Deed of Covenant.

      9.3.2 The provisions of Clauses 11.3 and 11.4 shall also apply, mutatis mutandis, to any claims under Clause 9.3.1, save that the provisos at the ends of each of Clauses 11.4.1(i) and (ii) shall be deemed not to apply to any such claims.

9.4 Purchaser’s Warranties

      9.4.1 The Purchaser warrants to the Sellers that the statements set out in Schedule 8 are true and accurate.

9.4.2 The Purchaser acknowledges that the Sellers have entered into this Agreement in reliance upon the statements set out in Schedule 8.

9.5 Waiver

Save in the case of fraud, each Seller undertakes to the Purchaser to irrevocably waive, or procure the irrevocable waiver of, all claims (if any) which it or any member of the Sellers’ Group may at any time have against a Group Company and/or any director, officer or employee of a Group Company in respect of any misrepresentation, inaccuracy or omission in or from information or advice provided by a Group Company or a director, officer or employee of a Group Company for the purposes of the Transaction, including in assisting the Sellers to give a Sellers’ Warranty or prepare the Disclosure Letter.

9.6 Termination Rights

9.6.1 If, at any time prior to Completion, the Sellers are in breach of any the Sellers’ Warranties contained in paragraphs 1 (otherthan 1.1.11,1.1.12 and 1.1.14), 4.1.2, 4.3.2, 4.3.3 or 14 of Schedule 7 or in material breach of the Sellers’ Warranty contained in paragraph 4.1.1 of Schedule 7 (or, in any case, would be if such Sellers’ Warranties were repeated at that time), the Purchaser shall be entitled (in addition and without prejudice to all other rights or remedies available to it including the right to claim damages) by notice in writing to the Principal Seller to terminate this Agreement (other than this Clause 9.6.1 and Clauses 1, 5.3.5, 12 and 13.5 to 13.24)), such termination to be without prejudice to any accrued rights, obligations and liabilities under this Agreement.

9.6.2 Any failure by the Purchaser to exercise the right to terminate this Agreement under Clause 9.6.1 shall not constitute a waiver of any other rights of the Purchaser arising out of any breach of any Sellers’ Warranty.

10 Limitation of Sellers’Liability

10.1 Time Limitation for Claims

The Sellers shall not be liable in respect of any claim for breach of a Sellers’ Warranty or under the Tax Deed of Covenant or under Clause 9.3.1(v), as the case may be, unless a notice of the claim is given by the Purchaser to the Principal Seller:

10.1.1	in the case of any claim under paragraph 13 of Schedule 7 (Tax Warranties) or under the Tax Deed of Covenant not later than 1700 (CET) on the seventh anniversary of the Completion Date together with written general particulars of that claim (with sufficient detail to enable the Principal Seller to identify the subject of the claim) and, to the extent practicable, the Purchaser’s genuine pre-estimate of the quantum of the claim and how this has been quantified;
10.1.2	in the case of any other claim for breach of a Sellers’ Warranty, within 15 months following Completion; and
10.1.3	in the case of any claim under Clause 9.3.1(v), on or before 30 June 2014 or, if earlier, six months following such date (if any) on which the Rome Lease

Agreement is either extended or renewed or on which any member of the Purchaser’s Group enters into a new lease in respect of the IC Rome Hotel,

except that there shall be no time limitation for giving notice of any claim for breach of a Sellers’ Warranty under any of paragraphs 1.1, 4.1.1, 4.1.2, 4.3.2, 4.3.3 and 14 of Schedule7.

Any claim notified by the Purchaser to the Principal Seller pursuant to this Clause shall specify the matters set out in Clause 11.1.

10.2 Minimum Claims

10.2.1 The Sellers shall not be liable in respect of any individual claim or a series of related claims or claims arising from substantially similar facts or circumstances, in each case;

(i)	for breach of a Sellers’ Warranty, where the liability agreed or determined (disregarding the provisions of this Clause 10.2) in respect of any such claim or series of claims does not exceed €200,000; and
(ii)	for claims under the Tax Deed of Covenant, where the liability agreed or determined (disregarding the provisions of this Clause 10.2) in respect of any such claim or series of claims does not exceed €5,000.

10.2.2 Where the liability agreed or determined in respect of any such claim or series of claims referred to in Clause 10.2.1(i) exceeds €200,000 or, as the case may be, in Clause 10.2.1 (ii) exceeds €5,000, the Sellers shall be liable for the amount of the claim or series of claims as agreed or determined and not merely for the excess.

10.3 Aggregate Minimum Claims

10.3.1	The Sellers shall not be liable in respect of any claim for breach of a Sellers’ Warranty unless the aggregate amount of all claims for which the Sellers would otherwise be liable for breach of any Sellers’ Warranty (disregarding the provisions of this Clause 10.3) exceeds €6,000,000.
10.3.2	The Sellers shall not be liable in respect of any claim under the Tax Deed of Covenant unless the aggregate amount of all claims for which the Sellers would otherwise be liable under the Tax Deed of Covenant (disregarding the provisions of this Clause 10.3) exceeds €25,000.
10.3.3	Where the liability agreed or determined in respect of all claims referred to in Clause 10.3.1 exceeds €6,000,000 or, as the case may be, in Clause 10.3.2 exceeds €25,000, the Sellers shall be liable for the aggregate amount of all claims for breach of Sellers’ Warranty or under the Tax Deed of Covenant, respectively, as agreed or determined and not merely for the amount of the excess.

10.4 Maximum Liability

The aggregate liability of the Sellers in respect of:

(i) any claim for breach of any of the Sellers’ Warranties (other than those set out in paragraphs 1.1, 4.1.1, 4.1.2, 4.3.2, 4.3.3 and 14 of Schedule 7) shall not exceed an aggregate amount equal to €150,000,000;

(ii) any claim under Clause 9.3.1 (v) shall not exceed an amount equal to €4 million,

provided that the aggregate liability of the Sellers in respect of all claims under this Agreement and the Tax Deed of Covenant shall not exceed €633,800,000.

10.5 Provisions

The Sellers shall not be liable under this Agreement in respect of a claim to the extent that:

10.5.1	allowance, provision or reserve is made in the Net Current Asset Statement in respect of the matter giving rise to such claim; or
10.5.2	the matter giving rise to such claim is noted as a contingent liability in the Audited Accounts.

10.6 Matters Arising Subsequent to this Agreement

The Sellers shall not be liable under this Agreement in respect of any matter, act, omission or circumstance (or any combination thereof), including the aggravation of a matter or circumstance and any losses arising therefrom, to the extent that the same would not have occurred but for:

10.6.1 Agreed matters

any matter or thing done or omitted to be done pursuant to and in compliance with this Agreement or otherwise at the request in writing or with the approval in writing of the Purchaser;

10.6.2 Acts of the Purchaser

any act, omission or transaction of the Purchaser, any member of the Purchaser’s Group or any of the Group Companies or their respective directors, officers, employees or agents or, successors in title, after Completion:

(i)	outside the ordinary course of business as now carried on or any negligent act, omission or transaction; or any default of any such person or persons after Completion; or
(ii)	otherwise than pursuant to a legally binding commitment to which any of the Group Companies is subject on or before Completion;

10.6.3 Changes in legislation

(i)

the passing of, or any change in, after the date of this Agreement, any law, rule, regulation or administrative practice of any government, governmental department, agency or regulatory body (including, without prejudice to the generality of the foregoing, any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of relief from Taxation not actually (or prospectively) in effect at the date of this Agreement; or

(ii)

any change after the date of this Agreement of any generally accepted interpretation or application of any legislation; or

10.6.4 Accounting and Taxation Policies

any change in accounting or Taxation policy, bases or practice of the Purchaser or any of the Group Companies introduced or having effect after the Completion Date,

save to the extent required to comply with laws and regulations in place as at the date of this Agreement.

10.7 Insurance

The Sellers shall not be liable under this Agreement in respect of any claim to the extent that the Losses in respect of which such claim is made are recovered under a policy of insurance or would have been so recovered had such policy of insurance (or an equivalent policy of insurance) been maintained beyond Completion.

10.8 Net Financial Benefit

The Sellers shall not be liable under this Agreement or the Tax Deed of Covenant in respect of any Losses suffered by the Purchaser or any Group Company to the extent of any corresponding savings or net quantifiable financial benefit actually received by the Purchaser, any member of the Purchaser’s Group or the relevant Group Company, as the case may be, arising directly from such Losses or the substantive matters giving rise to such Losses, which savings and benefits such persons would not otherwise have received (for example, without limitation, where the amount (if any) by which any Taxation for which the Purchaser or any Group Company would otherwise have been liable to be assessed is actually reduced or extinguished as a result of the substantive matters giving rise to such Losses) but having regard, inter alia, to any delay which may be experienced in enforcing, utilising or receiving such saving or net financial benefit.

10.9 Mitigation of Losses

The Purchaser shall procure that all reasonable steps are taken and all reasonable assistance is given to avoid or mitigate any Losses which in the absence of mitigation would be reasonably likely to give rise to or increase a claim under this Agreement.

10.10  Purchaser’s Right to Recover

   10.10.1 Recovery for actual liabilities

Without prejudice to the Purchaser’s right to notify the Principal Seller of such claim at any earlier time, the Sellers shall not be liable under this Agreement unless and until the liability in respect of which the claim is made has become due and payable.

       10.10.2 Prior to recovery from the Sellers etc.

If, before any Seller pays an amount in discharge of any claim under this Agreement the Purchaser or any Group Company recovers or is entitled to recover (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser or Group Company (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, the Purchaser shall procure that, before or at the same time as steps are taken to enforce a claim against the relevant Seller following notification under Clause 11 of this Agreement, all reasonable steps are taken to enforce such recovery and any actual recovery (less any reasonable costs incurred in obtaining such recovery) shall reduce or satisfy, as the case may be, such claim to the extent of such recovery.

10.10.3	Following recovery from the Sellers
	If any Seller has paid an amount in discharge of any claim under this Agreement and the Purchaser or any Group Company is entitled to recover (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser or Group Company (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, the Purchaser shall procure that such reasonable steps are taken as the relevant Seller may reasonably require to enforce such recovery and shall, or shall procure that the relevant Group Company shall, pay to the relevant Seller as soon as practicable after receipt an amount equal to: (i) any sum recovered from the third party less any costs and expenses incurred in obtaining such recovery less any Taxation attributable to the recovery after taking account of any tax relief available in respect of any matter giving rise to the claim; or if less: (ii) the amount previously paid by the relevant Seller to the Purchaser less any Taxation attributable to it.
10.10.4	Recovery Indemnity
	The Principal Seller shall indemnify and covenant to pay the Purchaser (for and on behalf of itself and each Group Company) in respect of any Losses, costs and expenses which the Purchaser and/or any Group Company may incur as a result of any reasonable steps taken pursuant to Clauses 10.10.2 and/or 10.10.3, save to the extent that such Losses, costs and expenses have already been reimbursed by way of deduction of the relevant costs and expenses from any such recovery as referred to in such Clauses.
10.11	Double Claims
	The Purchaser shall not be entitled to recover from the Sellers under this Agreement and/or the Tax Deed of Covenant more than the amount of the Losses suffered.
10.12	Fraud
	None of the limitations contained in this Clause 10 shall apply to any claim which arises or is increased, or to the extent to which it arises or is increased, as the consequence of, or which is delayed as a result of, fraud or wilful concealment by any Seller, any member of the Sellers’ Group or any of their respective directors, officers or employees.
11	Claims
11.1	Notification of Potential Claims
	If the Purchaser or any Group Company becomes aware of any fact, matter or circumstance that will or is reasonably likely to give rise to a claim against the Sellers under this Agreement the Purchaser shall within 30 Business Days thereof give a notice in writing to the Principal Seller specifying in reasonable detail the legal and factual basis of the claim and if practicable, an estimate of the amount of Losses which are, or are to be, the subject of the claim (including any Losses which are contingent on the occurrence of any future event). Failure to give notice within such period shall not affect the rights of the Purchaser except to the extent that any Seller is prejudiced by the failure.

11.2 Commencement of Proceedings

Any claim notified pursuant to Clause 11.1 shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be irrevocably withdrawn six months after the notice is given pursuant to Clause 11.1 or in the case of any contingent liability, six months after such contingent liability becomes an actual liability and is due and payable unless legal proceedings in respect of it have been commenced.

11.3 Investigation by the Sellers

In connection with any matter or circumstance that may give rise to a claim against the Sellers under this Agreement, after Completion:

11.3.1

the Purchaser shall allow, and shall procure that the relevant Group Company allows, the Sellers and their financial, accounting or legal advisers such access as is reasonably required to investigate the matter or circumstance alleged to give rise to a claim and whether and to what extent any amount is payable in respect of such claim; and

11.3.2

the Purchaser shall disclose to the Sellers all primary material of which the Purchaser is aware which relates to the claim and shall, and shall procure that any other relevant members of the Purchaser’s Group shall, give, subject to their being paid all reasonable costs and expenses, such information and assistance, including access to premises and personnel, and the right to examine and copy or photograph any assets, accounts, documents and records, as the Sellers or their financial, accounting or legal advisers may reasonably request. The Sellers agree to ensure that all such information is kept confidential and to use it only for the purpose of investigating and defending the claim in question.

11.4 Conduct of Third Party Claims

11.4.1 If the matter or circumstance that may give rise to a claim against the Sellers under this Agreement is a result of or in connection with a claim by or liability to a third party then, without prejudice to the rights of the insurers of the Purchaser’s Group:

(i)

subject to the Sellers indemnifying the Purchaser or other member(s) of the Purchaser’s Group concerned against all Losses, the Purchaser shall, or the Purchaser shall procure that such other members of the Purchaser’s Group shall, take such action as the Sellers may reasonably request to avoid, dispute, deny, defend, resist, appeal, compromise or contest such claim, provided (in each case) that to do so would not be materially prejudicial or detrimental to the business of any Hotel;

(ii)

subject to the Sellers indemnifying the Purchaser or other member(s) of the Purchaser’s Group concerned against all Losses that arise or result from such claim (including, without limitation, those arising from or relating to its conduct, defence and/or settlement), the Sellers shall be entitled at their own cost and expense and in their absolute discretion, by notice in writing to the Purchaser, to take such action as they shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest such claim or liability (including, without limitation, making counterclaims or other claims against third parties) in the name of and on behalf of the Purchaser or other member of the Purchaser’s Group concerned and to have the

conduct of any related proceedings, negotiations or appeals, provided (in each case) that to do so would not be materially prejudicial or detrimental to the business of any Hotel; and

(iii) the Purchaser or other member of the Purchaser’s Group concerned may not admit, compromise, dispose of or settle such claim without the written consent of the Sellers (not to be unreasonably withheld or delayed).

11.5 Application

11.5.1	Subject to Clause 11.5.2 below, the provisions of Clauses 10 and 11 shall apply (in accordance with their respective terms) to all Sellers’ Warranties.
11.5.2	The provisions of Clauses 10 and 11 shall apply (in accordance with their respective terms) to the Tax Warranties and the Tax Deed of Covenant, other than Clauses 10.5, 10.6, 10.9 (in respect of claims under the Tax Deed of Covenant only), 10.10 and 11.1, 11.2, 11.3 and 11.4 of this Agreement, which shall not apply to the Tax Warranties or the Tax Deed of Covenant.
11.5.3	None of the provisions of Clauses 10 or 11 shall apply to any claim under Clause 9.3, other than Clauses 10.1, 10.4, 10.5.1, 10.7, 10.8, 10.10.1, 10.10.3, 10.10.4, 10.11, 10.12, 11.3, 11.4 (subject to Clause 9.3.2) and this Clause 11.5.3, in each case, in accordance with their respective terms.
11.5.4	In respect of any other claim under this Agreement (other than a claim to which any of Clauses 11.5.1 to 11.5.3 apply), none of the provisions of Clauses 10 or 11 shall apply other than Clauses 10.4, 10.8, 10.9, 10.11, 10.12 and this Clause 11.5.4 which shall apply, in each case, in accordance with their respective terms.

12      Confidentiality

12.1 Announcements

No announcement or circular in connection with the existence or the subject matter of this Agreement shall be made or issued by or on behalf of any of the Sellers or the Purchaser without the prior written approval of the Principal Seller and the Purchaser. This shall not affect any announcement or circular required by law or any regulatory body or the rules of any recognised stock exchange on which the shares of any party or any member of the Sellers’ Group or the Purchaser’s Group respectively are listed but the party with an obligation to make an announcement or issue a circular shall consult with the other party insofar as is reasonably practicable before complying with such an obligation.

12.2   Confidentiality

12.2.1	Pending Completion, this Clause 12 shall be without prejudice to the Confidentiality Agreement, which Agreement shall remain in full force and effect up to Completion. With immediate effect on Completion, the Confidentiality Agreement shall terminate, save for any then accrued rights and/or obligations of the parties thereunder.
12.2.2	Subject to Clause 12.1 and Clause 12.2.3:

(i) each of the Sellers and the Purchaser shall treat as strictly confidential and not disclose or use any information received or obtained as a result of entering into this Agreement (or any agreement entered into pursuant to this Agreement) which relates to:

(a)	the provisions of this Agreement and any agreement entered into pursuant to this Agreement; or
(b)	the negotiations relating to this Agreement (and any such other agreements);

(ii)	the Sellers shall treat as strictly confidential and not disclose or use any information relating to the Group Companies or any other information relating to the business, financial or other affairs (including future plans and targets) of the Purchaser’s Group (including the Group Companies); and
(iii)	the Purchaser shall treat as strictly confidential and not disclose or use any information relating to the business, financial or other affairs (including future plans and targets) of the Sellers’ Group or, prior to Completion, the Group Companies.

12.2.3 Clause 12.2 shall not prohibit disclosure or use of any information if and to the extent:

(i)	the disclosure or use is required by law, any regulatory body or any recognised stock exchange on which the shares of any Seller or the Purchaser or any member of the Sellers’ Group or the Purchaser’s Group respectively are listed;
(ii)	the disclosure or use is required to vest the full benefit of this Agreement in any of the Sellers or the Purchaser;
(iii)	the disclosure or use is required for the purpose of any judicial proceedings arising out of this Agreement or any other agreement entered into under or pursuant to this Agreement or the disclosure is made to a Tax Authority in connection with the Tax affairs of the disclosing party;
(iv)	the disclosure is made to professional advisers, funders and/or (if applicable) potential syndicate members of such funders to any of the Sellers and/or the Purchaser on terms that such professional advisers, funders and potential syndicate members undertake to comply with the provisions of Clause 12.2.2 in respect of such information as if they were a party to this Agreement;
(v)	the disclosure is made on a confidential basis to members of the Sellers’ Group or the Purchaser’s Group and such members agree to treat the information as confidential and adhere to the terms of this Clause 12 as if they were party to this Agreement;
(vi)	the information is or becomes publicly available (other than by breach of the Confidentiality Agreement or of this Agreement);
(vii)	the other parties have given prior written approval for the disclosure or use; or
(viii)	the information is independently developed after Completion,

provided that prior to disclosure or use of any information pursuant to Clause 12.2.3(i), (ii) or (iii) except in the case of disclosure to a Tax Authority, the party concerned shall promptly notify the other parties of such requirement with a view to providing such other parties with the opportunity to contest such disclosure or use or otherwise to agree the timing and content of such disclosure or use.

12.3 Application to Tax Deed of Covenant

 For the purposes of this Clause 12, references to “Agreement” shall be deemed to include the Tax Deed of Covenant.

13      Other Provisions

13.1 Further Assurances

13.1.1	Each of the Sellers and the Purchaser shall, and shall use reasonable endeavours to procure that any necessary third party shall, from time to time execute such documents and perform such acts and things as any Seller or the Purchaser may reasonably require to transfer the Shares to the Purchaser in accordance with the terms of, and otherwise to give each of them the full benefit of, this Agreement.
13.1.2	Following Completion, pending registration of the Purchaser as owner of the Shares, the Sellers shall only exercise their voting and other rights in relation to such Shares in accordance with the Purchaser’s instructions and shall otherwise promptly provide or make available to the Purchaser any benefits attaching or accruing to the Shares on or after Completion.
13.1.3	If any property, right or asset which does not form part of the Assets and is not otherwise contemplated to be so transferred, is inadvertently transferred by the Sellers’ Group to the Purchaser on Completion under this Agreement, the Purchaser, at the Principal Seller’s cost, shall transfer such property, right or asset (and any related liability) back to a member of the Sellers’ Group nominated by the Principal Seller for nil consideration, as soon as reasonably practicably after becoming aware or otherwise being informed in writing by the Principal Seller of such matter.
13.1.4	The Purchaser shall, and shall procure that the relevant Group Companies shall, retain for a reasonable period, such reasonable period to include (for the avoidance of doubt and without limitation) such period as is required under any applicable Tax Statute, from Completion the books, records and documents of the Group Companies to the extent they relate to the period prior to Completion and shall, and shall procure that the relevant Group Companies shall, allow the Sellers upon their written request reasonable access to such books, records and documents, including the right to take copies, at the Sellers’ expense.
13.1.5	The Purchaser shall assist and co-operate with the Sellers in procuring prior to Completion that each of the Group Companies whose name contains or includes the names “InterContinental” shall change its name so that it does not contain any such name or any name which is likely to be confused with the same. To the extent that the name of any Group Company whose name contains or includes the name Intercontinental has not been changed on or prior to Completion to a name not

including or containing any such name or any name likely to be confused with the same, the Purchaser shall procure that, as soon as reasonably practicable following Completion, the name of any such Group Company is so changed.

13.1.6

The Purchaser shall not, and shall procure that no member of the Purchaser’s Group shall, after Completion, use in any way whatsoever any trading names or registered or unregistered trade marks owned by or licensed (other than by a Group Company) to the Sellers’ Group (including, without limitation, InterContinental) other than as permitted under the Individual Hotel Management Agreements and the Trade Mark Deeds.

13.1.7

If any property, right or asset owned by a member of the Sellers’ Group is used, enjoyed or exercised exclusively by or in relation to the Group on or before Completion other than:

(i)	the Excluded Rights; and
(ii)	any property, rights and assets to be, or contemplated to be, provided, made available and/or licensed by the Sellers’ Group to the Group under or in accordance with the terms of the Individual Hotel Management Agreements,

the Principal Seller shall procure that the relevant member of the Sellers’ Group, at that relevant member’s cost, shall transfer such property, right or asset (and any related liability) to a member of the Purchaser’s Group nominated by the Purchaser, for nil consideration, as soon as reasonably practicable after becoming aware or otherwise being informed in writing by the Purchaser of such matter, together with any rights, monies and/or other benefits paid, provided, accrued or accruing in respect of such property, right or asset from Completion.

13.2 Release of Guarantees

13.2.1

The Purchaser shall use reasonable endeavours to procure by Completion or, to the extent not done by Completion, within 60 days thereafter or, to the extent not done within such period, as soon as reasonably practicable thereafter, the release of any member of the Sellers’ Group from any securities, guarantees or indemnities given by or binding upon any member of the Sellers’ Group in respect of any liability of the Group Companies. Pending such release the Purchaser shall indemnify the Sellers (for themselves and as trustees for the other members of the Sellers’ Group) against all amounts paid by any of them after Completion pursuant to any such securities, guarantees and indemnities in respect of such liability of the Group Companies.

13.2.2

The Sellers shall use reasonable endeavours to procure by Completion or, to the extent not done by Completion, within 30 days thereafter, or, to the extent not done within such period, as soon as reasonably practicable thereafter, the release of each Group Company from any securities, guaranties or indemnities given by or binding upon the Group Company in respect of any liability of any member of the Sellers’ Group including, for the avoidance of doubt, the Sienna Hotel Security Agreements. Pending such release, the Sellers shall indemnify the Purchaser (for itself and as trustee for the Group Companies) against all amounts paid by any of them after Completion pursuant to any such securities, guarantees and indemnities in respect of such liability of any member of the Sellers’ Group.

13.3 Contracts

      13.3.1 In relation to the Split Contracts, the parties agree that, subject to Clause 13.3.2, with effect from Completion:

(i)	the Purchaser shall, or shall procure that the relevant member of the Purchaser’s Group shall, to the extent it is lawfully and contractually able to do so pursuant to the terms of the relevant Split Contract: (i) hold any payments, goods or other benefits received under a Split Contract to the extent such payments, goods or other benefits do not relate solely to the business of any, some or all of the Hotels (“Non Hotel Benefits”) on trust for the Sellers or any other member of the Sellers’ Group and as soon as reasonably practicable following receipt of the same shall provide the Sellers such Non Hotel Benefits or, where it is not lawfully and contractually able to do so pursuant to the terms of the relevant Split Contract, make such other arrangements with the Sellers to provide to the relevant member of the Sellers’ Group, the Non Hotel Benefits, including the enforcement at the cost and for the account of the Sellers of all rights of the relevant Group Company against any other party thereto; and (ii) carry out or perform its obligations under the Split Contracts and (so far as it lawfully and contractually may pursuant to the terms of the relevant Split Contract) do all such things as the Sellers may reasonably require to enable due performance by the Sellers’ Group of the Split Contracts for the Purchaser’s benefit to the Relevant Extent and shall indemnify and keep indemnified the Sellers (for themselves and as trustees for any other member of the Sellers’ Group) against any Losses incurred by any member of the Sellers’ Group arising from the failure by any member of the Purchaser’s Group to carry out, perform or discharge such obligations or do such things as the Sellers may reasonably require to enable such due performance and against any Losses which any member of the Sellers’ Group may suffer by reason of their taking any reasonable action to avoid, resist or defend any Loss referred to in this paragraph;
(ii)	each Seller undertakes to perform, or to procure the performance (unless prohibited by law from doing so) of all Split Contracts, to the Relevant Extent, in accordance with their terms and conditions as sub-contractor of the relevant member of the Purchaser’s Group provided that such subcontracting is permitted under the terms of the relevant Split Contract, and where sub contracting is not permissible, the Sellers undertake to perform, or procure the performance (unless prohibited by law or the relevant Split Contract from doing so), to the Relevant Extent, of the relevant Split Contract as agent of the Purchaser or the relevant member of the Purchaser’s Group as appropriate in accordance with its terms and conditions and in each case to indemnify the Purchaser (for itself and as trustee for the other members of the Purchaser’s Group) against any Losses incurred by any member of the Purchaser’s Group in respect of any failure on the part of a member of the Sellers’ Group to perform the obligations contained in this Clause 13.3.1 (ii); and
(iii)	if the Sellers so request, the Purchaser shall take such action, or procure that such action is taken as is reasonably necessary to agree an arrangement with the counterparty or counterparties to the relevant Split

Contract whereby the Split Contract is terminated and replaced by two or more contracts (including one with any member of the Purchaser’s Group and one with any member of the Sellers’ Group) and provided that, so far as the terms of any contract to be entered into by the Purchaser or other member of the Purchaser’s Group or the Sellers or any other member of the Sellers’ Group is concerned, such terms shall be no worse than the equivalent terms contained in the relevant Split Contract, reflecting the relevant requirements of the Sellers and the Purchaser.

13.3.2 For the purposes of Clause 13.3.1, neither the Purchaser nor any other member of the Purchaser’s Group shall be liable to any member of the Sellers’ Group for breach of, or otherwise under, Clause 13.3.1 to the extent that such liability arises or results from:

(i)	any breach of a Split Contract on or prior to Completion;
(ii)	any act or omission of any member of the Sellers’ Group or the Group prior to Completion; or
(iii)	any act or omission of any member of the Sellers’ Group on or after Completion, including a breach by any member(s) of the Sellers’ Group of their respective obligations under any of the relevant Individual Hotel Management Agreements.

