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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, 2005                                                           
|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)




|                                 |  |                                          
|-------------------------------- |  | -----------------------------------------
|Title of each class              |  | Name of each exchange on which registered
|                                 |  |                                          
|American Depositary Shares       |  | New York Stock Exchange                  
|Ordinary Shares of 10 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 10 pence
each                              432,936,345


þ o


o þ


þ o


12b-2


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



o þ


12b-2


o þ










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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                                                 |   |      | 44 | 
|                                                         |  | Trademarks                                                  |   |      | 45 | 
|                                                         |  | Organizational Structure                                    |   |      | 45 | 
|                                                         |  | Property, Plants and Equipment                              |   |      | 45 | 
|                                                         |  | Environment                                                 |   |      | 46 | 
|Item 5.                                                  |  | Operating and Financial Review and
    Prospects            |   |      | 46 | 
|                                                         |  | Introduction                                                |   |      | 46 | 
|                                                         |  | Critical Accounting Policies Under IFRS and
    US GAAP     |   |      | 47 | 
|                                                         |  | Operating Results                                           |   |      | 49 | 
|                                                         |  | Liquidity and Capital Resources                             |   |      | 57 | 
|Item 6.                                                  |  | Directors, Senior Management and
    Employees              |   |      | 60 | 
|                                                         |  | Directors and Senior Management                             |   |      | 60 | 
|                                                         |  | Compensation                                                |   |      | 63 | 
|                                                         |  | Board Practices                                             |   |      | 64 | 
|                                                         |  | Employees                                                   |   |      | 67 | 
|                                                         |  | Share Ownership                                             |   |      | 68 | 
|Item 7.                                                  |  | Major Shareholders and Related Party
    Transactions       |   |      | 69 | 
|                                                         |  | Major Shareholders                                          |   |      | 69 | 
|                                                         |  | Related Party Transactions                                  |   |      | 69 | 
|Item 8.                                                  |  | Financial Information                                       |   |      | 69 | 
|                                                         |  | Consolidated Statements and Other Financial
    Information |   |      | 69 | 
|                                                         |  | Significant Changes                                         |   |      | 70 | 
|Item 9.                                                  |  | The Offer and Listing                                       |   |      | 70 | 
|                                                         |  | Plan of Distribution                                        |   |      | 71 | 
|                                                         |  | Selling Shareholders                                        |   |      | 71 | 
|                                                         |  | Dilution                                                    |   |      | 71 | 
|                                                         |  | Expenses of the Issue                                       |   |      | 71 | 

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|                                                     |  |                                                                                  |  |      |    | 
|---------------------------------------------------- |  | -------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                     |  |                                                                                  |  | Page |   
|                                                     |  |                                                                                  |  |      |   
|Item 10.                                             |  | Additional Information                                                           |  |      | 71 | 
|                                                     |  | Memorandum and Articles of Association                                           |  |      | 71 | 
|                                                     |  | Material Contracts                                                               |  |      | 74 | 
|                                                     |  | Exchange Controls                                                                |  |      | 76 | 
|                                                     |  | Taxation                                                                         |  |      | 76 | 
|                                                     |  | Documents on Display                                                             |  |      | 80 | 
|Item 11.                                             |  | Quantitative and Qualitative Disclosures
    About Market Risk                   |  |      | 80 | 
|Item 12.                                             |  | Description of Securities Other Than Equity
    Securities                       |  |      | 82 | 
|                                                    
|PART II                                             
|Item 13.                                             |  | Defaults, Dividend Arrearages and
    Delinquencies                              |  |      | 82 | 
|Item 14.                                             |  | Material Modifications to the Rights of
    Security Holders and Use of Proceeds |  |      | 82 | 
|Item 15.                                             |  | Controls and Procedures                                                          |  |      | 82 | 
|Item 16.                                             |  | [Reserved]                                                                       |  |      | 82 | 
|Item 16A.                                            |  | Audit Committee Financial Expert                                                 |  |      | 82 | 
|Item 16B.                                            |  | Code of Ethics                                                                   |  |      | 82 | 
|Item 16C.                                            |  | Principal Accountant Fees and Services                                           |  |      | 83 | 
|Item 16D.                                            |  | Exemptions from the Listing Standards for
    Audit Committees                   |  |      | 83 | 
|Item 16E.                                            |  | Purchases of Equity Securities by the
    Issuer and Affiliated Purchasers       |  |      | 83 | 
|                                                    
|PART III                                            
|Item 17.                                             |  | Financial Statements                                                             |  |      | 84 | 
|Item 18.                                             |  | Financial Statements                                                             |  |      | 85 | 
|Item 19.                                             |  | Exhibits                                                                         |  |      | 85 | 
|EX-4.B.V: NEW ZEALAND SHARE SALE DEED               
|EX-4.B.VI: AUSTRALIA SHARE AND UNIT SALE DEED       
|EX-4.B.VII: BRITVIC UNDERWRITING AGREEMENT          
|EX-4.B.VIII: SALE AND PURCHASE AGREEMENT            
|EX-4.C.II: RICHARD HARTMAN'S LETTER OF APPOINTMENT  
|EX-4.C.IV: STEVAN PORTER'S LETTER OF APPOINTMENT    
|EX-4.C.VI: RICHARD SOLOMONS' LETTER OF APPOINTMENT  
|EX-4.C.VIII: ANDREW COSSLETT'S LETTER OF APPOINTMENT
|EX-8: LIST OF SUBSIDIARIES                          
|EX-12.A: CERTIFICATION                              
|EX-12.B: CERTIFICATION                              
|EX-13.A: CERTIFICATION                              



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INTRODUCTION






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 and following
    June 27, 2005 to the ordinary shares of 10 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
    Customs & Excise on certain goods and services.                                                                                                                                                                                                                                                                                                                        



 20-F


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


20-F 20-F 20-F


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PART I







|        |                                                          
|------- | ---------------------------------------------------------
|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISORS








|        |                                        
|------- | ---------------------------------------
|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE








|        |                
|------- | ---------------
|ITEM 3. | KEY INFORMATION




SELECTED CONSOLIDATED FINANCIAL INFORMATION


Summary




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| |                                          
| | -----------------------------------------
| | Consolidated Profit and Loss Account Data

|                                                                       |                              |                                                 |       |       |         |  |       |         |   |  |       |       |  
|---------------------------------------------------------------------- | ---------------------------- | ----------------------------------------------- | ----- | ----- | ------- |  | ----- | ------- | - |  | ----- | ----- | -
|                                                                       |                              | Years ended December 31,                        |      
|                                                                       |                              |                                                 |      
|                                                                       |                              | 2005(1)(2)                                      |       |       | 2005(1) |  |       | 2004(1) |  
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|                                                                       |                              | $                                               |       |       | £       |  |       | £       |  
|                                                                       |                              | (in millions, except per share and ADS amounts) |      
|Amounts in accordance with IFRS                                        |                              |                                                 |       |       |         |  |       |         |   |  |       |      
|Revenue:                                                               |                              |                                                 |       |       |         |  |       |         |   |  |       |      
|                                                                       | Continuing operations        |                                                 |       | 1,555 |         |  |       | 852     |   |  |       | 731   |  
|                                                                       | Discontinued operations      |                                                 |       | 1,931 |         |  |       | 1,058   |   |  |       | 1,473 |  
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|                                                                       |                              |                                                 | 3,486 |       |         |  | 1,910 |         |   |  | 2,204 |      
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Total operating profit before other operating income and
    expenses: |                              |                                                 |       |       |         |  |       |         |   |  |       |      
|                                                                       | Continuing operations        |                                                 |       | 347   |         |  |       | 190     |   |  |       | 134   |  
|                                                                       | Discontinued operations      |                                                 |       | 272   |         |  |       | 149     |   |  |       | 212   |  
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|                                                                       |                              |                                                 | 619   |       |         |  | 339   |         |   |  | 346   |      
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Other operating income and expenses:                                   |                              |                                                 |       |       |         |  |       |         |   |  |       |      
|                                                                       | Continuing operations        |                                                 |       | (40   | )       |  |       | (22     | ) |  |       | (49   | )
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|                                                                       |                              |                                                 | (40   | )     |         |  | (22   | )       |   |  | (49   | )    
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Total operating profit:                                                |                              |                                                 |       |       |         |  |       |         |   |  |       |      
|                                                                       | Continuing operations        |                                                 |       | 307   |         |  |       | 168     |   |  |       | 85    |  
|                                                                       | Discontinued operations      |                                                 |       | 272   |         |  |       | 149     |   |  |       | 212   |  
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|                                                                       |                              |                                                 | 579   |       |         |  | 317   |         |   |  | 297   |      
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Financial income                                                       |                              |                                                 | 55    |       |         |  | 30    |         |   |  | 70    |      
|Financial expenses                                                     |                              |                                                 | (115  | )     |         |  | (63   | )       |   |  | (103  | )    
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Profit before tax                                                      |                              |                                                 | 519   |       |         |  | 284   |         |   |  | 264   |      
|Tax                                                                    |                              |                                                 | (146  | )     |         |  | (80   | )       |   |  | 127   |      
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Profit after tax                                                       |                              |                                                 | 373   |       |         |  | 204   |         |   |  | 391   |      
|Gain on disposal of assets, net of tax                                 |                              |                                                 | 568   |       |         |  | 311   |         |   |  | 19    |      
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Profit available for shareholders                                      |                              |                                                 | 941   |       |         |  | 515   |         |   |  | 410   |      
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Attributable to:                                                       |                              |                                                 |       |       |         |  |       |         |   |  |       |      
|                                                                       | Equity holders of the parent |                                                 |       | 906   |         |  |       | 496     |   |  |       | 383   |  
|                                                                       | Minority equity interest     |                                                 |       | 35    |         |  |       | 19      |   |  |       | 27    |  
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Profit for the year                                                    |                              |                                                 | 941   |       |         |  | 515   |         |   |  | 410   |      
|                                                                       |                              |                                                 |       |       |         |  |       |         |  
|Earnings per ordinary share:                                           |                              |                                                 |       |       |         |  |       |         |   |  |       |      
|                                                                       | Basic                        |                                                 |       | 173.9 | ¢       |  |       | 95.2    | p |  |       | 53.9  | p
|                                                                       | Diluted                      |                                                 |       | 170.0 | ¢       |  |       | 93.1    | p |  |       | 53.3  | p
|                                                                       | Adjusted(4)                  |                                                 |       | 69.9  | ¢       |  |       | 38.2    | p |  |       | 33.9  | p
|                                                                       |                              |                                                 |       |       |         |  |       |         |  

Footnotes on page 10.


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|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |      |     |  |      |      |     |  |      |      |     | 
|-------------------------------------------------------------------------------------------- | ----------------------------- | ----------------------------------------------- | ----- | ----- | ------------ |  | ----- | ------------ | --- | ----- | ------------ | ---- | ---------- | ------------- | ----- | ---- | ------- |  | --- | ------- | -- |  | ------- | ---- | --- |  | ---- | ---- | --- |  | ---- | ---- | --- | 
|                                                                                             |                               |                                                 |       |       |              |  |       | Three months |     |       | 12 months    |      |            | 15 months     |       |      |        
|                                                                                             |                               |                                                 |       | ended |              |  | ended |              |     | ended |              |      | Year ended |              
|                                                                                             |                               | Year ended December 31,                         |       |       | December 31, |  |       | December 31, |     |       | December 31, |      |            | September 30, |      
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |      
|                                                                                             |                               | 2005(1)(2)                                      |       |       | 2005(1)      |  |       | 2004(1)      |     |       | 2002         |      |            | 2003          |       |      | 2003(1) |  |     | 2002(1) |    |  | 2001(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         |                                                 |       | 189   |              |  |       | 104          |     |       |              | 257  |            |               |       | 14   |         |  |     | (63     | )  |  |         | (49  | )   |  |      | 102  |     |  |      | 130  |    
|                                                                                             | Discontinued operations:      |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |      |     |  |      |      |     |  |      |      |    
|                                                                                             |                               | Income from discontinued operations             |       |       | 75           |  |       |              | 41  |       |              |      | 62         |               |       |      | 46      |  |     |         | 92 |  |         |      | 138 |  |      |      | 226 |  |      |      | 521 | 
|                                                                                             |                               | Surplus on disposal                             |       |       | 384          |  |       |              | 210 |       |              |      | 21         |               |       |      |        |  |     |         |   |  |         |      |    |  |      |      | 171 |  |      |      | 25  | 
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |     
|                                                                                             | Total discontinued operations |                                                 |       | 459   |              |  |       | 251          |     |       |              | 83   |            |               |       | 46   |         |  |     | 92      |    |  |         | 138  |     |  |      | 397  |     |  |      | 546  |    
|Cumulative effect on prior years of adoption of FAS 142                                      |                               |                                                 |      |       |              |  |      |              |     |       |             |      |            |               | (712  | )    |         |  |    |         |    |  | (712    | )    |     |  |     |      |     |  |     |     
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |     
|                                                                                             | Net income/(loss)             |                                                 |       | 648   |              |  |       | 355          |     |       |              | 340  |            |               |       | (652 | )       |  |     | 29      |    |  |         | (623 | )   |  |      | 499  |     |  |      | 676  |    
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |     
|Per ordinary share and American Depositary
    Share(5)                                      |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |      |     |  |      |      |     |  |      |     
|Basic                                                                                        |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |      |     |  |      |      |     |  |      |     
|Income/(loss) before cumulative effect on prior years of change
    in accounting principle: |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |      |     |  |      |      |     |  |      |     
|                                                                                             | Continuing operations         |                                                 |       | 36.4  | ¢            |  |       | 20.0         | p   |       |              | 36.2 | p          |               |       | 1.9  | p       |  |     | (8.6    | )p |  |         | (6.7 | )p  |  |      | 14.0 | p   |  |      | 17.8 | p  
|                                                                                             | Discontinued operations       |                                                 |       | 88.0  | ¢            |  |       | 48.2         | p   |       |              | 11.7 | p          |               |       | 6.3  | p       |  |     | 12.6    | p  |  |         | 18.9 | p   |  |      | 54.3 | p   |  |      | 74.6 | p  
|Cumulative effect on prior years of adoption of FAS 142                                      |                               |                                                 |      |       |              |  |      |              |     |       |             |      |            |               | (97.1 | )p   |         |  |    |         |    |  | (97.1   | )p   |     |  |     |      |     |  |     |     
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |     
|Net income/(loss)                                                                            |                               |                                                 | 124.4 | ¢     |              |  | 68.2  | p            |     |       | 47.9         | p    |            |               | (88.9 | )p   |         |  | 4.0 | p       |    |  | (84.9   | )p   |     |  | 68.3 | p    |     |  | 92.4 | p   
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |     
|Diluted                                                                                      |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |      |     |  |      |      |     |  |      |     
|Income/(loss) before cumulative effect on prior years of change
    in accounting principle: |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |      |     |  |      |      |     |  |      |     
|                                                                                             | Continuing operations         |                                                 |       | 35.6  | ¢            |  |       | 19.5         | p   |       |              | 35.7 | p          |               |       | 1.9  | p       |  |     | (8.6    | )p |  |         | (6.7 | )p  |  |      | 13.9 | p   |  |      | 17.7 | p  
|                                                                                             | Discontinued operations       |                                                 |       | 86.0  | ¢            |  |       | 47.1         | p   |       |              | 11.5 | p          |               |       | 6.3  | p       |  |     | 12.6    | p  |  |         | 18.9 | p   |  |      | 54.1 | p   |  |      | 74.2 | p  
|Cumulative effect on prior years of adoption of FAS 142                                      |                               |                                                 |      |       |              |  |      |              |     |       |             |      |            |               | (97.1 | )p   |         |  |    |         |    |  | (97.1   | )p   |     |  |     |      |     |  |     |     
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |     
|Net income/(loss)                                                                            |                               |                                                 | 121.6 | ¢     |              |  | 66.6  | p            |     |       | 47.2         | p    |            |               | (88.9 | )p   |         |  | 4.0 | p       |    |  | (84.9   | )p   |     |  | 68.0 | p    |     |  | 91.9 | p   
|                                                                                             |                               |                                                 |       |       |              |  |       |              |     |       |              |      |            |               |       |      |         |  |     |         |    |  |         |     

Footnotes on page 10.


9



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| |                                
| | -------------------------------
| | Consolidated Balance Sheet Data

|                                               |  |               |       |  |      |  |       |      |  |  |       | 
|---------------------------------------------- |  | ------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                               |  | December 31,  |      
|                                               |  |               |      
|                                               |  | 2005(3)       |       |  | 2005 |  |       | 2004 | 
|                                               |  |               |       |  |      |  |       |      | 
|                                               |  | $             |       |  | £    |  |       | £    | 
|                                               |  | (in millions) |      
|Amounts in accordance with IFRS                |  |               |       |  |      |  |       |      |  |  |       | 
|Goodwill and intangible assets                 |  |               | 411   |  |      |  | 238   |      |  |  | 206   | 
|Property, plant and equipment                  |  |               | 2,340 |  |      |  | 1,356 |      |  |  | 1,926 | 
|Investments and other financial assets         |  |               | 267   |  |      |  | 155   |      |  |  | 122   | 
|Current assets                                 |  |               | 1,220 |  |      |  | 707   |      |  |  | 598   | 
|Non-current assets classified as held for sale |  |               | 481   |  |      |  | 279   |      |  |  | 1,826 | 
|Total assets                                   |  |               | 4,719 |  |      |  | 2,735 |      |  |  | 4,678 | 
|                                               |  |               |       |  |      |  |       |      | 
|Current
    liabilities(6)                     |  |               | 1,370 |  |      |  | 794   |      |  |  | 926   | 
|Long-term
    debt(6)                          |  |               | 707   |  |      |  | 410   |      |  |  | 1,156 | 
|Share capital                                  |  |               | 85    |  |      |  | 49    |      |  |  | 723   | 
|IHG shareholders equity                       |  |               | 1,870 |  |      |  | 1,084 |      |  |  | 1,821 | 
|                                               |  |               |       |  |      |  |       |      | 

|                                               |  |               |       |  |      |  |       |      |  |  |       |  |  |      |       |  |      |  |        |  |  |  |        | 
|---------------------------------------------- |  | ------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  | ---- |  | ------ |  |  |  | ------ | 
|                                               |  | December 31,  |      
|                                               |  |               |      
|                                               |  | 2005(3)       |       |  | 2005 |  |       | 2004 |  |  | 2003  |  |  | 2002 |       |  | 2001 | 
|                                               |  |               |       |  |      |  |       |      |  |  |       |  |  |      |       |  |      | 
|                                               |  | $             |       |  | £    |  |       | £    |  |  | £     |  |  | £    |       |  | £    | 
|                                               |  | (in millions) |      
|Amounts in accordance with US GAAP             |  |               |       |  |      |  |       |      |  |  |       |  |  |      |       |  |      |  |        |  |  |  |        | 
|Goodwill and intangible assets                 |  |               | 2,407 |  |      |  | 1,395 |      |  |  | 1,384 |  |  |      | 1,587 |  |      |  | 2,702  |  |  |  | 2,902  | 
|Property, plant and equipment                  |  |               | 2,905 |  |      |  | 1,684 |      |  |  | 3,454 |  |  |      | 3,916 |  |      |  | 6,552  |  |  |  | 6,343  | 
|Investments and other financial assets         |  |               | 243   |  |      |  | 141   |      |  |  | 115   |  |  |      | 174   |  |      |  | 189    |  |  |  | 205    | 
|Current assets                                 |  |               | 1,284 |  |      |  | 744   |      |  |  | 699   |  |  |      | 978   |  |      |  | 983    |  |  |  | 1,209  | 
|Non-current assets classified as held for sale |  |               | 445   |  |      |  | 258   |      |  |  | 300   |  |  |      |      |  |      |  |       |  |  |  |       | 
|Total assets                                   |  |               | 7,284 |  |      |  | 4,222 |      |  |  | 5,952 |  |  |      | 6,655 |  |      |  | 10,426 |  |  |  | 10,659 | 
|                                               |  |               |       |  |      |  |       |      |  |  |       |  |  |      |       |  |      | 
|Current
    liabilities(6)                     |  |               | 2,112 |  |      |  | 1,224 |      |  |  | 2,021 |  |  |      | 1,496 |  |      |  | 2,109  |  |  |  | 2,033  | 
|Long-term
    debt(6)                          |  |               | 62    |  |      |  | 36    |      |  |  | 52    |  |  |      | 523   |  |      |  | 622    |  |  |  | 779    | 
|Share capital                                  |  |               | 74    |  |      |  | 43    |      |  |  | 697   |  |  |      | 739   |  |      |  | 243    |  |  |  | 242    | 
|IHG shareholders equity                       |  |               | 3,477 |  |      |  | 2,015 |      |  |  | 2,796 |  |  |      | 3,380 |  |      |  | 6,221  |  |  |  | 6,381  | 
|                                               |  |               |       |  |      |  |       |      |  |  |       |  |  |      |       |  |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The results for 2002 and 2001 include 52 weeks (Hotels
    12 months). Fiscal 2003 reflects 15 months trading for
    Hotels, Soft Drinks 64 weeks ended December 20, 2003
    and Mitchells and Butlers plc which reflects 28 weeks
    ended April 12, 2003. For the year 2004, Hotels include
    12 months and Soft Drinks 53 weeks ended
    December 25, 2004. For the year 2005, Hotels include
    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 = $1.83 solely for
    convenience.                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) | US dollar amounts have been translated at the Noon Buying
    Rate on December 31, 2005 of £1.00 = $1.73
    solely for convenience.                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | Adjusted earnings per share are disclosed in order to show
    performance undistorted by other operating income and expenses,
    abnormal interest and tax and gain on disposal of assets.                                                                                                                                                                                                                                                                                             
|   
|(5) | Each American Depositary Share represents one ordinary share.                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(6) | Long-term debt under IFRS includes amounts supported by
    long-term credit facilities, which are classified as current
    liabilities under US GAAP.                                                                                                                                                                                                                                                                                                                                  

Dividends




10



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Ordinary dividend


|                               |  |                          |       |  |           |  |       |       |  |  |         |  |  |       |       |  |       |  |       |     |  |  |       | 
|------------------------------ |  | ------------------------ | ----- |  | --------- |  | ----- | ----- |  |  | ------- |  |  | ----- | ----- |  | ----- |  | ----- | --- |  |  | ----- | 
|                               |  | Pence per ordinary share |       |  | $ per ADS | 
|                               |  |                          |       |  |           | 
|                               |  | Interim                  |       |  | Final     |  |       | Total |  |  | Interim |  |  | Final |       |  | Total | 
|                               |  |                          |       |  |           |  |       |       |  |  |         |  |  |       |       |  |       | 
|Year ended September 30,       |  |                          |       |  |           |  |       |       |  |  |         |  |  |       |       |  |       |  |       |     |  |  |       | 
|2001(1)                        |  |                          | 12.27 |  |           |  | 28.20 |       |  |  | 40.47   |  |  |       | 0.177 |  |       |  | 0.406 |     |  |  | 0.583 | 
|2002(1)                        |  |                          | 12.58 |  |           |  | 29.14 |       |  |  | 41.72   |  |  |       | 0.205 |  |       |  | 0.474 |     |  |  | 0.679 | 
|Period ended December 31, 2003 |  |                          |       |  |           |  |       |       |  |  |         |  |  |       |       |  |       |  |       |     |  |  |       | 
|Six
    Continents(1)          |  |                          | 7.65  |  |           |  |      |       |  |  | 7.65    |  |  |       | 0.119 |  |       |  |      |     |  |  | 0.119 | 
|IHG                            |  |                          | 4.05  |  |           |  | 9.45  |       |  |  | 13.50   |  |  |       | 0.068 |  |       |  | 0.174 |     |  |  | 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 | (2) |  |  | 0.268 | 






|    |                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Restated to reflect an equivalent number of shares in
    InterContinental Hotels Group PLC.                                                    
|   
|(2) | The 2005 final dividend payable to ADS holders will be paid in
    USD and was set using the closing USD/GBP spot rate of
    February 28, 2006.