13.3.3 In relation to the Sellers’ Group Contracts, the parties agree that with effect from Completion:

(i) the Sellers shall, or shall procure that relevant member of the Sellers’ Group shall, to the extent it is lawfully and contractually able to do so pursuant to the terms of the relevant Sellers’ Group Contract: (i) hold any payments, goods or other benefits received under the Sellers’ Group Contracts to the extent such payments, goods or other benefits relate solely to the business of any, some or all of the Hotels (“Hotel Benefits”) on trust for the relevant member of the Purchaser’s Group and as soon as reasonably practicable following receipt of the same shall provide the Purchaser such Hotel Benefits or, where it is not lawfully and contractually able to do so pursuant to the terms of the relevant Sellers’ Group Contract, make such other arrangements with the Purchaser to provide to the relevant member of the Purchaser’s Group, the Hotel Benefits, including the enforcement at the cost and for the account of the Purchaser of all rights of the relevant member of the Sellers’ Group against any other party thereto; and (ii) carry out or perform its obligations (unless prohibited by law from doing so), of all Sellers’ Group Contracts and (so far as it lawfully and contractually may pursuant to the terms of the relevant Sellers’ Group Contract) do all such things as the Purchaser may reasonably require to enable due performance by the Purchaser’s Group of the Sellers’ Group Contracts for the Seller’s benefit to the .Relevant Extent and shall indemnify and keep indemnified the Purchaser (for itself and as trustee for the other members of the Purchaser’s Group) against any Losses incurred by any member of the Purchaser’s Group arising from the failure by any member of the Sellers’ Group to carry out, perform or discharge such obligations or do such things as the Purchaser may reasonably require to enable such

due performance and against any Losses which any member of the Purchaser’s Group may suffer by reason of their taking any reasonable action to avoid, resist or defend any Loss referred to in this paragraph;

(ii)

the Purchaser undertakes to perform, or to procure the performance (unless prohibited by law from doing so), of all the Sellers’ Group Contracts to the Relevant Extent, in accordance with their terms and conditions as sub-contractor of the relevant member of the Sellers’ Group provided that such sub-contracting is permitted under the terms of the relevant Sellers’ Group Contract, and where sub contracting is not permissible, the Purchaser undertakes to perform, or procure the performance (unless prohibited by law or the relevant Sellers’ Group Contract from doing so), to the Relevant Extent, of the relevant Sellers’ Group Contract as agent of any Seller or the relevant member of the Sellers’ Group as appropriate in accordance with its terms and conditions and in each case to indemnify the Sellers (for themselves and as trustees for the other members of the Sellers’ Group) against any Losses incurred by any member of the Sellers’ Group in respect of any failure on the part of a member of the Purchaser’s Group to perform the obligations contained in this Clause 13.3.3(ii); and

(iii)

if the Purchaser so requests, the Sellers shall take such action, or procure that such action is taken as is reasonably necessary to agree an arrangement with the counterparty or counterparties to the relevant Sellers’ Group Contract whereby the Sellers’ Group Contract is terminated and replaced by two or more contracts (including one with any member of the Purchaser’s Group and one with any member of the Sellers’ Group) and provided that, so far as the terms of any contract to be entered, into by the Purchaser or any member of the Purchaser’s Group or the Sellers or any member of the Sellers’ Group is concerned, such terms shall be no worse than the equivalent terms contained in the relevant Sellers’ Group Contract, reflecting the relevant requirements of the Sellers and the Purchaser.

13.3.4 Inter-Group Arrangements

(i)

Subject to Clause 13.3.4(ii), the Principal Seller shall ensure that, by Completion, all agreements, arrangements, obligations, undertakings and commitments between any member(s) of the Sellers’ Group, on the one hand, and any member(s) of the Group, on the other, are (at the Principal Seller’s expense) terminated, such termination to be without prejudice to any then accrued rights, obligations and/or liabilities of the parties thereunder and shall indemnify the Purchaser (as trustee for the Group Companies) for any Losses arising as a direct result of such termination.

(ii)

Clause 13.3.4(i) shall not apply to:

(a)	any Sellers’ Group Contract or Split Contract;
(b)	this Agreement or any of the Transaction Documents or to the extent otherwise expressly provided in any of such documents;
(c)	the Pre-Sale Reorganisation Documents;
(d)	the Individual Hotel Management Agreements or any agreements or arrangements to be, or contemplated to be, provided, made available

	or licensed by the Sellers’ Group to the Group under or in accordance with the terms of such Individual Hotel Management Agreements;
(e)	the TCA;
(f)	any arrangements in the ordinary course of business on arm’s length commercial terms,

each of which shall remain in full force and effect in accordance with their terms.

13.4 Further Undertakings

13.4.1 Insurance

(i)

The Sellers shall procure that from the date of this Agreement until Completion the interests of the Group and the Group Companies are noted on any insurance policies maintained by or on behalf of the Sellers’ Group in relation to any Group Company and shall provide reasonable evidence thereof to the Purchaser within 10 Business Days of the date of this Agreement. ‘

(ii)

Other than as provided for in the Individual Hotel Management Agreements, the Purchaser agrees that, following Completion, the Sellers’ Group shall not be required to maintain any of the insurance policies maintained prior to Completion by or on behalf of the Sellers’ Group in relation to any Group Company. If any Seller decides to maintain any of such policies, the Purchaser shall not be entitled to benefit from such policies and the Purchaser will put in place such insurances as it shall require in relation thereto.

13.4.2	Cannes Beach Concession
	The Sellers and the Purchaser shall co-operate in seeking, and shall use reasonable endeavours to obtain, approval from the Town of Cannes to the arrangements which are the subject of this Agreement pursuant to the Beach Concession Agreement, including the change in directors of SNC Carlton Inter-Continental Cannes. Should such approval fail to be obtained, such failure shall not entitle either party to postpone Completion.
13.4.3	IC Vienna Hotel
	The Sellers agrees to procure that immediately prior to Completion BOEBV shall pay to the Republic of Austria the sum of €360,000 in accordance with Article III of the assignment agreement between BOEBV, the Principal Seller and the Republic of Austria dated 3 February 2006, in full and final satisfaction and discharge of BOEBV’s obligations under such Article and of all obligations to pay purchase price under and in accordance with such agreement.
13.4.4	Omega Litigation

(i) Subject to the Principal Seller indemnifying the Purchaser (on behalf of itself and other members of the Purchaser’s Group) on demand against all Losses incurred from time to time by the Purchaser or any other member(s)

of the Purchaser’s Group that arise or result from or relate to the Omega Litigation, the Purchaser shall, or shall procure that the relevant member(s) of the Group shall, following Completion, continue the Omega Litigation for the benefit of and pursuant to the instructions of IHM and/or the Principal Seller. In particular, the Purchaser shall and shall procure that IHGG shall:

(a)	act pursuant to the instructions of IHM and/or the Principal Seller, including with regard to the appointment and dismissal of IHGG’s counsel for the Omega Litigation and the legal actions taken by such counsel, in each case, in connection with the Omega Litigation;
(b)	not admit, compromise, dispose of or settle the Omega Litigation without the prior written consent of the Principal Seller; and
(c)	to the extent practicable, assign all potential claims and receivables arising out or in connection with the Omega Litigation to the Principal Seller as trustee for and on behalf of IHM (net of any Losses and Tax). Clause 13.16 shall not apply to this Clause 13.4.4(i)(c).

(ii)

As a separate and independent obligation, and without prejudice to any other indemnity contained herein, the Principal Seller will indemnify the Purchaser (on behalf of itself and other members of the Purchaser’s Group) on demand against all Losses incurred from time to time by the Purchaser or any other member(s) of the Purchaser’s Group arising out of or in connection with any claim made by OMEGA Hotels GmbH (or any related party thereto) either by way of a counterclaim or under separate proceedings,

(iii)

To the extent that any claim under this Clause 13.4.4 is in respect of Taxation such claim shall to such extent be treated as a Tax Claim (as defined in the Tax Deed of Covenant) and shall be dealt with subject to and in accordance with the terms of the Tax Deed of Covenant.

13.4.5 IC Dublin Agreement

(i)	The Sellers shall use all reasonable endeavours to procure by Completion or, to the extent not done by Completion, shall as soon as reasonably practicable thereafter ensure, that the IC Dublin Agreement is novated from BOEBV to the Principal Seller.
(ii)	If the novation of the IC Dublin Agreement as contemplated by Clause 13.4.5(i) does not take place prior to Completion, then following Completion:

(a)

the Purchaser shall at the Principal Seller’s expense provide reasonable assistance to the Sellers in procuring such novation; and

(b)

the Sellers shall indemnify the Purchaser (for itself and on behalf of each Group Company) against all Losses incurred by the Purchaser and/or any of the Group Companies arising or resulting from (A) the IC Dublin Agreement and/or any non-compliance therewith (including any amount paid or payable by any Group Company pursuant to the IC Dublin Agreement) and/or (B) compliance with sub-clause (a) above.

(iii) To the extent that any claim under Clause 13.4.5(ii)(b) is in respect of Taxation such claim shall to such extent be treated as a Tax Claim (as defined in the Tax Deed of Covenant) and shall be dealt with subject to and in accordance with the terms of the Tax Deed of Covenant.

13.4.6	Pre-Sale Reorganisation
	Save as contemplated in Clauses 13.4.7 to 13.4.9, the Principal Seller shall procure that the Pre-Sale Reorganisation and all steps and matters contemplated thereby or related thereto are undertaken, implemented and completed prior to Completion in accordance with the terms of the Pre-Sale Reorganisation Documents.
13.4.7	Sienna Hotel

(i)	The Principal Seller shall use reasonable endeavours to procure by Completion or, to the extent not done by Completion, shall as soon as reasonably practicable thereafter ensure, that the rights and obligations under the Sienna Hotel PSPA are assigned from BOEBV to the Principal Seller.
(ii)	To the extent that the assignment of the Sienna Hotel PSPA referred to in Clause 13.4.7(i) does not take place prior to Completion:

(a)	the Purchaser shall at the Principal Seller’s expense provide reasonable assistance to the Sellers in procuring such assignment; and
(b)	pending such assignment, the Sellers shall indemnify the Purchaser against any Losses incurred by the Purchaser’s Group that arise or result from any liability of any Group Company pursuant to such agreement.

(iii) To the extent that any claim under Clause 13.4.7(ii)(b) is In respect of Taxation such claim shall to such extent be treated as a Tax Claim (as defined In the Tax Deed of Covenant) and shall be dealt with subject to and in accordance with the terms of the Tax Deed of Covenant,

13.4.8 Athenaeum

(i)	The Sellers shall use reasonable endeavours to procure by Completion or, to the extent not done by Completion, shall as soon as reasonably practicable thereafter ensure, that the Athenaeum Agreement is novated from BOEBV to the Principal Seller.
(ii)	To the extent that the novation as contemplated by Clause 13.4.8(i) does not take place prior to Completion:

(a)	the Purchaser shall provide reasonable assistance to the Sellers in procuring such novation; and
(b)	pending such novation, the Sellers shall indemnify the Purchaser against any Losses incurred by the Purchaser’s Group that arise or result from any liability of any Group Company pursuant to or in connection with the Athenaeum Agreement and/or Athenaeum.

(iii) To the extent that any claim under Clause 13.4.8(ii)(b) is In respect of Taxation, such claim shall, to such extent, be treated as a Tax Claim (as defined in the Tax Deed of Covenant) and shall be dealt with subject to and in accordance with the terms of the Tax Deed of Covenant.

13.4.9 Almaty Technical Services Agreement

(i)	The Sellers shall use reasonable endeavours to procure by Completion or, to the extent not done by Completion shall as soon as reasonably practicable thereafter ensure, that the Almaty technical services agreement dated 13 June 2004 between IHGG and Mercury Invest LLC is assigned from IHGG to a member of the Sellers’ Group.
(ii)	If the novation of the Almaty technical services agreement as contemplated by Clause 13.4.9(i) does not take place prior to Completion, then following Completion:

(a)

the Purchaser shall at the Principal Seller’s expense provide reasonable assistance to the Seller’s expense in procuring such assignment; and

(b)

the Sellers shall lindemnify the Purchaser (for itself and on behalf of each Group Company) against all Losses incurred by the Purchaser and/or any Group Company arising or resulting from (A) the Almaty technical services agreement and/or any non-compliance therewith (including any amount paid or payable by any Group Company pursuant to the Almaty technical services agreement) and/or (B) compliance with sub-clause (a) above.

(iii) To the extent that any claim under Clause 13.4.9(ii)(b) is in respect of Taxation such claim shall to such extent be treated as a Tax Claim (as defined in the Tax Deed of Covenant) and shall be dealt with subject to and in accordance with the terms of the Tax Deed of Covenant.

13.4.10	Minimum Net Assets
	If at any time after Completion and before the fourteenth anniversary of Completion either:

(i)	the Principal Seller ceases, or is to cease, to be a member of the Sellers’ Group; or
(ii)	the net assets of the Principal Seller are less than €150,000,000,

the Sellers shall promptly (a) notify the Purchaser in writing of such and (b) upon the written request (and at the sole discretion) of the Purchaser, ensure that all obligations and liabilities of the Principal Seller under this Agreement and/or the Tax Deed of Covenant are promptly novated to a continuing member of the Sellers’ Group with net assets, both as at such time and reasonably anticipated for the period of 6 months immediately thereafter, of not less than €150,000,000 (the “Substitute Principal Seller”), in which event, upon such novation, the Substitute Principal Seller shall assume and be subject to all obligations and liabilities of the Principal Seller under this Agreement and/or the Tax Deed of Covenant as if it were the Principal Seller, including (without limitation) the Principal Seller’s obligations and liabilities under this Clause 13.4.10. The Principal Seller or the Substitute

	Principal Seller (as the case may be) shall from time to time furnish to the Purchaser on demand reasonable evidence of its net asset position.
13.4.11	IC Amstel Hotel Individual Hotel Management Agreement
	The Principal Seller undertakes to procure that, prior to Completion:

(i)

a notarial deed, in the form attached as Annexure 4 to the Individual Hotel Management Agreement relating to the IC Amstel Hotel (the “IC Amstel HMA”), is entered into between IHG Management (Netherlands) B.V. and B.V. Amstel Hotel Maatschappij before a notary public in the Netherlands pursuant to which the qualitative obligation (kwalitatieve verplichtlng) to be granted to IHG Management (Netherlands) B.V. in accordance with the IC Amstel HMA will be registered with the relevant Land Registry in the Netherlands; and

(ii)

the original notarial deed is submitted to the relevant Land Registry in the Netherlands in order for such registration to occur.

13.4.12	IC Carlton Cannes Hotel Individual Hotel Management Agreement
	The Principal Seller and the Purchaser agree to work together in good faith between the date of this Agreement and the Completion Date in order to finalise the terms of the Individual Hotel Management Agreement relating to the IC Carlton Cannes Hotel. The Principal Seller and the Purchaser acknowledge that there are no outstanding commercial issues as between themselves in respect of such Individual Hotel Management Agreement and that the only amendments which may need to be made are mechanical amendments which may be necessary to reflect and take account of the split of the ownership and operation of the IC Carlton Cannes Hotel as between Société des Hôtels Réunis SAS and SNC Carlton Inter-Continental Cannes.
13.4.13	IC Frankfurt Hotel Individual Hotel Management Agreement
	The Principal Seller and the Purchaser agree to work together in good faith between the date of this Agreement and the Completion Date in order to finalise the terms of the Individual Hotel Management Agreement relating to the IC Frankfurt Hotel. The Principal Seller and the Purchaser acknowledge that there are no outstanding commercial issues as between themselves in respect of such Individual Hotel Management Agreement and that the only amendments which may need to be made are mechanical amendments which may be necessary to reflect and take account of:

(i)	the split of the ownership and operation of the IC Frankfurt Hotel as between FIH and IHB Germany; and
(ii)	the fact that FIH itself shall not be subject to any obligation under that Individual Hotel Management Agreement and that therefore the Purchaser and IHGG shall procure that FIH fulfils certain obligations (where required to give effect to the terms of that Individual Hotel Management Agreement).

13.4.14	IC Madrid Hotel Hotel Trade Mark Agreement
	Between the date of this Agreement and Completion, the Principal Seller and the Purchaser shall negotiate and agree (both acting reasonably and in good faith) the

	amount of, and the payment periods (whether lump sum or instalment) in respect of, the royalty fee payable under the Hotel Trade Mark Agreement in respect of the IC Madrid Hotel, the agreement of such amount to be based on the parties’ reasonable assessment of the fair market value of such trade mark license, and shall procure that the agreement so reached is reflected in the final version of such Hotel Trade Mark Agreement to be executed and delivered at Completion in accordance with Schedule 5.
13.4.15	Change of Business Address
	The Purchaser undertakes to notify the Commercial Register in Germany of the new business address of each of IHB Germany, FIH and IHGG within 10 Business Days of Completion.

13.5 Sellers’ Liability

13.5.1	The rights and obligations of each of the Sellers (other than the Principal Seller) under this Agreement shall only relate to the Assets which it is selling under this Agreement.
13.5.2	Each Seller:

(i)	agrees that the Principal Seller shall receive or pay any sums receivable or payable by it under this Agreement and the Tax Deed of Covenant on behalf of each relevant Seller to the extent that such sum relates to the Shares being sold by any such Seller;
(ii)	irrevocably directs the Purchaser to pay any sums due and payable by the Purchaser to it under this Agreement and/or the Tax Deed of Covenant, to the Principal Seller; and
(iii)	agrees that payment by the Purchaser in accordance with the direction in Clause 13.5.2(ii) shall constitute a good and absolute discharge of the Purchaser’s obligation to pay any amount so paid to the Sellers under this Agreement and/or, as the case may be, the Tax Deed of Covenant.

13.5.3	The Principal Seller shall be jointly and severally liable with each other Seller for any breach of this Agreement by any other such Seller.
13.5.4	The Principal Seller and each of the other Sellers agrees that where any right is given to the Principal Seller under this Agreement, such right shall be exercisable exclusively by the Principal Seller and any such exercise shall be binding on each of the Sellers.
13.5.5	Any liability to the Purchaser under this Agreement may in whole or in part be released, compounded or compromised or time or indulgence given by the Purchaser in its absolute discretion as regards any of the Sellers under such liability without in any way prejudicing or affecting its rights against any other or others of the Sellers under the same or a like liability whether joint and several or otherwise.

13.6 Whole Agreement

13.6.1	This Agreement contains the whole agreement between the Setters and the Purchaser relating to the subject matter of this Agreement at the date of this Agreement to the exclusion of any terms implied by law which may be excluded by contract and supersedes any previous written or oral agreement between the Sellers and the Purchaser in relation to the matters dealt with in this Agreement.
13.6.2	The Purchaser acknowledges that it has not been induced to enter this Agreement by any representation, warranty or undertaking not expressly incorporated into it and (without prejudice to the generality of the foregoing) that neither the Sellers nor any other member of the Sellers’ Group makes any representation or warranty as to the accuracy of the forecasts, estimates, projections, statements of intent or statements of opinion provided to the Purchaser or its representatives or advisers on or prior to the date of this Agreement (whether in presentations or otherwise) or in or pursuant to the Disclosure Letter.
13.6.3	So far as is permitted by law and except in the case of fraud, each of the Sellers and the Purchaser agrees and acknowledges that its only right and remedy in relation to any warranty or undertaking made or given in connection with this Agreement shall be for breach of the terms of this Agreement to. the exclusion of all other rights and remedies (including those in tort or arising under statute).
13.6.4	In Clauses 13.6.1 to 13.6.3, “this Agreement” includes the Disclosure Letter, the Confidentiality Agreement and all documents entered into pursuant to this Agreement.

13.7 Reasonableness

Each of the Sellers and the Purchaser confirms it has received independent legal advice relating to all the matters provided for in this Agreement, including the terms of Clause 13.6 (Whole Agreement) and agrees that the provisions of this Agreement (including the Disclosure Letter, the Confidentiality Agreement and all documents entered into pursuant to this Agreement) are fair and reasonable.

13.8 Assignment

13.8.1	Except as otherwise expressly provided in this Agreement, neither the Sellers nor the Purchaser may without the prior written consent of the other, assign, grant any security interest over, hold on trust or otherwise transfer the benefit of the whole or any part of this Agreement.
13.8.2	Except as otherwise expressly provided in this Agreement, the Sellers or trie Purchaser may, without the consent of the other, assign to a connected company the benefit (but not the burden) of the whole or any part of this Agreement provided that;

(i)	such assignment shall not be absolute but shall be expressed to have effect only for so long as the assignee remains a connected company of the party concerned;
(ii)	the assignee shall not be entitled to receive under this Clause any greater amount than that to which the Purchaser or the Sellers, as appropriate would have been entitled;

(iii)	an additional payment will not be required to be made to the assignee as a result of such an assignment; and
(iv)	the other parties shall not incur any greater aggregate liability than if such assignment had not taken place.

For the purposes of this Clause 13,8,2, a “connected company” is a company which is a subsidiary of the party concerned or which is a holding company of such party or a subsidiary of such holding company.

13.8.3

The Purchaser may charge and/or assign the benefit of this Agreement to any bank or financial institution or other person by way of security or otherwise for the purposes of or in connection with the financing or refinancing (whether in whole or in part) by the Purchaser of the acquisition of the Assets provided that the Sellers shall incur no greater liability than if any such charge or assignment had not taken place. Without limitation to the foregoing, any such bank, financial institution or person (or any administrative receiver appointed by any of the foregoing or any other person appointed to enforce any such security) may charge or assign such rights on, for the purpose of or in connection with, any enforcement of the security under such finance arrangements.

13.8.4

Notwithstanding Clause 13.8.1, the Sellers acknowledge that the Purchaser may provide back to back indemnities, warranties or undertakings in respect of the matters the subject matter of this Agreement and/or the Tax Deed of Covenant to subsequent purchaser(s) of all or any of the Shares, Group Companies and/or Hotels, provided that the Sellers shall not incur any greater liability as a result thereof than they would have incurred had such subsequent disposal(s) not taken place. The Sellers agree that in the event that the Purchaser brings a claim under this Agreement or the Tax Deed of Covenant in respect of any Losses suffered by such subsequent purchaser(s) in connection with such back to back warranties, indemnities or undertakings that they will not raise the argument that such Losses are too remote.

13.9 Third Party Rights

A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of, or enjoy any benefit under, this Agreement.

13.10 Variation

No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the Sellers and the Purchaser.

13.11 Time of the Essence

Time shall be of the essence of this Agreement both as regards any dates and periods mentioned and as regards any dates and periods which may be substituted for them in accordance with this Agreement or by agreement in writing between the Sellers and the Purchaser.

13.12 Method of Payment

13.12.1 Method

(i)	Wherever in this Agreement provision is made for a payment to be made or procured by the Principal Seller or any other member of the Sellers’ Group to the Purchaser or to a Group Company, the Principal Seller and any relevant Seller shall arrange that such payment shall be made by the Principal Seller for itself and on behalf of the relevant member of the Sellers’ Group to the Purchaser for itself and on behalf of the relevant Group Company.
(ii)	Wherever in this Agreement provision is made for a payment to be made or procured by the Purchaser or a Group Company to the Principal Seller or any other Seller or to a member of the Sellers’ Group, the Purchaser shall arrange that such payment shall be made by the Purchaser for itself and/or on behalf of the relevant Group Company to the Principal Seller for itself and on behalf of the relevant Seller or member of the Sellers’ Group.
(iii)	Any such payments shall be effected by crediting for same day value the account specified by the Principal Seller or the Purchaser (as the case may be) on behalf of the party entitled to the payment (reasonably in advance and in sufficient detail to enable payment by telegraphic or other electronic means to be effected) on or before the due date for payment.
(iv)	Payment of a sum in accordance with this Clause shall be a good discharge to the payer (and those on whose behalf such payment is made) of its obligation to pay such sum and the payer (and those on whose behalf such payment is made) shall not be obliged to see to the application of the payment as between those on whose behalf the payment is received.

13.12.2

Payments In respect of Indemnities

For the avoidance of doubt, in respect of any indemnity provided under this Agreement and/or the Tax Deed of Covenant, the provider of such Indemnity may, upon the request (and at the discretion) of the beneficiary of such indemnity, be obliged to satisfy and discharge its obligations and liabilities under such indemnity by satisfying and discharging the Losses the subject of the indemnity directly, rather than requiring such beneficiary to meet such Losses itself and then claim reimbursement in respect thereof under the indemnity.

13.13 Costs

13.13.1	Save as provided otherwise herein, the Sellers shall bear all costs incurred by them in connection with the preparation, negotiation and entry into of this Agreement and the sale of the Assets.
13.13.2	Save as provided otherwise herein, the Purchaser shall bear all costs Incurred by it in connection with the preparation, negotiation and entry Into of this Agreement and the purchase of the Assets.

13.14 Stamp Duty, Fees and Taxes

The Purchaser shall bear the cost of all notarial fees and all registration, stamp and transfer taxes and duties or their equivalents in all jurisdictions where such fees, taxes and duties are payable as a result of the transactions contemplated by this Agreement and shall procure the payment thereof within applicable time limits. The Purchaser shall be responsible for arranging the payment of all such fees, taxes and duties, including fulfilling any administrative or reporting obligation imposed by the jurisdiction in question in connection with the payment of such taxes and duties. The Purchaser shall indemnify the Sellers (for themselves and as trustee for the other members of the Sellers’ Group) against any Losses suffered by the Sellers or any member of the Sellers’ Group as a result of the Purchaser failing to comply with its obligations under this Clause 13.14.

13.15 Interest

Save as expressly provided herein, if the Sellers or the Purchaser defaults in the payment when due of any sum payable under this Agreement, its liability shall be increased to include interest on such sum from (and including) the date when such payment is due until (but excluding) the date of actual payment (after as well as before judgment) at a rate per annum of EONIA plus 2 per cent (calculated on the basis of the rate published on the date such payment was due {or if not published on such date, the next date on which it is published)). Such interest shall accrue from day to day.

13.16 Grossing-up of Indemnity Payments, VAT

13.16.1	All payments made under this Agreement pursuant to an indemnity, warranty, compensation or reimbursement provision shall be made gross, free of any right of counterclaim or set-off and without deduction or withholding of any kind other than any deduction or withholding required by law.
13.16.2	If the deduction or withholding required by law is made from a payment (other than a payment of or in respect of interest) described in Clause 13.16.1 then the sum due from any party to this Agreement, as applicable, shall be increased to the extent necessary to ensure that, after the making of any deduction or withholding (and after giving credit for any tax relief available to the recipient in respect of the matter giving rise to the payment), the recipient receives a sum equal to the sum it would have received had no deduction or withholding been made.
13.16.3	Where any payment is made under this Agreement pursuant to an indemnity, warranty, compensation or reimbursement provision and that sum is subject to a charge to Taxation in the hands of the recipient (other than Taxation attributable to a payment being properly treated as an adjustment to the consideration paid by the Purchaser for the Shares) the sum payable shall be increased to such sum as will ensure that after payment of such Taxation (and after giving credit for any tax relief available to the recipient in respect of the matter giving rise to the payment) the recipient shall be left with a sum equal to the sum that it would have received in the absence of such a charge to Taxation.
13.16.4	Where any sum constituting an indemnity, warranty, compensation or reimbursement to any party to this Agreement (the “Party”) is paid to a person other than the Party but is treated as taxable in the hands of the Party, the payer shall promptly pay to the Party such sum as shall reimburse the Party for all

	Taxation suffered by it in respect of the payment (after giving credit for any tax relief available to the Party in respect of the matter giving rise to the payment).
13.16.5	Where under the terms of this Agreement one party is liable to indemnify, compensate or reimburse another party in respect of any costs, charges or expenses, the payment shall include an amount equal to any VAT thereon not otherwise recoverable by the other party, subject to that other party using all reasonable endeavours to recover such amount of VAT and (to the extent that it has been indemnified in respect of such amount of VAT) paying to indemnifying party the amount of VAT recovered.
13.16.6	If any payment under this Agreement constitutes the consideration for a taxable supply for VAT purposes, then in addition to that payment the payer shall pay any VAT due upon receipt of a valid VAT invoice.
13.16.7	For the purposes of this Clause 13.16, references to “the recipient” in Clauses 13.16.2 and 13.16.3, “the Party” in Clause 13.16.4 and “another party” or “the other party” in Clause 13.16.5 shall include the relevant Seller or Sellers where a payment is being made to the Principal Seller on behalf of any such Seller or Sellers.

13.17 Notices

13.17.1 Any notice or other communication in connection with this Agreement (each, a “Notice”) shall be:

(i)	in writing; and
(ii)	delivered by hand, fax, pre-paid first class post or courier.

13.17.2 A Notice to any Seller shall be sent to the following address, or such other person or address as InterContinental Hotels Group PLC or the Principal Seller on behalf of the Sellers may notify to the Purchaser from time to time:

BHR Holdings BV

Strawinskylaan 3105
7^th Floor
1077 ZX Amsterdam
The Netherlands

Fax: +31 20661 6039

with a copy to:

Intercontinental Hotels Group PLC

67 Alma Road, Windsor, Berkshire, SL4 3HD

Fax: 08701 971 463

Attention: SVP Legal and General Counsel

13.17.3 A Notice to the Purchaser shall be sent to the following address, or such other person or address as the Purchaser may notify to the Principal Seller from time to time:

Morgan Stanley Services (UK) Limited
Law Division
LN-CS/05
25 Cabot Square
Canary Wharf
London E14 4QA

Attention: The Company Secretary (Reference: Project Danube)

with a copy to:

MSREF VI Danube B.V.
Registration Number: 34251220
Registered Office: Kabelweg 37, 1014 BA, Amsterdam, The Netherlands

Attention: SVP Legal and General Counsel

13.17.4 A Notice shall be effective upon receipt and shall be deemed to have been received;

(i)	60 hours after posting, if delivered by pre-paid first class post;
(ii)	at the time of delivery, if delivered by hand or courier; or
(iii)	at the time of transmission in legible form, if delivered by fax.

13.18 Invalidity

13.18.1

If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, the provision shall apply with whatever deletion or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the parties.

13.18.2

To the extent it is not possible to delete or modify the provision, in whole or in part, under Clause 13.18.1, then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 13.18.1, not be affected.

13.19	Counterparts
	This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. The Sellers and the Purchaser may enter into this Agreement by signing any such counterpart.

13.20

No Waiver

The failure to exercise or delay in exercising a right or remedy in connection with this Agreement does not impair or constitute a waiver of the right or remedy or an impairment of or a waiver of other rights or remedies. No single or partial exercise of a right or remedy in connection with this Agreement will prevent further exercise of such right or remedy or the exercise of another right or remedy.

13.21	No Expiry
	Except to the extent that they have been performed and except where this Agreement provides otherwise, the obligations contained in this Agreement remain in force after Completion.

13.22

Sellers’ Representative

The Sellers hereby appoint the Principal Sellers as their representative who may (for and on behalf of the Sellers), make and authorise the making of any request, election, notification, proposal, act or consent expressed to be made on behalf of the Sellers to the Purchaser under or pursuant to this Agreement and/or any of the other Transaction Documents. The Purchaser shall be entitled at its sole discretion to have regard only to, and to rely absolutely upon and act in accordance with, without any liability to any party for having relied or acted thereon, acts, consents and notices, including requests, elections or proposals, made by the Principal Seller. Service of any notice or other communication on the Principal Seller shall be deemed to constitute valid service thereof on all the Sellers.

13.23 Governing Law and Submission to Jurisdiction

13.23.1

This Agreement shall be governed by and construed in accordance with English law.

13.23.2

Each of the Sellers and the Purchaser irrevocably agrees that the courts of England are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and that accordingly any proceedings arising out of or in connection with this Agreement shall be brought in such courts. Each of the Sellers and the Purchaser irrevocably submits to the jurisdiction of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

13.24 Appointment of Process Agent

13.24.1	The Sellers hereby irrevocably appoints InterContinental Hotels Group PLC of 67 Alma Road, Windsor, Berkshire, SL4 3HD as their agent to accept service of process in England in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Sellers.
13.24.2	The Sellers agree to inform the Purchaser in writing of any change of address of such process agent within 28 days of such change.
13.24.3	If such process agent ceases to be able to act as such or to have an address in England, the Sellers irrevocably agree to appoint a new process agent in England acceptable to the Purchaser and to deliver to the Purchaser within 14 days a copy of a written acceptance of appointment by the process agent.
13.24.4	The Purchaser hereby irrevocably appoints Morgan Stanley Services (UK) Limited of 25 Cabot Square, Canary Wharf, London E14 4QA as its agent to accept service of process in England in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Purchaser.

13.24.5	The Purchaser agrees to inform the Principal Seller in writing of any change of address of such process agent within 28 days of such change.
13.24.6	If such process agent ceases to be able to act as such or to have an address in England, the Purchaser irrevocably agrees to appoint a new process agent in England acceptable to the Principal Seller and to deliver to the Principal Seller within 14 days a copy of a written acceptance of appointment by the process agent.
13.24.7	Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law or the right to bring proceedings in any other jurisdiction for the purposes of the enforcement or execution of any judgment or other settlement in any other courts.

13.25	Tax Deed of Covenant
	For the purposes of Clauses 13.9 (unless expressly provided for in the Tax Deed of Covenant), 13.5, 13.7, 13.8, 13.11, 13.12, 13.13, 13.16, 13.17, 13.19, 13.20, 13.21, 13.22, 13.24 and, for the avoidance of doubt, 13.6, “Agreement” shall include the Tax Deed of Covenant.

In witness whereof this Agreement has been duly executed.

SIGNED by /s/ F.H. Wittebol
on behalf of BHR Holdings BV:

SIGNED by /s/ Marten Foxon AS ATTORNEY FOR
AND on behalf of Société Nouvelle du Grand Hotel SA:

SIGNED by /s/ Marten Foxon AS ATTORNEY FOR
AND on behalf of Société Des Hotels InterContinental France
SNC:

SIGNED by /s/ Marten Foxon AS ATTORNEY FOR
AND on behalf of Inter-Continental Hotels Corp.:

SIGNED by /s/Jan-Dries Mulder
on behalf of MSREF VI Danube BV:

Schedule 1
(Clause 2.1)
Details of Shares to be sold

			(3)
			Consideration
			(Initial Share
			Consideration (“ISC”)
			plus Estimated Net
(1)		(2)	Current Assets (“ENCA”))
Name of Seller		Number of Shares/Name of Company	€
1	BHR Holdings B.V. whose	728 shares of €100 each in the capital of	336,745,000 (ISC)
	registered office is at	BHR Overseas (Europe) B.V.	plus
	Strawinskylaan 3105, 7th Floor,		(11,833,000) (ENCA)
	1077 ZX Amsterdam, The
	Netherlands
		1 share at €1,000 in the capital of	15,000 (ISC)
		Intercontinental Hotel-
		Betriebsgesellschaft mbH (Austria)
2	Société Nouvelle du Grand	114,475 shares of €50 each in the capital	151,807,000 (ISC)
	Hotel SA whose registered office is	of Société Des Hôtels Réunls SAS	plus (4,399,000) (ENCA)
	at 5 place de I’Opéra, 75009 Paris
		2 shares of €16 each in the capital of SNC	3,000 (ISC)
		Carlton Inter-Continental Cannes
3	Societe Des Hotels
	InterContinental France SNC	33,757 shares of €100 each in the capital	50,700,000 (ISC)
	whose registered office is at 5 place	of B.V. Amstel Hotel Maatschappij	plus (855,000) (ENCA)
	de I’Opéra, 75009 Paris
		498 shares of €2 each in the capital of SCH Résidence (France) SNC	100,000 (ISC)
			plus
			(22,000) (ENCA)
4	Inter-Continental Hotels Corp., a	4,320 shares of HUF 10,000, each in the	340,000 (ISC)
	Delaware Corporation whose	capital of Inter-Continental Budapest
	principal place of business is at	Szálloda Zártkörüen Müködö
	Three Ravinia Drive, Atlanta, GA	Részvénytársaság “átalakulás alatt”.
		Upon registration of the conversion of
		Inter-Continental Budapest Szálloda
		Zártkörüen Müködö Részvénytársaság
		“átalakulás alatt” into a limited liability
		company (korlátolt felelösségü társaság),
		the 4,320 shares of HUF 10,000 shall be
		converted into one quota of HUF
		43,200,000

Schedule 2
The Companies and the Subsidiaries

1	Particulars of the Companies
	Name of Company:	BHR Overseas (Europe) B.V.
	Registered number:	33214174
	Registered office:	Strawinskylaan 3105 — 7,1077ZX Amsterdam
	Date and place of incorporation:	8 December 1988, Amsterdam
	Issued share capital:	€81,900
	Authorised share capital:	€91,000
	Registered shareholders and shares held:	BHR Holdings B.V. — 728 shares 91 shares held in treasury (expected to be cancelled on the date of this Agreement)
	Directors:	Paul Michael Storm,
		Jörg Hubert Schmittem
		Frederik Hendrik Wittebol
		Equity Trust Co. NV
		Andrew John Patrick Mary Gill
	Secretary:	N/A
	Accounting reference date:	31 December
	Auditors:	Ernst and Young
	Name of Company:	Société Des Hôtels Réunis SAS
	Registered number:	572 141 182 RCS PARIS
	Registered office:	5 place de I’Opera, 75009 Paris
	Date and place of incorporation:	09/09/1957 Paris
	Issued share capital:	€5,723,750
	Authorised share capital:	Not applicable under French Law
	Registered shareholders and shares held:	Societe Nouvelle du Grand Hotel SA, represented by Didier Boidin -114,475 shares
	Chairman:	Societe Nouvelle du Grand Hotel SA- represented by Didier Boidin
	Directors:	M. Oliver Resta
		M. Francois Chopinet
	Secretary:	N/A

	Name of Company:	Société Des Hôtels Réunis SAS
	Accounting reference date:	30 September
	Auditors:	Ernst and Young Audit SA (344 366 315 RCS Paris), 4 R Auber 75009 Paris
	Name of Company:	B.V. Amstel Hotel Maatschappij
	Registered number:	33002644
	Registered office:	Professor Tulpplein 1,1018GX Amsterdam
	Date of incorporation:	14 June 1900, Amsterdam
	Issued share capital:	€3,375,700
	Authorised share capital:	€9,983,200
	Registered shareholders and shares held:	Societe Des Hotels InterContinental France SNC — 33,757 shares
	Directors:	Hendrick Jan Bosch
		Paul Didier Jacques Thomas Marie Bergé
	Secretary:	N/A
	Accounting reference date:	31 December
	Auditors:	Ernst and Young
2	Particulars of the Subsidiaries
	Name of Subsidiary:	Hotelera el Carmen, S.A.
	Registration number:	Companies Registry of Madrid: Volume 1509, Page 123, Sheet M-27922
	Registered office:	Paseo de la Castellana 49, 28046 Madrid, Spain
	Tax identification number:	A28041036
	Date of incorporation:	21 December 1946
	Issued share capital:	EUR 4,652,328.24
	Authorised share capital:	EUR 4,652,328.24
	Shareholders and shares held:	BHR Overseas (Europe) B.V. -1,545,169 bearer
		shares
		Other — 455 bearer shares
	Directors:	Mr Xavier Baudin Francois
		Mr Alfonso Jordán Garcia
		Mr Mariano Bautista Sagües

Name of Subsidiary:	Hotelera el Carmen, S.A.
Secretary:	Mr Mariano Bautista Sagües
Accounting reference date:	31 December
Auditors:	Ernst and Young
Name of Subsidiary:	Intercontinental Hotel-Betriebsgesellschaft
	m.b.H.
Court of registration:	Commercial Court Vienna
Registration number:	FN 68339 z
Date of establishment:	12 August 1969
Date of incorporation:	28 August 1969
Share capital:	€7,121,937.75
Shareholders and shares held:	BHR Overseas (Europe) B.V. — EUR
	7,120,937.75
	BHR Holdings B.V, — EUR 1,000
Managing Directors:	Rolf Andre Hübner
	Patrick Simon McKenna
Accounting reference date:	31 December
Auditors:	Ernst and Young Wirtschaftsprüfungsgesellschaft
	mbH

Name of Subsidiary:	Inter-Continental Budapest Szálloda
	Zártkörüen Müködö Részvénytársaság
	“átalakulás alatt”
Registration number:	Cg. 01-10-042995
Registered office:	1052 Budapest, Apàczai Cs.J.u.12-14
Date of incorporation:	19 March 1996
Issued share capital:	HUF 4,320,000,000
Authorised share capital:	HUF 4,320,000,000
Shareholders and shares held:	BHR Overseas (Europe) B.V. — 427,680 shares each with a nominal value of HUF 10,000. Upon registration of the conversion of Inter- Continental Budapest Szálloda Zártkörüen Müködö Részvénytársaság “átalakulás alatt” into a limited liability company (korlátolt felelösségü társaság), the 427,680 shares of HUF 10,000 shall be converted into one quota of HUF 4,276,800,000.
	Inter-Continental Hotels Corp. — 4,320 shares each with a nominal value of HUF 10,000. Upon registration of the conversion of Inter- Continental Budapest Szálloda Zártkörüen Müködö Részvénytársaság “átalakulás alatt” into a limited liability company (korlátolt felelösségü társaság), the 4,320 shares of HUF 10,000 shall be converted into one quota of HUF 43,200,000.
Directors:	Mr Robert Kalman Kennedy
	Mr Michael Koth
	Mr Rolf André Hübner
Accounting reference date:	31 December
Auditors:	Ernst and Young Könyvvizsgáló Kortátolt Felelösségü Társaság HU 1132 Budapest, Vaci út 20.
Name of Subsidiary:	Inter-Continental Holding (Germany) GmbH
Court of registration:	Local court of Frankfurt am Main
Registration number:	HRB 34282
Date of establishment:	25 October 1991

Name of Subsidiary:	Inter-Continental Holding (Germany) GmbH
Date of incorporation:	25 October 1991
Share capital:	DEM 1,000,000
Shareholders and shares held:	BHR Overseas (Europe) B.V. - one share DEM
	1,000,000
Managing Directors:	Arnd Stahl
	Willy Weiland
	Wolfgang Gattringer
Accounting reference date:	31 December
Auditors:	N/A
Name of Subsidiary:	Frankfurt Intercontinental Hotels GmbH
Court of registration:	Local court of Frankfurt am Main
Registration number:	HRB 10279
Date of establishment:	9 December 1960
Date of incorporation:	9 December 1960
Share capital:	EUR 2,556,500
Shareholders and shares held:	Inter-Continental Holding (Germany) GmbH -
	one share EUR 2,300,820
	SC Hotels UK Pensions S.à.r.l. — one share
	EUR 204,550 and one share EUR 51,130
Managing Directors:	Arnd Stahl
	Willy Weiland
	Wolfgang Gattringer
Accounting reference date:	31 December
Auditors:	Ernst and Young
Name of Subsidiary:	Intercontinental Hotels Betriebsgesellschaft
	mbH
Court of registration:	Local court of Frankfurt am Main
Registration number:	HRB 11262
Date of establishment:	19 December 1961
Date of incorporation:	19 December 1961
Share capital:	DEM 15,166,600
Shareholders and shares held:	Intercontinental Holding (Germany) GmbH -
	one share DEM 15,166,600

Name of Subsidiary:	Intercontinental Hotels Betriebsgesellschaft
	mbH
Managing Directors:	Arnd Stahl
	Willy Weiland
	Wolfgang Gattringer
Accounting reference date:	31 December
Auditors:	Ernst & Young
Name of Subsidiary:	Delaville S.r.l.
Registration number:	03863541003
Registered office:	Roma, Via Sistina 67/69
Date of incorporation:	23 April 1990
Issued share capital:	€129,000.00
Authorised share capital:	N/A
Shareholders and shares held:	BHR Overseas (Europe) B.V. — sole
	shareholder
Directors:	Luigi De Rosa
	Didier Jean Boidin
	Antonio Cacioppo
Secretary:	N/A
Accounting reference date:	31 December
Auditors:	Paolo Castelli
	Paolo Omodeo Salè
	William Paul Barsanti
	Luciano Pagliarini
	Alfredo Martini
Name of Subsidiary:	SNC Carlton Inter-Continental Cannes
Registration number:	332 759 877 RCS CANNES
Registered office:	58 La Croisette 06400, CANNES
Date of incorporation:	05/06/1985
Authorised share capital:	€8,000
Shareholders and shares held:	Société Des Hôtels Réunis SAS — 498 shares
	Societe Nouvelle du Grand Hotel SA — 2 shares

Name of Subsidiary:	SNC Carlton Inter-Continental Cannes
Directors:	M. DidierBoidin
	M. Olivier Resta
	M. Francois Chopinet
Secretary:	N/A
Accounting reference date:	30 September
Auditors:	Ernst and Young Audit SA (344 366 315 RCS Paris), 4 R Auber 75009 Paris
Name of Subsidiary:	SCH Résidence (France) SNC
Registration number:	439 321 191 RCS PARIS
Registered office:	5 place de I’Opera 75009, Paris
Date of incorporation:	25/09/2001
Issued share capital:	€1,000
Authorised share capital:	Not applicable under French law
Shareholders and shares held:	Société Des Hôtels Réunis SAS — 2 shares
	Societe Des Hotels InterContinental France SNC - 498 shares
Directors:	M. Didier Boidin
Secretary:	N/A
Accounting reference date:	30 September
Auditors:	N/A

Schedule 3
The Properties
(Clause 1.1)

(1) Hotel Name	(2) Address and land references	(3) Tenure	(4) Freehold Owner	(5) Lessee	(6) Expiry of the term of the lease
		Freehold/		(if applicable)	(if applicable)
		Leasehold
Austria
1.  IC Vienna	Johannesgasse 28,1030 Vienna, Austria, cadastral no EZ 4001, land register 01006 LandstraBe, District Court, Inner City Vienna, surface 5679 sqm	F	Intercontinental Hotel- Betriebsgesellschaft m.b.H
France
2.  IC Carlton      Cannes	- 58, boulevard de la Croisette, 06400 Cannes, France, land register Section BX no. 34 and 203, 204,206 and 207 (resulting from a division of the plot formerly registered Section BX no. 35), surface area of 8,774 sqm (Hotel) - - 16B rue Pasteur — 06400 Cannes, France, land register Section BX no. 195 (resulting from a merger of plots formerly registered Section BX no. 140 and 142), 116 single and double parking spaces and a garage space for two coaches on the first underground floor (Car Park)	F (Hotel, Car Park and Ancillary Building) and L (Beach) concession	- SAS Société des Hotels Réunis (Hotel, Car Park and Ancillary Building) - - Town of Cannes (Beach)	SNC Carlton Inter-Continental Cannes (Beach)	31 December 2017 (Beach)
	- 7, rue Gérard Monod- 06400 Cannes, France, land register Section BV no. 27 (Ancillary Building) - - 58, boulevard de la Croisette — 06400 Cannes, France, land register Section C no.

(1) Hotel Name	(2) Address and land references	(3) Tenure	(4) Freehold Owner	(5) Lessee	(6) Expiry of the term of the lease
		Freehold/		(if applicable)	(if applicable)
		Leasehold
	12, surface 2,218 sqm (Beach)
Germany
3.  IC Frankfurt	Wilhelm-Leuschner-Str. 43,60329 Frankfurt, Germany, land register of Frankfurt Bezirk 9 (Local Court of Frankfurt am Main) folio 748, - - lot 83, plots 1/3 (Untermainkai 54) and 1/6 (Gutleutstr. 49 and Wilhelm-Leuschner-Str. 32-34) - - lot 82, plots 14/2 (Untermainkai 54) and 15/8 (Gutleutstr. 49 and Wilhelm-Leuschner-Str. 32-34) total surface 19,983 sqm	F (FIH) and L (IHB)	Frankfurt Intercontinental Hotels GesellschaftmbH (FIH)	Intercontinental Hotels Betriebsgesellschaft mbH (IHB)	31 December 2007 (IHB)
Hungary
4.  IC Budapest	1052 Budapest, Apáczai Csere János u. 12-14, Hungary, topographical lot No 24494, Budapest, surface 4,404 sqm	F	Inter-Continental Budapest Szálloda Zártkörüen Müködö Részvénytársaság “átalakulás alatt”
Italy
5.  IC de la Ville -      Rome	Via Sistina 69/75, Rome, Italy, land register Rome, folio 471, cadastral parcel 75 sub 501, surface 14,335 sqm	L	Reale Immobili SpA	Delaville SpA	31 December 2013
Netherlands
6.   IC Amstel-	Professor Tulpplein 1, Amsterdam,	F	BV Amstel Hotel

(1) Hotel Name	(2) Address and land references	(3) Tenure	(4) Freehold Owner	(5) Lessee	(6) Expiry of the term of the lease
		Freehold/		(if applicable)	(if applicable)
		Leasehold
Amsterdam	Netherlands, land register Amsterdam, section 00, no 4015, surface 33 ares and 82 centiares		Maatschappij
Spain
7.  lC Madrid	Castellana 49, Madrid, Spain, land register Madrid 6 (registered plot No 3,465 bis, page 138, volume 421, book 301), cadastral reference number 1565903VK4716F0001LK, built surface 3,695.96 sqm	F	Hotelera El Carmen SA

Schedule 4
Documents in the Agreed Terms
(Clause 1.1)

ECS Agreements

ECS and Holidex Access and Systems Agreement Termination Agreements

Holidex Access and Systems Agreements

Hotel Agreement Deeds of Termination

Hotel Trade Mark Agreements

IC Frankfurt Subsidiary HMA

Local Transfer Documents

Non-Disturbance Agreements

Pre-Sale Reorganisation Paper

Pro forma Individual Hotel Management Agreements

Purchasing Agreements

Service Agreement Termination Agreements

Side Letters

Tax Deed of Covenant

Written resignations of the officers of Group Companies

Schedule 5
Completion Obligations
(Clause 6.2)

1	General Obligations
1.1	Sellers’ Obligations
	On Completion, the Sellers shall deliver or make available to the Purchaser the following:

1.1.1	evidence that each of the Sellers is authorised to execute this Agreement and the other Transaction Documents to which they are a party;
1.1.2	the Tax Deed of Covenant duly executed by the Sellers;
1.1.3	the Individual Hotel Management Agreements duly executed and delivered by the members of the Sellers’ Group and the Group Companies which are parties thereto in respect of each Hotel;
1.1.4	the IC Frankfurt Subsidiary HMA duly executed and delivered by IHM and the relevant Group Companies which are parties thereto;
1.1.5	the Holidex Access and Systems Agreements duly executed and delivered by Six Continents Hotels, Inc. and the Group Companies which are parties thereto in respect of each Hotel;
1.1.6	the ECS Agreements duly executed and delivered by Six Continents Hotels, Inc. and the Group Companies which are parties thereto in respect of each Hotel;
1.1.7	the Purchasing Agreements duly executed and delivered by Six Continents Limited and the Group Companies which are parties thereto in respect of each Hotel;
1.1.8	in respect of the IC Madrid Hotel, the sale and purchase public deed granted by Mr Eliseo Diaz Moreno (as vendor) and Hotelera del Carmen, S.A. (as purchaser) on 28 November 1946 before the Notary Public Mr Rafael Núñez Lagos under number 1,531 of his official records, which shall be made available at the relevant Property;
1.1.9	in respect of all Properties, the Letting Documents, which shall be made available at the relevant Property;
1.1.10	the Service Agreement Termination Agreements duly executed and delivered by Six Continents Limited and the Group Companies which are parties thereto in respect of each Hotel;
1.1.11	the ECS and Holidex Access and Systems Agreement Termination Agreements duly executed and delivered by Six Continents Hotels, Inc. and the Group Companies which are parties thereto in respect of each Hotel;
1.1.12	the Hotel Agreement Deeds of Termination duly executed and delivered by the members of the Sellers’ Group and the Group Companies which are parties thereto in respect of each Hotel;

1.1.13	the Non-Disturbance Agreements duly executed and delivered by the members of the Sellers’ Group and the Group Companies which are parties thereto in respect of each Hotel;
1.1.14	the Side Letters duly executed and delivered by the members of the Sellers’ Group and the Group Companies which are parties thereto; and
1.1.15	the Hotel Trade Mark Agreements duly executed and delivered by the relevant member(s) of the Sellers’ Group and Group who are parties thereto.

1.2	The Purchaser’s Obligations
	On Completion, the Purchaser shall deliver or make available to the Sellers:

1.2.1	evidence of the due fulfilment of the condition set out in Clause 4.1;
1.2.2	evidence that Purchaser is authorised to execute this Agreement and the other Transaction Documents to which the Purchaser is a party;
1.2.3	the Tax Deed of Covenant duly executed by the Purchaser;
1.2.4	the Individual Hotel Management Agreements duly executed and delivered by the Purchaser in respect of each Hotel;
1.2.5	the Non-Disturbance Agreements duly executed by Barclays Bank PLC and the Purchaser in respect of each Hotel; and
1.2.6	the Side Letters duly executed and delivered by the Purchaser.

2	Transfer of Shares
2.1	General Transfer Obligations
	On Completion, the Sellers shall execute and/or deliver and/or make available such agreements, transfers, conveyances and other documents (subject to relevant local law and otherwise as may be agreed between the Sellers and the Purchaser) and share certificates as are required to implement the transfer of the Shares to the Purchaser (or its nominee(s)) as referred to in paragraph 2.2 below (“Local Transfer Documents”) and take such other steps as are required to transfer the Shares to the Purchaser or its nominee(s), in each case, with effect on Completion.
2.2	Specific Transfer Obligations
	On Completion:

2.2.1 The Netherlands

(i)	The relevant Seller and the Purchaser or its nominee(s) shall enter into notarial deeds of transfer in the Agreed Terms pursuant to which the relevant Seller transfers the relevant Shares to the Purchaser or its nominee(s), the Purchaser or its nominee(s) accepts such Shares and the relevant Group Company acknowledges the transfer.
(ii)	The Purchaser will nominate the Dutch Notary who will legalise the signatures on the powers of attorney to be signed on behalf of the

Purchaser or its nominee(s) relating to the notarial deeds mentioned under paragraph 2.2.1 (i) above.

2.2.2 France

(i)

In relation to any Shares having the form of actions in Société des Hôtels Réunis SAS, the relevant Seller shall deliver to the Purchaser (i) a duly completed, executed and dated share transfer form (ordre de mouvements); (ii) the updated share transfer register (registre des mouvements de titres); and (iii) the shareholder accounts (comptes d’actionnaires) of Société des Hôtels Réunis SAS, showing that all of the relevant Shares are held by such Seller; (iv) the shareholders’ meetings minute book (registre des procès-verbaux des assemblées générales) of Société des Hôtels Réunis SAS; and (v) the minutes of the meeting of the shareholders at which it was resolved to approve the Share transfer referred to in this paragraph. The Purchaser or its nominee(s) and the relevant Seller shall also enter into a reiterative agreement (acfe réitératif) or sign a pre-printed form no. 2759 for registration tax purposes reflecting the sale of the Shares as contemplated in this paragraph.

(ii)

In relation to any Shares having the form of part sociales in either of SNC Carlton Inter-Continental Cannes and SCH Résidence (France) SNC, the relevant Seller and the Purchaser or its nominee(s) shall execute (or shall have executed, with effect on Completion), a French language share transfer agreement (acte de cession) in the Agreed Terms suitable for the purpose of tax registration and formalities; and the relevant Seller shall obtain unanimous approval from the shareholders of SNC Carlton Inter-Continental Cannes and SCH Résidence (France) SNC, respectively, of the Purchaser and/or its nominee(s) as the new shareholder and of the transfer of the relevant Shares to the Purchaser or its nominee(s); and the relevant Seller shall deliver the shareholders’ meetings minute book (registre des assemblées des associés) of SNC Carlton Inter-Continental Cannes and SCH Residence (France) SNC to the Purchaser.