Special Dividend


|              |  |                |       |  |           |  |      | 
|------------- |  | -------------- | ----- |  | --------- |  | ---- | 
|              |  | Pence per      |       |  |          
|              |  | ordinary share |       |  | $ per ADS | 
|              |  |                |       |  |           | 
|December 2004 |  |                | 72.00 |  |           |  | 1.39 | 



| |               
| | --------------
| | Exchange Rates



|                                    |  |               |      |  |               |  |      | 
|----------------------------------- |  | ------------- | ---- |  | ------------- |  | ---- | 
|                                    |  | Months       |      |  | Months       | 
|                                    |  | highest       |      |  | lowest        | 
|Month                               |  | exchange rate |      |  | exchange rate | 
|                                    |  |               |      |  |               | 
|September 2005                      |  |               | 1.84 |  |               |  | 1.76 | 
|October 2005                        |  |               | 1.79 |  |               |  | 1.75 | 
|November 2005                       |  |               | 1.78 |  |               |  | 1.71 | 
|December 2005                       |  |               | 1.77 |  |               |  | 1.72 | 
|January 2006                        |  |               | 1.79 |  |               |  | 1.74 | 
|February 2006                       |  |               | 1.78 |  |               |  | 1.73 | 
|March 2006 (through March 17, 2006) |  |               | 1.76 |  |               |  | 1.73 | 

11



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|                          |  |        |      |  |         |  |      |      |  |  |      |  |  |  |      | 
|------------------------- |  | ------ | ---- |  | ------- |  | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|                          |  | Period |      |  | Average |  |      |      |  | 
|                          |  | end    |      |  | rate(1) |  |      | High |  |  | Low  | 
|                          |  |        |      |  |         |  |      |      |  |  |      | 
|Year ended September 30,  |  |        |      |  |         |  |      |      |  |  |      |  |  |  |      | 
|2001                      |  |        | 1.47 |  |         |  | 1.44 |      |  |  | 1.50 |  |  |  | 1.37 | 
|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 | 






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



12



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RISK FACTORS


20-F






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











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





13



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







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





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

e-commerce




| |                                                          
| | ---------------------------------------------------------
| | The Group may face difficulties insuring its
    business



14



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





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





| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 Group may experience a lack of selected development
    opportunities





| |                                               
| | ----------------------------------------------
| | The Group is exposed to the risk of litigation





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



15



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| |                                                                  
| | -----------------------------------------------------------------
| | The Group is required to comply with data privacy
    regulations





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












|        |                           
|------- | --------------------------
|ITEM 4. | INFORMATION ON THE COMPANY




SUMMARY




| |               
| | --------------
| | Group Overview







16



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##### Table of Contents

























| |                                      
| | -------------------------------------
| | Group History and Recent Developments







| |                              
| | -----------------------------
| | Acquisitions and Dispositions









17



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




  










18



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##### Table of Contents





FIGURE 1


|                              |  |                  |     |             |          |  |     |                |  |  |     | 
|----------------------------- |  | ---------------- | --- | ----------- | -------- |  | --- | -------------- |  |  | --- | 
|Asset disposal program detail |  | Number of hotels |     |             | Proceeds |  |     | Net book value | 
|                              |  |                  |     |             |          |  |     |                | 
|                              |  |                  |     | (£ billion) |         
|Disposed to date              |  |                  | 168 |             |          |  | 2.5 |                |  |  | 2.5 | 
|On the market                 |  |                  | 7   |             |          |  |    |                |  |  | 0.3 | 
|Remaining hotels              |  |                  | 22  |             |          |  |    |                |  |  | 0.9 | 



| |                
| | ---------------
| | Return of Funds











FIGURE 2


|                                  |  |        |                     |  |              |             |       |                     |  |  |                      |  |  |  |     | 
|--------------------------------- |  | ------ | ------------------- |  | ------------ | ----------- | ----- | ------------------- |  |  | -------------------- |  |  |  | --- | 
|Return of funds program           |  | Timing |                     |  | Total return |             |       | Returned to date(i) |  |  | Still to be returned | 
|                                  |  |        |                     |  |              |             |       |                     |  |  |                      | 
|                                  |  |        |                     |  |              | (£ million) |       |                     | 
|£501 million special dividend     |  |        | Paid December 2004  |  |              |             | 501   |                     |  |  | 501                  |  |  |  | Nil | 
|First £250 million share buyback  |  |        | Completed in 2004   |  |              |             | 250   |                     |  |  | 250                  |  |  |  | Nil | 
|Second £250 million share buyback |  |        | Ongoing             |  |              |             | 250   |                     |  |  | 233                  |  |  |  | 17  | 
|£996 million capital return       |  |        | Paid 8 July 2005    |  |              |             | 996   |                     |  |  | 996                  |  |  |  | Nil | 
|Third £250 million share buyback  |  |        | Yet to commence     |  |              |             | 250   |                     |  |  |                     |  |  |  | 250 | 
|£500 million special dividend     |  |        | Second quarter 2006 |  |              |             | 500   |                     |  |  |                     |  |  |  | 500 | 
|                                  |  |        |                     |  |              |             |       |                     |  |  |                      | 
|Total                             |  |        |                     |  |              |             | 2,747 |                     |  |  | 1,980                |  |  |  | 767 | 





| |       
| | ------
| | Hotels



19



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##### Table of Contents







| |            
| | -----------
| | Soft Drinks






SEGMENTAL INFORMATION




| |                        
| | -----------------------
| | Geographic Segmentation



|                                                                      |                                    |              |       |     |              |  |       |       |  
|--------------------------------------------------------------------- | ---------------------------------- | ------------ | ----- | --- | ------------ |  | ----- | ----- | -
|                                                                      |                                    | Year ended   |       |     | Year ended   | 
|                                                                      |                                    | December 31, |       |     | December 31, | 
|                                                                      |                                    | 2005         |       |     | 2004         | 
|                                                                      |                                    |              |       |     |              | 
|                                                                      |                                    | (£ million)  |      
|Revenue(1)(4)                                                         |                                    |              |       |     |              |  |       |      
|                                                                      | Americas                           |              |       | 400 |              |  |       | 319   |  
|                                                                      | Europe, the Middle East and Africa |              |       | 326 |              |  |       | 301   |  
|                                                                      | Asia Pacific                       |              |       | 84  |              |  |       | 71    |  
|                                                                      | Central                            |              |       | 42  |              |  |       | 40    |  
|                                                                      |                                    |              |       |     |              | 
|Continuing operations                                                 |                                    |              | 852   |     |              |  | 731   |      
|                                                                      |                                    |              |       |     |              | 
|                                                                      | Americas                           |              |       | 45  |              |  |       | 176   |  
|                                                                      | Europe, the Middle East and Africa |              |       | 956 |              |  |       | 1,234 |  
|                                                                      | Asia Pacific                       |              |       | 57  |              |  |       | 63    |  
|                                                                      |                                    |              |       |     |              | 
|Discontinued
    operations(3)                                        |                                    |              | 1,058 |     |              |  | 1,473 |      
|                                                                      |                                    |              |       |     |              | 
|Total                                                                 |                                    |              | 1,910 |     |              |  | 2,204 |      
|                                                                      |                                    |              |       |     |              | 
|Operating profit before other operating income and
    expenses(1)(2) |                                    |              |       |     |              |  |       |      
|                                                                      | Americas                           |              |       | 187 |              |  |       | 150   |  
|                                                                      | Europe, the Middle East and Africa |              |       | 47  |              |  |       | 24    |  
|                                                                      | Asia Pacific                       |              |       | 21  |              |  |       | 17    |  
|                                                                      | Central                            |              |       | (65 | )            |  |       | (57   | )
|                                                                      |                                    |              |       |     |              | 
|Continuing operations                                                 |                                    |              | 190   |     |              |  | 134   |      
|                                                                      |                                    |              |       |     |              | 
|                                                                      | Americas                           |              |       | 11  |              |  |       | 23    |  
|                                                                      | Europe, the Middle East and Africa |              |       | 127 |              |  |       | 182   |  
|                                                                      | Asia Pacific                       |              |       | 11  |              |  |       | 7     |  
|                                                                      |                                    |              |       |     |              | 
|Discontinued
    operations(3)                                        |                                    |              | 149   |     |              |  | 212   |      
|                                                                      |                                    |              |       |     |              | 
|Total                                                                 |                                    |              | 339   |     |              |  | 346   |      
|                                                                      |                                    |              |       |     |              | 




Footnotes on page 21.


20



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|                                                            |                                    |              |       |       |              |  |       |       |  
|----------------------------------------------------------- | ---------------------------------- | ------------ | ----- | ----- | ------------ |  | ----- | ----- | -
|                                                            |                                    | Year ended   |       |       | Year ended   | 
|                                                            |                                    | December 31, |       |       | December 31, | 
|                                                            |                                    | 2005         |       |       | 2004         | 
|                                                            |                                    |              |       |       |              | 
|                                                            |                                    | (%)          |      
|Revenue                                                     |                                    |              |       |       |              |  |       |      
|                                                            | Americas                           |              |       | 20.9  |              |  |       | 14.5  |  
|                                                            | Europe, the Middle East and Africa |              |       | 17.1  |              |  |       | 13.7  |  
|                                                            | Asia Pacific                       |              |       | 4.4   |              |  |       | 3.2   |  
|                                                            | Central                            |              |       | 2.2   |              |  |       | 1.8   |  
|                                                            |                                    |              |       |       |              | 
|Continuing operations                                       |                                    |              | 44.6  |       |              |  | 33.2  |      
|                                                            |                                    |              |       |       |              | 
|                                                            | Americas                           |              |       | 2.4   |              |  |       | 8.0   |  
|                                                            | Europe, the Middle East and Africa |              |       | 50.0  |              |  |       | 56.0  |  
|                                                            | Asia Pacific                       |              |       | 3.0   |              |  |       | 2.8   |  
|                                                            |                                    |              |       |       |              | 
|Discontinued operations                                     |                                    |              | 55.4  |       |              |  | 66.8  |      
|                                                            |                                    |              |       |       |              | 
|Total                                                       |                                    |              | 100.0 |       |              |  | 100.0 |      
|                                                            |                                    |              |       |       |              | 
|Operating profit before other operating income and expenses |                                    |              |       |       |              |  |       |      
|                                                            | Americas                           |              |       | 55.2  |              |  |       | 43.4  |  
|                                                            | Europe, the Middle East and Africa |              |       | 13.9  |              |  |       | 6.9   |  
|                                                            | Asia Pacific                       |              |       | 6.2   |              |  |       | 4.9   |  
|                                                            | Central                            |              |       | (19.2 | )            |  |       | (16.5 | )
|                                                            |                                    |              |       |       |              | 
|Continuing operations                                       |                                    |              | 56.1  |       |              |  | 38.7  |      
|                                                            |                                    |              |       |       |              | 
|                                                            | Americas                           |              |       | 3.2   |              |  |       | 6.6   |  
|                                                            | Europe, the Middle East and Africa |              |       | 37.5  |              |  |       | 52.7  |  
|                                                            | Asia Pacific                       |              |       | 3.2   |              |  |       | 2.0   |  
|                                                            |                                    |              |       |       |              | 
|Discontinued operations                                     |                                    |              | 43.9  |       |              |  | 61.3  |      
|                                                            |                                    |              |       |       |              | 
|Total                                                       |                                    |              | 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 2005:
    £1 = $1.83; (2004: £1 = $1.82). In the
    case of the euro, the translation rate is 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 (2005:
    £5 million; 2004: £15 million credit);
    Europe, the Middle East and Africa (2005: £12 million;
    2004: £57 million); and Asia Pacific (2005:
    £5 million; 2004: £7 million).
|   
|(3) | Europe, the Middle East and Africa includes discontinued
    operations for Hotels (2005: £57 million; 2004:
    £105 million) and Soft Drinks (2005:
    £70 million; 2004: £77 million). The
    Americas and Asia Pacific discontinued operations all relate to
    Hotels. Hotels discontinued operations are all owned and leased.                                                                                                               
|   
|(4) | Amounts are reported by origin. See Note 2 of Notes to the
    Financial Statements for details by destination, for which the
    amounts are not significantly different.                                                                                                                                                                                                                                                                            

21



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| |                      
| | ---------------------
| | Activity Segmentation



|                                                                      |             |                                    |       |     |              |   |       |     |     |  
|--------------------------------------------------------------------- | ----------- | ---------------------------------- | ----- | --- | ------------ | - | ----- | --- | --- | -
|                                                                      |             | Year ended                         |       |     | Year ended   |  
|                                                                      |             | December 31,                       |       |     | December 31, |  
|                                                                      |             | 2005                               |       |     | 2004         |  
|                                                                      |             |                                    |       |     |              |  
|                                                                      |             | (£ million)                        |      
|Revenue(1)                                                            |             |                                    |       |     |              |   |       |    
|                                                                      | Hotels      |                                    |       |     |              |   |       |     |    
|                                                                      |             | Americas                           |       |     | 400          |   |       |     | 319 |  
|                                                                      |             | Europe, the Middle East and Africa |       |     | 326          |   |       |     | 301 |  
|                                                                      |             | Asia Pacific                       |       |     | 84           |   |       |     | 71  |  
|                                                                      |             | Central(4)                         |       |     | 42           |   |       |     | 40  |  
|                                                                      |             |                                    |       |     |              |  
|Continuing operations                                                 |             |                                    | 852   |     |              |   | 731   |    
|                                                                      |             |                                    |       |     |              |  
|                                                                      | Hotels(3)   |                                    |       |     |              |   |       |     |    
|                                                                      |             | Americas                           |       |     | 45           |   |       |     | 176 |  
|                                                                      |             | Europe, the Middle East and Africa |       |     | 285          |   |       |     | 528 |  
|                                                                      |             | Asia Pacific                       |       |     | 57           |   |       |     | 63  |  
|                                                                      | Soft Drinks |                                    |       | 671 |              |   |       | 706 |    
|                                                                      |             |                                    |       |     |              |  
|Discontinued operations                                               |             |                                    | 1,058 |     |              |   | 1,473 |    
|                                                                      |             |                                    |       |     |              |  
|Total                                                                 |             |                                    | 1,910 |     |              |   | 2,204 |    
|                                                                      |             |                                    |       |     |              |  
|Operating profit before other operating income and
    expenses(1)(2) |             |                                    |       |     |              |   |       |    
|                                                                      | Hotels      |                                    |       |     |              |   |       |     |    
|                                                                      |             | Americas                           |       |     | 187          |   |       |     | 150 |  
|                                                                      |             | Europe, the Middle East and Africa |       |     | 47           |   |       |     | 24  |  
|                                                                      |             | Asia Pacific                       |       |     | 21           |   |       |     | 17  |  
|                                                                      |             | Central(4)                         |       |     | (65          | ) |       |     | (57 | )
|                                                                      |             |                                    |       |     |              |  
|Continuing operations                                                 |             |                                    | 190   |     |              |   | 134   |    
|                                                                      |             |                                    |       |     |              |  
|                                                                      | Hotels(3)   |                                    |       |     |              |   |       |     |    
|                                                                      |             | Americas                           |       |     | 11           |   |       |     | 23  |  
|                                                                      |             | Europe, the Middle East and Africa |       |     | 57           |   |       |     | 105 |  
|                                                                      |             | Asia Pacific                       |       |     | 11           |   |       |     | 7   |  
|                                                                      | Soft Drinks |                                    |       | 70  |              |   |       | 77  |    
|                                                                      |             |                                    |       |     |              |  
|Discontinued operations                                               |             |                                    | 149   |     |              |   | 212   |    
|                                                                      |             |                                    |       |     |              |  
|Total                                                                 |             |                                    | 339   |     |              |   | 346   |    
|                                                                      |             |                                    |       |     |              |  




Footnotes on page 23.


22



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|                                                            |                         |                                    |       |      |              |   |       |      |       |  
|----------------------------------------------------------- | ----------------------- | ---------------------------------- | ----- | ---- | ------------ | - | ----- | ---- | ----- | -
|                                                            |                         | Year ended                         |       |      | Year ended   |  
|                                                            |                         | December 31,                       |       |      | December 31, |  
|                                                            |                         | 2005                               |       |      | 2004         |  
|                                                            |                         |                                    |       |      |              |  
|                                                            |                         | (%)                                |      
|Revenue                                                     |                         |                                    |       |      |              |   |       |     
|                                                            | Hotels                  |                                    |       |      |              |   |       |      |      
|                                                            |                         | Americas                           |       |      | 20.9         |   |       |      | 14.5  |  
|                                                            |                         | Europe, the Middle East and Africa |       |      | 17.1         |   |       |      | 13.7  |  
|                                                            |                         | Asia Pacific                       |       |      | 4.4          |   |       |      | 3.2   |  
|                                                            |                         | Central                            |       |      | 2.2          |   |       |      | 1.8   |  
|                                                            |                         |                                    |       |      |              |  
|Continuing operations                                       |                         |                                    | 44.6  |      |              |   | 33.2  |     
|                                                            |                         |                                    |       |      |              |  
|                                                            | Hotels                  |                                    |       |      |              |   |       |      |      
|                                                            |                         | Americas                           |       |      | 2.4          |   |       |      | 8.0   |  
|                                                            |                         | Europe, the Middle East and Africa |       |      | 14.9         |   |       |      | 24.0  |  
|                                                            |                         | Asia Pacific                       |       |      | 3.0          |   |       |      | 2.8   |  
|                                                            | Soft Drinks             |                                    |       | 35.1 |              |   |       | 32.0 |      
|                                                            |                         |                                    |       |      |              |  
|Discontinued operations                                     |                         |                                    | 55.4  |      |              |   | 66.8  |     
|                                                            |                         |                                    |       |      |              |  
|Total                                                       |                         |                                    | 100.0 |      |              |   | 100.0 |     
|                                                            |                         |                                    |       |      |              |  
|Operating profit before other operating income and expenses |                         |                                    |       |      |              |   |       |     
|                                                            | Hotels                  |                                    |       |      |              |   |       |      |      
|                                                            |                         | Americas                           |       |      | 55.2         |   |       |      | 43.4  |  
|                                                            |                         | Europe, the Middle East and Africa |       |      | 13.9         |   |       |      | 6.9   |  
|                                                            |                         | Asia Pacific                       |       |      | 6.2          |   |       |      | 4.9   |  
|                                                            |                         | Central                            |       |      | (19.2        | ) |       |      | (16.5 | )
|                                                            |                         |                                    |       |      |              |  
|Continuing operations                                       |                         |                                    | 56.1  |      |              |   | 38.7  |     
|                                                            |                         |                                    |       |      |              |  
|                                                            | Hotels                  |                                    |       |      |              |   |       |      |      
|                                                            |                         | Americas                           |       |      | 3.2          |   |       |      | 6.6   |  
|                                                            |                         | Europe, the Middle East and Africa |       |      | 16.8         |   |       |      | 30.3  |  
|                                                            |                         | Asia Pacific                       |       |      | 3.2          |   |       |      | 2.0   |  
|                                                            | Soft Drinks             |                                    |       | 26.7 |              |   |       | 22.4 |      
|                                                            |                         |                                    |       |      |              |  
|                                                            | Discontinued operations |                                    |       | 43.9 |              |   |       | 61.3 |      
|                                                            |                         |                                    |       |      |              |  
|Total                                                       |                         |                                    | 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 2005:
    £1 = $1.83 (2004: £1 = $1.82). In
    the case of the euro, the translation rate is 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
    (2005: £7 million; 2004: £15 million
    credit); Europe, the Middle East and Africa (2005:
    £10 million; 2004: £57 million); and Asia
    Pacific (2005: £5 million; 2004: £7 million).
|   
|(3) | Hotels discontinued operations are all owned and leased.                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(4) | Central relates to global functions. Revenue relates to Holidex
    fee income.                                                                                                                                                                                                                                                                                                                                                                                       

23



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##### Table of Contents






HOTELS




| |         
| | --------
| | Overview









FIGURE 3


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










| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | demographics  as the population ages, increased
    leisure time drives more travel and hotel visits;
|
| |  | disposable income rising as the global population becomes older
    and wealthier;                    
|
| |  | travel volumes increasing as low cost airlines grow rapidly;                                          
|
| |  | globalization of trade and tourism;                                                                   

24



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##### Table of Contents





| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | the increasing affluence and freedom to travel of the Chinese
    middle class; and
|
| |  | brand preference amongst consumers is increasing.                                  







| |           
| | ----------
| | Operations



franchised


managed


owned and leased




25



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##### Table of Contents





|     |  |                 |     |                     |          |            |        |            |  |  |        |  |  |        |         |  |        |  |       |        |  |  |         |  |  |  |       |  |  |  |         | 
|---- |  | --------------- | --- | ------------------- | -------- | ---------- | ------ | ---------- |  |  | ------ |  |  | ------ | ------- |  | ------ |  | ----- | ------ |  |  | ------- |  |  |  | ----- |  |  |  | ------- | 
|     |  |                 |     |                     |          | 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   | 
|     |  |                 |     |                     |          |            |        |            |  |  |        |  |  |        |         |  |        |  |       |        |  |  |         | 
|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 | 
|2003 |  |                 | 171 |                     |          |            | 39,459 |            |  |  | 423    |  |  |        | 103,440 |  |        |  | 2,926 |        |  |  | 393,419 |  |  |  | 3,520 |  |  |  | 536,318 | 





| |         
| | --------
| | Strategy







| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 organization  to create a more efficient
    organization with strong core capabilities.                                                              





| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | organic growth, from June 2005, of 50,000 to 60,000 net rooms by
    the end of 2008 taking total room numbers from approximately
    538,000 to approximately 588,000 to 598,000;
|
| |  | out-performance of Total Shareholder Return (TSR)
    against a competitor set; and                                                                                             
|
| |  | improved Return on Capital Employed (ROCE).                                                                                                                                     









| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | a strong brand portfolio across the major markets, including two
    iconic brands: InterContinental and Holiday Inn;

26



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | market coverage  a presence in nearly
    100 countries and territories;                                                                                                                                                                                                                                                                                
|
| |  | hotel distribution  3,606 hotels,
    537,533 rooms, 126 million guest stays per annum;                                                                                                                                                                                                                                                                 
|
| |  | IHG global reservation channels delivering over
    $4.8 billion of rooms sales value to owners of Group
    managed hotels, franchisees and to the Group itself
    (global system rooms sales) in 2005, including
    $1.7 billion global system rooms sales from the internet.
    IHG reservation systems take over 22 million calls per
    annum;
|
| |  | A loyalty program, Priority Club Rewards, contributing
    $3.8 billion of global system rooms sales; and                                                                                                                                                                                                                                                
|
| |  | A strong web presence 
    holiday-inn.com is the
    industrys most visited site, with 75 million total
    site visits per annum.                                                                                                                                                                                                                    



27



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##### Table of Contents





| |                  
| | -----------------
| | Segmental Results



|                                                                                 |              |                    |     |     |              |   |     |     |     |  
|-------------------------------------------------------------------------------- | ------------ | ------------------ | --- | --- | ------------ | - | --- | --- | --- | -
|                                                                                 |              | Year ended         |     |     | Year ended   |  
|                                                                                 |              | December 31,       |     |     | December 31, |  
|                                                                                 |              | 2005               |     |     | 2004         |  
|                                                                                 |              |                    |     |     |              |  
|                                                                                 |              | (£ million)        |    
|Continuing
    revenue(1)(2)                                                     |              |                    |     |     |              |   |     |    
|                                                                                 | Americas     |                    |     |     |              |   |     |     |    
|                                                                                 |              | Owned and leased   |     |     | 123          |   |     |     | 94  |  
|                                                                                 |              | Managed            |     |     | 64           |   |     |     | 30  |  
|                                                                                 |              | Franchised         |     |     | 213          |   |     |     | 195 |  
|                                                                                 |              |                    |     |     |              |  
|                                                                                 |              |                    | 400 |     |              |   | 319 |    
|                                                                                 | EMEA         |                    |     |     |              |   |     |     |    
|                                                                                 |              | Owned and leased   |     |     | 236          |   |     |     | 231 |  
|                                                                                 |              | Managed            |     |     | 55           |   |     |     | 43  |  
|                                                                                 |              | Franchised         |     |     | 35           |   |     |     | 27  |  
|                                                                                 |              |                    |     |     |              |  
|                                                                                 |              |                    | 326 |     |              |   | 301 |    
|                                                                                 | Asia         |                    |     |     |              |   |     |     |    
|                                                                                 |              | Owned and leased   |     |     | 56           |   |     |     | 47  |  
|                                                                                 |              | Managed            |     |     | 25           |   |     |     | 21  |  
|                                                                                 |              | Franchised         |     |     | 3            |   |     |     | 3   |  
|                                                                                 |              |                    |     |     |              |  
|                                                                                 |              |                    | 84  |     |              |   | 71  |    
|                                                                                 | Central(3)   |                    |     | 42  |              |   |     | 40  |    
|                                                                                 |              |                    |     |     |              |  
|Total                                                                            |              |                    | 852 |     |              |   | 731 |    
|                                                                                 |              |                    |     |     |              |  
|Continuing operating profit before other operating income and
    expenses(1)(2) |              |                    |     |     |              |   |     |    
|                                                                                 | Americas     |                    |     |     |              |   |     |     |    
|                                                                                 |              | Owned and leased   |     |     | 15           |   |     |     | 4   |  
|                                                                                 |              | Managed            |     |     | 20           |   |     |     | 6   |  
|                                                                                 |              | Franchised         |     |     | 186          |   |     |     | 167 |  
|                                                                                 |              | Regional overheads |     |     | (34          | ) |     |     | (27 | )
|                                                                                 |              |                    |     |     |              |  
|                                                                                 |              |                    | 187 |     |              |   | 150 |    
|                                                                                 | EMEA         |                    |     |     |              |   |     |     |    
|                                                                                 |              | Owned and leased   |     |     | 11           |   |     |     | 2   |  
|                                                                                 |              | Managed            |     |     | 31           |   |     |     | 24  |  
|                                                                                 |              | Franchised         |     |     | 26           |   |     |     | 21  |  
|                                                                                 |              | Regional overheads |     |     | (21          | ) |     |     | (23 | )
|                                                                                 |              |                    |     |     |              |  
|                                                                                 |              |                    | 47  |     |              |   | 24  |    
|                                                                                 | Asia Pacific |                    |     |     |              |   |     |     |    
|                                                                                 |              | Owned and leased   |     |     | 10           |   |     |     | 9   |  
|                                                                                 |              | Managed            |     |     | 16           |   |     |     | 14  |  
|                                                                                 |              | Franchised         |     |     | 3            |   |     |     | 2   |  
|                                                                                 |              | Regional overheads |     |     | (8           | ) |     |     | (8  | )
|                                                                                 |              |                    |     |     |              |  
|                                                                                 |              |                    | 21  |     |              |   | 17  |    
|                                                                                 | Central(3)   |                    |     | (65 | )            |   |     | (57 | )  
|                                                                                 |              |                    |     |     |              |  
|Total                                                                            |              |                    | 190 |     |              |   | 134 |    
|                                                                                 |              |                    |     |     |              |  




Footnotes on page 29.