2.2.3 Hungary

(i)	The Purchaser or its nominee(s) and the relevant Seller shall execute and deliver a quota sale and purchase agreement in the Agreed Terms in respect of the Share in IC Szálloda.
(ii)	The Purchaser of the Share shall deliver to IC Szálloda a notice in a form and with the content required by the relevant Hungarian corporate laws for the transfer of the Share, declaring the purchase of the Share and the undertaking to adhere to the constitutional documents of IC Szálloda.
(iii)	The Principal Seller shall procure that the Purchaser is registered into the members’ list of IC Szálloda.
(iv)	In case the registration of the conversion of Inter-Continental Budapest Szálloda Zártkörüen Müködö Részvénytársaság “átalakulás alatt” into a limited liability company (korlátolt felelösségu társaság) does not occur until after Completion, the Purchaser or its nominee(s) and the Principal Seller

shall undertake such practical steps as may be reasonably required in order to transfer the relevant quota to the Purchaser (or its nominee(s)) either on Completion or, to the extent that such is not reasonably practicable, as soon as reasonably practicable thereafter.

For the avoidance of doubt, the quota sale and purchase agreement in the Agreed Terms shall be signed and delivered on Completion irrespective of whether the conversion has been registered in accordance with the relevant Hungarian corporate laws or not.

2.2.4	Austria
	In relation to the transfer of Shares in Intercontinental Hotel-Betriebsgesellschaft m.b.H. the relevant Seller(s) shall:

(i)	obtain the consent of the shareholder meeting and the consent of BOEBV. pursuant to sec 5 of the articles of association of Intercontinental Hotel-Betriebsgesellschaft m.b.H. to such transfer;
(ii)	execute and deliver to the Purchaser a local transfer agreement in the form of a notarial deed in the Agreed Terms; and
(iii)	procure the registration of the new shareholders with the companies register in respect of such Shares.

3	Further Obligations in Addition to Transfer
3.1	General Obligations
	The Sellers shall deliver or make available to the Purchaser the following:

3.1.1	the written resignations in the Agreed Terms (and legalised by a notary where required) of those directors, other board members or, as applicable, managing directors of each of the Group Companies notified in writing by the Purchaser to the Principal Seller within 30 days of the date of this Agreement (or in the case of Hotelera el Carmen SA within 10 Business Days of the date of this Agreement), such resignations to take effect on Completion;
3.1.2	if the Purchaser reasonably requires (and gives at least 5 Business Days’ notice to the Principal Seller prior to Completion), irrevocable powers of attorney or such other appropriate document (in such form and terms as the Purchaser may reasonably require) executed by each of the holders of the Shares in favour of the Purchaser or as it may direct to enable the Purchaser (pending registration of the relevant transfers) to exercise post Completion all voting and other rights attaching to the Shares and to appoint proxies for this purpose;
3.1.3	written waivers or consents in relation to any pre-emption rights in respect of the Shares to enable the Purchaser or its nominees to be registered as holders of, and to become the beneficial holders of, the Shares;
3.1.4	any releases which the parties have obtained under Clause 13.2;

3.1.5

any novations and/or assignments which the parties have obtained under Clauses 13.4.5 and Clauses 13.4.7 to 13.4.9; and

3.1.6

in each case where the said information is not in the possession of the relevant Group Company, the corporate books and records, duly written up to (but not including) the Completion Date, including the shareholders’ register and share certificates in respect of the Subsidiaries, and all other books and records, all to the extent required to be kept by each Group Company under the law of its jurisdiction of incorporation.

3.2	Board Resolutions of the Group Companies
	On Completion, the Sellers shall procure the passing of board resolutions of each Group Company (to the extent required by local laws) inter alia:

3.2.1	approving the share transfers referred to in paragraph 2 of this Schedule and the registration formalities as a result thereof subject only to their being duly stamped, to the extent required by law;
3.2.2	accepting the resignations referred to in paragraph 3.1.1 of this Schedule and appointing such persons (within the maximum number permitted by the relevant constitutive documents) as the Purchaser may nominate as directors and secretary;
3.2.3	changing its registered office in accordance with instructions given by the Purchaser; and
3.2.4	approving the relevant Individual Hotel Management Agreement, the relevant ECS Agreement, the relevant ECS and Holidex Access and Systems Termination Agreement, the relevant Holidex Access and Systems Agreement, the relevant Hotel Agreement Deed of Termination, the IC Frankfurt Subsidiary HMA and the relevant Purchasing Agreement,

	and shall hand to the Purchaser duly certificated copies of such resolutions.
3.3	Shareholders’ Resolutions of the Group Companies
	On Completion, the Sellers shall procure the passing of shareholders’ resolutions of each Group Company inter alia:

3.3.1	France
	In respect of SNC Carlton Inter-Continental Cannes, Société des Hôtels Réunis SAS and SCH Résidence (France) SNC:

(i)	appointing each of the persons nominated by the Purchaser as a gérant and/or président and/or manager of SNC Carlton Inter-Continental Cannes, Société des Hôtels Réunis SAS and SCH Résidence (France) SNC, respectively, such appointment to take effect as of Completion;
(ii)	accepting the resignations referred to in paragraph 3.1.1 of this Schedule, such resignations to take effect as of Completion; and
(iii)	changing its registered office in accordance with instructions given by the Purchaser.

3.3.2	Austria
	In respect of Intercontinental Hotel-Betriebsgesellschaft m.b.H.:

(i)	appointing each of the persons nominated by the Purchaser as a managing director of Intercontinental Hotel-Betriebsgesellschaft m.b.H., such appointment to take effect as of Completion;
(ii)	accepting the resignations referred to in paragraph 3.1.1 of this Schedule, such resignations to take effect as of Completion; and
(iii)	approving the Individual Hotel Management Agreement relating to the IC Vienna Hotel.

3.3.3	Italy
	In respect of Delaville S.r.l., appointing each of the persons nominated by the Purchaser as a director and/or manager of Delaville S.r.l., such appointment to take effect as of Completion.
3.3.4	Germany

(i)	in respect of IHB Germany, approving the IC Frankfurt Subsidiary HMA;
(ii)	in respect of FIH, approving FIH as guarantor of the obligations of IHB Germany under the IC Frankfurt Subsidiary HMA; and
(iii)	in respect of IHB Germany, FIH and IHGG:

(a)	appointing each of the persons nominated by the Purchaser as a managing director of IHB Germany, FIH and IHGG, respectively, such appointment to take effect as of Completion; and
(b)	accepting the resignations referred to in paragraph 3.1.1 of this Schedule, such resignations to take effect as of Completion.

3.3.5	The Netherlands
	In respect of BOEBV and B.V. Amstel Hotel Maatschappij:

(i)	appointing each of the persons nominated by the Purchaser as a managing director of BOEBV and B.V. Amstel Hotel Maatschappij, respectively, such appointment to take effect as of Completion;
(ii)	accepting the resignations of the current managing directors pursuant to paragraph 3.1.1 of this Schedule, such resignations to take effect as of Completion; and
(iii)	granting the managing directors resigning pursuant to paragraph 3.1.1 of this Schedule a discharge of liability for their duties as managing directors.

3.3.6	Spain
	In respect of Hotelera el Carmen, S.A.:

(i) appointing each of the persons nominated by the Purchaser as a director and/or managing director of Hotelera el Carmen, S.A., such appointment to take effect as of Completion; and

(ii) accepting the resignations referred to in paragraph 3.1.1 of this Schedule, such resignations to take effect as of Completion.

3.3.7	Hungary
	In respect of IC Szálloda:

(i)	waiving the statutory right of first refusal and the right of IC Szálloda to appoint a third party to exercise the statutory right of first refusal provided for IC Szálloda in respect of the Share to be sold to the Purchaser;
(ii)	appointing each of the persons nominated by the Purchaser as a managing director, member of the supervisory board and/or other individual registered into the Company register as a representative of IC Szálloda, such appointment to take effect as of Completion;
(iii)	accepting the resignations referred to in paragraph 3.1.1 of this Schedule, such resignations to take effect as of Completion; and
(iv)	ordering the change of registered seat of IC Szálloda as the Purchaser may direct.

3.4	Specific Obligations
	On Completion:

3.4.1	IC Amstel Hotel
	Except to the extent already done prior to Completion, the Principal Seller undertakes to procure that:

(i)	a notarial deed in the form attached as Annexure 6 to the IC Amstel HMA, is entered into between IHG Management (Netherlands) B.V. and B.V. Amstel Hotel Maatschappij before a notary public in the Netherlands pursuant to which the qualitative obligation (kwalitatieve verplichting) granted to IHG Management (Netherlands) B.V. in accordance with the IC Amstel HMA;
(ii)	the notarial deed is submitted to the relevant Land Registry in the Netherlands in order for such registration to occur; and
(iii)	the Principal Seller shall indemnify the Purchaser and/or B.V. Amstel Hotel Maatschappij (for themselves and as trustee for each member of the Group) for any costs which any of them may incur in respect of the establishment and registration of the abovementioned qualitative obligation after the Completion Date, to the extent these costs have not been reimbursed to B.V. Amstel Hotel Maatschappij by IHG Management (Netherlands) B.V.

3.4.2 IC Budapest Hotel

(i) The Purchaser shall deliver to the Sellers:

(a) an employment agreement, in the form attached as Annexure 5 to the IC Budapest HMA, entered into between the general manager of the IC Budapest Hotel and IC Szálloda for the purpose of enabling

	the general manager of the IC Budapest Hotel to exercise certain powers of IHG Szálloda Budapest Szolgáltató Kft. set out in the IC Budapest HMA relating to employees of IC Szálloda; and
(b)	two mandate agreements, in the forms attached as Annexure 6 to the IC Budapest HMA, entered into between IHG Szálloda Budapest Szolgáltató Kft. and IC Szálloda for the purpose of enabling:

(a)	IHG Szálloda Budapest Szolgáltató Kft. to act on behalf and in the name of IC Szálloda in commercial relations with third parties, commencing and progressing legal proceedings or making necessary governmental or other filings which may be customary or usual in the operation and management of the IC Budapest Hotel; and
(b)	such persons who may be designated by IHG Szálloda Budapest Szolgáltató Kft. in accordance with the IC Budapest HMA to make disposals from the bank account(s) of IC Szálloda and register such authorisation with the bank(s) keeping the bank account(s) of IC Szálloda.

3.4.3	IC Carlton Cannes Hotel
	The Purchaser shall deliver to the Sellers a certified copy of a notarial deed in the form attached as Annexure 6 to the Individual Hotel Management Agreement relating to the IC Carlton Cannes Hotel (the “IC Carlton Cannes HMA”), entered into by Société des Hôtels Réunis SAS and HH France Holdings Sarl before a notary in France pursuant to which the right of first offer granted to HH France Holdings Sarl in accordance with the IC Carlton Cannes HMA will be registered with the relevant Land Registry in France (Conservation des Hypothèques), in order to inform third parties of the existence of the right of first offer, and the Purchaser shall, as soon as reasonably practicable after Completion, deliver to the Sellers evidence that the notarial deed has been submitted to the Conservation des Hypothèques in order for such registration to occur.
3.4.4	IC Frankfurt Hotel
	The Purchaser shall deliver to the Sellers a deed granting FIH’s consent for entry in the land register of a personal restricted easement (Beschränkte Persönliche Dienstbarkeit) in favour of IHM, substantially in the form attached as Annexure 5 to the main Individual Hotel Management Agreement relating to the IC Frankfurt Hotel (the “IC Frankfurt Main HMA”), executed by FIH with its signature confirmed by a notary in Germany.
3.4.5	IC Madrid Hotel
	The Principal Seller undertakes to procure that:

(i) a notarial deed, in the form attached as Annexure 6 to the Individual Hotel Management Agreement relating to the IC Madrid Hotel (the “IC Madrid HMA”), is entered into between Lituma Servicios Empresariales, S.L. and Hotelera el Carmen, S.A. before a notary in Spain pursuant to which the right of first offer granted to Lituma Servicios Empresariales, S.L. in

	accordance with the IC Madrid HMA will be registered with the Land Registry in Spain by Lituma Servicios Empresariales, S.L.;
(ii)	the original notarial deed is submitted to the Land Registry in Spain in order for such registration to occur; and
(iii)	the price for the grant of the right of first offer of €15,000 (together with any applicable VAT) is paid by Lituma Servicios Empresariales, S.L. to Hotelera el Carmen, S.A.

3.4.6 IC Rome Hotel

(i)

The Purchaser shall deliver to the Sellers a secondment agreement, in the form attached as Annexure 6 to the IC Rome HMA, entered into between InterContinental Hotels Italia S.r.l and Delaville S.r.l. for the purpose of seconding the general manager of the IC Rome Hotel to Delaville S.r.l.

(ii)

The Sellers and the Purchaser shall procure the passing of a board resolution of the board of directors appointed in accordance with paragraph 3.3.3 of this Schedule 5 of Delaville S.r.l. (i) approving the Individual Hotel Management Agreement relating to the IC Rome Hotel; (ii) appointing the general manager of the IC Rome Hotel as the Direttore Generale of Delaville S.r.l.; and (iii) granting to a director the powers to execute a notarial power of attorney for the delegation of the necessary powers to the Direttore Generale as set out in the board resolutions attached as Annexure 5 to the IC Rome HMA.

3.4.7

IC Vienna Hotel

The Purchaser shall deliver to the Sellers a prokura agreement, in the form attached as Annexure 5 to the Individual Hotel Management Agreement relating to the IC Vienna Hotel (the “IC Vienna HMA”), entered into between the general manager of the IC Vienna Hotel, Intercontinental Hotel-Betriebsgesellschaft m.b.H. and IC Hotelbetriebsführungs GmbH for the purpose of enabling the general manager of the IC Vienna HMA to represent Intercontinental Hotel-Betriebsgesellschaft m.b.H. with single signing authority for the period during which he/she remains as general manager of the IC Vienna Hotel.

Schedule 6
Net Current Asset Statement
(Clause 8.1)

Part 1
Definitions

For the purposes of this Schedule 6:

“Accruals” means the monetary value of all goods and services, received by any Group Company before the Completion Date which have not been paid for by that Company as at 2400 hours (CET) at the end of the Completion Date including interest owed by the Group Companies in respect of any Actual Inter-Group Debt, any wages, salaries, severance or redundancy pay arising on terminations notified by the Group Companies prior to the Completion Date (including in relation to the potential redundancy referred to in paragraph 8.1.7 of the Specific Disclosure section of the Disclosure Letter), deductions from employees salaries on account of tax, VAT, accrued Tax (other than in respect of Corporate Income Tax) and property tax and employer’s and employees social security payment and pension contribution accruals for the calendar month in which the Completion Date falls, any amounts in respect of bonuses for 2005 and prior years and for the period up to Completion and accrued benefits under the Cannes Employee Profit Sharing Scheme as at 2400 hours (CET) at the end of the Completion Date, together with social security and any deductions on account of Tax in respect thereof in respect of Relevant Employees which will, in each case, be apportioned on a pro-rata time basis;

“Accrued Income” means the monetary value of all goods and services provided by any Group Company before the Completion Date for which revenue has not been received by that Company as at 2400 hours (CET) at the end of the Completion Date including interest due to the Group Companies in respect of the Actual Inter-Group Credit; “Appointment Notice” means a notice given by the Principal Seller or the Purchaser, as the case may be, to the other pursuant to paragraph 3.2 of Part 2 of this Schedule 6, requiring that the draft Net Current Asset Statement be referred to the Reporting Accountants;

“Carlton Merger Gains” means the taxable temporary differences (as defined in IAS 12) of Société des Hôtels Réunis SAS arising as a result of deferred recognition of gains arising on the merger on 14 August 1985 of SNBA into Société des Hôtels Réunis SAS;

“Cash” means the aggregate amount of cash at the Hotels and the balances in the Group Companies’ cash books;

“Corporate Income Tax” means: (i) liabilities for Taxation arising on income and profits generated during the current tax year up to the Completion Date; (ii) liabilities for Taxation arising on income and profits generated during prior tax years which have not been paid or discharged as at the Completion Date; and (iii) any liabilities of or any payments to be made by any Group Company (other than to another Group Company) under the TCA;

“Creditors” means all liabilities, borrowings and indebtedness of, or arising out of or attributable to the operations of, the Group Companies as at 2400 hours (CET) at the end of the Completion Date including, without limitation, creditors, overdrafts, monies held on account, bills of exchange, Tax (other than to the extent taken into account in Accruals), Accruals, Inter-Group Payables and Deferred Income but excluding, for the avoidance of doubt, Deferred Tax and any amounts included in Corporate Income Tax or any Actual Inter-Group Debt;

“Current Guest Accounts” means uninvoiced or invoiced but unpaid accounts of guests staying at any Property as at, and in respect of the period up to and including, Completion who are booked to remain at that Property after Completion and uninvoiced or invoiced but unpaid accounts of corporate clients in respect of guests who have stayed at any Property prior to Completion;

“Current Guest Deposits” means advance deposits and receipts of guests who will be staying at or using the services provided at any Property following the Completion Date and any sums credited to corporate client accounts in respect of guests who will be staying at or using the services provided at any Property following the Completion Date, in each case, to the extent such deposits, receipts and sums relate to the period following the Completion Date;

“Debtors” means all the book and other debts owed or owing to, including those arising out of or attributable to the operations of, any Group Company as at 2400 hours (CET) at the end of the Completion Date including Accrued Income, Employee Loans, Prepayments, Inter-Group Receivables and the right to receive payment for services rendered, but not invoiced, before Completion which shall include that portion of Current Guest Accounts relating to the period prior to Completion and further including the right of Hotelera el Carmen S.A. to receive payment of €15,000 on Completion in respect of the right of first offer granted by it to Lituma Servicios Empresariales, S.L. pursuant to the IC Madrid HMA, but, for the avoidance of doubt, not including Deferred Tax or any amount included in Actual Inter-Group Credit;

“Deferred Income” means all payments received and unpaid invoices issued by the Group Companies before the Completion Date to the extent that they relate to a service to be provided by that Company after the Completion Date including any Current Guest Deposits and Health Club Membership Fees;

“Deferred Tax” means the amount of any liabilities for income taxes payable in future periods in respect of taxable temporary differences together with the amount of any assets for income taxes recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits as defined in IAS 12, or the equivalent amount of any liability or asset as calculated in accordance with the Applicable GAAP, together with Profit Repayable Loan Deductions;

“EBITDA” means earnings before interest, tax, depreciation and amortisation;

“Eligible Deferred Tax” means Deferred Tax (but only to the extent it arises when calculated in accordance with the provisions of paragraph 4.3 of Part 3 of this Schedule 6 and, subject thereto, IAS 12), other than Ineligible Deferred Tax Assets and Fixed Asset Deferred Tax;

“Eligible Deferred Tax Assets” means the aggregate of Eligible Deferred Tax attributable to deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits which meet the recognition criteria in IAS 12, evaluated on the basis set out in the definition of “Eligible Deferred Tax”, and, for the avoidance of doubt, this definition shall exclude any Ineligible Deferred Tax Assets;

“Eligible Deferred Tax Liabilities” means Eligible Deferred Tax attributable to taxable temporary differences as defined in IAS 12;

“Employee Loans” means any loan made to an employee, consultant or officer of any Group Company or any other person who provides services to any Group Company by any Group Company, full details of which are contained in the Group Information Section of the Data Room;

“Fixed Asset Deferred Tax” means the amount of any Deferred Tax resulting from differences between the carrying values of fixed assets and their respective tax bases as defined in IAS 12, or

the equivalent amount as calculated in accordance with the Applicable GAAP, including but not limited to differences arising due to revaluations and impairments recorded in the accounts which have not given rise to an equivalent tax effect and differences in the amount of depreciation deducted for accounting and tax purposes;

“French Pension Provision” means the amount of the provision in respect of pensions liabilities of Société des Hôtels Réunis SAS taken into account under “Creditors” in the Net Current Asset Statement and for which a Tax deduction is not available in respect of periods prior to Completion;

“Health Club Membership Fees” means all membership fees paid to the Group Companies by members of the health club located at any Property and run by any such Company to the extent such fees relate to the period of membership following the Completion Date;

“IAS 12” means International Accounting Standard 12 (Income Taxes);

“Ineligible Deferred Tax Assets” means any Deferred Tax attributable to deductible temporary differences as defined in IAS 12 in respect of the Italian tax losses of €2.6 million which expire at 31 December 2006, the German corporate income tax losses of €115.6 million, the German trade losses of €67.6 million and the Profit Repayable Loan Deductions;

“Inter-Group Debt Balance Balancing Item” means:

(i)	if the Actual Inter-Group Debt Balance is greater than or equal to the Completion Inter-Group Debt Balance, the amount of the difference (if any), which amount (if any) shall be treated as a liability in the Net Current Asset Statement; and
(ii)	if the Actual Inter-Group Debt Balance is less than the Completion Inter-Group Debt Balance, the amount of the difference, which amount shall be treated as an asset in the Net Current Asset Statement;

“Inter-Group Payables” means all amounts due as at 2400 hours (CET) at the end of the Completion Date from the Group Companies to the Sellers’ Group (excluding any amounts included in Actual Inter-Group Debt) comprising trading debts or liabilities owed by the Group Companies to a member of the Sellers’ Group as at 2400 hours (CET) at the end of the Completion Date;

“Inter-Group Receivables” means all amounts due as at 2400 hours (CET) at the end of the Completion Date from the Sellers’ Group to the Group Companies (excluding any amounts included in Actual Inter-Group Credit) comprising trading debts or liabilities owed by a member of the Sellers’ Group to the Group Companies as at 2400 hours (CET) at the end of the Completion Date, including payments due under the TCA to a Group Company (other than from another Group Company);

“Prepayments” means all payments made by the Group Companies before the Completion Date to the extent that such relate to a supply to any such Company of goods and/or services the benefit of which is to be received after the Completion Date;

“Profit Repayable Loan Deductions” means any future Tax deductions in respect of the Outstanding Principal Amount as at Completion under the Loan Agreement II — Division of Existing Loan (Novation) dated 31 December 2003 between Intercontinental (Holdings) Germany GmbH and BHR Overseas (Europe) BV;

“Purchaser’s Disagreement Notice” means a notice given by the Purchaser in accordance with Clause 13.17 and pursuant to paragraph 3.1 of Part 2 of this Schedule 6 stating that the draft Net Current Asset Statement does not comply with the provisions of this Schedule 6;

“Reporting Accountants” means PricewaterhouseCoopers LLC or, if that firm is unable, unwilling or inappropriate to act at that time in any matter referred to them under this Agreement, a firm of Chartered Accountants to be agreed by the Principal Seller and the Purchaser within five Business Days of a notice by one to the other requiring such agreement or failing such agreement to be nominated on the application of either of them by or on behalf of the President for the time being of the Institute of Chartered Accountants in England and Wales;

“Sellers’ Disagreement Notice” means a notice given by the Principal Seller in accordance with Clause 13.17 and pursuant to paragraph 3.2 of Part 2 of this Schedule 6 stating its reasons for disagreement with the Purchaser’s Disagreement Notice; and

“Stock” means all items of a type which have prior to the date hereof been regarded as stock which are unused, owned beneficially by any Group Company and held at any Property at Completion.

Part 2
Determination and Confirmation of Net Current Assets

1	Submission of the Net Current Asset Statement
1.1	Net Current Asset Statement
	The Principal Seller shall procure that, as soon as practicable following the Completion Date (and in any event on or before the day that is 90 days following the Completion Date), it prepares and delivers to the Purchaser the draft Net Current Asset Statement for each Group Company and, in aggregate, the Group, in each case, as at 2400 hours at the end of the Completion Date:

1.1.1	in accordance with the principles and methodology set out in Part 3 of this Schedule 6; and
1.1.2	in the format of the pro forma Net Current Asset Statement set out in Part 4 of this Schedule 6.

2	Access to Information
	In order to allow the Principal Seller to prepare, and the Purchaser to review, the Net Current Asset Statement:
2.1	the Purchaser shall:

2.1.1	keep up-to-date and make available to the Principal Seller and its representatives its books and records relating to the Group Companies (with the right to take copies, at the Principal Seller’s expense) during normal office hours and co-operate with it with regard to the calculation and review of the draft Net Current Asset Statement;
2.1.2	insofar as it is reasonable to do so, make available the services of the employees of the relevant Group Companies to assist the Principal Seller and its representatives to undertake the matters contemplated by this paragraph 2; and
2.1.3	provide or ensure the provision of all other information within its ownership and control and assistance which may reasonably be requested by the Principal Seller; and

2.2 the Principal Seller shall procure that after the preparation of the draft Net Current Asset Statement, it shall give the Purchaser and its representatives access to the working papers and files (with the right to take copies at the Purchaser’s expense) and personnel which or who are relevant to the review of the draft Net Current Asset Statement by the Purchaser or its representatives subject to the Purchaser providing or procuring the provision of any hold harmless undertaking that the Principal Seller’s accountants may reasonably require.

3	Preparation, Agreement and/or Determination
3.1	Within 45 Business Days of receipt by the Purchaser of the draft Net Current Asset Statement, the Purchaser may serve a Purchaser’s Disagreement Notice and attach a schedule of those items in respect of which it disagrees with the draft Net Current Asset Statement together with reasons for the disagreement in reasonable detail. In the absence of such notice, the draft Net Current Asset Statement shall become the Net Current Asset Statement and shall (save in the case of fraud or manifest error) be final and binding on the parties for all purposes.
3.2	If the Purchaser gives a valid Purchaser’s Disagreement Notice, the Principal Seller may serve a Sellers’ Disagreement Notice stating its reasons for disagreement (in reasonable detail) with the Purchaser’s Disagreement Notice within 10 Business Days of receipt by the Principal Seller of the Purchaser’s Disagreement Notice. If the Principal Seller does not serve such a valid Sellers’ Disagreement Notice, the draft Net Current Asset Statement as amended to reflect the matters specified in the Purchaser’s Disagreement Notice shall be the Net Current Asset Statement and shall be final and binding on the parties for all purposes (save in the case of fraud or manifest error). Within a further 10 Business Days from the date of the Sellers’ Disagreement Notice (if any), the Principal Seller and the Purchaser shall attempt in good faith to reach agreement in respect of the Net Current Asset Statement and if they are unable to do so then either the Principal Seller or the Purchaser may, by notice to the other, give an Appointment Notice. The Purchaser shall procure that after the service of a Purchaser’s Disagreement Notice, it shall give the Principal Seller and its accountants access to the Purchaser’s accountants’ working papers and files (with the right to take copies at the Principal Seller’s expense) and personnel which or who are relevant to the review of the Purchaser’s Disagreement Notice by the Principal Seller or its accountants, subject to the Principal Seller providing or procuring the provision of any hold harmless undertaking that the Purchaser’s accountants may reasonably require.
3.3	Except to the extent that the parties agree otherwise, the Reporting Accountants shall determine their own procedure but:

3.3.1 apart from procedural matters and as otherwise set out in this Agreement shall determine only:

(i)	whether any of the disagreements and/or alterations to the draft Net Current Asset Statement or the Purchaser’s Disagreement Notice, put forward in the Purchaser’s Disagreement Notice or, as the case may be, Sellers’ Disagreement Notice are correct in whole or in part; and
(ii)	if so, what alterations should be made to the draft Net Current Asset Statement in order to correct the relevant inaccuracy in it;

3.3.2	shall apply the accounting policies, principles, practices, terms and conditions, methods and bases referred to in and in accordance with Part 3 of this Schedule 6;
3.3.3	shall make their determination pursuant to paragraph 3.3.1 above as soon as is reasonably practicable;
3.3.4	the procedure of the Reporting Accountants shall:

(i) give the parties a reasonable opportunity to make written and oral representations to them;

(ii)	require that the parties supply each other with a copy of any written representations at the same time as they are made to the Reporting Accountants; and
(iii)	permit each party to be present while oral submissions are being made by any other party;

3.3.5

for the avoidance of doubt, the Reporting Accountants shall only address and resolve items raised in the Purchaser’s Disagreement Notice which are disputed in the Sellers’ Disagreement Notice and shall not otherwise be entitled to determine the scope of their own jurisdiction, save that the Reporting Accountants shall be entitled and required to determine any consequential matters and amendments arising out of their resolution of the differences between the parties, such as resultant tax amendments; and

3.3.6

there is no presumption that the treatment of any matter in dispute should or should not be changed from that in the draft Net Current Asset Statement and no objection should be made to any matter raised by the Purchaser’s Disagreement Notice on the grounds that the matter in respect of which such notice is raised is below any materiality level which might otherwise apply.