28



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|                                                                           |              |                    |       |       |              |   |       |       |       |  
|-------------------------------------------------------------------------- | ------------ | ------------------ | ----- | ----- | ------------ | - | ----- | ----- | ----- | -
|                                                                           |              | Year ended         |       |       | Year ended   |  
|                                                                           |              | December 31,       |       |       | December 31, |  
|                                                                           |              | 2005               |       |       | 2004         |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              | (%)                |      
|Continuing revenue                                                         |              |                    |       |       |              |   |       |      
|                                                                           | Americas     |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 14.4         |   |       |       | 12.8  |  
|                                                                           |              | Managed            |       |       | 7.5          |   |       |       | 4.1   |  
|                                                                           |              | Franchised         |       |       | 25.0         |   |       |       | 26.7  |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 46.9  |       |              |   | 43.6  |      
|                                                                           | EMEA         |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 27.7         |   |       |       | 31.6  |  
|                                                                           |              | Managed            |       |       | 6.5          |   |       |       | 5.9   |  
|                                                                           |              | Franchised         |       |       | 4.1          |   |       |       | 3.7   |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 38.3  |       |              |   | 41.2  |      
|                                                                           | Asia Pacific |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 6.6          |   |       |       | 6.4   |  
|                                                                           |              | Managed            |       |       | 2.9          |   |       |       | 2.9   |  
|                                                                           |              | Franchised         |       |       | 0.4          |   |       |       | 0.4   |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 9.9   |       |              |   | 9.7   |      
|                                                                           | Central(3)   |                    |       | 4.9   |              |   |       | 5.5   |      
|                                                                           |              |                    |       |       |              |  
|Total                                                                      |              |                    | 100.0 |       |              |   | 100.0 |      
|                                                                           |              |                    |       |       |              |  
|Continuing operating profit before other operating income and
    expenses |              |                    |       |       |              |   |       |      
|                                                                           | Americas     |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 7.9          |   |       |       | 3.0   |  
|                                                                           |              | Managed            |       |       | 10.5         |   |       |       | 4.5   |  
|                                                                           |              | Franchised         |       |       | 97.9         |   |       |       | 124.6 |  
|                                                                           |              | Regional overheads |       |       | (17.9        | ) |       |       | (20.1 | )
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 98.4  |       |              |   | 112.0 |      
|                                                                           | EMEA         |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 5.8          |   |       |       | 1.5   |  
|                                                                           |              | Managed            |       |       | 16.3         |   |       |       | 17.9  |  
|                                                                           |              | Franchised         |       |       | 13.7         |   |       |       | 15.7  |  
|                                                                           |              | Regional overheads |       |       | (11.1        | ) |       |       | (17.2 | )
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 24.7  |       |              |   | 17.9  |      
|                                                                           | Asia Pacific |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 5.3          |   |       |       | 6.7   |  
|                                                                           |              | Managed            |       |       | 8.4          |   |       |       | 10.4  |  
|                                                                           |              | Franchised         |       |       | 1.6          |   |       |       | 1.5   |  
|                                                                           |              | Regional overheads |       |       | (4.2         | ) |       |       | (6.0  | )
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 11.1  |       |              |   | 12.6  |      
|                                                                           | Central(3)   |                    |       | (34.2 | )            |   |       | (42.5 | )    
|                                                                           |              |                    |       |       |              |  
|Total                                                                      |              |                    | 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 rates are 2005:
    £1 = $1.83; (2004: £1 = $1.82).
|   
|(2) | Amounts are reported by origin.                                                                                                                                                                                                      
|   
|(3) | Central relates to global functions. Revenue relates to Holidex
    fee income.                                                                                                                                                      

29



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|                                                                              |              |                    |       |      |              |   |       |      |     |  
|----------------------------------------------------------------------------- | ------------ | ------------------ | ----- | ---- | ------------ | - | ----- | ---- | --- | -
|                                                                              |              | Year ended         |       |      | Year ended   |  
|                                                                              |              | December 31,       |       |      | December 31, |  
|                                                                              |              | 2005               |       |      | 2004         |  
|                                                                              |              |                    |       |      |              |  
|                                                                              |              | ($ million)        |      
|Continuing
    revenue(1)                                                     |              |                    |       |      |              |   |       |     
|                                                                              | Americas     |                    |       |      |              |   |       |      |    
|                                                                              |              | Owned and leased   |       |      | 224          |   |       |      | 171 |  
|                                                                              |              | Managed            |       |      | 118          |   |       |      | 55  |  
|                                                                              |              | Franchised         |       |      | 389          |   |       |      | 357 |  
|                                                                              |              |                    |       |      |              |  
|                                                                              |              |                    | 731   |      |              |   | 583   |     
|                                                                              | EMEA         |                    |       |      |              |   |       |      |    
|                                                                              |              | Owned and leased   |       |      | 431          |   |       |      | 421 |  
|                                                                              |              | Managed            |       |      | 100          |   |       |      | 78  |  
|                                                                              |              | Franchised         |       |      | 64           |   |       |      | 49  |  
|                                                                              |              |                    |       |      |              |  
|                                                                              |              |                    | 595   |      |              |   | 548   |     
|                                                                              | Asia Pacific |                    |       |      |              |   |       |      |    
|                                                                              |              | Owned and leased   |       |      | 102          |   |       |      | 86  |  
|                                                                              |              | Managed            |       |      | 45           |   |       |      | 38  |  
|                                                                              |              | Franchised         |       |      | 6            |   |       |      | 5   |  
|                                                                              |              |                    |       |      |              |  
|                                                                              |              |                    | 153   |      |              |   | 129   |     
|                                                                              | Central(2)   |                    |       | 76   |              |   |       | 73   |    
|                                                                              |              |                    |       |      |              |  
|Total                                                                         |              |                    | 1,555 |      |              |   | 1,333 |     
|                                                                              |              |                    |       |      |              |  
|Continuing operating profit before other operating income and
    expenses(1) |              |                    |       |      |              |   |       |     
|                                                                              | Americas     |                    |       |      |              |   |       |      |    
|                                                                              |              | Owned and leased   |       |      | 28           |   |       |      | 7   |  
|                                                                              |              | Managed            |       |      | 36           |   |       |      | 12  |  
|                                                                              |              | Franchised         |       |      | 340          |   |       |      | 304 |  
|                                                                              |              | Regional overheads |       |      | (62          | ) |       |      | (50 | )
|                                                                              |              |                    |       |      |              |  
|                                                                              |              |                    | 342   |      |              |   | 273   |     
|                                                                              | EMEA         |                    |       |      |              |   |       |      |    
|                                                                              |              | Owned and leased   |       |      | 20           |   |       |      | 4   |  
|                                                                              |              | Managed            |       |      | 57           |   |       |      | 44  |  
|                                                                              |              | Franchised         |       |      | 47           |   |       |      | 38  |  
|                                                                              |              | Regional overheads |       |      | (38          | ) |       |      | (42 | )
|                                                                              |              |                    |       |      |              |  
|                                                                              |              |                    | 86    |      |              |   | 44    |     
|                                                                              | Asia Pacific |                    |       |      |              |   |       |      |    
|                                                                              |              | Owned and leased   |       |      | 19           |   |       |      | 17  |  
|                                                                              |              | Managed            |       |      | 29           |   |       |      | 25  |  
|                                                                              |              | Franchised         |       |      | 5            |   |       |      | 3   |  
|                                                                              |              | Regional overheads |       |      | (15          | ) |       |      | (15 | )
|                                                                              |              |                    |       |      |              |  
|                                                                              |              |                    | 38    |      |              |   | 30    |     
|                                                                              | Central(2)   |                    |       | (119 | )            |   |       | (104 | )  
|                                                                              |              |                    |       |      |              |  
|Total                                                                         |              |                    | 347   |      |              |   | 243   |     
|                                                                              |              |                    |       |      |              |  




Footnotes on page 31.


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|                                                                           |              |                    |       |       |              |   |       |       |       |  
|-------------------------------------------------------------------------- | ------------ | ------------------ | ----- | ----- | ------------ | - | ----- | ----- | ----- | -
|                                                                           |              | Year ended         |       |       | Year ended   |  
|                                                                           |              | December 31,       |       |       | December 31, |  
|                                                                           |              | 2005               |       |       | 2004         |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              | (%)                |      
|Continuing revenue                                                         |              |                    |       |       |              |   |       |      
|                                                                           | Americas     |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 14.4         |   |       |       | 12.8  |  
|                                                                           |              | Managed            |       |       | 7.6          |   |       |       | 4.1   |  
|                                                                           |              | Franchised         |       |       | 25.0         |   |       |       | 26.8  |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 47.0  |       |              |   | 43.7  |      
|                                                                           | EMEA         |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 27.7         |   |       |       | 31.6  |  
|                                                                           |              | Managed            |       |       | 6.4          |   |       |       | 5.8   |  
|                                                                           |              | Franchised         |       |       | 4.1          |   |       |       | 3.7   |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 38.2  |       |              |   | 41.1  |      
|                                                                           | Asia Pacific |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 6.6          |   |       |       | 6.4   |  
|                                                                           |              | Managed            |       |       | 2.9          |   |       |       | 2.9   |  
|                                                                           |              | Franchised         |       |       | 0.4          |   |       |       | 0.4   |  
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 9.9   |       |              |   | 9.7   |      
|                                                                           | Central(2)   |                    |       | 4.9   |              |   |       | 5.5   |      
|                                                                           |              |                    |       |       |              |  
|Total                                                                      |              |                    | 100.0 |       |              |   | 100.0 |      
|                                                                           |              |                    |       |       |              |  
|Continuing operating profit before other operating income and
    expenses |              |                    |       |       |              |   |       |      
|                                                                           | Americas     |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 8.1          |   |       |       | 2.9   |  
|                                                                           |              | Managed            |       |       | 10.4         |   |       |       | 4.9   |  
|                                                                           |              | Franchised         |       |       | 98.0         |   |       |       | 125.1 |  
|                                                                           |              | Regional overheads |       |       | (17.9        | ) |       |       | (20.5 | )
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 98.6  |       |              |   | 112.4 |      
|                                                                           | EMEA         |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 5.8          |   |       |       | 1.7   |  
|                                                                           |              | Managed            |       |       | 16.4         |   |       |       | 18.1  |  
|                                                                           |              | Franchised         |       |       | 13.5         |   |       |       | 15.6  |  
|                                                                           |              | Regional overheads |       |       | (11.0        | ) |       |       | (17.3 | )
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 24.7  |       |              |   | 18.1  |      
|                                                                           | Asia         |                    |       |       |              |   |       |       |      
|                                                                           |              | Owned and leased   |       |       | 5.5          |   |       |       | 7.0   |  
|                                                                           |              | Managed            |       |       | 8.4          |   |       |       | 10.3  |  
|                                                                           |              | Franchised         |       |       | 1.4          |   |       |       | 1.2   |  
|                                                                           |              | Regional overheads |       |       | (4.3         | ) |       |       | (6.2  | )
|                                                                           |              |                    |       |       |              |  
|                                                                           |              |                    | 11.0  |       |              |   | 12.3  |      
|                                                                           | Central(2)   |                    |       | (34.3 | )            |   |       | (42.8 | )    
|                                                                           |              |                    |       |       |              |  
|Total                                                                      |              |                    | 100.0 |       |              |   | 100.0 |      
|                                                                           |              |                    |       |       |              |  






|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Amounts are reported by origin.                                                
|   
|(2) | Central relates to global functions. Revenue relates to Holidex
    fee income.

31



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| |              
| | -------------
| | Global System



Priority Club Rewards:


Central Reservation System Technology:


Reservation Call Centers:


Internet:






| |                    
| | -------------------
| | Sales and Marketing







|  |                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;

32



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|  |                                                   
|- | --------------------------------------------------
| | making the direct channels the best available; and
| 
| | improving pricing structure.                      



| |              
| | -------------
| | Global Brands



| |                
| | ---------------
| | Brands Overview



|                  |  |                   |         |  |        |  |       | 
|----------------- |  | ----------------- | ------- |  | ------ |  | ----- | 
|                  |  | December 31, 2005 |        
|                  |  |                   |        
|Brands            |  | Room numbers      |         |  | Hotels | 
|                  |  |                   |         |  |        | 
|InterContinental  |  |                   | 46,262  |  |        |  | 137   | 
|Crowne Plaza      |  |                   | 65,404  |  |        |  | 235   | 
|Holiday Inn       |  |                   | 267,816 |  |        |  | 1,435 | 
|Express           |  |                   | 133,554 |  |        |  | 1,590 | 
|Staybridge Suites |  |                   | 9,915   |  |        |  | 87    | 
|Candlewood Suites |  |                   | 12,683  |  |        |  | 112   | 
|Hotel Indigo      |  |                   | 497     |  |        |  | 3     | 
|Other(1)          |  |                   | 1,402   |  |        |  | 7     | 
|Total             |  |                   | 537,533 |  |        |  | 3,606 | 






|    |                                                                       
|--- | ----------------------------------------------------------------------
|(1) | Other comprises seven non-IHG branded hotels under IHG
    management.



| |                 
| | ----------------
| | InterContinental

|                           |  |          |        |  |          |  |        |       |  |  |        |  |  |              |        |  |  |  |        | 
|-------------------------- |  | -------- | ------ |  | -------- |  | ------ | ----- |  |  | ------ |  |  | ------------ | ------ |  |  |  | ------ | 
|                           |  | Americas |        |  | Americas |  |        | EMEA  |  |  | EMEA   |  |  |             
|                           |  | total    |        |  | O & L    |  |        | total |  |  | O & L  |  |  | Asia Pacific |       
|                           |  |          |        |  |          |  |        |       |  |  |        |  |  |              |       
|Average room rate
    $(1) |  |          | 141.55 |  |          |  | 224.83 |       |  |  | 167.10 |  |  |              | 234.37 |  |  |  | 154.07 | 
|Room
    numbers(2)        |  |          | 15,328 |  |          |  | 1,847  |       |  |  | 21,473 |  |  |              | 3,843  |  |  |  | 9,461  | 






|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the year ended December 31, 2005; quoted at constant
    US$ exchange rate. Owned and leased average room rate is for
    comparable InterContinental hotels.
|   
|(2) | As at December 31, 2005.                                                                                                                                         







33



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| |             
| | ------------
| | Crowne Plaza

|                           |  |          |        |  |          |  |       |       |  |  |        |  |  |              |        |  |  |  |        | 
|-------------------------- |  | -------- | ------ |  | -------- |  | ----- | ----- |  |  | ------ |  |  | ------------ | ------ |  |  |  | ------ | 
|                           |  | Americas |        |  | Americas |  |       | EMEA  |  |  | EMEA   |  |  |             
|                           |  | total    |        |  | O & L    |  |       | total |  |  | O & L  |  |  | Asia Pacific |       
|                           |  |          |        |  |          |  |       |       |  |  |        |  |  |              |       
|Average room rate
    $(1) |  |          | 103.16 |  |          |  | 73.41 |       |  |  | 132.08 |  |  |              | 124.20 |  |  |  | 89.22  | 
|Room
    numbers(2)        |  |          | 37,074 |  |          |  | 293   |       |  |  | 16,031 |  |  |              | 2,063  |  |  |  | 12,299 | 






|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the year ended December 31, 2005; quoted at constant
    US$ exchange rate. Owned and leased average room rate is for
    comparable Crowne Plaza hotels.
|   
|(2) | As at December 31, 2005.                                                                                                                                     









| |            
| | -----------
| | Holiday Inn

|                           |  |          |         |  |          |  |       |       |  |  |        |  |  |              |        |  |  |  |        | 
|-------------------------- |  | -------- | ------- |  | -------- |  | ----- | ----- |  |  | ------ |  |  | ------------ | ------ |  |  |  | ------ | 
|                           |  | Americas |         |  | Americas |  |       | EMEA  |  |  | EMEA   |  |  |             
|                           |  | total    |         |  | O & L    |  |       | total |  |  | O & L  |  |  | Asia Pacific |       
|                           |  |          |         |  |          |  |       |       |  |  |        |  |  |              |       
|Average room rate
    $(1) |  |          | 85.18   |  |          |  | 89.72 |       |  |  | 105.76 |  |  |              | 127.87 |  |  |  | 71.78  | 
|Room
    numbers(2)        |  |          | 195,004 |  |          |  | 1,882 |       |  |  | 50,944 |  |  |              | 3,031  |  |  |  | 21,868 | 






|    |                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the year ended December 31, 2005; quoted at constant
    US$ exchange rate. Owned and leased average room rate is for
    comparable Holiday Inn hotels.
|   
|(2) | As at December 31, 2005.                                                                                                                                    







34



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| |        
| | -------
| | Express

|                           |  |          |         |  |       |  |        |       |  |  |              |  |  |  |       | 
|-------------------------- |  | -------- | ------- |  | ----- |  | ------ | ----- |  |  | ------------ |  |  |  | ----- | 
|                           |  | Americas |         |  | EMEA  |  |        | EMEA  |  |  |             
|                           |  | total    |         |  | total |  |        | O & L |  |  | Asia Pacific | 
|                           |  |          |         |  |       |  |        |       |  |  |              | 
|Average room rate
    $(1) |  |          | 80.65   |  |       |  | 96.86  |       |  |  | 77.37        |  |  |  | 47.70 | 
|Room
    numbers(2)        |  |          | 115,810 |  |       |  | 16,971 |       |  |  | 1,604        |  |  |  | 773   | 






|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the year ended December 31, 2005; quoted at constant
    US$ exchange rate. Owned and leased average room rate is for
    comparable Express hotels.
|   
|(2) | As at December 31, 2005.                                                                                                                                









| |                  
| | -----------------
| | Staybridge Suites

|                           |  |          |       | 
|-------------------------- |  | -------- | ----- | 
|                           |  | Americas |      
|                           |  | total    |      
|                           |  |          |      
|Average room rate
    $(1) |  |          | 92.80 | 
|Room
    numbers(2)        |  |          | 9,915 | 






|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | For the year ended December 31, 2005; quoted at constant
    US$ exchange rate.
|   
|(2) | As at December 31, 2005.                                                       

long-stay high-speed






35



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| |                  
| | -----------------
| | Candlewood Suites

|                           |  |          |        | 
|-------------------------- |  | -------- | ------ | 
|                           |  | Americas |       
|                           |  | total    |       
|                           |  |          |       
|Average room rate
    $(1) |  |          | 62.03  | 
|Room
    numbers(2)        |  |          | 12,683 | 






|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | For the year ended December 31, 2005; quoted at constant
    US$ exchange rate.
|   
|(2) | As at December 31, 2005.                                                       

one-bedroom well-equipped




| |             
| | ------------
| | Hotel Indigo

style-conscious 24-hour




| |                      
| | ---------------------
| | Geographical Analysis





|                                                                                                           |  |              |      |  |      |  |      |              |  |  |     | 
|---------------------------------------------------------------------------------------------------------- |  | ------------ | ---- |  | ---- |  | ---- | ------------ |  |  | --- | 
|                                                                                                           |  | Americas     |      |  | EMEA |  |      | Asia Pacific | 
|                                                                                                           |  |              |      |  |      |  |      |              | 
|                                                                                                           |  | (% of total) |     
|Room
    numbers(1)                                                                                        |  |              | 71.9 |  |      |  | 19.6 |              |  |  | 8.5 | 
|Hotel level operating profit (before central overheads and other
    operating income and
    expenses)(2) |  |              | 49%  |  |      |  | 43%  |              |  |  | 8%  | 






|    |                                      
|--- | -------------------------------------
|(1) | As at December 31, 2005.             
|   
|(2) | For the year ended December 31, 2005.

36



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|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |         |  |  |       |       |  |  |         |         | 
|---------------- | ---------------- | --------------- | -- | ------------------ | -------- | ---------- | ----- | ---------- |  |  | ----- | -- |  | ------ | ------ | ------ | ----- |  | ----- | ------ |  |  | ------- | ------- |  |  | ----- | ----- |  |  | ------- | ------- | 
|                 |                  |                 |    |                    |          | Management |       |            |  |  |       |    |  |        |       
|                 |                  |                 |    | contract and joint |          |            |       |            | 
|                 |                  | Owned or leased |    |                    | ventures |            |       | Franchised |  |  | Total |   
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |   
|                 |                  | Hotels          |    |                    | Rooms    |            |       | Hotels     |  |  | Rooms |    |  | Hotels |        |        | Rooms |  |       | Hotels |  |  | Rooms   |        
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |        
|United States    |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |         |  |  |       |       |  |  |         |        
|                 | InterContinental |                 |    | 3                  |          |            |       | 1,490      |  |  |       | 9  |  |        |        | 3,938  |       |  |       | 1      |  |  |         | 263     |  |  |       | 13    |  |  |         | 5,691   | 
|                 | Crowne Plaza     |                 |    |                   |          |            |       |           |  |  |       | 17 |  |        |        | 6,482  |       |  |       | 90     |  |  |         | 24,829  |  |  |       | 107   |  |  |         | 31,311  | 
|                 | Holiday Inn      |                 |    | 3                  |          |            |       | 758        |  |  |       | 46 |  |        |        | 14,228 |       |  |       | 843    |  |  |         | 157,191 |  |  |       | 892   |  |  |         | 172,177 | 
|                 | Express          |                 |    |                   |          |            |       |           |  |  |       | 1  |  |        |        | 252    |       |  |       | 1,355  |  |  |         | 108,084 |  |  |       | 1,356 |  |  |         | 108,336 | 
|                 | Staybridge       |                 |    | 2                  |          |            |       | 229        |  |  |       | 35 |  |        |        | 4,287  |       |  |       | 46     |  |  |         | 4,896   |  |  |       | 83    |  |  |         | 9,412   | 
|                 | Candlewood       |                 |    |                   |          |            |       |           |  |  |       | 76 |  |        |        | 9,218  |       |  |       | 36     |  |  |         | 3,465   |  |  |       | 112   |  |  |         | 12,683  | 
|                 | Hotel Indigo     |                 |    |                   |          |            |       |           |  |  |       | 2  |  |        |        | 305    |       |  |       | 1      |  |  |         | 192     |  |  |       | 3     |  |  |         | 497     | 
|                 | Other            |                 |    |                   |          |            |       |           |  |  |       | 2  |  |        |        | 295    |       |  |       |       |  |  |         |        |  |  |       | 2     |  |  |         | 295     | 
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |        
|Total            |                  |                 | 8  |                    |          |            | 2,477 |            |  |  | 188   |    |  |        | 39,005 |        |       |  | 2,372 |        |  |  | 298,920 |         |  |  | 2,568 |       |  |  | 340,402 |        
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |        
|Rest of Americas |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |         |  |  |       |       |  |  |         |        
|                 | InterContinental |                 |    | 1                  |          |            |       | 357        |  |  |       | 12 |  |        |        | 3,779  |       |  |       | 19     |  |  |         | 5,501   |  |  |       | 32    |  |  |         | 9,637   | 
|                 | Crowne Plaza     |                 |    | 1                  |          |            |       | 293        |  |  |       | 2  |  |        |        | 357    |       |  |       | 23     |  |  |         | 5,113   |  |  |       | 26    |  |  |         | 5,763   | 
|                 | Holiday Inn      |                 |    | 2                  |          |            |       | 1,124      |  |  |       | 4  |  |        |        | 1,844  |       |  |       | 129    |  |  |         | 19,859  |  |  |       | 135   |  |  |         | 22,827  | 
|                 | Express          |                 |    |                   |          |            |       |           |  |  |       |   |  |        |        |       |       |  |       | 69     |  |  |         | 7,474   |  |  |       | 69    |  |  |         | 7,474   | 
|                 | Staybridge       |                 |    |                   |          |            |       |           |  |  |       | 2  |  |        |        | 335    |       |  |       | 2      |  |  |         | 168     |  |  |       | 4     |  |  |         | 503     | 
|                 | Candlewood       |                 |    |                   |          |            |       |           |  |  |       |   |  |        |        |       |       |  |       |       |  |  |         |        |  |  |       |      |  |  |         |        | 
|                 | Hotel Indigo     |                 |    |                   |          |            |       |           |  |  |       |   |  |        |        |       |       |  |       |       |  |  |         |        |  |  |       |      |  |  |         |        | 
|                 | Other            |                 |    |                   |          |            |       |           |  |  |       |   |  |        |        |       |       |  |       |       |  |  |         |        |  |  |       |      |  |  |         |        | 
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |        
|Total            |                  |                 | 4  |                    |          |            | 1,774 |            |  |  | 20    |    |  |        | 6,315  |        |       |  | 242   |        |  |  | 38,115  |         |  |  | 266   |       |  |  | 46,204  |        
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |        
|Total Americas   |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |         |  |  |       |       |  |  |         |        
|                 | InterContinental |                 |    | 4                  |          |            |       | 1,847      |  |  |       | 21 |  |        |        | 7,717  |       |  |       | 20     |  |  |         | 5,764   |  |  |       | 45    |  |  |         | 15,328  | 
|                 | Crowne Plaza     |                 |    | 1                  |          |            |       | 293        |  |  |       | 19 |  |        |        | 6,839  |       |  |       | 113    |  |  |         | 29,942  |  |  |       | 133   |  |  |         | 37,074  | 
|                 | Holiday Inn      |                 |    | 5                  |          |            |       | 1,882      |  |  |       | 50 |  |        |        | 16,072 |       |  |       | 972    |  |  |         | 177,050 |  |  |       | 1,027 |  |  |         | 195,004 | 
|                 | Express          |                 |    |                   |          |            |       |           |  |  |       | 1  |  |        |        | 252    |       |  |       | 1,424  |  |  |         | 115,558 |  |  |       | 1,425 |  |  |         | 115,810 | 
|                 | Staybridge       |                 |    | 2                  |          |            |       | 229        |  |  |       | 37 |  |        |        | 4,622  |       |  |       | 48     |  |  |         | 5,064   |  |  |       | 87    |  |  |         | 9,915   | 
|                 | Candlewood       |                 |    |                   |          |            |       |           |  |  |       | 76 |  |        |        | 9,218  |       |  |       | 36     |  |  |         | 3,465   |  |  |       | 112   |  |  |         | 12,683  | 
|                 | Hotel Indigo     |                 |    |                   |          |            |       |           |  |  |       | 2  |  |        |        | 305    |       |  |       | 1      |  |  |         | 192     |  |  |       | 3     |  |  |         | 497     | 
|                 | Other            |                 |    |                   |          |            |       |           |  |  |       | 2  |  |        |        | 295    |       |  |       |       |  |  |         |        |  |  |       | 2     |  |  |         | 295     | 
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |        
|Total            |                  |                 | 12 |                    |          |            | 4,251 |            |  |  | 208   |    |  |        | 45,320 |        |       |  | 2,614 |        |  |  | 337,035 |         |  |  | 2,834 |       |  |  | 386,606 |        
|                 |                  |                 |    |                    |          |            |       |            |  |  |       |    |  |        |        |        |       |  |       |        |  |  |         |        

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|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |        |  |  |     |     |  |  |         |        | 
|-------------------------- | ---------------- | --------------- | -- | ------------------ | -------- | ---------- | ------ | ---------- |  |  | ----- | -- |  | ------ | ------ | ------ | ----- |  | --- | ------ |  |  | ------ | ------ |  |  | --- | --- |  |  | ------- | ------ | 
|                           |                  |                 |    |                    |          | Management |        |            |  |  |       |    |  |        |       
|                           |                  |                 |    | contract and joint |          |            |        |            | 
|                           |                  | Owned or leased |    |                    | ventures |            |        | Franchised |  |  | Total |   
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |   
|                           |                  | Hotels          |    |                    | Rooms    |            |        | Hotels     |  |  | Rooms |    |  | Hotels |        |        | Rooms |  |     | Hotels |  |  | Rooms  |       
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|United Kingdom             |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |        |  |  |     |     |  |  |         |       
|                           | InterContinental |                 |    | 1                  |          |            |        | 451        |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     | 1   |  |  |         | 451    | 
|                           | Crowne Plaza     |                 |    |                   |          |            |        |           |  |  |       | 6  |  |        |        | 1,530  |       |  |     | 7      |  |  |        | 1,656  |  |  |     | 13  |  |  |         | 3,186  | 
|                           | Holiday Inn      |                 |    |                   |          |            |        |           |  |  |       | 69 |  |        |        | 11,757 |       |  |     | 41     |  |  |        | 5,625  |  |  |     | 110 |  |  |         | 17,382 | 
|                           | Express          |                 |    |                   |          |            |        |           |  |  |       | 1  |  |        |        | 120    |       |  |     | 102    |  |  |        | 10,586 |  |  |     | 103 |  |  |         | 10,706 | 
|                           | Staybridge       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Candlewood       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Other            |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|Total                      |                  |                 | 1  |                    |          |            | 451    |            |  |  | 76    |    |  |        | 13,407 |        |       |  | 150 |        |  |  | 17,867 |        |  |  | 227 |     |  |  | 31,725  |       
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|Europe                     |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |        |  |  |     |     |  |  |         |       
|                           | InterContinental |                 |    | 8                  |          |            |        | 3,007      |  |  |       | 13 |  |        |        | 4,542  |       |  |     | 3      |  |  |        | 1,097  |  |  |     | 24  |  |  |         | 8,646  | 
|                           | Crowne Plaza     |                 |    | 8                  |          |            |        | 2,063      |  |  |       | 7  |  |        |        | 1,886  |       |  |     | 20     |  |  |        | 4,402  |  |  |     | 35  |  |  |         | 8,351  | 
|                           | Holiday Inn      |                 |    | 12                 |          |            |        | 3,031      |  |  |       | 7  |  |        |        | 1,281  |       |  |     | 159    |  |  |        | 23,023 |  |  |     | 178 |  |  |         | 27,335 | 
|                           | Express          |                 |    | 11                 |          |            |        | 1,604      |  |  |       | 9  |  |        |        | 1,007  |       |  |     | 36     |  |  |        | 3,338  |  |  |     | 56  |  |  |         | 5,949  | 
|                           | Staybridge       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Candlewood       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Other            |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|Total                      |                  |                 | 39 |                    |          |            | 9,705  |            |  |  | 36    |    |  |        | 8,716  |        |       |  | 218 |        |  |  | 31,860 |        |  |  | 293 |     |  |  | 50,281  |       
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|The Middle East and Africa |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |        |  |  |     |     |  |  |         |       
|                           | InterContinental |                 |    | 1                  |          |            |        | 385        |  |  |       | 35 |  |        |        | 10,939 |       |  |     | 4      |  |  |        | 1,052  |  |  |     | 40  |  |  |         | 12,376 | 
|                           | Crowne Plaza     |                 |    |                   |          |            |        |           |  |  |       | 11 |  |        |        | 3,079  |       |  |     | 5      |  |  |        | 1,415  |  |  |     | 16  |  |  |         | 4,494  | 
|                           | Holiday Inn      |                 |    |                   |          |            |        |           |  |  |       | 18 |  |        |        | 3,556  |       |  |     | 14     |  |  |        | 2,671  |  |  |     | 32  |  |  |         | 6,227  | 
|                           | Express          |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     | 2      |  |  |        | 316    |  |  |     | 2   |  |  |         | 316    | 
|                           | Staybridge       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Candlewood       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Other            |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|Total                      |                  |                 | 1  |                    |          |            | 385    |            |  |  | 64    |    |  |        | 17,574 |        |       |  | 25  |        |  |  | 5,454  |        |  |  | 90  |     |  |  | 23,413  |       
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|Total EMEA                 |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |        |  |  |     |     |  |  |         |       
|                           | InterContinental |                 |    | 10                 |          |            |        | 3,843      |  |  |       | 48 |  |        |        | 15,481 |       |  |     | 7      |  |  |        | 2,149  |  |  |     | 65  |  |  |         | 21,473 | 
|                           | Crowne Plaza     |                 |    | 8                  |          |            |        | 2,063      |  |  |       | 24 |  |        |        | 6,495  |       |  |     | 32     |  |  |        | 7,473  |  |  |     | 64  |  |  |         | 16,031 | 
|                           | Holiday Inn      |                 |    | 12                 |          |            |        | 3,031      |  |  |       | 94 |  |        |        | 16,594 |       |  |     | 214    |  |  |        | 31,319 |  |  |     | 320 |  |  |         | 50,944 | 
|                           | Express          |                 |    | 11                 |          |            |        | 1,604      |  |  |       | 10 |  |        |        | 1,127  |       |  |     | 140    |  |  |        | 14,240 |  |  |     | 161 |  |  |         | 16,971 | 
|                           | Staybridge       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Candlewood       |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           | Other            |                 |    |                   |          |            |        |           |  |  |       |   |  |        |        |       |       |  |     |       |  |  |        |       |  |  |     |    |  |  |         |       | 
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       
|Total                      |                  |                 | 41 |                    |          |            | 10,541 |            |  |  | 176   |    |  |        | 39,697 |        |       |  | 393 |        |  |  | 55,181 |        |  |  | 610 |     |  |  | 105,419 |       
|                           |                  |                 |    |                    |          |            |        |            |  |  |       |    |  |        |        |        |       |  |     |        |  |  |        |       

38



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|                                        |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |         |  |  |       |       |  |  |         |         | 
|--------------------------------------- | ---------------- | --------------- | -- | ------------------ | -------- | ---------- | ------ | ---------- |  |  | ----- | --- |  | ------ | ------- | ------ | ----- |  | ----- | ------ |  |  | ------- | ------- |  |  | ----- | ----- |  |  | ------- | ------- | 
|                                        |                  |                 |    |                    |          | Management |        |            |  |  |       |     |  |        |        
|                                        |                  |                 |    | contract and joint |          |            |        |            | 
|                                        |                  | Owned or leased |    |                    | ventures |            |        | Franchised |  |  | Total |    
|                                        |                  |                 |    |                    |          |            |        |            |  |  |       |    
|                                        |                  | Hotels          |    |                    | Rooms    |            |        | Hotels     |  |  | Rooms |     |  | Hotels |         |        | Rooms |  |       | Hotels |  |  | Rooms   |        
|                                        |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |        
|Far East and Australasia (Asia Pacific) |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |         |  |  |       |       |  |  |         |        
|                                        | InterContinental |                 |    | 1                  |          |            |        | 495        |  |  |       | 18  |  |        |         | 6,606  |       |  |       | 8      |  |  |         | 2,360   |  |  |       | 27    |  |  |         | 9,461   | 
|                                        | Crowne Plaza     |                 |    |                   |          |            |        |           |  |  |       | 32  |  |        |         | 10,468 |       |  |       | 6      |  |  |         | 1,831   |  |  |       | 38    |  |  |         | 12,299  | 
|                                        | Holiday Inn      |                 |    | 1                  |          |            |        | 198        |  |  |       | 62  |  |        |         | 17,415 |       |  |       | 25     |  |  |         | 4,255   |  |  |       | 88    |  |  |         | 21,868  | 
|                                        | Express          |                 |    |                   |          |            |        |           |  |  |       | 3   |  |        |         | 636    |       |  |       | 1      |  |  |         | 137     |  |  |       | 4     |  |  |         | 773     | 
|                                        | Staybridge       |                 |    |                   |          |            |        |           |  |  |       |    |  |        |         |       |       |  |       |       |  |  |         |        |  |  |       |      |  |  |         |        | 
|                                        | Candlewood       |                 |    |                   |          |            |        |           |  |  |       |    |  |        |         |       |       |  |       |       |  |  |         |        |  |  |       |      |  |  |         |        | 
|                                        | Other            |                 |    |                   |          |            |        |           |  |  |       | 5   |  |        |         | 1,107  |       |  |       |       |  |  |         |        |  |  |       | 5     |  |  |         | 1,107   | 
|                                        |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |        
|Total                                   |                  |                 | 2  |                    |          |            | 693    |            |  |  | 120   |     |  |        | 36,232  |        |       |  | 40    |        |  |  | 8,583   |         |  |  | 162   |       |  |  | 45,508  |        
|                                        |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |        
|Total                                   |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |         |  |  |       |       |  |  |         |        
|                                        | InterContinental |                 |    | 15                 |          |            |        | 6,185      |  |  |       | 87  |  |        |         | 29,804 |       |  |       | 35     |  |  |         | 10,273  |  |  |       | 137   |  |  |         | 46,262  | 
|                                        | Crowne Plaza     |                 |    | 9                  |          |            |        | 2,356      |  |  |       | 75  |  |        |         | 23,802 |       |  |       | 151    |  |  |         | 39,246  |  |  |       | 235   |  |  |         | 65,404  | 
|                                        | Holiday Inn      |                 |    | 18                 |          |            |        | 5,111      |  |  |       | 206 |  |        |         | 50,081 |       |  |       | 1,211  |  |  |         | 212,624 |  |  |       | 1,435 |  |  |         | 267,816 | 
|                                        | Express          |                 |    | 11                 |          |            |        | 1,604      |  |  |       | 14  |  |        |         | 2,015  |       |  |       | 1,565  |  |  |         | 129,935 |  |  |       | 1,590 |  |  |         | 133,554 | 
|                                        | Staybridge       |                 |    | 2                  |          |            |        | 229        |  |  |       | 37  |  |        |         | 4,622  |       |  |       | 48     |  |  |         | 5,064   |  |  |       | 87    |  |  |         | 9,915   | 
|                                        | Candlewood       |                 |    |                   |          |            |        |           |  |  |       | 76  |  |        |         | 9,218  |       |  |       | 36     |  |  |         | 3,465   |  |  |       | 112   |  |  |         | 12,683  | 
|                                        | Hotel Indigo     |                 |    |                   |          |            |        |           |  |  |       | 2   |  |        |         | 305    |       |  |       | 1      |  |  |         | 192     |  |  |       | 3     |  |  |         | 497     | 
|                                        | Other            |                 |    |                   |          |            |        |           |  |  |       | 7   |  |        |         | 1,402  |       |  |       |       |  |  |         |        |  |  |       | 7     |  |  |         | 1,402   | 
|                                        |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |        
|Total                                   |                  |                 | 55 |                    |          |            | 15,485 |            |  |  | 504   |     |  |        | 121,249 |        |       |  | 3,047 |        |  |  | 400,799 |         |  |  | 3,606 |       |  |  | 537,533 |        
|                                        |                  |                 |    |                    |          |            |        |            |  |  |       |     |  |        |         |        |       |  |       |        |  |  |         |        



| |         
| | --------
| | Americas





| |     
| | ----
| | EMEA





| |             
| | ------------
| | Asia Pacific



39



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##### Table of Contents





| |                               
| | ------------------------------
| | Room Count and System Pipeline













40



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##### Table of Contents



FIGURE 4


|                                                 |                     |        |       |        |           |  |    |      |        |  |           |         |  |  |       |         |  
|------------------------------------------------ | ------------------- | ------ | ----- | ------ | --------- |  | -- | ---- | ------ |  | --------- | ------- |  |  | ----- | ------- | -
|                                                 |                     | Hotels |       |        | Rooms     | 
|                                                 |                     |        |       |        |           | 
|                                                 |                     |        |       | Change |           |  |    |      | Change | 
|Global hotel and room count at December 31, 2005 |                     | 2005   |       |        | over 2004 |  |    | 2005 |        |  | over 2004 |        
|                                                 |                     |        |       |        |           |  |    |      |        |  |           |        
|Analyzed by brand:                               |                     |        |       |        |           |  |    |      |        |  |           |         |  |  |       |        
|                                                 | InterContinental    |        |       | 137    |           |  |    | 5    |        |  |           | 46,262  |  |  |       | 1,746   |  
|                                                 | Crowne Plaza        |        |       | 235    |           |  |    | 20   |        |  |           | 65,404  |  |  |       | 3,777   |  
|                                                 | Holiday Inn         |        |       | 1,435  |           |  |    | (49  | )      |  |           | 267,816 |  |  |       | (10,971 | )
|                                                 | Holiday Inn Express |        |       | 1,590  |           |  |    | 78   |        |  |           | 133,554 |  |  |       | 7,519   |  
|                                                 | Staybridge Suites   |        |       | 87     |           |  |    | 8    |        |  |           | 9,915   |  |  |       | 726     |  
|                                                 | Candlewood Suites   |        |       | 112    |           |  |    | 3    |        |  |           | 12,683  |  |  |       | 276     |  
|                                                 | Hotel Indigo        |        |       | 3      |           |  |    | 2    |        |  |           | 497     |  |  |       | 357     |  
|                                                 | Other brands        |        |       | 7      |           |  |    | (1   | )      |  |           | 1,402   |  |  |       | (99     | )
|                                                 |                     |        |       |        |           |  |    |      |        |  |           |        
|Total                                            |                     |        | 3,606 |        |           |  | 66 |      |        |  | 537,533   |         |  |  | 3,331 |        
|                                                 |                     |        |       |        |           |  |    |      |        |  |           |        
|Analyzed by ownership type:                      |                     |        |       |        |           |  |    |      |        |  |           |         |  |  |       |        
|                                                 | Owned and leased    |        |       | 55     |           |  |    | (111 | )      |  |           | 15,485  |  |  |       | (22,935 | )
|                                                 | Managed             |        |       | 504    |           |  |    | 101  |        |  |           | 121,249 |  |  |       | 22,296  |  
|                                                 | Franchised          |        |       | 3,047  |           |  |    | 76   |        |  |           | 400,799 |  |  |       | 3,970   |  
|                                                 |                     |        |       |        |           |  |    |      |        |  |           |        
|Total                                            |                     |        | 3,606 |        |           |  | 66 |      |        |  | 537,533   |         |  |  | 3,331 |        
|                                                 |                     |        |       |        |           |  |    |      |        |  |           |        

FIGURE 5


|                                     |                     |        |     |        |           |  |     |      |        |  |           |        |  |  |        |        |  
|------------------------------------ | ------------------- | ------ | --- | ------ | --------- |  | --- | ---- | ------ |  | --------- | ------ |  |  | ------ | ------ | -
|                                     |                     | Hotels |     |        | Rooms     | 
|                                     |                     |        |     |        |           | 
|                                     |                     |        |     | Change |           |  |     |      | Change | 
|Global pipeline at December 31, 2005 |                     | 2005   |     |        | over 2004 |  |     | 2005 |        |  | over 2004 |       
|                                     |                     |        |     |        |           |  |     |      |        |  |           |       
|Analyzed by brand:                   |                     |        |     |        |           |  |     |      |        |  |           |        |  |  |        |       
|                                     | InterContinental    |        |     | 27     |           |  |     | 6    |        |  |           | 9,353  |  |  |        | 2,513  |  
|                                     | Crowne Plaza        |        |     | 54     |           |  |     | 17   |        |  |           | 13,514 |  |  |        | 4,201  |  
|                                     | Holiday Inn         |        |     | 204    |           |  |     | 48   |        |  |           | 31,035 |  |  |        | 5,630  |  
|                                     | Holiday Inn Express |        |     | 429    |           |  |     | 71   |        |  |           | 38,066 |  |  |        | 6,351  |  
|                                     | Staybridge Suites   |        |     | 79     |           |  |     | 27   |        |  |           | 8,195  |  |  |        | 2,843  |  
|                                     | Candlewood Suites   |        |     | 83     |           |  |     | 37   |        |  |           | 7,467  |  |  |        | 3,583  |  
|                                     | Hotel Indigo        |        |     | 8      |           |  |     | 5    |        |  |           | 882    |  |  |        | 494    |  
|                                     |                     |        |     |        |           |  |     |      |        |  |           |       
|Total                                |                     |        | 884 |        |           |  | 211 |      |        |  | 108,512   |        |  |  | 25,615 |       
|                                     |                     |        |     |        |           |  |     |      |        |  |           |       
|Analyzed by ownership type:          |                     |        |     |        |           |  |     |      |        |  |           |        |  |  |        |       
|                                     | Owned and leased    |        |     | 2      |           |  |     |     |        |  |           | 574    |  |  |        | (96    | )
|                                     | Managed             |        |     | 98     |           |  |     | 14   |        |  |           | 27,805 |  |  |        | 5,387  |  
|                                     | Franchised          |        |     | 784    |           |  |     | 197  |        |  |           | 80,133 |  |  |        | 20,324 |  
|                                     |                     |        |     |        |           |  |     |      |        |  |           |       
|Total                                |                     |        | 884 |        |           |  | 211 |      |        |  | 108,512   |        |  |  | 25,615 |       
|                                     |                     |        |     |        |           |  |     |      |        |  |           |       



| |            
| | -----------
| | Seasonality



41



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| |            
| | -----------
| | Competition





| |                  
| | -----------------
| | Key Relationships









| |                       
| | ----------------------
| | Performance Indicators



|         |                  |                    |  |           |            |   |  |            |           |        |      |   |        |           |  |  |      |        |  |   |        |   |  |  |      |        
|-------- | ---------------- | ------------------ |  | --------- | ---------- | - |  | ---------- | --------- | ------ | ---- | - | ------ | --------- |  |  | ---- | ------ |  | - | ------ | - |  |  | ---- | -------
|         |                  | Owned & leased     |  |           | Managed    |   |  |           
|         |                  | comparable         |  |           | comparable |   |  | Franchised |          
|         |                  |                    |  |           |            |   |  |            |          
|         |                  |                    |  | Change vs |            |   |  |            | Change vs |        |      |   |        | Change vs | 
|         |                  | 2005               |  |           | 2004       |   |  | 2005       |           |        | 2004 |   |        | 2005      |  |  | 2004 |       
|         |                  |                    |  |           |            |   |  |            |           |        |      |   |        |           |  |  |      |       
|Americas |                  |                    |  |           |            |   |  |            |           |        |      |   |        |           |  |  |      |        |  |   |        |   |  | 
|         | InterContinental |                    |  |           |            |   |  |            |           |        |      |   |        |           |  |  |      |        |  |   |        |   |  |  |     
|         |                  | Occupancy          |  |           | 76.3       | % |  |            | 4.2       | % pts. |      |   | 66.9   | %         |  |  | 6.4  | % pts. |  |   | 60.1   | % |  |  | 2.2  | % pts. 
|         |                  | Average daily rate |  | $         | 224.83     |   |  |            | 11.2      | %      |      | $ | 145.42 |           |  |  | 5.1  | %      |  | $ | 111.82 |   |  |  | 10.1 | %      
|         |                  | RevPAR             |  | $         | 171.54     |   |  |            | 17.7      | %      |      | $ | 95.32  |           |  |  | 16.2 | %      |  | $ | 67.17  |   |  |  | 14.3 | %      
|         | Crowne Plaza     |                    |  |           |            |   |  |            |           |        |      |   |        |           |  |  |      |        |  |   |        |   |  |  |     
|         |                  | Occupancy          |  |           | 66.1       | % |  |            | 3.8       | % pts. |      |   | 72.2   | %         |  |  | 2.3  | % pts. |  |   | 61.9   | % |  |  | (0.3 | )% pts.
|         |                  | Average daily rate |  | $         | 73.41      |   |  |            | 1.5       | %      |      | $ | 117.36 |           |  |  | 9.4  | %      |  | $ | 98.62  |   |  |  | 8.9  | %      
|         |                  | RevPAR             |  | $         | 48.52      |   |  |            | 7.6       | %      |      | $ | 84.78  |           |  |  | 12.9 | %      |  | $ | 61.02  |   |  |  | 8.4  | %      
|         | Holiday Inn      |                    |  |           |            |   |  |            |           |        |      |   |        |           |  |  |      |        |  |   |        |   |  |  |     
|         |                  | Occupancy          |  |           | 70.6       | % |  |            | 2.9       | % pts. |      |   | 68.4   | %         |  |  | 3.1  | % pts. |  |   | 61.8   | % |  |  | 1.5  | % pts. 
|         |                  | Average daily rate |  | $         | 89.72      |   |  |            | 9.3       | %      |      | $ | 83.39  |           |  |  | 6.0  | %      |  | $ | 85.47  |   |  |  | 6.5  | %      
|         |                  | RevPAR             |  | $         | 63.33      |   |  |            | 14.0      | %      |      | $ | 57.01  |           |  |  | 11.0 | %      |  | $ | 52.80  |   |  |  | 9.2  | %      