3.4	The determination of the Reporting Accountants pursuant to paragraph 3.3.1 shall: (i) be made in writing and sent to the parties at such time as they shall determine; and (ii) unless otherwise agreed by the parties, include reasons for each relevant determination.
3.5	The Reporting Accountants shall act as experts and not as arbitrators and their determination of any matter falling within their jurisdiction shall be final and binding on the parties save in the event of fraud or manifest error (when the relevant part of their determination shall be void and the matter shall be remitted to the Reporting Accountants for correction). In particular, without limitation their determination shall be deemed to be incorporated into the draft Net Current Asset Statement, which, as adjusted, shall then be final and binding on the Sellers and the Purchaser save as aforesaid.
3.6	The parties shall co-operate with the Reporting Accountants and comply with their reasonable requests made in connection with the carrying out of their duties under this Agreement. In particular, without limitation: (i) the Purchaser shall keep up to date and, subject to reasonable notice, make available to the Principal Seller, the Principal Seller’s representatives and the Reporting Accountants its books and records relating to the relevant Group Companies during normal office hours and upon reasonable request during the period from the appointment of the Reporting Accountants down to the making of the relevant determination; and (ii) during such period the Principal Seller shall and shall procure that its representatives shall subject to the Purchaser providing or procuring the provision of any reasonable hold harmless undertaking that the Principal Seller’s accountants may reasonably require and subject to reasonable notice make available to the Purchaser, the Purchaser’s representatives and the Reporting Accountants the working papers and files relating to the preparation of the draft Net Current Asset Statement.
3.7	Subject to paragraph 3.9, nothing in this paragraph 3 shall entitle a party or the Reporting Accountants access to any information or document which is protected by legal professional privilege, or which has been prepared by the other party or its accountants and other professional advisers with a view to assessing the merits of any claim or argument.

3.8	A party shall not be entitled by reason of paragraphs 3.7 or 3.9 to refuse to supply such part or parts of documents as contain only the facts on which the relevant claim or argument is based.
3.9	Each party shall, and shall procure that its accountants and other advisers shall, and shall instruct the Reporting Accountants to keep all information and documents provided to them pursuant to this paragraph 3 confidential and shall not use the same for any purpose, except for disclosure or use in connection with the preparation of the Net Current Asset Statement, the proceedings of the Reporting Accountants or another matter arising out of this Schedule 6 or in defending any claim or argument or alleged claim or argument relating to this Schedule 6 or its subject matter.
3.10	The Purchaser, on the one hand, and the Sellers, on the other, shall be responsible for discharging the fees, costs and expenses of the Reporting Accountants 50:50, unless the Reporting Accountants determine otherwise based on the respective merits of the matters in dispute and the conduct of the parties in relation thereto.

Part 3
Accounting policies to be adopted in the Net Current Asset Statement

1	Preparation of Valuation
	The Net Current Asset Statement and any element of it shall be prepared in accordance with the provisions of this paragraph and in the order of priority set out in this paragraph:
1.1	in accordance with the provisions of paragraphs 2 to 5 inclusive of this Part 3 of Schedule 6;
1.2	unless and to the extent inconsistent with or contradictory to paragraph 1.1, and insofar as it results in a treatment which complies with Applicable GAAP, on a basis consistent with the same accounting principles, policies, treatments and categorisations as were used in the preparation of the Audited Accounts and/or Unaudited Accounts, as the case may be, of the relevant Group Company, as there applied, including in relation to the exercise of accounting discretion and judgement; and
1.3	unless and to the extent inconsistent with or contradictory to paragraphs 1.1 and 1.2, in accordance with Applicable GAAP as at the Completion Date.
2	Specific Accounting Policies
2.1	No account shall be taken of events taking place or information becoming available after the date the Principal Seller delivers the draft Net Current Asset Statement to the Purchaser pursuant to paragraph 2.1 of Part 2 of this Schedule 6. Events taking place and information available before that date will only be reflected in the draft Net Current Asset Statement if they provide additional evidence of conditions existing at or events occurring on or prior to the Completion Date.
2.2	Save to the extent this Agreement expressly provides otherwise, the Net Current Asset Statement will exclude any effects of the change of control or ownership of the Group Companies contemplated by this Agreement and of the Completion mechanics and payments (other than payments due under the TCA as a result of the exit of any Group Company from the French tax consolidation). Where judgement is required in determining the value of assets and liabilities, the Net Current Asset Statement shall be prepared in such manner as reflects the normal practices adopted in the preparation of the Audited Accounts and/or Unaudited Accounts, as the case may be, save to the extent that such are inconsistent with or contradictory to Applicable GAAP in which event Applicable GAAP should be complied with.
2.3	The Net Current Asset Statement will be prepared on the basis of an aggregation of net current asset statements drawn up for each Group Company in each case as at 2400 hours (CET) at the end of the Completion Date.
2.4	The Net Current Asset Statement shall not take into account any amount in respect of any liability in respect of payments by Frankfurt IC Hotels GmbH of guaranteed dividends after Completion.
2.5	The Net Current Asset Statement shall not take into account any provision, liability, costs, charges, expenses, claims, demands, accrual or other amount in respect of any claim by

	Aachener und Münchener Lebensversicherung AG against IHGG under the lease agreement dated 30 December 1993 between such parties.
2.6	The Net Current Asset Statement shall not take into account any assets or liabilities of any nature of Hofburg or Wiener since the Group only has a (direct or indirect, as the case may be) minority equity shareholding in such companies.
2.7	The values attributable to each element of the Net Current Assets Statement in respect of Frankfurt InterContinental Hotels GmbH shall be calculated as if the Sellers’ direct and indirect shareholding in such Company were 100% (and not 90%).
2.8	All assets included in the Net Current Asset Statement (other than those assets in respect of which specific accounting treatment(s) are otherwise set out in paragraphs 2 to 5 (inclusive) of this Part 3 of Schedule 6) shall be included at a value equal to the lower of cost to the relevant Group Company and fair market value. “Cost” shall exclude any non arm’s length profit or gains arising as a result of any non arm’s length transactions between any members of the Sellers’ Group and any of the Group Companies and/or between any of the Group Companies themselves.
3	Cash, Deferred Income and Prepayments
3.1	Doubtful debts
	Doubtful debt provisions will be included applying consistent principles to those used in the Audited Accounts and/or Unaudited Accounts as applicable.
3.2	Deferred Income and Prepayments
	Deferred Income and Prepayments will be apportioned on a time basis in relation to the period to which the Deferred Income or the Prepayment relates, as at 2400 hours CET at the end of the Completion Date.
3.3	Cash

3.3.1	Subject to paragraph 3.3.2 below, cash shall be determined by reference to the cash book balance used by the Group Companies as opposed to the Group Companies’ bank statement balance and shall include any cash held at the relevant Hotel.
3.3.2	In respect of the €252,000 of cash held in escrow as rent security in respect of the Rome lease, such cash shall be included in the Net Current Asset Statement at a value of €157,000 only.

3.4	Specific Excluded Assets
	Any amount representing cash received by or a receivable of any Group Company in respect of the Omega Litigation shall, to the extent that it would otherwise be included as such, be excluded as debtors, cash and/or other assets, as the case may be.

4	Current Liabilities
4.1	Corporate Income Tax
	The recognition of the liability for Taxation (if any) will include all unpaid Tax liabilities for prior Tax years adjusted to reflect liability for Taxation (if any) arising on profits generated during the current tax year up to the Completion Date (but in all cases excluding any Tax taken into account in Accruals or Creditors). Such liability and adjustment will be calculated on the basis of Applicable GAAP and tax rules and practices applied to each Group Company, in the case of Applicable GAAP and save for those Group Companies which were members of a fiscal unity immediately prior to Completion as if each Group Company were not a member of a group of companies. Where a Group Company does not terminate its accounting period on Completion, liabilities to Tax and Reliefs shall be computed as if the period commencing on the date after the end of the last accounting period before Completion in relation to which Tax has been computed for the relevant Group Company and ending on Completion, was a period by reference to which a Tax return fell to be made to the relevant Tax Authority.
4.2	Specific Creditors/Liabilities

4.2.1 The following items shall, to the extent not already included as such, be included as Creditors in the Net Current Asset Statement:

(i)	all unpaid fees, commissions, charges, penalties, interest and other costs and/or expenses incurred, agreed to be incurred or which would be incurred by the Group Companies in connection with the termination, prepayment, repayment, breakage or unwind of any borrowings, indebtedness in the nature of borrowings and/or cash pooling arrangements of the Group Companies, and/or of any guarantees or other security arrangements relating to such borrowings, indebtedness and/or cash pooling arrangements, in each case, of any of the Group Companies as at or before Completion;
(ii)	all unpaid costs and/or expenses incurred or agreed to be incurred in each case on or before Completion, by any Group Company in connection with the Transaction and/or the Transaction process;
(iii)	the capital expenditure of the Group Companies set out in Schedule 16 in respect of each Hotel to the extent such capital expenditure has not been so expended as at Completion, treating each Hotel separately and adjusting only in respect of each Hotel where actual capital expenditure in the period from 1 June 2006 to Completion is less than that set out in the column headed “Total” in Schedule 16;
(iv)	any unpaid or deferred consideration payable by any Group Company to the Republic of Austria for shares in InterContinental Hotel-Betriebsgesellschaft and any consideration agreed to be paid or payable by any Group Company to the minority shareholders in Hotelera el Carmen SA in so far as such consideration has been agreed to be paid; and
(v)	in respect of the claim and/or judgment in the action between Azur Pressing EuRL and SNC Carlton InterContinental Cannes referred to in paragraph

11.1 of the Specific Disclosure section of the Disclosure Letter, the sum of €130,000.

  4.3 Deferred Tax

4.3.1	No amount in respect of Deferred Tax shall be treated as a current asset or a current liability except that amounts in respect of Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities shall be recognised on the basis set out in this paragraph 4.3. For the avoidance of doubt, the amounts computed in respect of any Eligible Deferred Tax Assets and the amounts computed in respect of any Eligible Deferred Tax Liabilities shall not be aggregated, but shall appear as separate line items in the Net Current Asset Statement, except to the extent that (and subject to paragraphs 4.3.6 and 4.3.7 below) Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities arise in the same jurisdiction and are offsettable as a computational matter.
4.3.2	Amounts in respect of Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities respectively shall be included as current assets and current liabilities respectively at amounts equal to the discounted amount (discounted to Completion at a discount rate of 7%) of any future liability or reduction in liability expected to arise in respect of such Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities. Subject to paragraph 4.3.8 below, Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities expected to arise more than 5 years after Completion will be excluded.
4.3.3	The computation of amounts to be included in respect of Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities will be based on an assumption that taxable profits of the Group Companies in each of the five years from Completion will be as set out below (being in each case 50% of the 2006 budgeted EBITDA for the Hotel in the relevant jurisdiction).

	Assumed Taxable Profits in
	each of the 5 years from
Group Company/Jurisdiction	Completion
Delaville S.r.l (Italy)	€1.836 million
InterContinental Hotel-Betriebsgesellschaft m.b.H. (Austria)	€2.713 million
B. V. Amstel Hotel Maatschappij (Netherlands)	€1.645 million
BHR Overseas (Europe) B.V. (Netherlands)	€0
Société des Hôtels Réunis SAS (France)
SNC Carlton Inter-Continental Cannes(France)	€4.7495 million (for the group of three companies)
SCH Résidence (France) SNC (France)
Inter-Continental Szálloda Budapest Részvénytarasaság “átalakulás alatt” (Hungary)	€3.882 million

	Assumed Taxable Profits in
	each of the 5 years from
Group Company/Jurisdiction	Completion
Inter-Continental Holding (Germany) GmbH (Germany)
InterContinental Hotels Betriebsgesellschaft m.b.H. (Germany)	€3.428 million (for the group of three companies)
Frankfurt InterContinental Hotels Gesellschaft m.b.H. (Germany)
Hotelera el Carmen S.A. (Spain)	€3.040 million

4.3.4 The computation of the amounts to be included in respect of Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities will be based on the corporate income tax rates set out below:

Jurisdiction	Corporate Income Tax Rate
Austria	25%
France	33.33%
Germany	40% (being trade tax at 20% and corporate income tax at 25% after deducting trade tax)
Hungary	16%
Italy	37.25%
Netherlands	29.6%
Spain	35%

4.3.5

The computation of amounts to be included in respect of Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities for InterContinental Hotel-Betriebsgesellschaft m.b.H. (Austria), will be computed by reference to an assumed level of Austrian tax losses of €4.3m with an amount included as an Eligible Deferred Tax Liability to the extent that the amount computed under this paragraph 4.3 is less than the amount which would be computed under this paragraph 4.3 if there were €4.3m of Austrian tax losses; and an amount included as an Eligible Deferred Tax Asset to the extent that the amount computed in accordance with this paragraph 4.3 is greater than the amount which would be computed in accordance with this paragraph 4.3 if there were €4.3m of Austrian tax losses.

4.3.6

The aggregate amount to be included in respect of Eligible Deferred Tax Assets for InterContinental Hotel-Betriebsgesellschaft m.b.H. (Austria) and Delaville S.r.l (in each case computed in accordance with paragraphs 4.3.1 to 4.3.4 above but before any offsetting referred to in paragraph 4.3.1 above) shall not exceed the amount which would be so included if the aggregate amount by reference to which Eligible Deferred Tax Assets for InterContinental Hotel-Betriebsgesellschaft m.b.H.

	(Austria) and Delaville S.r.l are computed were €8.2m. In the event that the operation of this paragraph reduces the amounts by reference to which Eligible Deferred Tax Assets would otherwise be taken into account, the reduction in the amount to be so taken into account in respect of each of InterContinental Hotel-Betriebsgesellschaft m.b.H. (Austria) and Delaville S.r.l shall be made on a just and reasonable basis.
4.3.7	Other than in respect of InterContinental Hotel-Betriebsgesellschaft m.b.H. (Austria) and Delaville S.r.l, where Eligible Deferred Tax Assets and Eligible Deferred Tax Liabilities arise in the same jurisdiction and are offsettable as a computational matter, all possible offsets shall be made in determining the amounts to be included in the Net Current Asset Statement, provided that Eligible Deferred Tax Assets of a maximum of €1 million (before computation in accordance with paragraphs 4.3.1 to 4.3.4 above) and Eligible Deferred Tax Liabilities of a maximum of €1 million (before computation in accordance with paragraphs 4.3.1 to 4.3.4 above) may be offset and (i) amounts in respect of any remaining Eligible Deferred Tax Liabilities shall then be computed and included, and (ii) no amounts in respect of any remaining Eligible Deferred Tax Assets shall be included. In the event that the operation of this paragraph reduces the Eligible Deferred Tax Assets which would otherwise be taken into account the Principal Seller will be entitled to choose which Eligible Deferred Tax Assets are to be disregarded. For the avoidance of doubt, the offsetting referred to in this paragraph 4.3.7 in each relevant jurisdiction shall be of the gross amounts of taxable temporary differences (on the one hand) and deductible temporary differences and carried forward unused tax losses and tax credits (on the other), in each case as such amounts are defined for the purposes of the definition of Deferred Tax in Part 1 of this Schedule 6.
4.3.8	A further amount, calculated in accordance with this paragraph 4.3.8, shall be taken into account in computing the amounts in respect of Eligible Deferred Tax Liabilities to be included in the Net Current Asset Statement, as follows:

(i)

the French Pension Provision shall be offset against the untaxed amount of Carlton Merger Gains remaining at the beginning of the period commencing on the date following the fifth anniversary of Completion. The resulting amount shall then be divided by 13, with one thirteenth treated as a taxable profit arising in each of the years beginning with the period commencing on the date following the fifth anniversary of Completion; and

(ii)

an amount, to be treated as an Eligible Deferred Tax Liability in the Net Current Asset Statement, shall then be computed in respect of the annual amounts resulting from the computations in (i) above, on the basis of the French corporate income tax rate referred to in paragraph 4.3.4 above and after discounting the resulting amounts in accordance with paragraph 4.3.2 above.

5	Aggregation
	Each entry shall be the aggregate of the separate amounts in respect of any heading for each of the Group Companies.

Part 4
Pro forma Net Current Asset Statement

Pro forma Net Current Asset Statement in respect of the Net Current Assets

Asset/Liability	Amount (€)			Amount (€)
Current Assets
Debtors		•
Stock		•
Cash		•
Eligible Deferred Tax Assets		•
Inter-Group Debt Balance Balancing Item (if any)		•
Less					•
Current Liabilities
Creditors		(•	)
Corporate Income Tax		(•	)
Eligible Deferred Tax Liabilities		(•	)
Inter-Group Debt Balance Balancing Item (if any)		(•	)
					(•	)
Net Current Assets					•/(•	)

Schedule 7
Warranties given by the Sellers
(Clause 9)

1 Corporate Information

1.1 The Shares and the Group Companies

1.1.1	Each Share Seller is entitled to sell and transfer to the Purchaser the full legal and beneficial ownership of the Shares set opposite its name in column 2 to Schedule 1 free from all Encumbrances on the terms of this Agreement without the consent of any other party.
1.1.2	The Shares set opposite the Share Sellers’ names in column 2 to Schedule 1 comprise the whole of the issued and allotted share capital of each Company to which they relate and have been properly and validly issued and allotted and are each fully paid.
1.1.3	Each Group Company is the sole legal and beneficial owner of all the issued and allotted shares in the Subsidiaries listed in Part 2 to Schedule 2 free from all Encumbrances.
1.1.4	The shares in the Subsidiaries listed in Part 2 to Schedule 2 comprise the whole of the issued and allotted share capital of the Subsidiaries, have been properly and validly issued and allotted and each are fully paid.
1.1.5	No person has the right (whether exercisable now or in the future and whether contingent or not) to call for the allotment, conversion, issue, registration, sale or transfer, amortisation or repayment of any share capital or any other security giving rise to a right over, or an interest in, the capital of any Group Company under any option, agreement or other arrangement (including conversion rights and rights of pre-emption).
1.1.6	The Shares and the shares in the Subsidiaries have not been and are not listed on any stock exchange or regulated market.
1.1.7	No Group Company has any interest in, or has agreed to acquire, any interest in any share capital or other security referred to in paragraph 1.1.5 of any body corporate (wherever incorporated) other than: (a) the Subsidiaries set out in Schedule 2; or (b) an interest of less than 0.1 per cent in companies listed on any stock exchange or in regulated investment funds which, in either case, the Group Company holds for cash management purposes only.
1.1.8	The particulars contained in Schedule 1 and 2 are true and accurate.
1.1.9	No Group Company has agreed to merge or consolidate with a body corporate or any other person.
1.1.10	Intercontinental Hotel-Betriebsgesellschaft m.b.H. is the sole legal and beneficial owner of 122,449 shares, representing approximately 24.48 per cent, of the issued and allotted share capital, of Wiener free from all Encumbrances, which shares are each fully paid and, so far as the Sellers are aware, have been properly and validly issued and allotted.

1.1.11	So far as the Sellers are aware, Wiener is the sole legal and beneficial owner of 100 per cent of the issued and allotted share capital of Hofburg, which shares are each fully paid and so far as the Sellers are aware, have been properly and validly issued and allotted.
1.1.12	So far as the Sellers are aware, no person has the right (whether exercisable now or in the future and whether contingent or not) to call for the allotment, conversion, issue, registration, sale or transfer, amortisation or repayment of any share capital or any other security giving rise to a right over, or an interest in, the capital of entire of Hofburg or Wiener under any option, agreement or other arrangement (including conversion rights and rights of pre-emption).
1.1.13	No Group Company has (whether directly or indirectly) any, or has agreed to acquire any, interest in any share or loan capital or any other security giving rise to a right over, or an interest in, the capital of Hofburg or Wiener, other than the shares described in paragraphs 1.1.10 and 1.1.11 above.
1.1.14	Société des Hôtels Réunis SAS is the sole legal and beneficial owner of 667 shares (amounting to an approximate 1.6 percent. interest) in the issued and allotted share capital of Société Immobilière de I’Industrie Hotelière de Paris SA (“SIIHP”) and of 150 shares, (constituting an approximate 1 percent. interest), in the issued and allotted share capital of SEMEC, and Intercontinental Hotel-Betriebsgesellschaft m.b.H is the sole legal and beneficial owner of 10 shares in the issued and allotted share capital of Einkaufsgenossenschaft für das Hotel und Gastgewerbe Reg. Genossenschaft m.b.H (“Hogast”), all such shares described above being free from any Encumbrances, fully paid and, so far as the Sellers are aware, have been properly and validly issued and allotted. Save for the shareholdings described in this paragraph 1.1.14, no Group Company has any obligation, commitment or liability (whether actual, conditional or contingent) which is owed or otherwise relates to any of SIIHP and/or SEMEC and/or Hogast, nor are there any agreements, arrangements or understandings which give rise or may give rise to any such obligation, commitment or liability.

1.2 Insolvency etc.

1.2.1	No Seller or Group Company is insolvent under the laws of its jurisdiction of incorporation or otherwise unable to pay its debts as they fall due.
1.2.2	There are no proceedings in relation to any compromise or arrangement with creditors or any winding up, bankruptcy or other insolvency proceedings concerning any Seller or Group Company and, so far as the Sellers are aware, no events have occurred which, under applicable laws, would justify such proceedings.
1.2.3	So far as the Sellers are aware, no steps have been taken to enforce any security over any assets of any Seller or Group Company and no event has occurred to give the right to enforce such security.

1.3 Constitutional Documents, Corporate registers and minute books

1.3.1 The constitutional documents in the Data Room are true and accurate copies of the constitutional documents of the Group Companies and, so far as the Sellers are

	aware, there have not been and are not any material breaches by any Group Company of its constitutional documents.
1.3.2	The registers and minute books required to be maintained by each Group Company under the law of the jurisdiction of its incorporation:

(i)	are up-to-date;
(ii)	are maintained in accordance with applicable law; and
(iii)	contain records of all matters required to be dealt with in such books and records,
in each case in all material respects.

1.3.3	All registers and books referred to in paragraph 1.3.2 are in the possession (or under the control) of the relevant Group Company.
1.3.4	All filings, publications, registrations and other formalities required by applicable law to be delivered or made by the Group Companies to company registries in each relevant jurisdiction have been duly delivered or made on a timely basis.

2 Audited Accounts

2.1	Latest Audited Accounts
	The Audited Accounts of the Group Companies for the financial period ended on the relevant Accounts Date have been prepared:

2.1.1	in accordance with applicable law and with the accounting principles, standards and practices generally accepted at the relevant Accounts Date; and
2.1.2	subject to paragraph 2.1.1, on a basis consistent, in all material respects, with that adopted in preparing the audited accounts of each respective Group Company for the previous two financial years,

and, in each case, give a true and fair view of the assets, liabilities and state of affairs of such Group Companies at the relevant Accounts Date and of the profits or losses for the period concerned.

2.2	Management Accounts, Aggregated Financial Summary and Unaudited Accounts
	So far as the Sellers are aware:

(a)

the Management Accounts and the Aggregated Financial Summary have been prepared with due care in accordance with USALI applied on a consistent basis, it being acknowledged: (i) that the Management Accounts have been prepared for internal management and reporting purposes only and have not been audited; and (ii) that the Aggregated Financial Summary is extracted from the management accounts of the Hotels for the relevant period (which have been prepared on the same basis as the Management Accounts) and has not been audited; and

(b)

the Unaudited Accounts are fair and not misleading having regard to the purpose for which they were drawn up and do not materially misstate the assets and

liabilities of IHGG and SCHRF as at the relevant Accounts Date nor the profits or losses of IHGG and SCHRF for the relevant period concerned.

2.3	Since the Accounts Date
	Since the relevant Accounts Date and up to the date hereof:

2.3.1	the business of each Group Company has been carried on as a going concern in the ordinary course, without any material interruption or material alteration in its nature, scope or manner;
2.3.2	no material capital commitments have been entered into by any Group Company other than is contemplated by such Group Company’s capital budget, as included in the Data Room. For these purposes a material capital commitment is one involving capital expenditure of, in aggregate, over €1,000,000 exclusive of VAT;
2.3.3	no Group Company has declared, made or paid any dividend or other distribution;
2.3.4	no Group Company has issued or agreed to issue any share capital or any other security constituting or giving rise to a right over its capital;
2.3.5	no Group Company has redeemed or purchased or agreed to redeem or purchase any of its share capital;
2.3.6	no material adverse change in the financial or trading position of a Group Company has occurred;
2.3.7	no Group Company has, other than in the ordinary course of business:

(i)	assumed or incurred, or agreed to assume or incur, a liability, obligation or expense (actual or contingent); or
(ii)	acquired or disposed of, or agreed to acquire or dispose of, an asset; and

2.3.8 no Group Company has changed its accounting reference period.

2.4	Accounting Records
	Each Group Company’s accounting records are up-to-date, in its possession or under its control and are maintained in accordance with applicable law.

3	Guarantees
3.1	Summary details of all outstanding guarantees, indemnities, suretyship or security given:

3.1.1	by any Group Company to or for the benefit of any member of the Sellers’ Group;
3.1.2	by any member of the Sellers’ Group to or for the benefit of any Group Company; or
3.1.3	otherwise by or for the benefit of any Group Company, other than in the ordinary course of business,

are disclosed in the Data Room.

3.2 No Group Company has (i) any outstanding or available financial facilities (which for the avoidance of doubt shall exclude any occupational leases and operating leases in the ordinary course) or any borrowings (or other indebtedness in the nature of borrowings), in

	each case, owed to or made available by any person which is not a Group Company or a member of the Sellers’ Group or (ii) any outstanding and/or unpaid interest, commissions, fees (including break fees), penalties or other charges relating to any of the facilities, borrowings or indebtedness described in sub-paragraph (i) above.
4	Properties
4.1	General

4.1.1	The Properties comprise all the land and buildings owned, leased or occupied by the Group Companies.
4.1.2	The Group Company named in Schedule 3 as owner of a Property is the legal owner of and beneficially entitled to the whole of the proceeds of sale of that Property.
4.1.3	Except in relation to the Properties, no Group Company has any liability, whether actual or contingent, arising out of a transfer, lease, tenancy, licence, agreement or other document relating to land, premises or an interest in land or premises.

4.2	Material Issues Reports on Title
	The deeds, documents and information supplied to the Sellers’ Property Lawyers for the purpose of preparation of the Material Issues Reports on Title were when supplied and remain now complete and correct in all material respects and so far as the Sellers are aware the information contained in the Material Issues Reports on Title is complete and accurate in all material respects.
4.3	Properties
	Possession and occupation

4.3.1 A Group Company is in actual occupation and possession of the whole of each of the Properties, none of which is vacant, and (except by virtue of the Letting Documents) no other person is in or actually or conditionally entitled to possession, occupation, use or control of any of the Properties.