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|                  |                    |                |   |           |            |  |  |            |           |  |      |        |   |           |  |      |        |  |   |       |   |  |  |      |       
|----------------- | ------------------ | -------------- | - | --------- | ---------- |  |  | ---------- | --------- |  | ---- | ------ | - | --------- |  | ---- | ------ |  | - | ----- | - |  |  | ---- | ------
|                  |                    | Owned & leased |   |           | Managed    |  |  |           
|                  |                    | comparable     |   |           | comparable |  |  | Franchised |          
|                  |                    |                |   |           |            |  |  |            |          
|                  |                    |                |   | Change vs |            |  |  |            | Change vs |  |      |        |   | Change vs | 
|                  |                    | 2005           |   |           | 2004       |  |  | 2005       |           |  | 2004 |        |   | 2005      |  |      | 2004   | 
|                  |                    |                |   |           |            |  |  |            |           |  |      |        |   |           |  |      |        | 
|Express           |                    |                |   |           |            |  |  |            |           |  |      |        |   |           |  |      |        |  |   |       |   |  |  |     
|                  | Occupancy          |                |   |          |            |  |  |           |           |  |      | 75.1   | % |           |  | 5.4  | % pts. |  |   | 66.7  | % |  |  | 2.2  | % pts.
|                  | Average daily rate |                |   |          |            |  |  |           |           |  | $    | 119.12 |   |           |  | 8.4  | %      |  | $ | 80.57 |   |  |  | 6.7  | %     
|                  | RevPAR             |                |   |          |            |  |  |           |           |  | $    | 89.51  |   |           |  | 16.8 | %      |  | $ | 53.71 |   |  |  | 10.3 | %     
|Staybridge Suites |                    |                |   |           |            |  |  |            |           |  |      |        |   |           |  |      |        |  |   |       |   |  |  |     
|                  | Occupancy          |                |   | 75.1      | %          |  |  | 4.4        | % pts.    |  |      | 75.5   | % |           |  | 1.3  | % pts. |  |   | 73.7  | % |  |  | 2.9  | % pts.
|                  | Average daily rate |                | $ | 78.77     |            |  |  | 1.8        | %         |  | $    | 94.22  |   |           |  | 7.3  | %      |  | $ | 91.29 |   |  |  | 5.2  | %     
|                  | RevPAR             |                | $ | 59.12     |            |  |  | 8.1        | %         |  | $    | 71.16  |   |           |  | 9.1  | %      |  | $ | 67.28 |   |  |  | 9.5  | %     
|Candlewood Suites |                    |                |   |           |            |  |  |            |           |  |      |        |   |           |  |      |        |  |   |       |   |  |  |     
|                  | Occupancy          |                |   |          |            |  |  |           |           |  |      | 75.0   | % |           |  | 3.6  | % pts. |  |   | 69.8  | % |  |  | 1.2  | % pts.
|                  | Average daily rate |                |   |          |            |  |  |           |           |  | $    | 61.03  |   |           |  | 9.2  | %      |  | $ | 64.99 |   |  |  | 3.3  | %     
|                  | RevPAR             |                |   |          |            |  |  |           |           |  | $    | 45.76  |   |           |  | 14.8 | %      |  | $ | 45.33 |   |  |  | 5.2  | %     





|     |                  |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |        |  |   |        |   |  |  |      |       
|---- | ---------------- | ------------------ |  | --------- | ---------- | - |  | ---------- | --------- | ------- | ---- | - | ------ | --------- |  |  | ---- | ------ |  | - | ------ | - |  |  | ---- | ------
|     |                  | Owned & leased     |  |           | Managed    |   |  |           
|     |                  | comparable         |  |           | comparable |   |  | Franchised |          
|     |                  |                    |  |           |            |   |  |            |          
|     |                  |                    |  | Change vs |            |   |  |            | Change vs |         |      |   |        | Change vs | 
|     |                  | 2005               |  |           | 2004       |   |  | 2005       |           |         | 2004 |   |        | 2005      |  |  | 2004 |       
|     |                  |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |       
|EMEA |                  |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |        |  |   |        |   |  | 
|     | InterContinental |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |        |  |   |        |   |  |  |     
|     |                  | Occupancy          |  |           | 69.5       | % |  |            | 5.1       | % pts.  |      |   | 62.7   | %         |  |  | 1.7  | % pts. |  |   | 68.5   | % |  |  | 10.3 | % pts.
|     |                  | Average daily rate |  | $         | 234.37     |   |  |            | 5.0       | %       |      | $ | 141.75 |           |  |  | 6.6  | %      |  | $ | 158.71 |   |  |  | 6.4  | %     
|     |                  | RevPAR             |  | $         | 162.99     |   |  |            | 13.3      | %       |      | $ | 88.83  |           |  |  | 9.5  | %      |  | $ | 108.78 |   |  |  | 25.2 | %     
|     | Crown Plaza      |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |        |  |   |        |   |  |  |     
|     |                  | Occupancy          |  |           | 67.5       | % |  |            | 3.2       | % pts.  |      |   | 73.2   | %         |  |  | 0.6  | % pts. |  |   | 63.7   | % |  |  | 2.3  | % pts.
|     |                  | Average daily rate |  | $         | 124.20     |   |  |            | (0.1      | )%      |      | $ | 134.68 |           |  |  | 13.3 | %      |  | $ | 131.74 |   |  |  | 5.7  | %     
|     |                  | RevPAR             |  | $         | 83.80      |   |  |            | 4.9       | %       |      | $ | 98.63  |           |  |  | 14.3 | %      |  | $ | 83.94  |   |  |  | 9.6  | %     
|     | Holiday Inn      |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |        |  |   |        |   |  |  |     
|     |                  | Occupancy          |  |           | 62.5       | % |  |            | (2.6      | )% pts. |      |   | 71.1   | %         |  |  | 1.4  | % pts. |  |   | 64.8   | % |  |  | 0.5  | % pts.
|     |                  | Average daily rate |  | $         | 127.87     |   |  |            | (1.3      | )%      |      | $ | 107.41 |           |  |  | 4.6  | %      |  | $ | 102.95 |   |  |  | 4.1  | %     
|     |                  | RevPAR             |  | $         | 79.94      |   |  |            | (5.3      | )%      |      | $ | 76.34  |           |  |  | 6.7  | %      |  | $ | 66.68  |   |  |  | 4.9  | %     
|     | Express          |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |        |  |   |        |   |  |  |     
|     |                  | Occupancy          |  |           | 65.5       | % |  |            | 4.1       | % pts.  |      |   | 60.8   | %         |  |  | 10.1 | % pts. |  |   | 69.4   | % |  |  | 1.3  | % pts.
|     |                  | Average daily rate |  | $         | 77.37      |   |  |            | (2.7      | )%      |      | $ | 80.67  |           |  |  | (3.0 | )%     |  | $ | 99.80  |   |  |  | 3.8  | %     
|     |                  | RevPAR             |  | $         | 50.64      |   |  |            | 3.8       | %       |      | $ | 49.06  |           |  |  | 16.4 | %      |  | $ | 69.27  |   |  |  | 5.9  | %     





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|             |                  |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |         |  |   |        |   |  |  |      |       
|------------ | ---------------- | ------------------ |  | --------- | ---------- | - |  | ---------- | --------- | ------- | ---- | - | ------ | --------- |  |  | ---- | ------- |  | - | ------ | - |  |  | ---- | ------
|             |                  | Owned & leased     |  |           | Managed    |   |  |           
|             |                  | comparable         |  |           | comparable |   |  | Franchised |          
|             |                  |                    |  |           |            |   |  |            |          
|             |                  |                    |  | Change vs |            |   |  |            | Change vs |         |      |   |        | Change vs | 
|             |                  | 2005               |  |           | 2004       |   |  | 2005       |           |         | 2004 |   |        | 2005      |  |  | 2004 |        
|             |                  |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |        
|Asia Pacific |                  |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |         |  |   |        |   |  | 
|             | InterContinental |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |         |  |   |        |   |  |  |     
|             |                  | Occupancy          |  |           | 65.9       | % |  |            | (4.3      | )% pts. |      |   | 71.0   | %         |  |  | (0.7 | )% pts. |  |   | 68.0   | % |  |  | 6.6  | % pts.
|             |                  | Average daily rate |  | $         | 283.79     |   |  |            | 18.9      | %       |      | $ | 146.66 |           |  |  | 5.8  | %       |  | $ | 142.36 |   |  |  | 10.4 | %     
|             |                  | RevPAR             |  | $         | 186.92     |   |  |            | 11.7      | %       |      | $ | 104.13 |           |  |  | 4.7  | %       |  | $ | 96.84  |   |  |  | 22.4 | %     
|             | Crowne Plaza     |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |         |  |   |        |   |  |  |     
|             |                  | Occupancy          |  |           |           |   |  |            |          |         |      |   | 77.1   | %         |  |  | 1.8  | % pts.  |  |   | 74.6   | % |  |  | 0.8  | % pts.
|             |                  | Average daily rate |  |           |           |   |  |            |          |         |      | $ | 91.48  |           |  |  | 8.3  | %       |  | $ | 99.60  |   |  |  | 0.5  | %     
|             |                  | RevPAR             |  |           |           |   |  |            |          |         |      | $ | 70.55  |           |  |  | 10.9 | %       |  | $ | 74.33  |   |  |  | 1.5  | %     
|             | Holiday Inn      |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |         |  |   |        |   |  |  |     
|             |                  | Occupancy          |  |           | 76.9       | % |  |            | 16.8      | % pts.  |      |   | 75.2   | %         |  |  | (1.6 | )% pts. |  |   | 71.3   | % |  |  | 1.6  | % pts.
|             |                  | Average daily rate |  | $         | 97.79      |   |  |            | 5.5       | %       |      | $ | 74.14  |           |  |  | 12.7 | %       |  | $ | 67.35  |   |  |  | 6.0  | %     
|             |                  | RevPAR             |  | $         | 75.17      |   |  |            | 34.9      | %       |      | $ | 55.78  |           |  |  | 10.3 | %       |  | $ | 48.03  |   |  |  | 8.5  | %     
|             | Express          |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |         |  |   |        |   |  |  |     
|             |                  | Occupancy          |  |           |           |   |  |            |          |         |      |   | 64.9   | %         |  |  | 7.4  | % pts.  |  |   | 67.3   | % |  |  | 1.6  | % pts.
|             |                  | Average daily rate |  |           |           |   |  |            |          |         |      | $ | 71.20  |           |  |  | (5.1 | )%      |  | $ | 59.75  |   |  |  | (2.3 | )%    
|             |                  | RevPAR             |  |           |           |   |  |            |          |         |      | $ | 46.24  |           |  |  | 7.2  | %       |  | $ | 40.21  |   |  |  | 0    | %     
|             | Other            |                    |  |           |            |   |  |            |           |         |      |   |        |           |  |  |      |         |  |   |        |   |  |  |     
|             |                  | Occupancy          |  |           |           |   |  |            |          |         |      |   | 65.8   | %         |  |  | (5.8 | )% pts. |  |   |       |   |  |  |     |       
|             |                  | Average daily rate |  |           |           |   |  |            |          |         |      | $ | 77.60  |           |  |  | (1.6 | )%      |  |   |       |   |  |  |     |       
|             |                  | RevPAR             |  |           |           |   |  |            |          |         |      | $ | 51.08  |           |  |  | (9.6 | )%      |  |   |       |   |  |  |     |       







| |           
| | ----------
| | Regulation






SOFT DRINKS








44



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##### Table of Contents






TRADEMARKS







ORGANIZATIONAL STRUCTURE




| |                                            
| | -------------------------------------------
| | Principal operating subsidiary undertakings











Soft Drinks













|       |                                                                                                                                                                                                                                                                                 
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|note a | The Group exercised dominant influence and controlled Britannia
    Soft Drinks Limited up to 14 December 2005 when the Group
    disposed of all its interests. Accordingly, the Groups
    investment was treated as a subsidiary undertaking until the
    date of disposal.
|      
|note b | The companies listed above include all those which principally
    affect the amount of profit and assets of the Group.                                                                                                                                                         




PROPERTY, PLANTS AND EQUIPMENT




|                                        |  |                 |     |  |          |  |     |              |  |  |       |  |  |  |       | 
|--------------------------------------- |  | --------------- | --- |  | -------- |  | --- | ------------ |  |  | ----- |  |  |  | ----- | 
|                                        |  | Europe,         |     |  |          |  |     |              | 
|Net book value of land and buildings as |  | the Middle East |     |  |          |  |     |              | 
|at December 31, 2005                    |  | and Africa      |     |  | Americas |  |     | Asia Pacific |  |  | Total | 
|                                        |  |                 |     |  |          |  |     |              |  |  |       | 
|                                        |  | (£ million)     |    
|Hotels                                  |  |                 | 609 |  |          |  | 241 |              |  |  | 204   |  |  |  | 1,054 | 
|                                        |  |                 |     |  |          |  |     |              |  |  |       | 





45



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ENVIRONMENT










| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | is sensitive to environmental issues and considers all the
    potential effects of its projects and developments;
|
| |  | introduces, promotes, implements and enforces sound
    environmental policies;                                   
|
| |  | establishes management responsibility and accountability for
    environmentally friendly practices; and          
|
| |  | benchmarks performance against best industry practice.                                                            





80-90 100-room











|        |                                             
|------- | --------------------------------------------
|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS




INTRODUCTION




| |                      
| | ---------------------
| | Business and Overview



46



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##### Table of Contents









Operational Performance











CRITICAL ACCOUNTING POLICIES UNDER IFRS AND US GAAP










| |                                                    
| | ---------------------------------------------------
| | Property, Plant and Equipment and Intangible Assets



|    |                                     
|--- | ------------------------------------
|(i) | Goodwill and other Intangible Assets





47



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|     |           
|---- | ----------
|(ii) | Impairment









| |                    
| | -------------------
| | Sale of Real Estate





| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | 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                                                          
|
| |  | will the Company actually receive the proceeds.                                                             



48



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| |             
| | ------------
| | Income Taxes







| |                
| | ---------------
| | Loyalty program





| |                    
| | -------------------
| | Legal Contingencies






OPERATING RESULTS




| |                      
| | ---------------------
| | Accounting Principles









| |     |                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Not to restate the comparative information disclosed in the 2005
    financial statements in accordance with IAS 32 Financial
    Instruments: Disclosure and Presentation and IAS 39
    Financial Instruments: Recognition and Measurement.
|
| | (b) | Not to restate business combinations before January 1, 2004.                                                                                                                                                                                     

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| |     |                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | To recognize all actuarial gains and losses on pensions and
    other post-employment benefits directly in equity at
    January 1, 2004.    
|
| | (d) | To retain UK GAAP carrying values of property, plant and
    equipment, including revaluations, as deemed cost at transition.                
|
| | (e) | Not to recognize separately cumulative foreign exchange
    movements up to January 1, 2004.                                                 
|
| | (f) | To apply IFRS 2 Share-based Payments to grants of
    equity instruments after November 7, 2002 that had not
    vested at January 1, 2005.







| |                                                                    
| | -------------------------------------------------------------------
| | Year ended December 2005 compared with year ended
    December 2004



| |      
| | -----
| | Group

|                                                                  |                                                                  |              |       |     |              |  |       |     |  
|----------------------------------------------------------------- | ---------------------------------------------------------------- | ------------ | ----- | --- | ------------ |  | ----- | --- | -
|                                                                  |                                                                  | Year ended   |       |     | Year ended   | 
|                                                                  |                                                                  | December 31, |       |     | December 31, | 
|                                                                  |                                                                  | 2005         |       |     | 2004         | 
|                                                                  |                                                                  |              |       |     |              | 
|                                                                  |                                                                  | (£ million)  |      
|GROUP RESULTS                                                     |                                                                  |              |       |     |              |  |       |    
|Revenue:                                                          |                                                                  |              |       |     |              |  |       |    
|Continuing operations                                             |                                                                  |              |       |     |              |  |       |    
|                                                                  | Hotels                                                           |              |       | 852 |              |  |       | 731 |  
|Discontinued operations                                           |                                                                  |              |       |     |              |  |       |    
|                                                                  | Hotels                                                           |              |       | 387 |              |  |       | 767 |  
|                                                                  | Soft Drinks                                                      |              |       | 671 |              |  |       | 706 |  
|                                                                  |                                                                  |              |       |     |              | 
|Total revenue                                                     |                                                                  |              | 1,910 |     |              |  | 2,204 |    
|                                                                  |                                                                  |              |       |     |              | 
|Operating profit before other operating income and expenses:      |                                                                  |              |       |     |              |  |       |    
|Continuing operations                                             |                                                                  |              |       |     |              |  |       |    
|                                                                  | Hotels                                                           |              |       | 190 |              |  |       | 134 |  
|Discontinued operations                                           |                                                                  |              |       |     |              |  |       |    
|                                                                  | Hotels                                                           |              |       | 79  |              |  |       | 135 |  
|                                                                  | Soft Drinks                                                      |              |       | 70  |              |  |       | 77  |  
|                                                                  |                                                                  |              |       |     |              | 
|Total operating profit before other operating income and expenses |                                                                  |              | 339   |     |              |  | 346   |    
|Other operating income and expenses:                              |                                                                  |              |       |     |              |  |       |    
|Continuing operations                                             |                                                                  |              |       |     |              |  |       |    
|                                                                  | Impairment of property, plant and equipment                      |              |       | (7  | )            |  |       | (48 | )
|                                                                  | Restructuring costs                                              |              |       | (13 | )            |  |       | (11 | )
|                                                                  | Property damage                                                  |              |       | (9  | )            |  |       |    |  
|                                                                  | Employee benefits curtailment gain                               |              |       | 7   |              |  |       |    |  
|                                                                  | Reversal of previously recorded provisions                       |              |       |    |              |  |       | 20  |  
|                                                                  | Provision for investment in associates                           |              |       |    |              |  |       | (16 | )
|                                                                  | Provision for investment in other financial assets               |              |       |    |              |  |       | (2  | )
|                                                                  | Write back of provision for investment in other financial assets |              |       |    |              |  |       | 8   |  
|                                                                  |                                                                  |              |       |     |              | 
|Operating profit                                                  |                                                                  |              | 317   |     |              |  | 297   |    
|                                                                  |                                                                  |              |       |     |              | 

50



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Special Items






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | £13 million charge (2004 £11 million charge)
    relating to the delivery of the further restructuring of the
    Hotels business;                                                                                                                                                                                                                                                                                                                                                      
|
| |  | £9 million charge (2004 £nil million) of property
    damage relating from fire and natural disasters;                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | £7 million charge (2004 £48 million charge)
    for impairment of property, plant and equipment;                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | £7 million credit (2004 £nil million)for employee
    benefits curtailment as a result of the UK hotels disposal;                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | £nil million (2004 £20 million credit) relating
    to the reversal of previously recorded provisions;                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | £nil million (2004 £16 million charge) relating
    to an impairment in the value of associate investments;                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | £nil million (2004 £2 million charge) relating to
    impairment in the value in investments in other financial assets;                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | £nil million (2004 £8 million credit) relating to
    write back in provisions in investments in other financial
    assets;                                                                                                                                                                                                                                                                                                                                                            
|
| |  | £nil million (2004 £11 million expense) relating
    to one time net financial expenses;                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | £8 million credit (2004 £183 million credit)
    representing the release of provisions relating to tax matters
    which have been settled or in respect of which the relevant
    statutory limitation period has expired, principally relating to
    acquisitions (including provisions relating to pre-acquisition
    periods) and disposals, intra-group financing and, in 2004, the
    recognition of a deferred tax asset of £83 million in
    respect of capital losses; and
|
| |  | £311 million gain (2004 £19 million gain)
    net of tax on disposal of assets.                                                                                                                                                                                                                                                                                                                                                                                                         



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Net Financing Costs




Taxation








Gain on Disposal of
Assets




Earnings




Dividends




Capital Expenditure and
Cash Flow








52



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| |                                                    
| | ---------------------------------------------------
| | Highlights for the year ended December 31,
    2005





| |                          
| | -------------------------
| | Continuing Hotels Results

|                                                             |              |              |     |     |              |  |     |        |   |  |      |      | 
|------------------------------------------------------------ | ------------ | ------------ | --- | --- | ------------ |  | --- | ------ | - |  | ---- | ---- | 
|                                                             |              | Year ended   |     |     | Year ended   |  |     |       
|                                                             |              | December 31, |     |     | December 31, |  |     |       
|                                                             |              | 2005         |     |     | 2004         |  |     | Change |  
|                                                             |              |              |     |     |              |  |     |        |  
|                                                             |              | (£ million)  |     |     | %            | 
|Revenue:                                                     |              |              |     |     |              |  |     |        |   |  |      |     
|                                                             | Americas     |              |     | 400 |              |  |     | 319    |   |  |      | 25.4 | 
|                                                             | EMEA         |              |     | 326 |              |  |     | 301    |   |  |      | 8.3  | 
|                                                             | Asia Pacific |              |     | 84  |              |  |     | 71     |   |  |      | 18.3 | 
|                                                             | Central      |              |     | 42  |              |  |     | 40     |   |  |      | 5.0  | 
|                                                             |              |              |     |     |              |  |     |        |  
|                                                             |              |              | 852 |     |              |  | 731 |        |   |  | 16.6 |     
|                                                             |              |              |     |     |              |  |     |        |  
|Operating profit before other operating income and expenses: |              |              |     |     |              |  |     |        |   |  |      |     
|                                                             | Americas     |              |     | 187 |              |  |     | 150    |   |  |      | 24.7 | 
|                                                             | EMEA         |              |     | 47  |              |  |     | 24     |   |  |      | 95.8 | 
|                                                             | Asia Pacific |              |     | 21  |              |  |     | 17     |   |  |      | 23.5 | 
|                                                             | Central      |              |     | (65 | )            |  |     | (57    | ) |  |      | 14.0 | 
|                                                             |              |              |     |     |              |  |     |        |  
|                                                             |              |              | 190 |     |              |  | 134 |        |   |  | 41.8 |     
|                                                             |              |              |     |     |              |  |     |        |  

Revenue.


Operating profit.




| |         
| | --------
| | Americas



| |                            
| | ---------------------------
| | Continuing Americas Results

|         |                  |              |     |     |              |  |     |        |  |  |      |       | 
|-------- | ---------------- | ------------ | --- | --- | ------------ |  | --- | ------ |  |  | ---- | ----- | 
|         |                  | Year ended   |     |     | Year ended   |  |     |       
|         |                  | December 31, |     |     | December 31, |  |     |       
|         |                  | 2005         |     |     | 2004         |  |     | Change | 
|         |                  |              |     |     |              |  |     |        | 
|         |                  | ($ million)  |     |     | %            | 
|Revenue: |                  |              |     |     |              |  |     |        |  |  |      |      
|         | Owned and leased |              |     | 224 |              |  |     | 171    |  |  |      | 31.0  | 
|         | Managed          |              |     | 118 |              |  |     | 55     |  |  |      | 114.5 | 
|         | Franchised       |              |     | 389 |              |  |     | 357    |  |  |      | 9.0   | 
|         |                  |              |     |     |              |  |     |        | 
|         |                  |              | 731 |     |              |  | 583 |        |  |  | 25.4 |      
|         |                  |              |     |     |              |  |     |        | 

53



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|                                                             |                  |              |     |     |              |  |     |        |  |  |      |       | 
|------------------------------------------------------------ | ---------------- | ------------ | --- | --- | ------------ |  | --- | ------ |  |  | ---- | ----- | 
|                                                             |                  | Year ended   |     |     | Year ended   |  |     |       
|                                                             |                  | December 31, |     |     | December 31, |  |     |       
|                                                             |                  | 2005         |     |     | 2004         |  |     | Change | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  | ($ million)  |     |     | %            | 
|Operating profit before other operating income and expenses: |                  |              |     |     |              |  |     |        |  |  |      |      
|                                                             | Owned and leased |              |     | 28  |              |  |     | 7      |  |  |      | 300.0 | 
|                                                             | Managed          |              |     | 36  |              |  |     | 12     |  |  |      | 200.0 | 
|                                                             | Franchised       |              |     | 340 |              |  |     | 304    |  |  |      | 11.8  | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  |              | 404 |     |              |  | 323 |        |  |  | 25.1 |      
|Regional overheads                                           |                  |              | (62 | )   |              |  | (50 | )      |  |  | 24.0 |      
|                                                             |                  |              |     |     |              |  |     |        | 
|Total $ million                                              |                  |              | 342 |     |              |  | 273 |        |  |  | 25.3 |      
|                                                             |                  |              |     |     |              |  |     |        | 
|Sterling equivalent
    £ million(i)                         |                  |              | 187 |     |              |  | 150 |        |  |  | 24.7 |      
|                                                             |                  |              |     |     |              |  |     |        | 






|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The results have been translated into pounds sterling at
    weighted average rates of exchange for the year. The translation
    rates are fiscal 2005: £1 = $1.83 (2004:
    £1 = $1.82).













54



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| |                               
| | ------------------------------
| | Europe, Middle East and Africa



| |                        
| | -----------------------
| | Continuing EMEA Results

|                                                             |                  |              |     |     |              |  |     |        |  |  |      |       | 
|------------------------------------------------------------ | ---------------- | ------------ | --- | --- | ------------ |  | --- | ------ |  |  | ---- | ----- | 
|                                                             |                  | Year ended   |     |     | Year ended   |  |     |       
|                                                             |                  | December 31, |     |     | December 31, |  |     |       
|                                                             |                  | 2005         |     |     | 2004         |  |     | Change | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  | (£ million)  |     |     | %            | 
|Revenue:                                                     |                  |              |     |     |              |  |     |        |  |  |      |      
|                                                             | Owned and leased |              |     | 236 |              |  |     | 231    |  |  |      | 2.2   | 
|                                                             | Managed          |              |     | 55  |              |  |     | 43     |  |  |      | 27.9  | 
|                                                             | Franchised       |              |     | 35  |              |  |     | 27     |  |  |      | 29.6  | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  |              | 326 |     |              |  | 301 |        |  |  | 8.3  |      
|                                                             |                  |              |     |     |              |  |     |        | 
|Operating profit before other operating income and expenses: |                  |              |     |     |              |  |     |        |  |  |      |      
|                                                             | Owned and leased |              |     | 11  |              |  |     | 2      |  |  |      | 450.0 | 
|                                                             | Managed          |              |     | 31  |              |  |     | 24     |  |  |      | 29.2  | 
|                                                             | Franchised       |              |     | 26  |              |  |     | 21     |  |  |      | 23.8  | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  |              | 68  |     |              |  | 47  |        |  |  | 44.7 |      
|Regional overheads                                           |                  |              | (21 | )   |              |  | (23 | )      |  |  | (8.7 | )    
|                                                             |                  |              |     |     |              |  |     |        | 
|Total £ million                                              |                  |              | 47  |     |              |  | 24  |        |  |  | 95.8 |      
|                                                             |                  |              |     |     |              |  |     |        | 
|Dollar equivalent $
    million(i)                           |                  |              | 86  |     |              |  | 44  |        |  |  | 95.5 |      
|                                                             |                  |              |     |     |              |  |     |        | 






|    |                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The results have been translated into US dollars at weighted
    average rates of exchange for the year. The translation rates
    are fiscal 2005: $1 = £0.55 (2004: $1 =
    £0.55).











55



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| |             
| | ------------
| | Asia Pacific



| |                                
| | -------------------------------
| | Continuing Asia Pacific Results

|                                                             |                  |              |     |     |              |  |     |        |  |  |      |      | 
|------------------------------------------------------------ | ---------------- | ------------ | --- | --- | ------------ |  | --- | ------ |  |  | ---- | ---- | 
|                                                             |                  | Year ended   |     |     | Year ended   |  |     |       
|                                                             |                  | December 31, |     |     | December 31, |  |     |       
|                                                             |                  | 2005         |     |     | 2004         |  |     | Change | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  | ($ million)  |     |     | %            | 
|Revenue:                                                     |                  |              |     |     |              |  |     |        |  |  |      |     
|                                                             | Owned and leased |              |     | 102 |              |  |     | 86     |  |  |      | 18.6 | 
|                                                             | Managed          |              |     | 45  |              |  |     | 38     |  |  |      | 18.4 | 
|                                                             | Franchised       |              |     | 6   |              |  |     | 5      |  |  |      | 20.0 | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  |              | 153 |     |              |  | 129 |        |  |  | 18.6 |     
|                                                             |                  |              |     |     |              |  |     |        | 
|Operating profit before other operating income and expenses: |                  |              |     |     |              |  |     |        |  |  |      |     
|                                                             | Owned and leased |              |     | 19  |              |  |     | 17     |  |  |      | 11.8 | 
|                                                             | Managed          |              |     | 29  |              |  |     | 25     |  |  |      | 16.0 | 
|                                                             | Franchised       |              |     | 5   |              |  |     | 3      |  |  |      | 66.7 | 
|                                                             |                  |              |     |     |              |  |     |        | 
|                                                             |                  |              | 53  |     |              |  | 45  |        |  |  | 17.8 |     
|Regional overheads                                           |                  |              | (15 | )   |              |  | (15 | )      |  |  |     |     
|                                                             |                  |              |     |     |              |  |     |        | 
|Total $ million                                              |                  |              | 38  |     |              |  | 30  |        |  |  | 26.7 |     
|                                                             |                  |              |     |     |              |  |     |        | 
|Sterling equivalent
    £ million(i)                         |                  |              | 21  |     |              |  | 16  |        |  |  | 31.2 |     
|                                                             |                  |              |     |     |              |  |     |        | 






|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The results have been translated into pounds sterling at
    weighted average rates of exchange for the year. The translation
    rates are fiscal 2004: £1 = $1.83 (2004:
    £1 = $1.82).











56



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| |        
| | -------
| | Central



| |        
| | -------
| | Central

|                                   |  |              |      |   |              |  |      |        |  |  |      | 
|---------------------------------- |  | ------------ | ---- | - | ------------ |  | ---- | ------ |  |  | ---- | 
|                                   |  | Year ended   |      |   | Year ended   |  |      |       
|                                   |  | December 31, |      |   | December 31, |  |      |       
|                                   |  | 2005         |      |   | 2004         |  |      | Change | 
|                                   |  |              |      |   |              |  |      |        | 
|                                   |  | (£ million)  |      |   | %            | 
|Revenue                            |  |              | 42   |   |              |  | 40   |        |  |  | 5.0  | 
|Gross central costs                |  |              | (107 | ) |              |  | (97  | )      |  |  | 10.3 | 
|                                   |  |              |      |   |              |  |      |        | 
|Net central costs £ million        |  |              | (65  | ) |              |  | (57  | )      |  |  | 14.0 | 
|                                   |  |              |      |   |              |  |      |        | 
|Dollar equivalent $
    million(i) |  |              | (118 | ) |              |  | (102 | )      |  |  | 15.7 | 
|                                   |  |              |      |   |              |  |      |        | 






|    |                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The results have been translated into US dollars at weighted
    average rates of exchange for the year. The translation rates
    are fiscal 2005: $1 = £0.55 (2004: $1 =
    £0.55).





| |                        
| | -----------------------
| | Discontinued Operations








LIQUIDITY AND CAPITAL RESOURCES




| |                     
| | --------------------
| | Sources of Liquidity








57



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| |                               
| | ------------------------------
| | Cash From Operating Activities





| |                                   
| | ----------------------------------
| | Cash Used for Investing Activities













58



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| |                        
| | -----------------------
| | Contractual Obligations



|                                   |  |               |     |  |           |  |     |           |  |  |           |       |  |         |     |  |  |  |     | 
|---------------------------------- |  | ------------- | --- |  | --------- |  | --- | --------- |  |  | --------- | ----- |  | ------- | --- |  |  |  | --- | 
|                                   |  | Total amounts |     |  | Less than |  |     |           |  |  |           | After | 
|                                   |  | committed     |     |  | 1 year    |  |     | 1-3 years |  |  | 3-5 years |       |  | 5 years |    
|                                   |  |               |     |  |           |  |     |           |  |  |           |       |  |         |    
|                                   |  | (£ million)   |    
|Long-term debt                     |  |               | 412 |  |           |  | 2   |           |  |  | 33        |       |  |         | 377 |  |  |  |    | 
|Operating lease obligations        |  |               | 274 |  |           |  | 36  |           |  |  | 56        |       |  |         | 33  |  |  |  | 149 | 
|Other long-term
    obligations(i) |  |               | 82  |  |           |  | 6   |           |  |  | 12        |       |  |         | 8   |  |  |  | 56  | 
|Capital contracts placed           |  |               | 76  |  |           |  | 76  |           |  |  |          |       |  |         |    |  |  |  |    | 
|                                   |  |               |     |  |           |  |     |           |  |  |           |       |  |         |    
|                                   |  |               | 844 |  |           |  | 120 |           |  |  | 101       |       |  |         | 418 |  |  |  | 205 | 
|                                   |  |               |     |  |           |  |     |           |  |  |           |       |  |         |    






|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(i) | Other long-term obligations includes credit balances on currency
    swaps, interest rate swaps, forward contracts and pension
    obligations.











| |                         
| | ------------------------
| | Pension Plan Commitments











59



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|        |                                           
|------- | ------------------------------------------
|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES




DIRECTORS AND SENIOR MANAGEMENT






|                           |  |                                          |  |              |      |  |                  |  |      | 
|-------------------------- |  | ---------------------------------------- |  | ------------ | ---- |  | ---------------- |  | ---- | 
|                           |  |                                          |  | Initially    |      |  | Date of next     | 
|                           |  |                                          |  | appointed to |      |  | reappointment    | 
|Name                       |  | Title                                    |  | the board    |      |  | by shareholders* | 
|                           |  |                                          |  |              |      |  |                  | 
|Andrew Cosslett            |  | Director and Chief Executive             |  |              | 2005 |  |                  |  | 2007 | 
|Richard Hartman            |  | Director and Managing Director, EMEA     |  |              | 2003 |  |                  |  | 2007 | 
|David
    Kappler(1)       |  | Director and Senior Independent Director |  |              | 2004 |  |                  |  | 2007 | 
|Ralph
    Kugler(1)        |  | Director                                 |  |              | 2003 |  |                  |  | 2007 | 
|Jennifer
    Laing(1)      |  | Director                                 |  |              | 2005 |  |                  |  | 2006 | 
|Robert C.
    Larson(1)    |  | Director                                 |  |              | 2003 |  |                  |  | 2006 | 
|Jonathan
    Linen(1)      |  | Director                                 |  |              | 2005 |  |                  |  | 2006 | 
|Stevan Porter              |  | Director and President, The Americas     |  |              | 2003 |  |                  |  | 2006 | 
|Sir David
    Prosser(1)   |  | Director                                 |  |              | 2003 |  |                  |  | 2007 | 
|Richard Solomons           |  | Director and Finance Director            |  |              | 2003 |  |                  |  | 2007 | 
|Sir Howard
    Stringer(1) |  | Director                                 |  |              | 2003 |  |                  |  | 2007 | 
|David Webster              |  | Chairman                                 |  |              | 2003 |  |                  |  | 2007 | 






|    |                                    
|--- | -----------------------------------
|(1) | Independent non-executive director.



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | 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, Sir Howard Stringer and David Webster will be required,
    under the Companys articles of association, to stand for
    re-election at the 2007
    Annual General Meeting. Any further reappointments at the 2007
    meeting would be on a voluntary basis.



| |         
| | --------
| | Officers

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



| |                              
| | -----------------------------
| | Former Directors and Officers





| |                       
| | ----------------------
| | Directors and Officers

Tom Conophy




60



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Andrew Cosslett




Peter Gowers


e-commerce,


Richard Hartman




A. Patrick Imbardelli




David Kappler




Ralph Kugler




Jennifer Laing




61



---



##### Table of Contents



Robert C Larson




Jonathan Linen




Stevan Porter




Sir David Prosser




Tracy Robbins




Richard Solomons




Sir Howard Stringer




David Webster




62



---



##### Table of Contents





Richard Winter







COMPENSATION








| |            
| | -----------
| | Share Plans





| |                            
| | ---------------------------
| | Executive Share Option Plan









63



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##### Table of Contents





| |                                   
| | ----------------------------------
| | Short Term Deferred Incentive Plan





| |                                  
| | ---------------------------------
| | Performance Restricted Share Plan





| |               
| | --------------
| | Sharesave Plan





| |                                              
| | ---------------------------------------------
| | Options and Ordinary Shares held by Directors






BOARD PRACTICES




| |                     
| | --------------------
| | Contracts of Service





64



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| |                     
| | --------------------
| | Directors Contracts

|                 |  |                |         |  |                 |  |           | 
|---------------- |  | -------------- | ------- |  | --------------- |  | --------- | 
|                 |  | Contract       |         |  | Unexpired term/ | 
|Directors        |  | effective date |         |  | notice period   | 
|                 |  |                |         |  |                 | 
|Andrew Cosslett  |  |                | 2.3.05  |  |                 |  | 12 months | 
|Richard Hartman  |  |                | 4.15.03 |  |                 |  | 12 months | 
|Stevan Porter    |  |                | 4.15.03 |  |                 |  | 12 months | 
|Richard Solomons |  |                | 4.15.03 |  |                 |  | 12 months | 
|                 |  |                |         |  |                 | 







| |                        
| | -----------------------
| | Payments on Termination





Committees




Executive Committee




Audit Committee




65



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##### Table of Contents









| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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,
    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 and oversee a specific Code of Ethics for the senior
    financial officers, which is consistent with the Groups
    overall Guidelines for Proper Business Conduct.                                                                        



Remuneration Committee




Nomination Committee




66



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##### Table of Contents



Disclosure Committee




General Purposes Committee









EMPLOYEES


full-time




|                              |  |                |        |                 |            |  |       |               |  |  |              |  |  |       |       |  |  |  |        | 
|----------------------------- |  | -------------- | ------ | --------------- | ---------- |  | ----- | ------------- |  |  | ------------ |  |  | ----- | ----- |  |  |  | ------ | 
|                              |  |                |        | Rest of Europe, |            |  |       |               |  |  |             
|                              |  |                |        | the Middle East |            |  |       |               |  |  |             
|                              |  | United Kingdom |        |                 | and Africa |  |       | United States |  |  | Asia Pacific |  |  | Total |      
|                              |  |                |        |                 |            |  |       |               |  |  |              |  |  |       |      
|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 | 
|                              |  |                |        |                 |            |  |       |               |  |  |              |  |  |       |      
|2003:                         |  |                |        |                 |            |  |       |               |  |  |              |  |  |       |       |  |  |  |        | 
|Hotels                        |  |                | 11,174 |                 |            |  | 5,585 |               |  |  | 5,704        |  |  |       | 4,648 |  |  |  | 27,111 | 
|Soft Drinks                   |  |                | 2,698  |                 |            |  |      |               |  |  |             |  |  |       |      |  |  |  | 2,698  | 
|                              |  |                |        |                 |            |  |       |               |  |  |              |  |  |       |      
|InterContinental Hotels Group |  |                | 13,872 |                 |            |  | 5,585 |               |  |  | 5,704        |  |  |       | 4,648 |  |  |  | 29,809 | 
|Discontinued operations       |  |                | 15,014 |                 |            |  |      |               |  |  |             |  |  |       |      |  |  |  | 15,014 | 
|                              |  |                |        |                 |            |  |       |               |  |  |              |  |  |       |      
|                              |  |                | 28,886 |                 |            |  | 5,585 |               |  |  | 5,704        |  |  |       | 4,648 |  |  |  | 44,823 | 
|                              |  |                |        |                 |            |  |       |               |  |  |              |  |  |       |      






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





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SHARE OWNERSHIP




|                      |  |                 |         |    
|--------------------- |  | --------------- | ------- | ---
|                      |  | Ordinary shares |        
|                      |  | of 10 pence     |        
|                      |  |                 |        
|Directors             |  |                 |         |    
|Andrew Cosslett       |  |                 | 94,741  |    
|Richard Hartman       |  |                 | 183,682 |    
|David Kappler         |  |                 | 1,908   |    
|Ralph Kugler          |  |                 | 654     |    
|Jennifer Laing        |  |                 |        |    
|Robert C. Larson      |  |                 | 7,857   | (1)
|Jonathan Linen        |  |                 | 10,000  | (1)
|Stevan Porter         |  |                 | 175,834 |    
|Sir David Prosser     |  |                 | 3,273   |    
|Richard Solomons      |  |                 | 164,005 |    
|Sir Howard Stringer   |  |                 | 5,548   |    
|David Webster         |  |                 | 31,823  |    
|                     
|Officers              |  |                 |         |    
|Tom Conophy           |  |                 | 85,846  |    
|Peter Gowers          |  |                 | 70,660  |    
|A. Patrick Imbardelli |  |                 | 137,783 |    
|Tracy Robbins         |  |                 | 15,470  |    
|Richard Winter        |  |                 | 83,378  |    






|    |                                                 
|--- | ------------------------------------------------
|(1) | Held in the form of American Depositary Receipts









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|        |                                                  
|------- | -------------------------------------------------
|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS




MAJOR SHAREHOLDERS




|                            |  |             |            |     |            |  |       |             |  |  |            |     |  |             |       |     |          |  |            |     |  |  |       |    
|--------------------------- |  | ----------- | ---------- | --- | ---------- |  | ----- | ----------- |  |  | ---------- | --- |  | ----------- | ----- | --- | -------- |  | ---------- | --- |  |  | ----- | ---
|                            |  | March 2006  |            |     | April 2005 |  |       | April 2004  | 
|                            |  |             |            |     |            |  |       |             | 
|                            |  | 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 | 
|                            |  |             |            |     |            |  |       |             |  |  |            |     |  |             |       |     |          | 
|Lloyds TSB Group Plc        |  |             | 19,534,651 |     |            |  | 4.51% |             |  |  | 26,773,575 |     |  |             | 4.44% |     |          |  |            | (1) |  |  |       | (1)
|Legal & General Group Plc   |  |             | 13,753,588 |     |            |  | 3.17% |             |  |  | 24,233,225 |     |  |             | 4.02% |     |          |  | 29,924,045 |     |  |  | 4.10% |    
|Barclays PLC                |  |             |            | (1) |            |  |       | (1)         |  |  | 20,246,584 |     |  |             | 3.36% |     |          |  |            | (1) |  |  |       | (1)
|AXA SA                      |  |             |            | (1) |            |  |       | (1)         |  |  | 18,121,201 |     |  |             | 3.00% |     |          |  |            | (1) |  |  |       | (1)
|Dodge & Cox Funds           |  |             |            | (1) |            |  |       | (1)         |  |  |            | (1) |  |             |       | (1) |          |  | 25,106,594 |     |  |  | 3.40% |    






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










RELATED PARTY TRANSACTIONS









|        |                      
|------- | ---------------------
|ITEM 8. | FINANCIAL INFORMATION




CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION




| |                     
| | --------------------
| | Financial Statements





| |                  
| | -----------------
| | Legal Proceedings



69



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| |          
| | ---------
| | Dividends






SIGNIFICANT CHANGES









|        |                      
|------- | ---------------------
|ITEM 9. | THE OFFER AND LISTING





|                        |  |                |      |  |           |  |      |      |  |  |       |  |  |  |      | 
|----------------------- |  | -------------- | ---- |  | --------- |  | ---- | ---- |  |  | ----- |  |  |  | ---- | 
|                        |  | £ per          |      |  |          
|                        |  | ordinary share |      |  | $ per ADS | 
|                        |  |                |      |  |           | 
|Year ended September 30 |  | High           |      |  | Low       |  |      | High |  |  | Low   | 
|                        |  |                |      |  |           |  |      |      |  |  |       | 
|2001                    |  |                | 8.02 |  |           |  | 5.49 |      |  |  | 12.00 |  |  |  | 7.75 | 
|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   | 
|                                       |  |                |      |  |           |  |      |      |  |  |       | 
|2004                                   |  |                |      |  |           |  |      |      |  |  |       |  |  |  |       | 
|First quarter                          |  |                | 5.75 |  |           |  | 4.79 |      |  |  | 10.80 |  |  |  | 8.90  | 
|Second quarter                         |  |                | 5.82 |  |           |  | 4.87 |      |  |  | 10.78 |  |  |  | 8.70  | 
|Third quarter                          |  |                | 6.49 |  |           |  | 5.37 |      |  |  | 11.82 |  |  |  | 9.88  | 
|Fourth quarter                         |  |                | 6.91 |  |           |  | 6.45 |      |  |  | 13.09 |  |  |  | 11.80 | 
|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 (through March 17, 2006) |  |                | 9.01 |  |           |  | 8.07 |      |  |  | 15.83 |  |  |  | 14.40 | 

70



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|                                       |  |                |      |  |           |  |      |      |  |  |       |  |  |  |       | 
|-------------------------------------- |  | -------------- | ---- |  | --------- |  | ---- | ---- |  |  | ----- |  |  |  | ----- | 
|                                       |  | £ per          |      |  |          
|                                       |  | ordinary share |      |  | $ per ADS | 
|                                       |  |                |      |  |           | 
|Month ended                            |  | High           |      |  | Low       |  |      | High |  |  | Low   | 
|                                       |  |                |      |  |           |  |      |      |  |  |       | 
|September 2005                         |  |                | 7.50 |  |           |  | 7.06 |      |  |  | 13.76 |  |  |  | 12.53 | 
|October 2005                           |  |                | 7.25 |  |           |  | 6.88 |      |  |  | 12.79 |  |  |  | 12.04 | 
|November 2005                          |  |                | 8.00 |  |           |  | 7.20 |      |  |  | 13.76 |  |  |  | 12.67 | 
|December 2005                          |  |                | 8.42 |  |           |  | 7.90 |      |  |  | 14.53 |  |  |  | 13.77 | 
|January 2006                           |  |                | 8.66 |  |           |  | 8.07 |      |  |  | 15.39 |  |  |  | 14.40 | 
|February 2006                          |  |                | 8.88 |  |           |  | 8.51 |      |  |  | 15.57 |  |  |  | 14.79 | 
|March 2006 (through to March 17, 2006) |  |                | 9.01 |  |           |  | 8.31 |      |  |  | 15.83 |  |  |  | 14.40 | 






PLAN OF DISTRIBUTION







SELLING SHAREHOLDERS







DILUTION







EXPENSES OF THE ISSUE









|         |                       
|-------- | ----------------------
|ITEM 10. | ADDITIONAL INFORMATION




MEMORANDUM AND ARTICLES OF ASSOCIATION


S-8 1-10409)






Principal Objects




71



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##### Table of Contents



Directors








Rights Attaching to
Shares








Voting Rights






| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.



72



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| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an ordinary resolution, which includes resolutions for the
    election of directors, the approval of financial statements, the
    cumulative annual payment of dividends, the appointment of
    auditors, the increase of authorized share capital or the grant
    of authority to allot shares;
|
| |  | a special resolution, which includes resolutions amending the
    Companys memorandum and articles of association,
    disapplying statutory pre-emption rights or changing the
    Companys name; and                                                                                            
|
| |  | an extraordinary resolution, which includes resolutions
    modifying the rights of any class of the Companys shares
    at a meeting of the holders of such class or relating to certain
    matters concerning the Companys winding up.                                                         



three-fourths








Variation of Rights


three-fourths


Rights in a
Winding-up






| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                      



73



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Limitations on Voting and
Shareholding







MATERIAL CONTRACTS






| |                       
| | ----------------------
| | IHG Facility Agreement











| |                                         
| | ----------------------------------------
| | Disposal to Hospitality Properties Trust

IHG-2 IHG-2,




74



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##### Table of Contents







| |                   
| | ------------------
| | UK Hotels Disposal







Australasian Hotels
Disposals






Britvic Underwriting
Agreement


inter alia


75



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##### Table of Contents



Disposal to
Westbridge




  











EXCHANGE CONTROLS











TAXATION






| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | certain financial institutions;                                                                                                  
|
| |  | insurance companies;                                                                                                             
|
| |  | 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;                                                                                  

76



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| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | tax-exempt organizations;                                                                                                      
|
| |  | persons who acquired our ADSs or shares pursuant to the exercise
    of any employee stock option or otherwise as compensation.











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





| |                                      
| | -------------------------------------
| | United States Federal Income Taxation



77



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| |                          
| | -------------------------
| | Taxation of Capital Gains



| |                        
| | -----------------------
| | United Kingdom Taxation







| |                                      
| | -------------------------------------
| | United States Federal Income Taxation





| |           
| | ----------
| | PFIC Rules

mark-to


78



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##### Table of Contents







| |                              
| | -----------------------------
| | Additional Tax Considerations



| |                               
| | ------------------------------
| | United Kingdom Inheritance Tax





| |                                                                  
| | -----------------------------------------------------------------
| | United Kingdom Stamp Duty and Stamp Duty Reserve Tax
    (SDRT)











79



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DOCUMENTS ON DISPLAY


20-F 1-800-SEC-0330







|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK

Exchange and Interest Rate Risk, and Financial Instruments
















Quantitative Information about Market Risk




| |                          
| | -------------------------
| | Interest Rate Sensitivity



80



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| |                     
| | --------------------
| | At December 31, 2005

|                                   |  |                                        |     |   |      |  |      |      |  |  |      |  |  |      |       |   |            |  |   |       |  |  |               |  |  |  |       |   |  |  |       | 
|---------------------------------- |  | -------------------------------------- | --- | - | ---- |  | ---- | ---- |  |  | ---- |  |  | ---- | ----- | - | ---------- |  | - | ----- |  |  | ------------- |  |  |  | ----- | - |  |  | ----- | 
|                                   |  | Expected to mature before December 31, |     |   |      |  |     
|                                   |  |                                        |     |   |      |  |     
|                                   |  | 2006                                   |     |   | 2007 |  |      | 2008 |  |  | 2009 |  |  | 2010 |       |   | Thereafter |  |   | Total |  |  | Fair value(i) | 
|                                   |  |                                        |     |   |      |  |      |      |  |  |      |  |  |      |       |   |            |  |   |       |  |  |               | 
|                                   |  | (£ million, except percentages)        |    
|Long-Term Debt:                    |  |                                        |     |   |      |  |      |      |  |  |      |  |  |      |       |   |            |  |   |       |  |  |               |  |  |  |       |   |  |  |       | 
|Fixed Rate (US dollar)             |  |                                        |    |   |      |  |     |      |  |  |     |  |  |      |      |   |            |  |  |       |  |  |              |  |  |  |      |   |  |  |      | 
|Average dollar interest rate       |  |                                        |    |   |      |  |     |      |  |  |     |  |  |      |      |   |            |  |  |       |  |  |              |  |  |  |      |   |  |  |      | 
|Fixed Rate (£)                     |  |                                        |    |   |      |  |     |      |  |  |     |  |  |      |      |   |            |  |  |       |  |  |              |  |  |  |      |   |  |  |      | 
|Average interest rate              |  |                                        |    |   |      |  |     |      |  |  |     |  |  |      |      |   |            |  |  |       |  |  |              |  |  |  |      |   |  |  |      | 
|Fixed Rate (euro)                  |  |                                        | 0.4 |   |      |  | 27.9 |      |  |  |     |  |  |      |      |   |            |  |  |       |  |  |              |  |  |  | 28.3  |   |  |  | 29.5  | 
|Average interest rate              |  |                                        | 7.8 | % |      |  | 7.0  | %    |  |  |     |  |  |      |      |   |            |  |  |       |  |  |              |  |  |  | 7.0   | % |  |  |      | 
|Variable Rate (various currencies) |  |                                        | 1.3 |   |      |  | 5.3  |      |  |  |     |  |  |      | 377.4 |   |            |  |  |       |  |  |              |  |  |  | 384.0 |   |  |  | 384.0 | 
|Average interest rate              |  |                                        | 2.9 | % |      |  | 2.9  | %    |  |  |     |  |  |      | 4.0   | % |            |  |  |       |  |  |              |  |  |  | 3.9   | % |  |  |      | 

|                                                 |  |                                              |     |   |      |  |   |      |  |  |      |  |  |      |   |  |            |  |   |       |  |  |               |  |  |  |     |   |  |  |    |  
|------------------------------------------------ |  | -------------------------------------------- | --- | - | ---- |  | - | ---- |  |  | ---- |  |  | ---- | - |  | ---------- |  | - | ----- |  |  | ------------- |  |  |  | --- | - |  |  | -- | -
|                                                 |  | Expected to mature before December 31,       |     |   |      |  |  
|                                                 |  |                                              |     |   |      |  |  
|                                                 |  | 2006                                         |     |   | 2007 |  |   | 2008 |  |  | 2009 |  |  | 2010 |   |  | Thereafter |  |   | Total |  |  | Fair value(i) | 
|                                                 |  |                                              |     |   |      |  |   |      |  |  |      |  |  |      |   |  |            |  |   |       |  |  |               | 
|                                                 |  | (local currency million, except percentages) |    
|Interest Rate Swaps and Forward rate agreements: |  |                                              |     |   |      |  |   |      |  |  |      |  |  |      |   |  |            |  |   |       |  |  |               |  |  |  |     |   |  |  |    |  
|Principal (US dollar)                            |  |                                              | 200 |   |      |  |  |      |  |  |     |  |  |      |  |  |            |  |  |       |  |  |              |  |  |  | 200 |   |  |  | (4 | )
|Fixed rate payable                               |  |                                              | 4.5 | % |      |  |  |      |  |  |     |  |  |      |  |  |            |  |  |       |  |  |              |  |  |  | 4.5 | % |  |  |   |  
|Variable rate receivable                         |  |                                              | 4.3 | % |      |  |  |      |  |  |     |  |  |      |  |  |            |  |  |       |  |  |              |  |  |  | 4.3 | % |  |  |   |  
|Principal (euro)                                 |  |                                              | 160 |   |      |  |  |      |  |  |     |  |  |      |  |  |            |  |  |       |  |  |              |  |  |  | 160 |   |  |  | (1 | )
|Fixed rate payable                               |  |                                              | 2.1 | % |      |  |  |      |  |  |     |  |  |      |  |  |            |  |  |       |  |  |              |  |  |  | 2.1 | % |  |  |   |  
|Variable rate receivable                         |  |                                              | 2.5 | % |      |  |  |      |  |  |     |  |  |      |  |  |            |  |  |       |  |  |              |  |  |  | 2.5 | % |  |  |   |  






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



| |                          
| | -------------------------
| | Exchange Risk Sensitivity





| |                     
| | --------------------
| | At December 31, 2005

|                                |  |               |      |         |               |  |      | 
|------------------------------- |  | ------------- | ---- | ------- | ------------- |  | ---- | 
|                                |  | Receive for $ |     
|                                |  |               |     
|                                |  |               |      | Average |              
|                                |  | Contract      |      |         | contractual   | 
|                                |  | amount        |      |         | exchange rate | 
|                                |  |               |      |         |               | 
|                                |  | (£ million)   |      |         |              
|Sterling                        |  |               | 17.4 |         |               |  | 1.72 | 
|                                |  |               |      |         |               | 
|Fair value of forward contracts |  |               | 0.0  |         |               |  |      | 
|                                |  |               |      |         |               | 



81



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|                      |  |           |       |          |  |  |      | 
|--------------------- |  | --------- | ----- | -------- |  |  | ---- | 
|                      |  | Deposited |       | Borrowed
|                      |  | 2005      |       | 2005    
|                      |  |           |       |         
|                      |  | (million)
|Sterling to US dollar |  |           | £  58 |          |  |  | $100 | 
|Sterling to euro      |  |           | £304  |          |  |  | 450 | 






|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES






PART II







|         |                                                
|-------- | -----------------------------------------------
|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES








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








|         |                        
|-------- | -----------------------
|ITEM 15. | CONTROLS AND PROCEDURES

13a-15(c) 15d-15(e)).