Title

4.3.2	There is no financial charge, mortgage or other security interest in or over or affecting any of the Properties.
4.3.3	No Properties are affected by a subsisting contract for sale.
4.3.4	A Group Company has in its possession or unconditionally held to its order all the original documents of title and other documents and papers relating to the Properties.

Notice of breach of encumbrances

4.3.5 No Group Company has received written notice of any breach of any covenants, obligations, title conditions, restrictions, stipulations or other matters set out or referred to in the deeds and documents relating to the Properties which notice remains outstanding and, so far as the Sellers are aware, no such notice is anticipated.

Notices

4.3.6 No notices materially affecting any property matter in respect of the Properties have been given by the Group Companies and no such notices have been received by any of the Group Companies the subject matter of which would have a material adverse effect on the continued use of the Property as a hotel (or in any other way in which it is currently used as at the date of this Agreement) and, so far as the Sellers are aware, no such notices are anticipated.

Leasehold Properties

4.3.7 In relation to such of the Properties as are leasehold:

(i)	the last instalment of rent was paid to and was accepted by the landlord or its agents without qualification; and
(ii)	no written notice alleging any breach of the covenants or obligations contained in the Lease, whether on the part of the landlord or the tenant, remains outstanding and, so far as the Sellers are aware, there are no material breaches of such covenants or obligations.

Material Letting Documents

4.3.8 In relation to any Material Letting Documents:

(i)	all rent and other payments under the Material Letting Documents have been paid to date and no rent has been commuted, waived or paid in advance of the due date for payment; and
(ii)	no written notice alleging any breach of the covenants or obligations contained in the Material Letting Documents, whether on the part of the landlord or the tenant, remains outstanding and, so far as the Sellers are aware, there are no material breaches of such covenants or obligations.

Disputes

4.3.9	There are no current material disputes relating to or in respect of any of the Properties.
4.3.10	No Group Company has, in relation to any Property, made any claim or complaint in relation to any neighbouring property or its use or occupation which claim or complaint continues to subsist.

Planning and zoning matters

4.3.11 So far as the Sellers are aware, during the period of three years immediately prior to the date of this Agreement no development at the Properties has been undertaken in breach of the relevant planning and zoning legislation or regulations.

Title documents

4.3.12 The Sellers have provided in the Data Room true and complete copies of all deeds and documents relevant to the title of any member of the Sellers’ Group and/or the Group to any of the Properties.

4.4 Construction

4.4.1	As at the date of this Agreement, in respect of the Properties there are no building, construction, refurbishment, repair or engineering works in progress nor are there any individual contracts in respect of which a Group Company or a member of the Sellers’ Group continues to have obligations in each case with an individual contract value in excess of €1,000,000 other than those contained in the Data Room.
4.4.2	The Sellers have provided in the Data Room true and complete copies of all building contracts and appointments affecting the Properties which have an individual contract value in excess of €1,000,000 and which have been entered into in the last three years immediately prior to the date of this Agreement.
4.4.3	In this paragraph 4.4.3, the expression “Construction Documentation” shall mean building contracts relatlng to the Properties: (i) in respect of which a certificate of practical completion was issued in the last three years immediately prior to the date of this Agreement; and/or (ii) relating to works in progress and “Relevant Claim” shall mean a written claim the value of which is in excess of €250,000.
	In respect of the Construction Documentation there are no outstanding:

(i)	Relevant Claims for financial compensation, extension of time or variation;
(li)	Relevant Claims against any member of the Sellers’ Group or any Group Company by any counterparty to the Construction Documentation alleging failure by the relevant member of the Sellers’ Group or Group Companies to perform its obligations under the relevant Construction Documentation; or
(iii)	Relevant Claims against any counterparty to the Construction Documentation for failure by such counterparty to perform any obligation of that counterparty under the Construction Documentation.

4.5	Interpretation
	If any term used in this paragraph 4 is specific to laws within a particular jurisdiction, it shall be taken to refer to the equivalent (or nearest equivalent) provision or legislation in the jurisdictions for each of the relevant Properties.
5	Assets
5.1	Ownership
	All assets included in the Audited Accounts and/or the Unaudited Accounts or acquired by any of the Group Companies since the relevant Accounts Date, other than the Properties and any assets disposed of or realised in the ordinary course of business, and excepting rights and retention of title arrangements arising by operation of law in the ordinary course of business:

5.1.1	are legally and beneficially owned by the Group Companies;
5.1.2	are, where capable of possession, in the possession or under the control of the relevant Group Company;

5.1.3 none of such assets is the subject of an Encumbrance or the subject of any factoring arrangement, conditional sale or credit agreement.

5.2	Sufficiency
	Save for those assets which are to be supplied and/or provided, and/or made available and/or licensed by the Sellers’ Group to the Group Companies under or in accordance with the terms of the Sellers’ Group Contracts, the relevant Individual Hotel Management Agreements, the ECS Agreements, the Holidex Agreements, the Purchasing Agreements, the IC Frankfurt Subsidiary HMA, the Side Letters, the Hotel Trade Mark Agreements or any other agreement to be entered into between a member of the Sellers’ Group and the Group pursuant to the terms of the Individual Hotel Management Agreements, the assets (including rights under contract and/or licence) owned by a Group Company are sufficient, and comprise all the material assets necessary, for the operation and conduct of the business of the relevant Hotel as such has been operated and conducted in the ordinary course during the 12 months prior to the date of this Agreement.
5.3	Shared Assets
	None of the assets (including rights under contract and/or licence, other than under the Split Contracts) owned by a Group Company åre used or required for use at a hotel or in a business not owned and/or operated by a Group Company.
5.4	Assets provided by Sellers’ Group
	None of the Hotels or Group Companies, or the business of any of the Hotels or Group Companies, use, receive or have the benefit of any assets, goods and/or services supplied, provided and/or licensed by any member(s) of the Sellers’ Group which (i) will not be transferred (legally and beneficially) to the Group on or prior to Completion and/or supplied, provided, made available or licensed to the relevant members of the Group under or in accordance with the terms of the relevant Sellers’ Group Contracts, the relevant Individual Hotel Management Agreements, the ECS Agreements, the Holidex Agreements, the Purchasing Agreements, the IC Frankfurt Subsidiary HMA, the Side Letters, the Hotel Trade Mark Agreements or any other agreement to be entered into between a member of the Sellers’ Group and the Group pursuant to the terms of the Individual Hotel Management Agreements.
6	Information Technology, Data Protection and Intellectual Property
6.1	Definitions
	For the purposes of this paragraph 6:
	“Group IT” means all Information Technology which is owned by any Group Company or which has in the last two years been used in connection with the business of any Group Company other than Retained IT;
	“Information Technology” means computer systems, communication systems, software and hardware;
	“Material Intellectual Property” means all Intellectual Property which at or immediately before Completion is used by any of the Group Companies and which is material to the . business of any of the Hotels; and
	“Retained IT” means Information Technology owned by, or licensed to, the Sellers’ Group.

	Information Technology
6.2	Ownership
	Each of the Group IT is owned by or licensed to the relevant Group Company.
6.3	Status
	All arrangements relating to, and licences of, Group IT which is material to the business of the Group Companies are summarised in the Data Room and:

6.3.1	are in full force and effect, no notice having been given by either side to terminate them;
6.3.2	no circumstances exist or have existed which would entitle a party to terminate them, vary them and/or make a claim for money or a money equivalent in respect of them; and
6.3.3	so far as the Sellers are aware the obligations of the parties thereto have been fully complied with,
and no disputes have arisen or are foreseeable in respect of those arrangements and licences.

6.4	Failure etc.
	There are, and in the past two years there have been, no performance reductions or breakdowns of, or logical or physical intrusions to, any Information Technology or loss of data which have had (or are having) a material adverse effect on the business of any Hotel and the Sellers are not aware of any fact or matter which may give rise to such a material adverse effect.
6.5	Protection
	The Group Companies have in place procedures which are in accordance with current good industry practice:

6.5.1	to prevent unauthorised access to and the introduction of viruses and other contaminants into the Group IT;
6.5.2	to take and store back-up copies of the software and data in the Group IT; and
6.5.3	to ensure that the business of the Group Companies can continue without material disruption in the event of breakdown or performance reduction of the Group IT or loss of data, whether due to natural disaster, power failure or otherwise.

	Data Protection
6.6	Compliance
	In the last two years each Group Company has complied in all material respects with all applicable requirements of any data protection legislation in the jurisdiction of its incorporation.
6.7	Regulators
	In the last two years no notice alleging non-compliance with any applicable data protection legislation (including any enforcement notice, deregistration notice or transfer prohibition notice) has been received by any of the Group Companies from any relevant regulator.

6.8	Undertakings
	In the last two years no undertaktng has been made in relation to data protection legislation by any Group Company to any relevant regulator.
6.9	Notices etc.
	In the last two years so far as the Sellers are aware, no correspondence, dispute, enquiry or information notice has been made or audit undertaken or proposed by any relevant regulator under data protection legislation in relation to any Group Company.
	Intellectual Property
6.10	Ownership
	All the Material Intellectual Property (whether registered or not) and all pending applications therefor will immediately following Completion be (or where appropriate in the case of pending applications, will upon registration be) legally owned free of any Encumbrances by, or licensed to the Group Company to which it relates. A list of registered trade marks owned by any of the Group Companies is set out in Part 1 of Schedule 13. So far as the Sellers are aware, a list of all registered Material Intellectual Property is set out in Part 2 of Schedule 13.
7	Contracts
7.1	Contracts
	No Group company is a party or subject to any material contract, transaction, arrangement, understanding or obligation which:

7.1.1	is not in the ordinary course of business;
7.1.2	is not on an arm’s length basis;
7.1.3	other than in relation to any property or contract of employment, is of a long-term nature, that is unlikely to have been fully performed, in accordance with its terms, more than 12 months after the date on which it was entered into or undertaken;
7.1.4	restricts its freedom to carry on its business in any part of the world in such manner as it thinks fit so as to have a material adverse effect on the Hotel to which such Group Company relates; or
7.1.5	involves the supply of goods and services, the aggregate sales value of which (exclusive of VAT) will be more than 5 per cent of turnover of the business of the Hotel to which the supply relates (exclusive of VAT) for the preceding financial year,

	other than such contracts, transactions, arrangements, undertakings and obligations, copies of which are contained in the Data Room.
7.2	Compliance with Contracts

7.2.1 Accurate, complete and up-to-date copies of all contracts referred to in paragraph 7.1 above are contained in the Data Room and, so far as the Sellers are aware, the terms of the contracts referred to in paragraphs 7.1 and 7.5 have been complied with in all material respects.

7.2.2

As at the date hereof, no notice of termination or, so far as the Sellers are aware, of intention to terminate has been received in respect of any contract referred to in paragraph 7.1 or 7.5 and, so far as the Sellers are aware, there are no grounds for rescission, avoidance or repudiation of any such contract.

7.2.3

True and complete copies of all material documents relating to, or summary details of all acquisitions or disposals of businesses or undertakings or shares (being in each case a transaction with a value of €1,500,000 or more) by any Group Company in the last seven years, together with details of any material actual or contingent liabilities that the Sellers are aware of in connection with any such disposal or acquisition, are contained in the Data Room.

7.3	Joint Ventures etc.
	No Group Company is, or has agreed to become, a member of any joint venture, consortium, partnership or other unincorporated association (other than a recognised trade association in relation to which the Group Company has no liability or obligation except for the payment of annual subscription or membership fees).
7.4	Agreements with Connected Parties

7.4.1	There are no material contracts or arrangements between, on the one hand, any Group Company and, on the other hand, any Seller or any other member of the Sellers’ Group other than on normal arm’s length commercial terms in the ordinary course of business.
7.4.2	No Group Company is party to any material contract with any current or former employee or current or former director or officer of any Group Company, any member of the Sellers’ Group or any person connected with any of such persons, or in which any such person as aforesaid is interested (whether directly or indirectly), other than on arm’s length commercial terms in the ordinary course of business.
7.4.3	Each Inter-Group Receivable and/or Inter-Group Payable of a Group Company, as at the date hereof, has arisen, been created or incurred in the ordinary course of business of such Group Company and on arm’s length commercial terms.

7.5 Disclosure of Material Contracts

7.5.1 The Data Room includes copies or summaries of:

(i)	all contracts and arrangements (other than any contracts of employment) to which any of the Group Companies are subject or a party which have an annual cost to the business of the Hotels of €50,000 or more;
(ii)	all of the Pre-Sale Reorganisation Documents,

	and all such copies and summaries are accurate, complete and up-to-date.
7.5.2	There are no contracts or arrangements relating to the Pre-Sale Reorganisation other than the Pre-Sale Reorganisation Documents.

7.6	Powers of Attorney and Authorities
	No Group Company has given a power of attorney or other authority which is still outstanding or effective by which a person may enter into an agreement, arrangement or obligation on such Group Compan’s behalf (other than an authority for a director, other officer or employee to enter into an agreement in the usual course of that person’s duties).
7.7	No Inter-Group Arrangements
	Other than:

7.7.1	the Sellers’ Group Contracts and the Split Contracts;
7.7.2	certain of the Transaction Documents;
7.7.3	the Indlvidual Hotel Management Agreements and any agreements or arrangements to be entered into between the Sellers’ Group and the Group under or in accordance with the terms of such Individual Hotel Management Agreements;
7.7.4	the Pre-Sale Reorganisation Documents;
7.7.5	the ECS Agreements;
7.7.6	the Holidex Access and Systems Agreements;
7.7.7	the Hotel Trade Mark Agreements;
7.7.8	the Non-Disturbance Agreements;
7.7.9	the Purchasing Agreements;
7.7.10	the IC Frankfurt Subsidiary HMA;
7.7.11	the Side Letters;
7.7.12	the TCA; and
7.7.13	any arrangements entered into on arm’s length commercial terms in the ordinary course of business,

	at Completion there will be no agreements, arrangements, undertakings, obligations or liabilities that exist between one or more Group Companies and one or more members of the Sellers’ Group.
8	Employees and Employee Benefits
8.1	Employees and Terms of Employment

8.1.1 The Data Room contains details, in relation to each Hotel at the date of this Agreement, of:

(i)	the total number and grades of Relevant Employees;
(ii)	the salary and contractual benefits, period of continuous employment, location, grade and age of each Senior Employee; and
(iii)	specimen terms and conditions of each grade or category of Relevant Employee.

8.1.2	No employee of the Sellers’ Group works in any business carried on by any Group Company, other than such persons as are to be employed by the Sellers’ Group with effect from Completion in the performance of the Sellers’ Group’s obligations under the relevant Individual Hotel Management Agreements.
8.1.3	So far as the Sellers are aware, no Group Company has made an offer which is outstanding to, or is bound by an agreement to, make any changes to any contractual terms or conditions of employment (as referred to in paragraphs 8.1.1 (iii) of this Schedule 7) of any of the Relevant Employees.
8.1.4	At the date of this Agreement, no Relevant Employee is on sick leave which has lasted for eight weeks or more.
8.1.5	At the date of this Agreement, no Senior Employee is absent on ordinary or additional maternity leave.
8.1.6	No offers of employment which are outstanding have been made by any Group Company to, or accepted by, any individual who is, or would be (if the offer was accepted) a Senior Employee, save in the ordinary course of business to replace staff.
8.1.7	No Group Company is a party to, bound by or proposing to introduce in respect of any director or Relevant Employee any redundancy payment scheme in addition to any redundancy pay prescribed by law, or any arrangement which is not set out in the specimen terms and conditions of employment disclosed in the Data Room or in the terms and conditions of employment of any Relevant Employee disclosed in the Data Room under which such Group Company makes payments in respect of termination of employment (whether voluntary or not) nor is there any poliy or practice in place for redundancy selection.
8.1.8	No Group Company has incurred any liability which remains undischarged at the date of this Agreement in connection with the termination of employment of any Senior Employee (including redundancy payments) or for failure to comply with any order for the reinstatement or re-engagement of any Relevant Employee. At the date of this Agreement there is no outstanding order for the re-instatement or re-engagement of any of the Relevant Employees or a former employee of a Group Company.
8.1.9	At the date of this Agreement no Group Company is involved in any material industrial or trade dispute or material negotiation with any trade union or other group or organisation representing Relevant Employees and there is no outstanding liability on the part of the Group Companies or any of them in respect of any such dispute and so far as the Sellers are aware, at the date of this Agreement there is nothing likely to give rise to such a dispute or claim.
8.1.10	No Senior Employee who has less than one year’s continuous service with a Group Company has been an employee of a member of the Sellers’ Group for more than 5 years.
8.1.11	Each Relevant Employee performs their employment obligations predominantly or exclusively for the business of the Hotel that their employing Group Company owns and/or operates (as the case may be).

8.1.12 At the date of Completion, no Group Company or Relevant Employee will be subject to a requirement to give contractual notice in excess of 12 months in order to terminate the employment of such Relevant Employee.

8.2 Termination of Employment

8.2.1	Between 1 January 2006 and the date one Business Day prior to the date of this Agreement, no Senior Employee has given notice terminating his or her employment.
8.2.2	Between 1 January 2006 and the date one Business Day prior to the date of this Agreement or, so far as the Sellers are aware, on the date of this Agreement, no Senior Employee has received notice terminating his or her employment nor have there been any proposals by any Group Company to terminate the employment of any Senior Employee.

6.3	Works Councils and Employee Representative Bodies
	The Data Room contains lists of all employee representative bodies which by law or any collective bargaining agreement have the right to be informed and consulted on matters which affect the Relevant Employees, and each Group Company has complied in all material respects with all such obligations, in particular, to inform and consult in relation to the arrangements contemplated by this Agreement to the extent required.
8.4	Consultancy Arrangements
	No Group Company is a party to any Consultancy Agreement and there are no proposals for any Group Company to enter into any Consultancy Agreement.
8.5	Collective Bargaining Agreements etc.
	Other than national collective bargaining agreements or industry-wide collective agreements, the union recognition agreements, collective agreements and European Works Council agreements contained in the Data Room are all the agreements between the Group Companies and trade unions or representative bodies.
8.6	Bonus or other Profit-related Schemes
	There are contained in the Data Room the rules and other documentation relating to all share incentive, share option, profit sharing, bonus or other incentive arrangements for or affecting any Relevant Employees or other workers or former employees or other former workers of the Group Companies in the last 12 months.
8.7	Compliance with Laws
	So far as the Sellers are aware, each Group Company has, in the 12 months prior to the date of this Agreement, complied in all material respects with all material legal and contractual obligations to and in relation to all Relevant Employees.

8.8 Retirement Benefit Arrangements

8.8.1	The arrangements contained in the Data Room and listed in Schedule 12 or in the Disclosure Letter (the “Retirement Benefit Arrangements”) are the only arrangements under which the Group Companies make payments for providing retirement, death, sickness, disability or life assurance benefits except for state or mandatory social security arrangements or mandatory collective bargaining arrangements to which any of the Group Companies contribute or are liablé or contingently liable to contribute in compliance with any law or regulation in respect of the Relevant Employees and/or any former employees, officers or former officers.
8.8.2	So far as the Sellers are aware, the Retirement Benefit Arrangements comply and have been managed at all times in all material respects with all legal and regulatory requirements and the Group Companies have at all times complied in all material respects with all applicable legal and regulatory requirements relating to the Retirement Benefit Arrangements and to any state or mandatory social security arrangements or mandatory collective bargaining agreements to which the Group Companies contribute.
8.8.3	All contributions and/or premiums due from the Sellers and/or the Group Companies under the terms of the Retirement Benefit Arrangements or to any state or mandatory social security arrangement or under any mandatory collective bargaining agreement have been paid on time.
8.8.4	There are no material disputes in relation to the Retirement Benefit Arrangements, and the Sellers are not aware of any pending or threatened disputes.
8.8.5	No assurance, promise or guarantee has been made to a Relevant Employee of a particuiar level or amount of benefits to be provided for or in respect of him/her (other than insured lump sum death in service benefits) under a Retirement Benefit Plan other than under the stand-alone defined benefit pension plan operated by Amstel Hotel Maatschappij in the Netherlands (the “DB Scheme”). So far as the Seller is aware, the specific provision of €606,000 made in the relevant Audited Accounts in respect of the underfunding of the DB Scheme as at the Accounts Date represents a reasonably prudent and proper level of provisions in respect of such DB Scheme underfunding in accordance with IFRS based on the facts and matters as at the date of this Agreement.

8.9	Pre-Completion Employment Transfer
	Prior to Completion the Pre-Sale Reorganisation will have been completed in all respects in relation to Transferring Employees and the Transferring Budapest Employees including for the avoidance of doubt:

8.9.1	the transfer to the members of the Sellers’ Group of employment agreements and/or secondment arrangements between the General Manager of each Hotel and Group Companies with the consent of each such General Manager;
8.9.2	the transfer of the 32 corporate employees of the Frankfurt corporate office on 1 June 2006 pursuant to a tripartite agreement between each employee, IHGG and InterContinental Hotels Managementgesellschaft mbH; and

8.9.3 the transfer to IC Szálloda of the Transferring Budapest Employees who work at the IC Budapest Hotel, effective 1 June 2006, and who were before then employed by and seconded to a member of the Sellers’ Group.

9	Legal Compliance
9.1	Licences and Consents
	All licences, consents, authorisations, orders, warrants, confirmations, permissions, certificates, approvals, registrations and authorities necessary for and material to the conduct of the business of each of the Hotels in the ordinary course as carried on as at the date of this Agreement, are in force and, so far as the Sellers are aware, are being complied with in all material respects as at the date hereof. None of the Sellers are aware of any reason why any of them should be suspended, modified or revoked (including as a result of the change of control of the Group Companies).
9.2	Compliance with Laws

9.2.1

So far as the Sellers are aware, there is no investigation disciplinary proceeding or enquiry by, or order, decree, decision or judgment of, any court, tribunal, arbitrator, governmental agency or regulatory body outstanding against any Group Company or any person for whose acts or defaults it may be vicariously liable which wll have a material adverse effect upon the business of any of the relevant Hotels or the Group Companies as the case may be.

9.2.2

No Group Company has received any written notice during the past 12 months from any court, tribunal, arbitrator, governmental agency or regulatory body with respect to a violation and/or failure to comply with any applicable law or regulation, or requiring it to take or omit any action which in any case would have a material adverse effect on the business of any of the relevant Hotels or the Group Companies as the case may be.

10	Environment
10.1	Definitions
	For the purposes of this paragraph 10:
	“Environment” means all or any of the following media (alone or in combination): air (including the air within buildings and the air within other natural or man-made structures whether above or below ground); water (including water under or within land); soil and land; and any ecological systems and living organisms supported by these media, including man and his property;
	“Environmental Law” means all applicable laws (including, for the avoidance of doubt, common law), statutes, regulations, statutory guidance notes and final and binding court and other tribunal decisions of any relevant jurisdiction (including without limitation the laws of the European Union) in force in the relevant jurisdiction at the date hereof whose purpose is to protect, or prevent pollution of, the Environment or to regulate emissions, discharges, or releases of Hazardous Substances into the Environment or to regulate the

	use, treatment, storage, burial, disposal, transport or handling of Hazardous Substances, or health and safety (including fire protection) laws and all bye-laws, codes, regulatibns, decrees or orders issued or promulgated or approved thereunder or in connection therewith to the extent that the same have force of law at the date hereof but excluding zoning and planning laws;
	“Environmental Permit” means any licence, approval, authorisation, permission, notification, waiver, order or exemption which is issued, granted or required under Environmental Law which is necessary for or material to the operation of the business of any of the relevant Hotels or the Group Companies, as the case may be, as carried out on or before the date hereof;
	“Hazardous Substances” means any natural or artificial substance of any nature (whether in the form of a solid, liquid, gas or vapour alone or in combination with any other substance) which is capable of causing harm or damage to the Environment or a nuisance to any person; and
	“Relevant Period” means the period commencing two years prior to the date hereof and ending on the date hereof.
10.2	Compliance
	So far as the Sellers are aware, each Group Company is and during the Relevant Period has been in material compliance with Environmental Law.
10.3	Permits
	All Environmental Permits required under Environmental Law:

10.3.1	have been obtained;
10.3.2	are in force; and
10.3.3	have been complied with in all material respects during the Relevant Period, and so far as the Sellers are aware none of them are likely to be revoked or suspended or not renewed.

10.4	Claims
	No Group Company has been involved in and/or received written notice during the Relevant Period of, or is at the date hereof subject to, any civil, criminal or regulatory notice, claim, suit or proceeding relating to Environmental Law or Environmental Permits which is likely to give rise to a material liability; and, so far as the Sellers are aware, no fact or circumstance exists which will or is likely to give rise to a notice, claim, suit or proceeding of that type.
10.5	Reports
	So far as the Sellers are aware, there are no environmental or health and safety reports or assessments relating to the Hotels, assets and/or business of any Group Company that are in the Sellers, or any other Group Company’s possession or control and were commissioned during the Relevant Period other than those included in the Data Room.

11	Litigation
11.1	Current Proceedings
	No Group Company is involved whether as claimant or defendant or other party in any material claim, legal action, proceeding, suit, litigation, prosecution, investigation, enquiry or arbitration (other than as claimant in the collection of debts arising in the ordinary course of its business none of which exceeds €500,000). For the purposes of paragraph 11 “material” means a claim, legal action, proceeding, suit, litigation, prosecution, investigation, enquiry or arbitration (or related series of such) the aggregats value of which exceeds €200,000.
11.2	Pending or Threatened Proceedings
	So far as the Sellers are aware, no material claim, legal action, proceeding, suit, litigation, prosecution, investigation, enquiry or arbitration is pending or threatened by or against any Group Company and, so far as the Sellers are aware, no fact or circumstance exists which will or is reasonably likely to give rise to a material claim, legal action, proceeding, suit, litigation, prosecution, investigation, enquiry or arbitration by or against any Group Company.
11.3	No court orders etc
	No Group Company is bound by any existing judgments or rulings, nor in the last three years has given any continuing undertakings arising from legal proceedings to any court, governmental agency, regulator or third party, which in any case has had or is reasonably likely to have a material adverse effect on the business of any of the Hotels or Group Companies.
12	Insurance
12.1	Particulars of Insurances
	Summary particulars (including policy holder details) of all insurance policies of, or relating or otherwise providing cover to, the Group Companies are contained in the Data Room.
12.2	Details on Policies
	In respect of the insurances referred to in paragraph 12.1:

12.2.1	all premiums have been duly paid to date;
12.2.2	none of the Sellers have received any notification that such insurances are not valid or enforceable; and
12.2.3	all statutory requirements to purchase insurance have been complied with by the Group Companies including any statutory requirements to keep evidence of such insurance.

12.3	Claims
	In respect of the insurances referred to in paragraph 12.1, so far as the Sellers are aware:

12.3.1	all claims and matters required to be notified to the relevant insurers under the terms of such insurances have been so notified;
12.3.2	such insurances are valid and enforceable;
12.3.3	there has been no breach of the terms, conditions or warranties of any of the polices that would entitle insurers to decline to pay all or any part of any claim made under the policies; and
12.3.4	nothing has been done or omitted to be done by or on behalf of any of the Group Companies or member(s) of the Sellers’ Group which might entitle such insurers to refuse indemnity in whole or part.