20-F







|         |           
|-------- | ----------
|ITEM 16. | [RESERVED]




ITEM 16A.AUDIT
COMMITTEE FINANCIAL EXPERT







ITEM 16B.CODE OF
ETHICS




82



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ITEM 16C.PRINCIPAL
ACCOUNTANT FEES AND SERVICES




|                   |  |              |     |  |              |  |     | 
|------------------ |  | ------------ | --- |  | ------------ |  | --- | 
|                   |  | Year ended   |     |  | Year ended   | 
|                   |  | December 31, |     |  | December 31, | 
|                   |  | 2005         |     |  | 2004         | 
|                   |  |              |     |  |              | 
|                   |  | (£ million)  |    
|Audit fees         |  |              | 3.9 |  |              |  | 3.8 | 
|Audit related fees |  |              | 2.7 |  |              |  | 1.6 | 
|Tax fees           |  |              | 0.6 |  |              |  | 0.5 | 
|                   |  |              |     |  |              | 
|Total              |  |              | 7.2 |  |              |  | 5.9 | 
|                   |  |              |     |  |              | 










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








|          |                                                                           
|--------- | --------------------------------------------------------------------------
|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 (01.01.05 - 01.10.05)        |  |                  | 1,750,000  |             |            |                  | 6.46             |                     |                    |                      | 1,750,000              |  |  |  | 89,689,655 |  |  | 
|Month 2 (no purchases in this month) |  |                  | n/a        |             |            |                  |                  |                     |                    |                      | n/a                    |  |  |  |            |  |  | 
|Month 3                              |  |                  | 8,735,000  |             |            |                  | 6.33             |                     |                    |                      | 8,735,000              |  |  |  | 80,954,655 |  |  | 
|Month 4 (04.01.05 - 04.26.05)        |  |                  | 8,975,000  |             |            |                  | 6.26             |                     |                    |                      | 8,975,000              |  |  |  | 71,979,655 |  |  | 
|Month 5 (no purchases in this month) |  |                  | n/a        |             |            |                  |                  |                     |                    |                      | n/a                    |  |  |  |            |  |  | 
|Month 6 (06.01.05 - 06.30.05)        |  |                  | 10         |             |            |                  | 6.96             |                     |                    |                      | 10                     |  |  |  | 90,349,451 |  |  | 
|Month 7 (no purchases in this month) |  |                  | n/a        |             |            |                  |                  |                     |                    |                      | n/a                    |  |  |  |            |  |  | 
|Month 8 (no purchases in this month) |  |                  | n/a        |             |            |                  |                  |                     |                    |                      | n/a                    |  |  |  |            |  |  | 
|Month 9 (09.08.05  09.30.05)        |  |                  | 3,270,000  |             |            |                  | 7.20             |                     |                    |                      | 3,270,000              |  |  |  | 87,079,451 |  |  | 
|Month 10 (10.01.05  10.24.05)       |  |                  | 3,650,000  |             |            |                  | 7.03             |                     |                    |                      | 3,650,000              |  |  |  | 83,429,451 |  |  | 
|Month 11 (11.22.05  11.30.05)       |  |                  | 550,000    |             |            |                  | 7.88             |                     |                    |                      | 550,000                |  |  |  | 82,879,451 |  |  | 
|Month 12 (12.01.05  12.31.05)       |  |                  | 3,670,000  |             |            |                  | 7.99             |                     |                    |                      | 3,670,000              |  |  |  | 79,209,451 |  |  | 
|                                     |  |                  |            |             |            |                  |                  |                     |                    |                      |                        |  |  | 
|Total                                |  |                  | 30,600,010 |             |            |                  |                  |                     |                    |                      | 30,600,010             |  |  |  |            |  |  | 
|                                     |  |                  |            |             |            |                  |                  |                     |                    |                      |                        |  |  | 





83



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PART III







|         |                     
|-------- | --------------------
|ITEM 17. | FINANCIAL STATEMENTS



84



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|         |                     
|-------- | --------------------
|ITEM 18. | FINANCIAL STATEMENTS



|                                                                                                                |  |      |     | 
|--------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                |  | Page |    
|                                                                                                                |  |      |    
|Report and Consent of Independent
    Registered Public Accounting Firm                                         |  |      | F-1 | 
|Financial Statements                                                                                            |  |      |     | 
|Consolidated Income Statement for the years
    ended December 31, 2005 and 2004                                |  |      | F-3 | 
|Consolidated Statement of Recognized Income
    and Expense for the years ended December 31, 2005
    and 2004  |  |      | F-4 | 
|Consolidated Balance Sheet for the years
    ended December 31, 2005 and 2004                                   |  |      | F-5 | 
|Consolidated Statement of Changes in
    Shareholders Funds for the years ended December 31,
    2005 and 2004 |  |      | F-6 | 
|Consolidated Cash Flow Statement for the
    years ended December 31, 2005 and 2004                             |  |      | F-8 | 
|Notes to the Financial Statements                                                                               |  |      | F-9 | 
|Schedule for the years ended December 31, 2005 and 2004                                                         |  |      |     | 
|Schedule II  Valuation and Qualifying Accounts                                                                 |  |      | S-1 | 






|         |         
|-------- | --------
|ITEM 19. | EXHIBITS





|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 2(b)(i)  |  | Instruments defining the Rights of Holders of
    Long-Term Debt: The
    total amount of
    long-term debt
    securities of the Group authorized under any individual
    instrument, other than the Amended and Restated
    Trust Deed dated September 21, 2000 relating to the
    Companys
    2000 million
    Debt Issuance Program originally constituted on October 9,
    1998 (incorporated by reference to Exhibit 2 of Six
    Continents PLCs Annual Report on Form 20-F (File
    No. 1-10409),
    dated December 20, 2001), and the
    Trust Deed dated September 24, 2003 relating to
    the Companys 1,000 million Debt Issuance Program and filed as
    Exhibit 2(b)(i) hereto does not exceed 10% of the total
    assets of the Group on a consolidated basis. The Company agrees
    to furnish copies of any or all such instruments to the
    Securities and Exchange Commission upon request
|                
|Exhibit 4(a)(i)  |  | £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)  |  | Purchase and Sale Agreement dated July 1, 2003 between
    InterContinental Hotels Group Resources Inc and HPT
    (incorporated by reference to Exhibit 4(b)(i) 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 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

85



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|                   |  |                                                                                                                                                                                                                                                                                                                                                                                
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  | 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)(iii)  |  | 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)(iv)   |  | 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)
|                  
|Exhibit 4(b)(v)    |  | 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                                                                                                                                                                            
|                  
|Exhibit 4(b)(vi)   |  | 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                                                                                                                 
|                  
|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)                                                         
|                  
|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                                                                                                     
|                  
|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                                                                                                                                                                      
|                  
|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                                                                                                                                                                        
|                  
|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)                                                                                                                                          
|                  
|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                                                                                                                                                                      

86



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|                   |  |                                                                                                                                                                                                                                   
|------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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                         
|                  
|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 of Young LLP (included on page
    F-2)                                                                                                                                                                          

87



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INTERCONTINENTAL HOTELS GROUP PLC





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                  
| | -----------------
| | Ernst & Young LLP

















F-1



---



##### Table of Contents



CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


F-3 333-108084 S-8 333-01572, 333-08336, 333-89508, 333-99785, 333-104691 333-126139) 20-F)




| |                  
| | -----------------
| | Ernst & Young LLP







F-2



---



##### Table of Contents



INTERCONTINENTAL HOTELS GROUP PLC





CONSOLIDATED INCOME STATEMENT


|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       |  |        |      |   |  |        |      |  
|-------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------------------- | ---- | ---- | ----------------------- |  | ----- | ----- | - | ---------- | ---------- | ---- | ------------ | ---------- | ---- | ---- | ----- |  | ------ | ---- | - |  | ------ | ---- | -
|                                                                                             |                                     | Year ended December 31,                        |      |      | Year ended December 31, | 
|                                                                                             |                                     | 2005                                           |      |      | 2004                    | 
|                                                                                             |                                     |                                                |      |      |                         | 
|                                                                                             |                                     | Continuing                                     |      |      | Discontinued            |  |       |       |   | Continuing |            |      | Discontinued |            |      |     
|                                                                                             |                                     | operations                                     |      |      | operations              |  |       | Total |   |            | operations |      |              | operations |      |      | Total | 
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|                                                                                             |                                     | (£ million, except per ordinary share amounts) |     
|Revenue(Note 2)                                                                              |                                     |                                                | 852  |      |                         |  | 1,058 |       |   |            | 1,910      |      |              |            | 731  |      |       |  | 1,473  |      |   |  | 2,204  |     
|Cost of sales                                                                                |                                     |                                                | (442 | )    |                         |  | (775  | )     |   |            | (1,217     | )    |              |            | (398 | )    |       |  | (1,079 | )    |   |  | (1,477 | )   
|Administrative expenses                                                                      |                                     |                                                | (150 | )    |                         |  | (74   | )     |   |            | (224       | )    |              |            | (140 | )    |       |  | (68    | )    |   |  | (208   | )   
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|                                                                                             |                                     |                                                | 260  |      |                         |  | 209   |       |   |            | 469        |      |              |            | 193  |      |       |  | 326    |      |   |  | 519    |     
|Depreciation and amortization (Note 2)                                                       |                                     |                                                | (70  | )    |                         |  | (60   | )     |   |            | (130       | )    |              |            | (59  | )    |       |  | (114   | )    |   |  | (173   | )   
|Other operating income and expenses (Note 5)                                                 |                                     |                                                | (22  | )    |                         |  |      |       |   |            | (22        | )    |              |            | (49  | )    |       |  |       |      |   |  | (49    | )   
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|Operating profit(Note 2)                                                                     |                                     |                                                | 168  |      |                         |  | 149   |       |   |            | 317        |      |              |            | 85   |      |       |  | 212    |      |   |  | 297    |     
|Financial income (Note 6)                                                                    |                                     |                                                | 30   |      |                         |  |      |       |   |            | 30         |      |              |            | 70   |      |       |  |       |      |   |  | 70     |     
|Financial expenses (Note 6)                                                                  |                                     |                                                | (54  | )    |                         |  | (9    | )     |   |            | (63        | )    |              |            | (103 | )    |       |  |       |      |   |  | (103   | )   
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|Profit before tax                                                                            |                                     |                                                | 144  |      |                         |  | 140   |       |   |            | 284        |      |              |            | 52   |      |       |  | 212    |      |   |  | 264    |     
|Tax (Note 7)                                                                                 |                                     |                                                | (28  | )    |                         |  | (52   | )     |   |            | (80        | )    |              |            | 194  |      |       |  | (67    | )    |   |  | 127    |     
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|Profit after tax                                                                             |                                     |                                                | 116  |      |                         |  | 88    |       |   |            | 204        |      |              |            | 246  |      |       |  | 145    |      |   |  | 391    |     
|Gain on disposal of assets, net of tax charge of
    £38 million (2004 credit of £4 million) |                                     |                                                |     |      |                         |  | 311   |       |   |            | 311        |      |              |            |     |      |       |  | 19     |      |   |  | 19     |     
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|Profit available for shareholders                                                            |                                     |                                                | 116  |      |                         |  | 399   |       |   |            | 515        |      |              |            | 246  |      |       |  | 164    |      |   |  | 410    |     
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|Attributable to:                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       |  |        |      |   |  |        |     
|                                                                                             | Equity holders of the
    parent(i) |                                                |      | 116  |                         |  |       | 380   |   |            |            | 496  |              |            |      | 246  |       |  |        | 137  |   |  |        | 383  |  
|                                                                                             | Minority equity interest            |                                                |      |     |                         |  |       | 19    |   |            |            | 19   |              |            |      |     |       |  |        | 27   |   |  |        | 27   |  
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|Profit for the year                                                                          |                                     |                                                | 116  |      |                         |  | 399   |       |   |            | 515        |      |              |            | 246  |      |       |  | 164    |      |   |  | 410    |     
|                                                                                             |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       | 
|Earnings per ordinary share:(Note 9)                                                         |                                     |                                                |      |      |                         |  |       |       |   |            |            |      |              |            |      |      |       |  |        |      |   |  |        |     
|                                                                                             | Basic                               |                                                |      | 22.3 | p                       |  |       | 72.9  | p |            |            | 95.2 | p            |            |      | 34.6 | p     |  |        | 19.3 | p |  |        | 53.9 | p
|                                                                                             | Diluted                             |                                                |      | 21.8 | p                       |  |       | 71.3  | p |            |            | 93.1 | p            |            |      | 34.3 | p     |  |        | 19.0 | p |  |        | 53.3 | p






|    |                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 Financial Statements.



F-3



---



##### Table of Contents



INTERCONTINENTAL HOTELS GROUP PLC





CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE


|                                                          |                                                             |              |     |     |              |  |     |     |  
|--------------------------------------------------------- | ----------------------------------------------------------- | ------------ | --- | --- | ------------ |  | --- | --- | -
|                                                          |                                                             | Year ended   |     |     | Year ended   | 
|                                                          |                                                             | December 31, |     |     | December 31, | 
|                                                          |                                                             | 2005         |     |     | 2004         | 
|                                                          |                                                             |              |     |     |              | 
|                                                          |                                                             | (£ million)  |    
|Income and expense recognized directly in equity          |                                                             |              |     |     |              |  |     |    
|                                                          | Gains on valuation of available-for-sale assets             |              |     | 31  |              |  |     |    |  
|                                                          | Gains on cash flow hedges                                   |              |     | 1   |              |  |     |    |  
|                                                          | Exchange differences on retranslation of foreign operations |              |     | 29  |              |  |     | (12 | )
|                                                          | Actuarial losses on defined benefit pension plans           |              |     | (23 | )            |  |     | (51 | )
|                                                          | Deficit transferred in respect of previous acquisition      |              |     |    |              |  |     | (6  | )
|                                                          |                                                             |              |     |     |              | 
|                                                          |                                                             |              | 38  |     |              |  | (69 | )  
|Transfers to the income statement                         |                                                             |              |     |     |              |  |     |    
|                                                          | On cash flow hedges                                         |              |     | (6  | )            |  |     |    |  
|                                                          | On disposal of foreign operations                           |              |     | 2   |              |  |     |    |  
|Tax on items taken directly to or transferred from equity |                                                             |              | 7   |     |              |  | 14  |    
|                                                          |                                                             |              |     |     |              | 
|Net income/(expense) recognized directly in equity        |                                                             |              | 41  |     |              |  | (55 | )  
|Profit for the year                                       |                                                             |              | 515 |     |              |  | 410 |    
|                                                          |                                                             |              |     |     |              | 
|Total recognized income and expense for the year          |                                                             |              | 556 |     |              |  | 355 |    
|                                                          |                                                             |              |     |     |              | 
|Attributable to:                                          |                                                             |              |     |     |              |  |     |    
|                                                          | Equity holders of the parent                                |              |     | 541 |              |  |     | 338 |  
|                                                          | Minority equity interest                                    |              |     | 15  |              |  |     | 17  |  
|                                                          |                                                             |              |     |     |              | 
|                                                          |                                                             |              | 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 Financial Statements.

F-4



---



##### Table of Contents



INTERCONTINENTAL HOTELS GROUP PLC





CONSOLIDATED BALANCE SHEET


|                                                               |  |              |        |   |              |  |        |  
|-------------------------------------------------------------- |  | ------------ | ------ | - | ------------ |  | ------ | -
|                                                               |  | December 31, |        |   | December 31, | 
|                                                               |  | 2005         |        |   | 2004         | 
|                                                               |  |              |        |   |              | 
|                                                               |  | (£ million)  |       
|ASSETS                                                         |  |              |        |   |              |  |        |  
|Property, plant and equipment  (Note 10)                      |  |              | 1,356  |   |              |  | 1,926  |  
|Goodwill  (Note 12)                                           |  |              | 118    |   |              |  | 152    |  
|Intangible assets  (Note 13)                                  |  |              | 120    |   |              |  | 54     |  
|Investment in associates  (Note 14)                           |  |              | 42     |   |              |  | 42     |  
|Other financial assets  (Note 15)                             |  |              | 113    |   |              |  | 80     |  
|                                                               |  |              |        |   |              | 
|Total non-current assets                                       |  |              | 1,749  |   |              |  | 2,254  |  
|                                                               |  |              |        |   |              | 
|Inventories  (Note 16)                                        |  |              | 3      |   |              |  | 42     |  
|Trade and other receivables  (Note 17)                        |  |              | 252    |   |              |  | 390    |  
|Current tax receivable                                         |  |              | 22     |   |              |  | 14     |  
|Cash and cash equivalents  (Note 18)                          |  |              | 324    |   |              |  | 72     |  
|Other financial assets  (Note 15)                             |  |              | 106    |   |              |  | 80     |  
|                                                               |  |              |        |   |              | 
|Total current assets                                           |  |              | 707    |   |              |  | 598    |  
|Non-current assets classified as held for sale 
    (Note 11) |  |              | 279    |   |              |  | 1,826  |  
|                                                               |  |              |        |   |              | 
|Total assets                                                   |  |              | 2,735  |   |              |  | 4,678  |  
|                                                               |  |              |        |   |              | 
|LIABILITIES                                                    |  |              |        |   |              |  |        |  
|Loans and other borrowings  (Note 20)                         |  |              | (2     | ) |              |  | (32    | )
|Trade and other payables  (Note 19)                           |  |              | (468   | ) |              |  | (633   | )
|Current tax payable                                            |  |              | (324   | ) |              |  | (261   | )
|                                                               |  |              |        |   |              | 
|Total current liabilities                                      |  |              | (794   | ) |              |  | (926   | )
|                                                               |  |              |        |   |              | 
|Loans and other borrowings  (Note 20)                         |  |              | (410   | ) |              |  | (1,156 | )
|Employee benefits  (Note 3)                                   |  |              | (76    | ) |              |  | (173   | )
|Provisions and other payables  (Note 19)                      |  |              | (107   | ) |              |  | (103   | )
|Deferred tax payable  (Note 25)                               |  |              | (210   | ) |              |  | (234   | )
|                                                               |  |              |        |   |              | 
|Total non-current liabilities                                  |  |              | (803   | ) |              |  | (1,666 | )
|Liabilities classified as held for sale 
    (Note 11)        |  |              | (34    | ) |              |  | (148   | )
|                                                               |  |              |        |   |              | 
|Total liabilities                                              |  |              | (1,631 | ) |              |  | (2,740 | )
|                                                               |  |              |        |   |              | 
|Net assets                                                     |  |              | 1,104  |   |              |  | 1,938  |  
|                                                               |  |              |        |   |              | 
|EQUITY                                                         |  |              |        |   |              |  |        |  
|Equity share capital                                           |  |              | 49     |   |              |  | 723    |  
|Capital redemption reserve                                     |  |              | 1      |   |              |  | 46     |  
|Shares held by employee share trusts                           |  |              | (22    | ) |              |  | (22    | )
|Other reserves                                                 |  |              | (1,528 | ) |              |  | 1,462  |  
|Unrealized gains and losses reserve                            |  |              | 23     |   |              |  |       |  
|Currency translation reserve                                   |  |              | 19     |   |              |  | (12    | )
|Retained earnings                                              |  |              | 2,542  |   |              |  | (376   | )
|                                                               |  |              |        |   |              | 
|IHG shareholders
    equity(i)                                |  |              | 1,084  |   |              |  | 1,821  |  
|Minority equity interest                                       |  |              | 20     |   |              |  | 117    |  
|                                                               |  |              |        |   |              | 
|Total equity                                                   |  |              | 1,104  |   |              |  | 1,938  |  
|                                                               |  |              |        |   |              | 






|    |                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 Financial Statements.



F-5



---



##### Table of Contents



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 |         
|                                                 |  | 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 |    |  | funds         | 
|                                                 |  |               |      |   |                                      |         |      |             |         |  |             |   |  |               |     |   |            |  |        |           |  |  |             |   |       |          |    |  |               | 
|                                                 |  | (£ million)   |     
|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 |  
|                                                 |  |               |      |   |                                      |         |      |             |         |  |             |   |  |               |     |   |            |  |        |           |  |  |             |   |       |          |    |  |               | 






|    |                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | 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 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.                                                                                                                                                      

F-6



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 programs,
    the second of which is expected to be completed in the first
    half of 2006. During the year, 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 and 2005. Of these, 19,460,010 (2004
    46,385,981) were 112 pence (2004 100 pence) shares in
    the capital of InterContinental Hotels Limited (formerly
    InterContinental Hotels Group PLC) and 11,140,000 were
    10 pence shares in the capital of InterContinental Hotels
    Group PLC (formerly New InterContinental Hotels Group PLC).                                                                                           
|
| | The authority given to the Company at the Annual General Meeting
    on June 1, 2005 to purchase its own shares was still valid
    at December 31, 2005. A resolution to renew the authority
    will be put to shareholders at the Annual General Meeting on
    June 1, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | At December 31, 2005 the authorized share capital was
    £160,050,000, comprising 1,600,000,000 ordinary shares of
    10 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 the merger reserve.                                                                                                                                                                                                                
|     
|(iv)  | The shares held by employee share trusts comprises
    £21.7 million (2004 £21.8 million) in
    respect of 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,
    2005 of £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.                    
|     
|(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 currency swaps
    that provide a hedge against a net investment in foreign
    operations.