13	Tax
13.1	Tax Returns and Compliance

13.1.1	In the last three years ending on the date of this Agreement all registrations, returns, computations, notices and information which are or have been required to be made or given by each Group Company for any Taxation purpose have been made or given within the requisite periods and on a proper basis and are up-to-date and correct and all records required to be maintained for Tax purposes have been so maintained.
13.1.2	In the last three years ending on the date of this Agreement each Group Company has properly made all material deductions, withholdings and retentions required to be made in respect of any actual or deemed payment made or benefit provided on or before the date of this Agreement and has to the extent required by law accounted for all such deductions, withholdings and retentions.
13.1.3	In the last three years ending on the date of this Agreement each Group Company has paid all material Tax which it has become liable to pay and is not, and has not in the three years ending on the date of this Agreement been, liable to pay a penalty, fine or interest (other than interest under section 233a German General Tax Act) in connection with Tax and, so far as the Sellers are aware, there are no circumstances by reason of which any Group Company may become liable to pay any penalty, fine or interest in connection with Tax (other than interest under section 233a German General Tax Act).
13.1.4	In the last three years ending on the date of this Agreement no Group Company has been subject to any investigation or non-routine audit by any Tax Authority.
13.1.5	No Group Company is currently involved in any material dispute in relation to Tax with any Tax Authority.

13.2 General

13.2.1	Each Group Company is and has at all times in the last six years ending on the date of this Agreement been resident for Tax purposes only in the jurisdiction in which it was incorporated.
13.2.2	No Group Company has in the last six years ending on the date of this Agreement ceased to be a member of a group of companies in such circumstances that a profit or gain was deemed to accrue for Tax purposes to the Group Company and

neither the execution of this Agreement nor this Agreement becoming unconditional on Completion will result in any profit or gain being deemed to accrue to the Group Company for any Taxation purpose.

13.3	ValueAdded Tax
	Each Group Company that is required to be registered for VAT purposes:

(a)	is registered for the purposes of the applicable VAT legislation in its jurisdiction of incorporation; and
(b)	has in the last three years ending on the date of this Agreement complied in all material respects with all other applicable VAT provisions in the relevant VAT legislation in its Jurisdiction of incorporation.

13.4	Stamp Duty
	All documents by virtue of which a Group Company has any material right, title or interest have been duly stamped.
13.5	Arm’s Length Dealing
	In the last three years ending on the date of this Agreement, no Group Company has been subject to any challenge by a Tax Authority in relation to transfer pricing relating to transactions or other arrangements (including for the avoidance of doubt financing arrangements) between any Group Company and any other Group Company or between any Group Company and any of its shareholders or other members of the Sellers’ Group.
14	Authority and Capacity

14.1.1	Each of the Sellers and each Group Company is validly existing and is a company duly incorporated under the law of its jurisdiction of incorporation.
14.1.2	Each of the Sellers has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed by it pursuant to or in connection with this Agreement.
14.1.3	The documents referred to in paragraph 14.1.2 will, when executed, constitute valid and binding obligations on each of the Sellers, in accordance with their respective terms.
14.1.4	Each of the Sellers has taken or will have taken by Completion all corporate action required by it to authorise it to enter into and to perform this Agreement and any other documents to be executed by it pursuant to or in connection with this Agreement.

15

Hofburg and Wiener

15.1

Save for the shareholdings described in paragraphs 1.1.10 and 1.1.11 above, no Group Company has any obligation, commitment or liability (whether actual, conditional or contingent) whlch is owed or otherwise relates to any of Hofburg and/or Wiener, nor are there any agreements, arrangements or understandings which give rise or may give rise to any such obligation, commitment or liability, other than arm’s length commercial trading arrangements entered into between intercontinental Hotel-Betriebsgesellschaft m.b.H and

	any of Hofburg and/or Wiener in the ordinary course of conduct of the business of the IC Vienna Hotel.
15.2	There are no borrowings (or indebtedness in the nature of borrowings) or facilities, debts, debt instruments or debt securities, or cash pooling or security arrangements between any Group Company and any of Hofburg and/or Wiener, or which are otherwise provided or made available by any Group Company for the benefit of Hofburg and/or Wiener.
15.3	No Group Company is liable for any acts or omissions of Hofburg and/or Wiener and, so far as the Sellers are aware, there are no facts, matters or circumstances as at the date of this Agreement which may give rise to any such liability.
15.4	No Group Company has any investment or interest in, or financial exposure to (in each case, whether directly or indirectly) Hofburg and/or Wiener, other/than (i) the equity investment in the share capital of such companies described in paragraphs 1.1.10 and 1.1.11 above and (ii) any obligations or liabilities under any arm’s length commercial trading arrangements entered into between intercontinental Hotel-Betriebsgesellschaft m.b.H and any of Hofburg and/or Wiener in the ordinary course of conduct of the business of the IC Vienna Hotel.

Schedule 8
Warranties given by the Purchaser
(Clause 9.4)

1	Authority and Capacity
1.1	Incorporation
	The Purchaser is validly existing and a company duly incorporated under the law of The Netherlands.
1.2	Authority to Enter into Agreement

1.2.1	The Purchaser has the legal right and full power and authority to enter Into and perform this Agreement, and any other Transaction Documents.
1.2.2	The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Purchaser in accordance with their respective terms.

1.3	Authorisation
	The Purchaser has taken or will have taken by Completion all corporate action required by it to authorise it to enter into and perform this Agreement and any other documents to be executed by it pursuant to or in connection with this Agreement.
2	Financing
	The Purchaser has adequate financial resources and facilities in place to satisfy its payment obligations on Completion to the Sellers under this Agreement.

Schedule 9
Sellers’ Knowledge
(Clause 9.1.4)

-1	-2	-3
Person	Area of Business	Sellers’ Warranties
Mike Goodson	Senior Vice President Capital and Asset Management	All other than tax
Marten Foxon	Senior Vice President Transactions EMEA	All other than tax
Samantha Ward	Director, Capital and Asset Management	All other than Tax
Charles Glanville	Senior Corporate Counsel	All other than Tax
Robert Kennedy	Vice President	Sellers’ Warranty 2.2 and 5
Jennifer Fox	Chief Operating Officer (InterContinental Hotels EMEA)	Sellers’ Warranty 5 and 7
David Coles	Vice President — UK Pensions	Pensions (Sellers’ Warranty 8.8)
Conny Verelst	Director, Compensation & Benefits EMEA Intercontinental Hotels Group	Pensions (Sellers’ Warranties 8.8)
Colin Garwood	Vice President — Tax	Tax (Sellers’ Warranty 13)
Nick Watson	Corporate Tax	Tax (Sellers’ Warranty 13)
David Holtick	Director Tax	Tax (Sellers’ Warranty 13)
Catherine Springett	Head of Company Secretariat	Insolvency (Sellers’ Warranty 1.2), Constitutional Documents (Sellers’ Warranty 1.3)
Marleen Van Nijverseel	Director, HR Policy and Legal Compliance Director	Employment (Sellers’ Warranties 8.1 to 8.7)
John Ludlow	Risk Management	Sellers’ Warranties 10
Mark Hanlon	Vice President of Engineering Operations Support & Quality InterContinental Hotels Group — Frankfurt Property and Environmental	Sellers’ Warranties 10
Luigi De Rosa	IC Rome, General Manager	All Sellers’ Warranties (except Tax) in so far as they relate to the IC Rome Hotel
Alfonso Jordan	IC Madrid, General Manager	All Sellers’ Warranties (except Tax) in so far as they relate to the IC Madrid Hotel
Hendrik Boch	IC Amsterdam, General Manager	All Seller’s Warranties (except Tax) in so far as they relate to the IC Amsterdam Hotel
Francois Chopinet	IC Cannes, General Manager	All Sellers’ Warranties (except Tax) in so far as they relate to the IC Carlton Cannes Hotel
Thomas R. Hilberath	IC Frankfurt, General Manager	All Sellers’ Warranties (except Tax) in so far as they relate to the IC Frankfurt Hotel
Michael Koth	IC Budapest, General Manager	All Sellers’ Warranties (except Tax) In so far as they relate to the IC Budapest

-1	-2	-3
Person	Area of Business	Sellers’ Warranties
		Hotel
Rolf Huebner	IC Vienna, General Manager	All Sellers’ Warranties (except Tax) in so far as they relate to the IC Vienna Hotel

Schedule 10
Part 1
Split Contracts
(Clause 13.3.1)

1	Agreement between Progros, pro Großverbraucher Einkaufsgesellschaft mbH, Intercontinental Hotels Managementgesellschaft mbH, Intercontinental Hotels Betriebsgesellschaft mit beschränkter Haftung and Holiday Inn Hotelgesellschaft mbH for the provision of purchasing services in connection with InterContinental Hotels Group owned and managed hotels In Germany.
2	Non F&B (national exclusive vendor for table top disposables, guest supplies, kitchen and housekeeping disposables, Johnson Diversey, Kimberly Clark and Duni product, printed non paper items, etc.) agreement between Bunzl Verpackungen GmbH & Co. KG and Intercontinental Hotels Betriebsgesellschaft mit beschrankter Haftung for the supply of non-food and beverage items to InterContinental Hotels Group owned and managed Hotels In Germany.
3	Food supply arrangements between Inversco and InterContinental Hotels Group for InterContinental Hotels Group owned and managed hotels in the Netherlands.
4	Supply of non-consumables agreement between Bunzl Outsourcing Services and InterContinental Hotels Group for InterContinental Hotels Group owned and managed hotels in the Netherlands.
5	Electricity supply agreement between Rendo energielevering B.V., Holiday Inns BV, Holiday Inns BV, Netherlands International Hotels BV, Holiday Inns (Eindhoven) BV, and B.V. Amstel Hotel Maatschapplj for InterContinental Hotels Group owned and managed hotels in the Netherlands.
6	Wine supply agreement between Oud Reuchlin & Boelen and InterContinental Hotels Group for InterContinental Hotels Group owned and managed hotels in the Netherlands.
7	Beer supply agreement between Brau Union Osterreich Aktiengesellschaft and Intercontinental Hotels BetriebsgesmbH for the supply of beer to hotels owned and managed by InterContinental Hotels Group in Austria, dated 02.09.02.
8	Payroll services agreement between Delaville S.p.A and ADP GSI Italia S.p.A. re payroll processing for InterContinental Hotels Group owned and managed hotels In Italy.

Part 2
Sellers’ Group Contracts
(Clause 13.3.3)

1	Supply of electricity agreement between Citiworks AG Munich and Intercontinental Hotels Managementgesellschaft mbH.
2	Software Licence Agreement between Newmarket International Limited and Six Continents PLC dated 4 June 2004 re “Delphi” software.
3	Umbrella agreement re payroll processing for InterContinental Hotels Group owned and managed hotels in Germany between Bremer Rechenzentrum GmbH and Intercontinental Hotels Managementgesellschaft mbH dated 09.05.05.
4	Payroll services agreement between Holiday Inns BV and NVA Group BV re payroll processing for InterContinental Hotels Group owned and managed hotels in the Netherlands.
5	Payroll services agreement between Bass Hotels & Resorts Espana SA (now known as InterContinental Hotels Group (Espana), S.A). and ADP GSI Espana, S.A. re payroll processing for InterContinental Hotels Group owned and managed hotels in Spain.

Schedule 11
Completion Inter-Group Debts/Credits
(Clause 6.4)

Part 1 — Completion Inter-Group Debts

		Amount
Lender	Borrower	€
Six Continents Limited	BV Amstel Hotel Maatschappij		3,000,000
Six Continents Limited	Hotelera El Carmen S.A.		23,000,000
Six Continents Limited	Inter-Continental Holding (Germany) GmbH		19,000,000
BHR Holdings B.V.	BHR Overseas (Europe) B.V.		20,500,000
BHR Services France	Société Des Hôtels Réunis SAS		18,890,000
	TOTAL		84,390,000

Part 2 — Completion Inter-Group Credits

None

Schedule 12
Retirement Benefit Arrangements

1	Germany
1.1	HOGA Rente.
2	Italy
2.1	Q.u.A.S supplementary health insurance fund (as per the National Collective Bargaining Agreement (only for departmental heads at the level of “Quado”).
2.2	Sanimpresa Plan (provided in accordance with the Territorial Collective Bargaining Agreement).
2.3	AXAPP Plan (only for General Manager).
2.4	Supplementary pension fund Mario Negri (provided in accordance with National Collective Bargaining Agreement for executives only).
2.5	Supplementary health insurance fund Mario Besusso (provided in accordance with the National Collective Bargaining Agreement for executives only).
2.6	Supplementary health insurance fund Antonio Pastore (provided in accordance with the National Collective Bargaining Agreement for executives only).
3	The Netherlands
3.1	IHG Delta Lioyd Nederland Defined Contribution Personal Pension Scheme.
3.2	Delta Lioyd Defined Benefit Pension Plan.
3.3	Hotel Industry Pension Fund (HORECAFOND).
4	Spain
4.1	Winterthur Vida, S.A. de Seguros y Reaseguros sobre la Vida Group life insurance policy (policy number: 82-00018197).
4.2	Sud America Vida y Pensiones, Cfa de Seguros y Reaseguros, S.A. Collective life insurance policy (policy number: 0729-C).
4.3	Winterthur Vida, S.A. de Seguros y Reaseguros sobre la Vida. Group life insurance policy (policy number: 082-001 8783).
4.4	“Premlo de Vinculacion” — long service award.
5	Hungary
5.1	Eletut Onkentes Magannyugdipenztar Defined Contribution Pension Plan.
6	General
6.1	IHG International Savings and Retirement Plan.

Schedule 13
Owned Registered Trade Marks and Registered Material Intellectual Property

Part 1
Owned Registered Trade Marks

Austria

Proprietor	Mark	Registration no.	Filing Date	Classes
Intercontinental Hotel- Betriebgesellschaft mbH	VIER JAHRESZEITEN	115661	26 Aug 1986	30

Germany

Proprietor	Mark	Registration no.	Filing Date	Classes
Frankfurt Intercontinental Hotels Gesellschaft mit beschränkter Haftung	IN TOUCH	30300998	9 Jan 2003	16, 35, 43
Intercontinental Hotels Betriebsgeselischaft mit beschränkter Haftung	VERANDA RESTAURANT & logo	30227498	4 Jun 2002	43
Intercontinental Hotels Betriebsgesellschaft mit beschränkter Haftung	DAXX MAINHATTANS’S BAR & logo	39805266	3 Feb 1998	42

Hungary

Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Szálloda Budapest Rèszvenytársaság (Rt.) “átalakulás alatt”	CORSO RESTAURANT BAR & Design	167793	16 Oct 2000	42

Spain

Proprietor	Mark	Registration no.	Filing Date	Classes
Hotelera El Carmen, S.A.	CASTELLANA CLUB (stylized letters)	M1722143	25 Sep 1992	42
Hotelera El Carmen, S.A.	49 BAR & design	M2469199	12 Apr 2002	43

Proprietor	Mark	Registration no.	Filing Date	Classes
Hotelera El Carmen, S.A.	ELJARDIN	M1267065	27 Jul 1988	42
Hotelera El Carmen, S.A.	O’XEITO label (trade name)	R208466	27 May 1992	N/A
Hotelera El Carmen, S.A.	OXEITO & logo	M1703929	27 May 1992	42
Hotelera El Carmen, S.A.	SARRACIN (trade name)	113321R	25 Mar 1974	N/A

Part 2
Registered Material Intellectual Property

1     Material Registered Trade Marks used under licence (whether written or not)

Austria

Proprietor	Mark	Registration no.	Filing Date	Classes
Intercontinental Hotels Managementgesellschaft mbH	CATERING’S BEST BY & design	212249	20 Feb 2003	35, 36, 39,4, 41, 43, 45
Intercontinental Hotels Managementgesellschaft mbH	Catering’s Best logo	212248	20 Feb 2003	35, 36, 39, 40, 41, 43, 45
Intercontinental Hotels Managementgesellschaft mbH	CATERING’S BEST	11092003 (Application)	19 Feb 2003	35, 36, 39, 40, 41, 43, 45
Inter-Continental Hotels Corporation	CATERING’S BEST BY INTERCONTINENTAL	CTM number 5170352 (application)	29 Jun 2006	16, 43
Inter-Continental Hotels Corporation	INTER.CONTINENTAL	87793	13 Apr 1978	37, 42
Inter-Continental Hotels Corporation	I LOGO	CTM REG. NO. 2786168	05 Feb 2004	41, 43, 45
Six Continents Hotels,Inc.	PRIORITY CLUB	CTM REG. NO. 003496478	17 Aug 2005	16, 35, 43
Benelux
Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Hotels Corporation	DE AMSTEL CLUB	614318	4 Jul 1997	35, 41, 42
Inter-Continental Hotels Corporation	THE AMSTELBAR BRASSERIE	598882	21 May 1996	29, 30, 32, 33, 42
Inter-Continental Hotels Corporation	AMSTEL HOTEL	469415	17 Aug 1989	41, 42
Inter-Continental Hotels Corporation	INTER.CONTINENTAL	484512	24 Jan 1990	39, 41, 42

Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Hotels Corporation	I LOGO	CTM REG. NO. 2786168	05-Feb-2004	41, 43, 45
Six Continents Hotels, Inc.	PRIORITY CLUB	CTM REG. NO. 003496478	17-Aug-2005	16, 35, 43
Inter-Continental Hotels Corporation	CATERING’S BEST BY INTERCONTINENTAL	CTM number 5170352 (application)	29 Jun 2006	16, 43
France
Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Hotels Corporation	CARLTON	1613473	17 Jul 1989	41, 42
Inter-Continental Hotels Corporation	CARLTON	1549918	21 Jul 1989	41
Inter-Continental Hotels Corporation	INTER.CONTINENTAL	1357469	09 Jun 1966	16, 35, 39, 41, 42
Inter-Continental Hotels Corporation	I LOGO	CTM REG. NO. 2786168	05 Feb 2004	41, 43, 45
Six Continents Hotels, Inc.	PRIORITY CLUB	CTM REG. NO. 003496478	17 Aug 2005	16, 35, 43
Inter-Continental Hotels Corporation	CATERING’S BEST BY INTERCONTINENTAL	CTM number 5170352 (application)	29 Jun 2006	16, 43
Germany
Proprietor	Mark	Registration no.	Filing Date	Classes
Intercontinental Hotels Managementgesellschaft mbH	CATERING’S BEST	303151889 (Application)	21 Mar 2003	16, 43
Inter-Continental Hotels Corporation	CATERING’S BEST BY INTERCONTINENTAL	CTM number 5170352 (application)	29 Jun 2006	16, 43
Intercontinental Hotels Managementgesellschaft mbH	SIGNATURES RESTAURANT & logo	39752676	5 Nov 1997	42
Inter-Continental Hotels Corporation	INTER.CONTINENTAL	649080	23-Jan-1992	42

Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Hotels Corporation	I LOGO	CTM REG NO. 2786168	05-Feb-2004	41, 43, 45
Six Continents Hotels, Inc.	PRIORITY CLUB	CTM REG. NO. 003496478	17-Aug-2005	16, 35, 43

Hungary

Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Hotels Corporation	I LOGO	CTM REG. NO. 2786168	05-Feb-2004	41, 43, 45
Inter-Continental Hotels Corporation	INTER.CONTINENTAL	117663	03-Mar-1975	42
Six Continents Hotels, Inc.	PRIORITY CLUB	CTM REG. NO. 003496478	17-Aug-2005	16, 35, 43
Inter-Continental Hotels Corporation	CATERING’S BEST BY INTERCONTINENTAL	CTM number 5170352 (application)	29 Jun 2006	16, 43

Italy

Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Hotels Corporation	I LOGO	CTM REG. NO. 2786168	05-Feb-2004	41, 43, 45
Inter-Continental Hotels Corporation	INTER.CONTINENTAL	449043	29-Sep-1986	42
Six Continents Hotels, Inc.	PRIORITY CLUB	CTM REG. NO. 003496478	17-Aug-2005	16, 35, 43
Inter-Continental Hotels Corporation	CATERING’S BEST BY INTERCONTINENTAL	CTM number 5170352 (application)	29 Jun 2006	16, 43

Spain

Proprietor	Mark	Registration no.	Filing Date	Classes
Inter-Continental Hotels	INTER.CONTINENTAL	755587	15-Jul-1978	42
Inter-Continental Hotels	I LOGO	CTM REG. NO. 2786168	05-Feb-2004	41, 43, 45
Six Continents Hotels, Inc.	PRIORITY CLUB	CTM REG. NO. 003496478	17-Aug-2005	16, 35, 43
Inter-Continental Hotels Corporation	CATERING’S BEST BY INTERCONTINENTAL	CTM number 5170352 (application)	29 Jun 2006	16, 43

2	Other Registered Material Intellectual Property
	None

Schedule 14
Permitted Pre-Completion Actions
(Clause 5.1)

Between the date of this Agreement and Completion, the Sellers shall be entitled to take (or procure that the relevant Group Company takes) such actions as are necessary in order to:

(i)	implement and complete the Pre-Sale Reorganisation Documents which have not been implemented and completed prior to the date of this Agreement;
(ii)	charge and invoice inter-company costs properly incurred between the Sellers’ Group and the Group in the ordinary course of conduct of the business, as conducted as at the date of this Agreement;
(iii)	convert the discount notes owed by Six Continents Limited to the Group Companies into cash;
(iv)	complete the assignment of the trade marks pursuant to the trade mark assignment agreements at items 1.12_1 in each of the B.V. Amstel Hotel Maatschappii, the SNC Carlton Inter-Continental Cannes, the Hotelera el Carmen S.A., the Intercontinental Hotel-Betriebsgesellschaft mit beschränkter Hoffung, the FIH and the IHB Germany sub-folders of the Miscellaneous section in the Data Room and item 0.43_3 of the Group Information sub-folder of the Miscellaneous section in the Data Room and the transfer of the domain names pursuant to the Domain Name Transfer Agreement at item 0.43_2 of the Group Information sub-folder of the Miscellaneous section in the Data Room as well as the completion of any steps necessary to ensure the validity of such assignments and transfer;
(v)	execute and complete the lease agreement between FIH and American Diner GbR in relation to Leon’s Restaurant at the IC Frankfurt Hotel, such lease agreement to be substantially in the same form as the draft provided in the Data Room; and
(vi)	rent up to an additional 3 flats on an annual basis to provide accommodation to seasonal workers and other staff at the IC Carlton Cannes Hotel for an aggregate monthly rent of up to €2,000.

Schedule 15
Slenna Hotel Security Agreements

• Guarantee Declaration dated 17 May 2001 by BOEBV to BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Osterreichische Postsparkasse Aktiengesellsehaft (“BAWAG”) and BayLaBa;

• Letter of Comfort dated 15 March 2001 by BOEBV to BAWAG and BayLaBa;

• Letter of Confirmation dated 5 July 2001 by BOEBV, UBM and Warimpex Finanz- und Beteiligungs Aktiengesellsehaft to BAWAG and BayLaBa;

• Pledge Agreement dated 8 July 2005 between BOEBV, BAWAG and BayLaBa;

• Power of Attorney granted on 26 November 2001 by BOEBV to BAWAG; and

• Registered Pledge Agreement over Additional Shares dated 26 November 2001 between BOEBV and BAWAG.

Schedule 16
Capital Expenditure

IC Amstel Hotel
in Euro

Capex category	Jun (estimate)		Jul Budgeted capital expenditure to Completion	Total
Rooms		5,800			5,800
Air-Conditioning					—
Public Areas					—
Meeting Rooms					—
Health Club					—
IT & Telephony		87,966			87,966
BOH					—
Kitchens		8,950			8,950
External & Building Fabric					—
Asbestos					—
M&E		78,671			78,671
Fire Safety		82,669			82,669
Access for disabled guests					—
Signage					—
Staff Uniforms					—
Base stock					—
Other		30,000			30,000
Rebranding					—
					—
Total Capital Expenditure		294,056			294,056

IC Budapest Hotel
in Euro

Capex category	Jun (estimate)		Jul Budgeted capital expenditure to Completion		Total
Rooms		—		—		—
Air-Conditioning		—		—		—
Public Areas		—		59,429		59,429
Meeting Rooms		—		—		—
Health Club		—		28,773		28,773
IT & Telephony		—		15,000		15,000
BOH		7,983		—		7,983
Kitchens		7,102		21,867		28,969
External & Building Fabric		—		—		—
Asbestos		—		—		—
M&E		—		—		—
Fire Safety		14,483		24,562		39,045
Access for disabled guests		—		—		—
Signage		—		—		—
Staff Uniforms		—		11,150		11,150
Base stock		—		294,000		294,000
Other		—		—		—
Rebranding		—		14,850		14,850
						—
Total Capital Expenditure		29,568		469,631		499,199

IC Carlton Cannes Hotel
in Euro

Capex category	Jun (estimate)		Jul Budgeted capital expenditure to Completion		Total
Rooms						—
Air-Conditioning		—				—
Public Areas						—
Meeting Rooms						—
Health Club						—
IT & Telephony		40,245		118,954		159,199
BOH						—
Kitchens						—
External & Building Fabric		—		11,738		11,738
Asbestos						—
M&E						—
Fire Safety		18,819		12,000		30,819
Access for disabled guests						—
Signage						—
Staff Uniforms				6,696		6,696
Base stock		—		248,350		248,350
Other						—
Rebranding						—
						—
Total Capital Expenditure		59,064		397,738		456,802

IC Frankfurt Hotel
in Euro

Capex category	Jun (estimate)		Jul Budgeted capital expenditure to Completion	Total
Rooms		10,132			10,132
Air-Conditioning					—
Public Areas					—
Meeting Rooms					—
Health Club					—
IT & Telephony		183,573			183,573
BOH					—
Kitchens					—
External & Building Fabric					—
Asbestos					—
M&E					—
Fire Safety		321,227			321,227
Access for disabled guests					—
Signage					—
Staff Uniforms		6,696			6,696
Base stock		344,200			344,200
Other					—
Rebranding					—
					—
Total Capital Expenditure		865,828			865,828

IC Madrid Hotel
in Euro

Capex category	Jun (estimate)		Jul Budgeted capital expenditure to Completion		Total
Rooms						—
Air-Conditioning		10,393		—		10,393
Public Areas		—		—		—
Meeting Rooms						—
Health Club		13,370		—		13,370
IT & Telephony						—
BOH		15,000		5,768		20,768
Kitchens						—
External & Building Fabric						—
Asbestos						—
M&E						—
Fire Safety		4,358		20,707		25,065
Access for disabled guests						—
Signage						—
Staff Uniforms						—
Base stock						—
Other		420,450		—		420,450
Rebranding						—
						—
Total Capital Expenditure		463,571		26,475		490,046

IC Rome Hotel
in Euro

Capex category	Jun (estimate)		Jul Budgeted capital expenditure to Completion	Total
Rooms					—
Air-Conditioning					—
Public Areas					—
Meeting Rooms					—
Health Club					—
IT & Telephony		88,572			88,572
BOH					—
Kitchens		2,090			2,090
External & Building Fabric					—
Asbestos					—
M&E		6,157			6,157
Fire Safety		112,482			112,482
Access for disabled guests					—
Signage					—
Staff Uniforms		10,800			10,800
Base stock		141,350			141,350
Other		-205			-205
Rebranding					—
					—
Total Capital Expenditure		361,246			361,246

IC Vienna Hotel
in Euro

Capex category	Jun (estimate)		Jul Budgeted capital expenditure to Completion	Total
Rooms		24,512			24,512
Air-Conditioning					—
Public Areas					—
Meeting Rooms					—
Health Club
IT & Telephony		33,954			33,954
BOH		293,657			293,657
Kitchens					—
External & Building Fabric					—
Asbestos					—
M&E					—
Fire Safety					—
Access for disabled guests					—
Signage					—
Staff Uniforms		6,696			6,696
Base stock		195,350			195,350
Other					—
Rebranding					—
Total Capital Expenditure		554,169			554,169

Schedule 17
Specific Indemnified Matters

1 Any claim by Ms Aloni against IC Szálloda in respect of personal injuries suffered at the IC Budapest as described in more detail at paragraph 11.1 of the Disclosure Letter.

2 Any claim by two guests at the IC Frankfurt Hotel for injuries following a fall on an escalator at the IC Frankfurt Hotel as described in more detail in item ICFra.11.3_2 in the Data Room and paragraph 11.1 of the Specific Disclosure section of the Disclosure Letter.

To: MSREF VI Danube BV
Kabelweg 37, 1014BA
Amsterdam
The Netherlands

September 5, 2006

Dear Sirs

Share Purchase Agreement dated 13 July 2006 between BHR Holdings BV, Société Nouvelle du Grand Hotel SA, Société Des Hotels InterContinental France SNC, Inter-Continental Hotels Corporation and MSREF VI Danube BV (the “Agreement”)

We refer to the Agreement

We acknowledge that Completion may take place on the Completion Date at a time before the time to which the Net Current Asset Statement is to be drawn up (being 2400 hours (CET) on the Completion Date) and accordingly agree that the Agreement be amended as follows:

1	paragraph 2.2. of Part 3 of Schedule 6 shall be amended as follows:
1.1	the words “on or following Completion (including any post Completion refinancing or reorganisation of capital)” shall be inserted immediately after the existing words “contemplated by this Agreement”; and
1.2	the words “including any payments under Clause 6.4” shall be added after the words “Completion mechanics and payments”;
2	the following shall be added as new paragraph 2.9 in Part 3 of Schedule 6 to the Agreement:

“2.9  Any actions taken outside the ordinary course of conduct of the Hotels by any of the Group Companies in the period after Completion up to and including 2400 hours (CET) on the Completion Date the effect of which is to deliberately increase or decrease Net Current Assets shall be disregarded in drawing up the Net Current Asset Statement.”;

3 the following shall be added as new paragraph 2.10 in Part 3 of Schedule 6 to the Agreement:

“2.10  The effect of any transactions involving IHGG’s bank account maintained with ABN AMRO Bank N.V. (account number 60.29.23.204) which are initiated or authorised by Jan Dries Mulder or by any member of the Purchaser’s Group (or any of their respective directors, employees or agents) shall be disregarded in drawing up the Net Current Asset Statement.”;

4 the following definitions in Part 1 of Schedule 6 shad be deleted and replaced by the following:

“Accruals” means the monetary value of all goods and services received by any Group Company before 2400 hours (CET) at the end of the Completion Date which have not been paid for by that Company as at 2400 hours (CET) at the end of the Completion Date including interest owed by the Group Companies in respect of

1

any Actual Inter-Group Debt, any wages, salaries, severance or redundancy pay arising on terminations notified by the Group Companies on or prior to the Completion Date (including in relation to the potential redundancy referred to in paragraph 8.1.7 of the Specific Disclosure section of the Disclosure Letter), deductions from employees salaries on account of tax, VAT, accrued Tax (other than in respect of Corporate Income Tax) and property tax and employer’s and employees social security payment and pension contribution accruals for the calendar month in which the Completion Date falls, any amounts in respect of bonuses for 2005 and prior years and for the period up to Completion and accrued benefits under the Cannes Employee Profit Sharing Scheme as at 2400 hours (CET) at the end of the Completion Date, together with social security and any deductions on account of Tax in respect thereof in respect of Relevant Employees which will, in each case, be apportioned on a pro-rata time basis;

“Accrued Income” means the monetary value of all goods and services provided by any Group Company on or before the Completion Date for which revenue has not been received by that Company as at 2400 hours (CET) at the end of the Completion Date Including interest due to the Group Companies in respect of the Actual Inter-Group Credit;

“Corporate Income Tax” means: (i) liabilities for Taxation arising on income and profits generated during the current tax year up to 2400 hours (CET) at the end of the Completion Date; (ii) liabilities for Taxation arising on income and profits generated during prior tax years which have not been paid or discharged as at 2400 hours (CET) at the end of the Completion Date; and (iii) any liabilities of or any payments to be made by any Group Company (other than to another Group Company) under the TCA;

“Current Guest Accounts” means uninvoiced or invoiced but unpaid accounts of guests staying at any Property as at, and in respect of the period up to and including, 2400 hours (CET) at the end of the Completion Date who are booked to remain at that Property after the Completion Date and uninvoiced or invoiced but unpaid accounts of corporate clients in respect of guests who have stayed at any Property on or prior to the Completion Date;

“Debtors” means all the book and other debts owed or owing to, including those arising out of or attributable to the operations of, any Group Company as at 2400 hours (CET) at the end of the Completion Date Including Accrued Income, Employee Loans, Prepayments, Inter-Group Receivables and the right to receive payment for services rendered, but not invoiced, before 2400 hours (CET) at the end of the Completion Date which shall include that portion of Current Guest Accounts relating to the period prior to 2400 hours (CET) at the end of the Completion Date and further including the right of Hotelera el Carmen S.A. to receive payment of €15,000 on Completion in respect of the right of first offer granted by it to Lituma Servicios Empresariales, S.L. pursuant to the IC Madrid HMA, but, for the avoidance of doubt, not including Deferred Tax or any amount included in Actual Inter-Group Credit;

“Deferred Income” means all payments received and unpaid invoices issued by the Group Companies before 2400 hours (CET) at the end of the Completion Date to the extent that they relate to a service to be provided by that Company after the

2

Completion Date including any Current Guest Deposits and Health Club Membership Fees;

“French Pension Provision” means the amount of the provision in respect of pensions liabilities of Société des Hôtels Réunis SAS taken into account under “Creditors” in the Net Current Asset Statement and for which a Tax deduction is not available in respect of periods prior to 2400 hours (CET) at the end of the Completion Date;

“Profit Repayable Loan Deductions” means any future Tax deductions in respect of the Outstanding Principal Amount as at 2400 hours (CET) at the end of the Completion Date under the Loan Agreement II — Division of Existing Loan (Novation) dated 31 December 2003 between Intercontinental (Holdings) Germany GmbH and BHR Overseas (Europe) BV;

“Stock” means all items of a type which have prior to the date hereof been regarded as stock which are unused, owned beneficially by any Group Company and held at any Property at 2400 hours (CET) at the end of the Completion Date; and

5	paragraph 4.1 of Part 3 of Schedule 6 shall be amended as follows:
5.1	in the first sentence of paragraph 4.1, the reference to “Completion Date” shall be deleted and replaced with “2400 (CET) at the end of the Completion Date”; and
5.2	in the final sentence of paragraph 4.1, the final reference to “Completion” shall be deleted and replaced with “2400 (CET) at the end of the Completion Date”.

Yours faithfully

/s/ Jorg H Schmittem

           &

/s/ Frederic Henderik Wittebol

For and on behalf of

BHR Holdings BV

/s/ Didier Boidin

For and on behalf of

Société Nouvelle du Grand Hotel SA

/s/ Gisclle Ford. Maillot

           &

/s/ Didier Boidin

For and on behalf of

Société Des Hotels InterContinental

France SNC

3

/s/ David A. Hom

For and on behalf of                         September 5, 2006

David A. Hom

Vice President and Secretary

Inter-Continental Hotels Corporation

Accepted and agreed

/s/ Jan-Dries Mulder 

For and on behalf of

MSREF VI Danube BV

Dated  4/9/2006

4

EX-8

InterContinental Hotels Group
List of Subsidiaries at December 31, 2006

Exhibit 8

Name of Company	Country of Incorporation
“The Londoner” (Hotel) Ltd.	England
American Commonwealth Assurance Co. Ltd.	Bermuda
Arabian Hotel Management Co. LLC	Oman
Asia Pacific Holdings Limited	England
Athenaeum Hotel & Touristic Enterprises S.A.	Greece
Avendra LLC	Delaware, USA
Barclay Operating Corp.	New York, USA
Barclay Operating Corp. — Argentina Branch	Argentina
BBJV Investments Limited	England
BCH Hotel Investment, Pte Ltd	Singapore
BHMC Canada Inc.	Canada
BHR Holdings B.V.	The Netherlands
BHR Luxembourg S.A.R.L.	Luxembourg
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
Blackfriars Hotels Ltd.	England
Brascan Imobiliaria Hotelaria e Turismo S.A.	Brazil
Bristol Oakbrook Tenant Company	Delaware, USA
C.A. Hotel Guayana	Venezuela
Café Biarritz	Texas, USA
Canobolas Caravan Motel Pty Ltd.	Australia
Cayo Largo Hotel Assoc. SNC por ASE	Georgia, USA
Centro de Servicios Hoteleros S.A. de C.V.	Mexico
Centrum Finance (Guernsey) Ltd.	Channel Islands
China Hotel Investment Ltd	Barbados
CIMS L.P.	Illinois, USA
Compania Hotelera Nuevos Horizontes	Venezuela
Compania Inter-Continental de Hoteles El Salvador S.A.	Venezuela
Cooper Leasing Company Ltd	England
Corporaction Turistica Real	BVI San Salvador
Covachas Festivas de America SA	Costa Rica
Crowne Plaza (Asia Pacific) Ltd.	Hong Kong
Crowne Plaza Amsterdam (Management) BV	The Netherlands
Crowne Plaza LAX, LLC	Georgia, USA
Crowne Plaza LLC	North Carolina, USA
Culross Finance Ltd.	Cayman
Delta Hotels Limited	Scotland
Dessarrolladora Holiday Inn, S.A. de C.V.	Mexico
Edinburgh IC Limited	England
Emerald Bay Hotel Co. Ltd	Thailand
EMERO BV	The Netherlands
Garden Court France SNC	France
General Innkeeping Acceptance Corporation	Tennessee, USA
Gestion Hotelera Gestel, C.A.	Venezuela
Golden Hotel Prague Hotels Services s.r.o.	Czech Republic
Grand Hotel du Congo SZARL	Rep of Congo, Zaire
Grand Hotel Inter-Continental Paris SNC	France
Guangzhou SC Hotels Services Ltd.	China
H.I (Burswood) Pty Ltd.	Australia
H.I (Burswood) Trust	Australia
H.I. (Newcastle) Pty Ltd.	Australia
H.I. (Newcastle) Trust	Australia
H.I. Mexicana Servicios, SA de CV	Mexico
H.I. Sara Hospitality Sdn Bhd	Malaysia
H.I. Soaltee Hotel Co. (P) Ltd.	Hong Kong
H.I. Soaltee Management Company Ltd	Hong Kong
H.I. Sugarloaf LLC	Georgia, USA
Hale International Ltd.	British Virgin Islands
Harvey’s Bar/Remington’s	Texas, USA
HC International Holdings, Inc.	Delaware, USA
HH France Holdings SARL	France
HH Hotels (EMEA) BV	The Netherlands
HH Hotels (EMEA) BV — Egyptian Branch	Egypt
HH Hotels (EMEA) BV — Russian Branch	Russia
HH Hotels (Romania) SRL	Romania
HH Hotels Tunisia SARL	Tunisia
HI (Ireland) Ltd.	Eire
HI Hotels Australia Trust	Australia
HIA (T) Pty Ltd.	Australia
HIA, Inc.	Tennessee, USA
HIM (Aruba) NV	Aruba
Holiday Hospitality Franchising, Inc.	Delaware, USA
Holiday Inn (Birmingham Airport) Ltd.	England
Holiday Inn (Dijon) SARL	France
Holiday Inn Cairns Pty Ltd.	Australia
Holiday Inn Mexicana S.A.	Mexico
Holiday Inn Operadora Mexico S.A. de C.V.	Mexico
Holiday Inns (Beijing) Ltd.	Hong Kong
Holiday Inns (Casablanca) Ltd	Hong Kong
Holiday Inns (China) Ltd.	Hong Kong
Holiday Inns (Chongging), Inc.	Tennessee, USA
Holiday Inns (Courtalin) Holdings SAS	France
Holiday Inns (Courtalin) SAS	France
Holiday Inns (Downtown Beijing) Ltd.	Hong Kong
Holiday Inns (Eindhoven) BV	The Netherlands
Holiday Inns (England) Ltd.	England
Holiday Inns (Germany) LLC	Tennessee, USA
Holiday Inns (Germany) LLC — German Branch	Germany
Holiday Inns (Guangzhou), Inc.	Tennessee, USA
Holiday Inns (Indonesia) B.V.	The Netherlands
Holiday Inns (Jamaica) Inc.	Tennessee, USA
Holiday Inns (Jamaica) Inc. — Jamaica Branch	Jamaica
Holiday Inns (Korea) Ltd.	Hong Kong
Holiday Inns (Macau) Ltd.	Hong Kong
Holiday Inns (Malaysia) Ltd.	Hong Kong
Holiday Inns (Middle East) Ltd.	Hong Kong
Holiday Inns (Nepal) Ltd.	Hong Kong
Holiday Inns (Philippines), Inc.	Tennessee, USA
Holiday Inns (Philippines), Inc. — Philippines Branch	Philippines
Holiday Inns (Saudi Arabia), Inc.	Tennessee, USA

InterContinental Hotels Group
List of Subsidiaries at December 31, 2006

Name of Company	Country of Incorporation
Holiday Inns (Shanghai) Ltd.	Hong Kong
Holiday Inns (South East Asia) Inc.	Tennessee, USA
Holiday Inns (South East Asia) Inc. — Singapore Branch	Singapore
Holiday Inns (Suisse) SA	Switzerland
Holiday Inns (Thailand) Ltd.	Hong Kong
Holiday Inns (The Netherlands) Inc.	Tennessee, USA
Holiday Inns (The Netherlands) Inc. — Dutch Branch	The Netherlands
Holiday Inns (UK), Inc.	Tennessee, USA
Holiday Inns (UK), Inc. — Malta Branch	Malta
Holiday Inns (UK), Inc. — UK Branch	England
Holiday Inns (Urumqi) Ltd.	Hong Kong
Holiday Inns (Xiamen) Ltd.	Hong Kong
Holiday Inns Australia Pty Ltd.	Australia
Holiday Inns Crowne Plaza (Beijing), Inc.	Tennessee, USA
Holiday Inns Crowne Plaza (Hong Kong), Inc.	Tennessee, USA
Holiday Inns de Espana S.A.	Spain
Holiday Inns Holdings (Australia) Pty Ltd.	Australia
Holiday Inns Inc.	Delaware, USA
Holiday Inns Investment (Nepal) Ltd.	Hong Kong
Holiday Inns Mexico Holdings, Inc.	Kentucky, USA
Holiday Inns of America (UK) Ltd.	England
Holiday Inns of Belgium NV	Belgium
Holiday Inns of Belgium NV — Swedish Branch	Sweden
Holiday Pacific Equity Corporation	Delaware, USA
Holiday Pacific LLC	Delaware, USA
Holiday Pacific Partners, LP	Delaware, USA
Hospitality Network Corporation	Japan
Hotel del Lago C.A.	Venezuela
Hotel Forum Ltd.	England
Hotel Inter-Continental London Ltd.	England
Hoteles Estelar de Colombia S.A.	Colombia
Hoteles Holiday Inn S.A. de C.V.	Mexico
Hoteles Y Centros Especializados S.A.	Mexico
Hoteles Y Turismo HIH Srl	Venezuela
IC International Hotels Limited Liability Company	Russia
IC US (Holdings) LP	Delaware, USA
IHC (Thailand) Ltd.	Thailand
IHC Buckhead LLC	Georgia, USA
IHC Edinburgh (Holdings) Ltd.	England
IHC Franchising LLC	Delaware, USA
IHC Hopkins (Holdings) Corp.	Delaware, USA
IHC Hotel Ltd.	England
IHC Inter-Continental (Holdings) Corp.	Delaware, USA
IHC London (Holdings) Ltd.	England
IHC May Fair (Holdings) Ltd.	England
IHC May Fair Hotel Ltd.	England
IHC M-H (Holdings) Corp.	Delaware, USA
IHC Overseas (U.K.) Ltd.	England
IHC UK (Holdings) Ltd	England
IHC United States (Holdings) Corp.	New York, USA
IHC Willard (Holdings) Corp.	Delaware, USA
IHG (Australasia) Limited	Singapore
IHG ANA Hotels Group Japan LLC	Japan
IHG ANA Hotels Holdings Co.	Japan
IHG Bangkok Limited	BVI
IHG Cyprus Limited	Cyprus
IHG ECS (Barbados) SRL	Barbados
IHG Franchising Brasil Ltda	Brazil
IHG Franchising DR Corporation	Delaware, USA
IHG Franchising DR Corporation — Dominican Republic Branch	Delaware, USA
IHG Franchising LLC	Delaware, USA
IHG Holdings (Australia) Pty Limited	Australia
IHG Hotels (New Zealand) Limited	New Zealand
IHG Hotels Management (Australia) Pty Limited	Australia
IHG IT Services (India) Private Limited	India
IHG Japan (Management) LLC	Japan
IHG Management (Maryland) LLC	Delaware, USA
IHG Management (Netherlands) B.V.	The Netherlands
IHG Nominees (Australia) Pty Ltd	Australia
IHG Operations (NZ) Limited	New Zealand
IHG Queenstown Limited	New Zealand
IHG Systems Pty Ltd	Australia
IHG Szalloda Budapest Szolgaltato Kft	Hungary
IHG(Victoria Park) Pty Ltd	Australia
Illinois Hotels Corp.	Delaware, USA
INNvest Realty Corp.	Tennessee, USA
Insurance Resource Services, Inc.	Delaware, USA
InterContinental (Branston) 1 Ltd	England
Inter-Continental (Holdings)Canada Inc.	Canada
Inter-Continental Central Park South LLC	New York, USA
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
InterContinental Gestion Hotelera S.L.	Spain
InterContinental Hong Kong Ltd.	Hong Kong
Intercontinental Hospitality Corporation	Delaware, USA
Inter-Continental Hotel Investment (S) Pte. Ltd.	Singapore
InterContinental Hoteleira Limitada	Brazil
Inter-Continental Hotels (Montreal) Operating Corp.	Quebec, Canada
Inter-Continental Hotels (Montreal) Owning Corp.	Quebec, Canada
Inter-Continental Hotels (Overseas) Ltd.	England
InterContinental Hotels (Puerto Rico) Inc	Puerto Rico
Inter-Continental Hotels (Singapore) Pte. Ltd.	Singapore
Inter-Continental Hotels Corporation	Delaware, USA
Inter-Continental Hotels Corporation — Cairo Branch	Egypt
Inter-Continental Hotels Corporation — Jordan Branch	Jordan
Inter-Continental Hotels Corporation — Malta Branch	Malta
Inter-Continental Hotels Corporation — Philippines Branch	Philippines
Inter-Continental Hotels Corporation — Poland Branch	Poland
Inter-Continental Hotels Corporation — Portugal Branch	Portugal
Inter-Continental Hotels Corporation — Tel Aviv Branch	Israel
Inter-Continental Hotels Corporation de Venezuela C.A.	Venezuela

InterContinental Hotels Group
List of Subsidiaries at December 31, 2006

Name of Company	Country of Incorporation
Intercontinental Hotels Corporation Limited	Bermuda
Intercontinental Hotels Corporation Limited — Egypt Branch	Egypt
Intercontinental Hotels Corporation Limited — Saudi Branch	Saudi
Inter-Continental Hotels Corporation Pty Ltd.	Australia
InterContinental Hotels Group (Asia Pacific) Pte Ltd	Singapore
InterContinental Hotels Group (Australia) Pty Limited	Australia
InterContinental Hotels Group (Canada) Inc.	Canada
InterContinental Hotels Group (Espana) SA	Spain
InterContinental Hotels Group (Greater China) Limited	Hong Kong
InterContinental Hotels Group (Japan) Inc.	Tennessee
InterContinental Hotels Group (Japan) Inc. — Japan Branch	Japan
InterContinental Hotels Group (Management Services) Ltd	England
InterContinental Hotels Group (New Zealand) Limited	New Zealand
InterContinental Hotels Group (Shanghai) Ltd	China
InterContinental Hotels Group Customer Services Ltd.	England
InterContinental Hotels Group do Brasil Ltda	Brazil
InterContinental Hotels Group Finance (CI) Ltd.	Jersey
InterContinental Hotels Group Healthcare Trustee Ltd	England
InterContinental Hotels Group Operating Corp.	USA
InterContinental Hotels Group PLC	England
InterContinental Hotels Group Resources Inc	Delaware, USA
InterContinental Hotels Group Resources Inc — Guam Branch	Guam
InterContinental Hotels Group Services Company	England
InterContinental Hotels Group Services Company — Spanish Branch	Spain
InterContinental Hotels Italia, SrL	Italy
InterContinental Hotels Limited	England
Intercontinental Hotels Management GmbH	Germany
InterContinental Hotels Nevada Corporation	Nevada
Inter-Continental Hotels of San Francisco Inc.	Delaware, USA
Inter-Continental Hotels Saudi Arabia Ltd.	Saudi Arabia
Inter-Continental Management (Australia) Pty Limited	Australia
Inter-Continental Netherlands CV	The Netherlands
InterContinental Overseas Holding Corporation	Delaware, USA
InterContinental Overseas Holding Corporation — Bermuda Branch	Bermuda
InterContinental Overseas Holding Corporation — Egyptian Branch	Egypt
InterContinental Overseas Holding Corporation — Jamaican Branch	Jamaica
InterContinental Overseas Holding Corporation — Slovakia Branch	Slovakia
Inthotel SA	Spain
Kenya Hotel Properties Ltd.	Kenya
Kumul Hotels Ltd.	Papua New Guinea
Louisiana Acquisitions Corp.	Delaware, USA
Maya Baiduri Sdn Bhd	Malaysia
Mifala Holdings (Vanuatu) Ltd.	Vanuatu
Netherlands International Hotels BV	The Netherlands
Nuevas Fronteras S.A.	Argentina
Openworld Ltd.	England
Orbis Travel Bureau	New York, USA
OSPR Pty Ltd.	Australia
Panacon	Louisiana, USA
Parkroyal Motor Hotels Pty Ltd.	Australia
Penrod Club Texas (Non Profit)	Texas, USA
Perseus Holding Corp.	Delaware, USA
Pershing Associates	District of Columbia
Pollstrong Limited	England
Powell Pine, Inc.	Delaware, USA
Premier Hotels (Christchurch) Ltd.	New Zealand
President Hotel & Tower Co Ltd.	Singapore
Priscilla Holiday of Texas, Inc.	Delaware, USA
PT Jakarta International Hotels & Development	Indonesia
PT SC Hotels & Resorts Indonesia	Indonesia
RDP Royal Palm Hotel Ltd.	Delaware, USA
Resort Services International (Cayo Largo) LP SE	Delaware, USA
SC (Andina) Inc.	Tennessee, USA
SC (Andina) Inc. (Chile Branch)	Chile
SC Cellars Ltd.	England
SC ESOP Trustee (Jersey) Ltd.	Jersey
SC Finance Investments Co.	England
SC Finance Investments Two Co.	England
SC Hotels & Resorts (India) Private Ltd.	India
SC Hotels & Resorts (Jamaica) Ltd	Jamaica
SC Hotels International Services, Inc.	Delaware, USA
SC Hotels Management Services, Inc.	Delaware, USA
SC Investment Minorities Ltd.	England
SC Investments Number 2 Ltd.	England
SC Investments Number 3 Ltd.	England
SC Leisure Group Ltd.	England
SC Luxembourg Investments SARL	Luxembourg
SC NAS 2 Ltd.	England
SC NAS 3 Ltd.	England
SC QUEST Ltd	England
SC Reservations (Philippines) Inc	Tennessee, USA
SC Reservations (Philippines) Inc — Philippines Branch	Phillippines
SC Southwick (UK) Ltd.	England
SC Trademarks Ltd.	England
SC Wine Bars Ltd.	England
SCH (Barbados) Ltd.	Barbados
SCH (China) Investments Ltd.	Hong Kong
SCH Insurance Company	Vermont, USA
SCH Minority Holdings LLC	Delaware, USA
SCHIL (Jamaica) Ltd	Jamaica
SCHIL Investment (Barbados) Ltd	Barbados
SCIH Branston 1	England
SCIH Branston 2	England
SCIH Branston 3	England
SFH Associates L.P.	California, USA
Sienna Hotel Sp.Z.o.o.	Poland
Six Continents (NAS) PLC	England
Six Continents Corporate Services Co	England
Six Continents Holdings Ltd.	England
Six Continents Hotels de Colombia SA	Colombia
Six Continents Hotels International Ltd.	England
Six Continents Hotels, Inc.	Delaware
Six Continents International Holdings BV	The Netherlands
Six Continents Investments Ltd.	England
Six Continents Leisure Ltd.	England

InterContinental Hotels Group
List of Subsidiaries at December 31, 2006

Name of Company	Country of Incorporation
Six Continents Limited (formerly PLC)	England
Six Continents Overseas Holdings Ltd.	England
Six Continents Profit Share Scheme Trustee Ltd.	England
Six Continents Restaurants Ltd.	England
SixCo Financing 1	England
SixCo Financing 2	England
SixCo North America, Inc.	Delaware
Soaltee Hotel Ltd.	Nepal
Societe des Grands Hotels du Liban	Lebanon
Societe des Hotels InterContinental France SNC	France
Societe des Hotels Reunis SAS	France
Societe Immobiliere Kinoise SZARL	Rep of Congo, Zaire
Societe Nouvelle du Grand Hotel SA	France
Southern Pacific Hotel Corp. (BVI) Ltd.	British Virgin Islands
Southern Pacific Hotel Corporation Sdn Bhd	Malaysia
Southern Pacific Hotels (Vanuatu) Ltd	Vanuatu
Southern Pacific Hotels Ltd.	Australia
Southern Pacific Hotels Properties Limited	British Virgin Islands
Southwick Ltd.	Cayman
SPHC (Asia) Limited	Hong Kong
SPHC (IP) Pty Ltd.	Australia
SPHC Group Pty Ltd.	Australia
SPHC Management Ltd.	Papua New Guinea
SSABCO Ltd. (liquidation candidate)	England
Tahiti Beachcomber SA	Tahiti
TAK How Investment Limited	Hong Kong
TH Management Ltd.	New Zealand
The GL Hotels Limited	India
The Hotel Clearing Corp.	Delaware, USA
THISCO	Delaware, USA
Tian An Hotels International Limited	Hong Kong
TLCI Limited	New Zealand/Cook Islands
Top of the Cross Pty Ltd.	Australia
TotRusUs (Russian Branch of HH Hotels (EMEA) BV	Russia
Travel Holdings (Australia) Pty Ltd.	Australia
Travlex Systems Pty Ltd.	Australia
Trifaith Investments Ltd.	British Virgin Islands
Union Leasing Company Ltd.	England
Universal de Hoteles SA	Colombia
Victoria Hotels (Christchurch) Ltd.	New Zealand
White Shield Insurance Company Ltd.	Gibraltar
Willard Associates	District of Columbia
World Trade Center Montreal Hotel Corp.	Quebec, Ontario
Xenia Hotel Abwicklungs GmbH (in liquidation)	Austria
Yokohama Grand Intercontinental Hotel Co. Ltd.	Japan

EX-12.A

Exhibit 12(a)

302 CERTIFICATION

I, Andrew Cosslett, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted principles;
(c)	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
(d)	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: March 30, 2007	By:	/s/ Andrew Cosslett
		Name:	Andrew Cosslett
		Title:	Director and Chief Executive Officer

EX-12.B

Exhibit 12(b)

302 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted principles;
(c)	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
(d)	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: March 30, 2007	By:	/s/ Richard Solomons
		Name:	Richard Solomons
		Title:	Finance Director

EX-13.A

Exhibit 13(a)

906 CERTIFICATION

The certification set forth below is being submitted in connection with the Annual Report on Form 20-F for the year ended December 31, 2006 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Andrew Cosslett, the Chief Executive Officer and Richard Solomons, the Finance Director of InterContinental Hotels Group PLC, each certifies that, to the best of his knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of InterContinental Hotels Group PLC.

Date: March 30, 2007	By:	/s/ Andrew Cosslett
		Name:	Andrew Cosslett
		Title:	Chief Executive Officer

By:	/s/ Richard Solomons
	Name:	Richard Solomons
	Title:	Finance Director