F-7



---



##### Table of Contents



INTERCONTINENTAL HOTELS GROUP PLC





CONSOLIDATED CASH FLOW STATEMENT


|                                                                                       |                                                  |              |        |      |              |  |      |      |  
|-------------------------------------------------------------------------------------- | ------------------------------------------------ | ------------ | ------ | ---- | ------------ |  | ---- | ---- | -
|                                                                                       |                                                  | Year ended   |        |      | Year ended   | 
|                                                                                       |                                                  | December 31, |        |      | December 31, | 
|                                                                                       |                                                  | 2005         |        |      | 2004         | 
|                                                                                       |                                                  |              |        |      |              | 
|                                                                                       |                                                  | (£ million)  |       
|Profit for the year                                                                    |                                                  |              | 515    |      |              |  | 410  |     
|Adjustments for:                                                                       |                                                  |              |        |      |              |  |      |     
|                                                                                       | Net financial expenses                           |              |        | 33   |              |  |      | 33   |  
|                                                                                       | Income tax charge/(credit)                       |              |        | 80   |              |  |      | (127 | )
|                                                                                       | Gain on disposal of assets, net of tax           |              |        | (311 | )            |  |      | (19  | )
|                                                                                       | Other operating income and expenses              |              |        | 22   |              |  |      | 49   |  
|                                                                                       | Depreciation and amortization                    |              |        | 130  |              |  |      | 173  |  
|                                                                                       | Equity settled share-based cost, net of payments |              |        | 12   |              |  |      | 12   |  
|                                                                                       | Other gains and losses                           |              |        |     |              |  |      | 4    |  
|                                                                                       |                                                  |              |        |      |              | 
|Operating cash flow before movements in working capital                                |                                                  |              | 481    |      |              |  | 535  |     
|Decrease in inventories                                                                |                                                  |              |       |      |              |  | 1    |     
|Increase in receivables                                                                |                                                  |              |       |      |              |  | (13  | )   
|(Decrease)/increase in provisions and other payables                                   |                                                  |              | (32    | )    |              |  | 50   |     
|Decrease in employee benefit obligation                                                |                                                  |              | (26    | )    |              |  | (58  | )   
|                                                                                       |                                                  |              |        |      |              | 
|Cash flow from operations                                                              |                                                  |              | 423    |      |              |  | 515  |     
|Interest paid                                                                          |                                                  |              | (59    | )    |              |  | (91  | )   
|Interest received                                                                      |                                                  |              | 29     |      |              |  | 72   |     
|Tax paid                                                                               |                                                  |              | (91    | )    |              |  | (35  | )   
|                                                                                       |                                                  |              |        |      |              | 
|Net cash from operating activities                                                     |                                                  |              | 302    |      |              |  | 461  |     
|                                                                                       |                                                  |              |        |      |              | 
|Cash flow from investing activities                                                    |                                                  |              |        |      |              |  |      |     
|Purchases of property, plant and equipment  Hotels                                    |                                                  |              | (121   | )    |              |  | (175 | )   
|Purchases of associates and other financial assets 
    Hotels                        |                                                  |              | (15    | )    |              |  | (12  | )   
|Disposal of assets, net of cash disposed of  Hotels                                   |                                                  |              | 1,816  |      |              |  | 101  |     
|Proceeds from other financial assets  Hotels                                          |                                                  |              | 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                                                     |                                                  |              | 1,863  |      |              |  | (151 | )   
|                                                                                       |                                                  |              |        |      |              | 
|Cash flow from financing activities                                                    |                                                  |              |        |      |              |  |      |     
|Proceeds from the issue of share capital                                               |                                                  |              | 10     |      |              |  | 16   |     
|Purchase of own shares                                                                 |                                                  |              | (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                                        |                                                  |              | (29    | )    |              |  | (33  | )   
|Proceeds on release of own shares by employee share trusts                             |                                                  |              | 16     |      |              |  | 16   |     
|Dividends paid to shareholders                                                         |                                                  |              | (81    | )    |              |  | (600 | )   
|Dividends paid to minority interests                                                   |                                                  |              | (177   | )    |              |  | (26  | )   
|(Decrease)/increase in borrowings                                                      |                                                  |              | (442   | )    |              |  | 258  |     
|Costs associated with new facilities                                                   |                                                  |              |       |      |              |  | (5   | )   
|Financial expense on early settlement of debt                                          |                                                  |              |       |      |              |  | (17  | )   
|                                                                                       |                                                  |              |        |      |              | 
|Net cash from financing activities                                                     |                                                  |              | (1,906 | )    |              |  | (648 | )   
|                                                                                       |                                                  |              |        |      |              | 
|Net movement in cash and cash equivalents in the year                                  |                                                  |              | 259    |      |              |  | (338 | )   
|Cash and cash equivalents at beginning of the year                                     |                                                  |              | 72     |      |              |  | 411  |     
|Exchange rate effects                                                                  |                                                  |              | (7     | )    |              |  | (1   | )   
|                                                                                       |                                                  |              |        |      |              | 
|Cash and cash equivalents at end of the year                                           |                                                  |              | 324    |      |              |  | 72   |     
|                                                                                       |                                                  |              |        |      |              | 






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



F-8



---



##### Table of Contents






Note 1  Corporate Information and Accounting
Policies




| |                      
| | ---------------------
| | Corporate information





| |                                           
| | ------------------------------------------
| | Summary of significant accounting policies

Basis of preparation






| |                        
| | -----------------------
| | Statement of compliance





| |                
| | ---------------
| | IFRS exemptions





| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Not to restate the comparative information disclosed in
    the 2005 financial statements in accordance with IAS 32
    Financial Instruments: Disclosure and Presentation
    and IAS 39 Financial Instruments: Recognition and
    Measurement.
|
| | b) Not to restate business combinations before
    January 1, 2004.                                                                                                                                                                                     
|
| | c) To recognize all actuarial gains and losses on pensions
    and other post-employment benefits directly in equity at
    January 1, 2004.                                                                                                            
|
| | d) To retain UK GAAP carrying values of property, plant and
    equipment, including revaluations, as deemed cost at transition.                                                                                                                        
|
| | e) Not to recognize separately cumulative foreign exchange
    movements up to January 1, 2004.                                                                                                                                                         
|
| | f) To apply IFRS 2 Share-based Payments to
    grants of equity instruments after November 7, 2002 that
    had not vested at January 1, 2005.                                                                                                        



F-9



---



##### Table of Contents







| |                       
| | ----------------------
| | Basis of consolidation











| |                   
| | ------------------
| | Foreign currencies







| |                      
| | ---------------------
| | Financial instruments







F-10



---



##### Table of Contents





| |                                             
| | --------------------------------------------
| | Derivative financial instruments and hedging







| |                              
| | -----------------------------
| | Property, plant and equipment







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







| |         
| | --------
| | Goodwill







| |                  
| | -----------------
| | Intangible assets



| |         
| | --------
| | Software



Management contracts




F-11



---



##### Table of Contents





| |                        
| | -----------------------
| | Other intangible assets









| |           
| | ----------
| | Associates







| |                 
| | ----------------
| | Financial assets









| |            
| | -----------
| | Inventories





| |                  
| | -----------------
| | Trade receivables





| |                          
| | -------------------------
| | Cash and cash equivalents







| |                     
| | --------------------
| | Assets held for sale



F-12



---



##### Table of Contents











| |               
| | --------------
| | Trade payables





| |                
| | ---------------
| | Loyalty program





| |               
| | --------------
| | Self insurance





| |           
| | ----------
| | Provisions





| |                          
| | -------------------------
| | Bank and other borrowings







| |         
| | --------
| | Pensions



| |                           
| | --------------------------
| | Defined contribution plans





| |                      
| | ---------------------
| | Defined benefit plans







F-13



---



##### Table of Contents









| |             
| | ------------
| | Deferred tax









| |                    
| | -------------------
| | Revenue recognition













| |                     
| | --------------------
| | Share-based payments







F-14



---



##### Table of Contents







| |       
| | ------
| | Leases





| |                   
| | ------------------
| | Disposal of Assets





| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | does the Company have a continuing managerial involvement to the
    degree associated with asset ownership;
|
| |  | has the Company transferred significant risks and rewards
    associated with asset ownership;              
|
| |  | can the Company reliably measure the proceeds; and                                                          
|
| |  | will the Company actually receive the proceeds.                                                             



| |                        
| | -----------------------
| | Discontinued operations





| |                 
| | ----------------
| | Use of estimates









| |                                  
| | ---------------------------------
| | New standards and interpretations



|        |  |                                                                                       
|------- |  | --------------------------------------------------------------------------------------
|IFRS 7  |  | Financial Instruments: Disclosures
    Effective from January 1, 2007                 
|IFRIC 4 |  | Determining whether an arrangement contains a lease
    Effective from January 1, 2006

F-15



---



##### Table of Contents







|         |                   
|-------- | ------------------
|Note 2  | Segmental Analysis

 


 


Hotels
















| |           
| | ----------
| | Franchised





| |        
| | -------
| | Managed





| |                 
| | ----------------
| | Owned and leased





F-16



---



##### Table of Contents



Soft Drinks






| |                              
| | -----------------------------
| | Year ended December 31, 2005*



| |        
| | -------
| | Revenue

|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |    |    |  |  |       |     | 
|------ | ------------------------------------------ | ----------- | --- | --- | ---- | ---- | --- | ------- |  |  | ------- | -- |  | ------ | -- | -- |  |  | ----- | --- | 
|       |                                            |             |     |     |      | Asia |     |         |  |  | Total   |   
|       |                                            | Americas    |     |     | EMEA |      |     | Pacific |  |  | Central |    |  | Hotels |   
|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |   
|       |                                            | (£ million) |    
|Hotels |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |    |    |  |  |       |    
|       | Owned and leased                           |             |     | 122 |      |      |     | 236     |  |  |         | 56 |  |        |    |   |  |  |       | 414 | 
|       | Managed                                    |             |     | 65  |      |      |     | 55      |  |  |         | 25 |  |        |    |   |  |  |       | 145 | 
|       | Franchised                                 |             |     | 213 |      |      |     | 35      |  |  |         | 3  |  |        |    |   |  |  |       | 251 | 
|       | Central                                    |             |     |    |      |      |     |        |  |  |         |   |  |        |    | 42 |  |  |       | 42  | 
|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |   
|       | Continuing operations                      |             |     | 400 |      |      |     | 326     |  |  |         | 84 |  |        |    | 42 |  |  |       | 852 | 
|       | Discontinued operations  owned and leased |             |     | 45  |      |      |     | 285     |  |  |         | 57 |  |        |    |   |  |  |       | 387 | 
|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |   
|       |                                            |             | 445 |     |      |      | 611 |         |  |  | 141     |    |  |        | 42 |    |  |  | 1,239 |    
|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |   

|              |             |             |     |     |              |  |       |       |  |  |       |       | 
|------------- | ----------- | ----------- | --- | --- | ------------ |  | ----- | ----- |  |  | ----- | ----- | 
|              |             | Continuing  |     |     | Discontinued |  |       | Group | 
|              |             |             |     |     |              |  |       |       | 
|              |             | (£ million) |    
|Group         |             |             |     |     |              |  |       |       |  |  |       |      
|              | Hotels      |             |     | 852 |              |  |       | 387   |  |  |       | 1,239 | 
|              | Soft Drinks |             |     |    |              |  |       | 671   |  |  |       | 671   | 
|              |             |             |     |     |              |  |       |       | 
|Total revenue |             |             | 852 |     |              |  | 1,058 |       |  |  | 1,910 |      
|              |             |             |     |     |              |  |       |       | 



| |                 
| | ----------------
| | Segmental result

|       |                                            |             |     |     |      |  |     |              |   |       |         |    |   |        |     |     |   |  |     |      |  
|------ | ------------------------------------------ | ----------- | --- | --- | ---- |  | --- | ------------ | - | ----- | ------- | -- | - | ------ | --- | --- | - |  | --- | ---- | -
|       |                                            |             |     |     |      |  |     |              |   | Total |        
|       |                                            | Americas    |     |     | EMEA |  |     | Asia Pacific |   |       | Central |    |   | Hotels |    
|       |                                            |             |     |     |      |  |     |              |   |       |         |    |   |        |    
|       |                                            | (£ million) |    
|Hotels |                                            |             |     |     |      |  |     |              |   |       |         |    |   |        |     |     |   |  |     |     
|       | Owned and leased                           |             |     | 15  |      |  |     | 11           |   |       |         | 11 |   |        |     |    |   |  |     | 37   |  
|       | Managed                                    |             |     | 20  |      |  |     | 31           |   |       |         | 16 |   |        |     |    |   |  |     | 67   |  
|       | Franchised                                 |             |     | 186 |      |  |     | 26           |   |       |         | 2  |   |        |     |    |   |  |     | 214  |  
|       | Regional and central                       |             |     | (34 | )    |  |     | (21          | ) |       |         | (8 | ) |        |     | (65 | ) |  |     | (128 | )
|       |                                            |             |     |     |      |  |     |              |   |       |         |    |   |        |    
|       | Continuing operations                      |             |     | 187 |      |  |     | 47           |   |       |         | 21 |   |        |     | (65 | ) |  |     | 190  |  
|       | Discontinued operations  owned and leased |             |     | 11  |      |  |     | 57           |   |       |         | 11 |   |        |     |    |   |  |     | 79   |  
|       |                                            |             |     |     |      |  |     |              |   |       |         |    |   |        |    
|       |                                            |             | 198 |     |      |  | 104 |              |   |       | 32      |    |   |        | (65 | )   |   |  | 269 |     
|       |                                            |             |     |     |      |  |     |              |   |       |         |    |   |        |    

F-17



---



##### Table of Contents



|                                       |                                     |             |     |     |              |  |     |       |  |  |     |     |  
|-------------------------------------- | ----------------------------------- | ----------- | --- | --- | ------------ |  | --- | ----- |  |  | --- | --- | -
|                                       |                                     | Continuing  |     |     | Discontinued |  |     | Group | 
|                                       |                                     |             |     |     |              |  |     |       | 
|                                       |                                     | (£ million) |    
|Group                                  |                                     |             |     |     |              |  |     |       |  |  |     |    
|                                       | Hotels                              |             |     | 190 |              |  |     | 79    |  |  |     | 269 |  
|                                       | Soft Drinks                         |             |     |    |              |  |     | 70    |  |  |     | 70  |  
|                                       |                                     |             |     |     |              |  |     |       | 
|                                       |                                     |             | 190 |     |              |  | 149 |       |  |  | 339 |    
|Unallocated expenses:                  |                                     |             |     |     |              |  |     |       |  |  |     |    
|                                       | Other operating income and expenses |             |     | (22 | )            |  |     |      |  |  |     | (22 | )
|                                       |                                     |             |     |     |              |  |     |       | 
|Operating profit                       |                                     |             | 168 |     |              |  | 149 |       |  |  | 317 |    
|Net finance costs                      |                                     |             | (24 | )   |              |  | (9  | )     |  |  | (33 | )  
|                                       |                                     |             |     |     |              |  |     |       | 
|Profit before tax                      |                                     |             | 144 |     |              |  | 140 |       |  |  | 284 |    
|Tax                                    |                                     |             | (28 | )   |              |  | (52 | )     |  |  | (80 | )  
|                                       |                                     |             |     |     |              |  |     |       | 
|Profit after tax                       |                                     |             | 116 |     |              |  | 88  |       |  |  | 204 |    
|Gain on disposal of assets, net of tax |                                     |             |    |     |              |  | 311 |       |  |  | 311 |    
|                                       |                                     |             |     |     |              |  |     |       | 
|Profit available for shareholders      |                                     |             | 116 |     |              |  | 399 |       |  |  | 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-18



---



##### Table of Contents





| |                          
| | -------------------------
| | Other segment information

|                         |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       |  |  |  |    |  |  |  |    | 
|------------------------ | ------------------------------------------- | ----------- |  | -- | ---- | ---- |  | ------- |  |  | ------- | -- |  | ------ |  | -- | ------ |  |  | ----- |  |  |  | -- |  |  |  | -- | 
|                         |                                             |             |  |    |      | Asia |  |         |  |  | Total   |    |  | Soft   |  |    | Total  | 
|                         |                                             | Americas    |  |    | EMEA |      |  | Pacific |  |  | Central |    |  | Hotels |  |    | Drinks |  |  | Group | 
|                         |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       | 
|                         |                                             | (£ million) | 
|Continuing operations:   |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       |  |  |  |    |  |  |  |   
|                         | Capital expenditure                         |             |  | 24 |      |      |  | 27      |  |  |         | 28 |  |        |  | 13 |        |  |  | 92    |  |  |  |   |  |  |  | 92 | 
|                         | Depreciation and
    amortization(i)        |             |  | 19 |      |      |  | 28      |  |  |         | 8  |  |        |  | 15 |        |  |  | 70    |  |  |  |   |  |  |  | 70 | 
|                         | Impairment of property, plant and equipment |             |  |   |      |      |  | 7       |  |  |         |   |  |        |  |   |        |  |  | 7     |  |  |  |   |  |  |  | 7  | 
|Discontinued operations: |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       |  |  |  |    |  |  |  |   
|                         | Capital expenditure                         |             |  | 4  |      |      |  | 36      |  |  |         | 4  |  |        |  |   |        |  |  | 44    |  |  |  | 47 |  |  |  | 91 | 
|                         | Depreciation and
    amortization(i)        |             |  | 1  |      |      |  | 11      |  |  |         | 3  |  |        |  |   |        |  |  | 15    |  |  |  | 45 |  |  |  | 60 | 






|    |                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------
|*   | Other than for Soft Drinks which reflects the 50 weeks and
    three days ended December 14.                                 
|   
|(i) | Included in the £130 million of depreciation and
    amortization is £23 million that relates to
    administrative expenses.



| |                              
| | -----------------------------
| | Year ended December 31, 2004*



| |        
| | -------
| | Revenue

|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |    |    |  |  |       |     | 
|------ | ------------------------------------------ | ----------- | --- | --- | ---- | ---- | --- | ------- |  |  | ------- | -- |  | ------ | -- | -- |  |  | ----- | --- | 
|       |                                            |             |     |     |      | Asia |     |         |  |  | Total   |   
|       |                                            | Americas    |     |     | EMEA |      |     | Pacific |  |  | Central |    |  | Hotels |   
|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |   
|       |                                            | (£ million) |    
|Hotels |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |    |    |  |  |       |    
|       | Owned and leased                           |             |     | 93  |      |      |     | 231     |  |  |         | 47 |  |        |    |   |  |  |       | 371 | 
|       | Managed                                    |             |     | 30  |      |      |     | 43      |  |  |         | 21 |  |        |    |   |  |  |       | 94  | 
|       | Franchised                                 |             |     | 196 |      |      |     | 27      |  |  |         | 3  |  |        |    |   |  |  |       | 226 | 
|       | Central                                    |             |     |    |      |      |     |        |  |  |         |   |  |        |    | 40 |  |  |       | 40  | 
|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |   
|       | Continuing operations                      |             |     | 319 |      |      |     | 301     |  |  |         | 71 |  |        |    | 40 |  |  |       | 731 | 
|       | Discontinued operations  owned and leased |             |     | 176 |      |      |     | 528     |  |  |         | 63 |  |        |    |   |  |  |       | 767 | 
|       |                                            |             |     |     |      |      |     |         |  |  |         |    |  |        |   
|       |                                            |             | 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-19



---



##### Table of Contents





| |                 
| | ----------------
| | Segmental result

|       |                                            |             |     |     |      |      |     |         |   |  |         |    |   |        |     |     |   |  |     |      |  
|------ | ------------------------------------------ | ----------- | --- | --- | ---- | ---- | --- | ------- | - |  | ------- | -- | - | ------ | --- | --- | - |  | --- | ---- | -
|       |                                            |             |     |     |      | Asia |     |         |   |  | Total   |   
|       |                                            | Americas    |     |     | EMEA |      |     | Pacific |   |  | Central |    |   | Hotels |    
|       |                                            |             |     |     |      |      |     |         |   |  |         |    |   |        |    
|       |                                            | (£ million) |    
|Hotels |                                            |             |     |     |      |      |     |         |   |  |         |    |   |        |     |     |   |  |     |     
|       | Owned and leased                           |             |     | 4   |      |      |     | 2       |   |  |         | 9  |   |        |     |    |   |  |     | 15   |  
|       | Managed                                    |             |     | 6   |      |      |     | 24      |   |  |         | 14 |   |        |     |    |   |  |     | 44   |  
|       | Franchised                                 |             |     | 167 |      |      |     | 21      |   |  |         | 2  |   |        |     |    |   |  |     | 190  |  
|       | Regional and central                       |             |     | (27 | )    |      |     | (23     | ) |  |         | (8 | ) |        |     | (57 | ) |  |     | (115 | )
|       |                                            |             |     |     |      |      |     |         |   |  |         |    |   |        |    
|       | Continuing operations                      |             |     | 150 |      |      |     | 24      |   |  |         | 17 |   |        |     | (57 | ) |  |     | 134  |  
|       | Discontinued operations  owned and leased |             |     | 23  |      |      |     | 105     |   |  |         | 7  |   |        |     |    |   |  |     | 135  |  
|       |                                            |             |     |     |      |      |     |         |   |  |         |    |   |        |    
|       |                                            |             | 173 |     |      |      | 129 |         |   |  | 24      |    |   |        | (57 | )   |   |  | 269 |     
|       |                                            |             |     |     |      |      |     |         |   |  |         |    |   |        |    

|                                       |                                     |             |     |     |              |  |     |       |  |  |     |     |  
|-------------------------------------- | ----------------------------------- | ----------- | --- | --- | ------------ |  | --- | ----- |  |  | --- | --- | -
|                                       |                                     | Continuing  |     |     | Discontinued |  |     | Group | 
|                                       |                                     |             |     |     |              |  |     |       | 
|                                       |                                     | (£ million) |    
|Group                                  |                                     |             |     |     |              |  |     |       |  |  |     |    
|                                       | Hotels                              |             |     | 134 |              |  |     | 135   |  |  |     | 269 |  
|                                       | Soft Drinks                         |             |     |    |              |  |     | 77    |  |  |     | 77  |  
|                                       |                                     |             |     |     |              |  |     |       | 
|                                       |                                     |             | 134 |     |              |  | 212 |       |  |  | 346 |    
|Unallocated expenses:                  |                                     |             |     |     |              |  |     |       |  |  |     |    
|                                       | Other operating income and expenses |             |     | (49 | )            |  |     |      |  |  |     | (49 | )
|                                       |                                     |             |     |     |              |  |     |       | 
|Operating profit                       |                                     |             | 85  |     |              |  | 212 |       |  |  | 297 |    
|Net finance costs                      |                                     |             | (33 | )   |              |  |    |       |  |  | (33 | )  
|                                       |                                     |             |     |     |              |  |     |       | 
|Profit before tax                      |                                     |             | 52  |     |              |  | 212 |       |  |  | 264 |    
|Tax                                    |                                     |             | 194 |     |              |  | (67 | )     |  |  | 127 |    
|                                       |                                     |             |     |     |              |  |     |       | 
|Profit after tax                       |                                     |             | 246 |     |              |  | 145 |       |  |  | 391 |    
|Gain on disposal of assets, net of tax |                                     |             |    |     |              |  | 19  |       |  |  | 19  |    
|                                       |                                     |             |     |     |              |  |     |       | 
|Profit available for shareholders      |                                     |             | 246 |     |              |  | 164 |       |  |  | 410 |    
|                                       |                                     |             |     |     |              |  |     |       | 






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

F-20



---



##### Table of Contents





| |                              
| | -----------------------------
| | Year ended December 31, 2004*



| |                       
| | ----------------------
| | 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 |      
|                                               |                            |             |       |  |      |      |       |         |  |  |         |  |  |        |    |  |        |  |       |       | 



| |                          
| | -------------------------
| | Other segment information

|                         |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       |  |  |  |    |  |  |  |     | 
|------------------------ | ------------------------------------------- | ----------- |  | -- | ---- | ---- |  | ------- |  |  | ------- | -- |  | ------ |  | -- | ------ |  |  | ----- |  |  |  | -- |  |  |  | --- | 
|                         |                                             |             |  |    |      | Asia |  |         |  |  | Total   |    |  | Soft   |  |    | Total  | 
|                         |                                             | Americas    |  |    | EMEA |      |  | Pacific |  |  | Central |    |  | Hotels |  |    | Drinks |  |  | Group | 
|                         |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       | 
|                         |                                             | (£ million) | 
|Continuing operations:   |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       |  |  |  |    |  |  |  |    
|                         | Capital expenditure                         |             |  | 45 |      |      |  | 37      |  |  |         | 15 |  |        |  | 12 |        |  |  | 109   |  |  |  |   |  |  |  | 109 | 
|                         | Depreciation and
    amortization(i)        |             |  | 12 |      |      |  | 26      |  |  |         | 6  |  |        |  | 15 |        |  |  | 59    |  |  |  |   |  |  |  | 59  | 
|                         | Impairment of property, plant and equipment |             |  | 14 |      |      |  | 30      |  |  |         | 4  |  |        |  |   |        |  |  | 48    |  |  |  |   |  |  |  | 48  | 
|Discontinued operations: |                                             |             |  |    |      |      |  |         |  |  |         |    |  |        |  |    |        |  |  |       |  |  |  |    |  |  |  |    
|                         | Capital expenditure                         |             |  | 15 |      |      |  | 58      |  |  |         | 5  |  |        |  |   |        |  |  | 78    |  |  |  | 70 |  |  |  | 148 | 
|                         | Depreciation and
    amortization(i)        |             |  | 17 |      |      |  | 44      |  |  |         | 7  |  |        |  |   |        |  |  | 68    |  |  |  | 46 |  |  |  | 114 | 






|    |                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------
|*   | Other than for Soft Drinks which reflects the 53 weeks
    ended December 25.                                                
|   
|(i) | Included in the £173 million of depreciation and
    amortization is £23 million that relates to
    administrative expenses.

F-21



---



##### Table of Contents





|         |                                      
|-------- | -------------------------------------
|Note 3  | Staff costs and directors emoluments

Costs


|                      |  |              |     |  |              |  |     | 
|--------------------- |  | ------------ | --- |  | ------------ |  | --- | 
|                      |  | Year ended   |     |  | Year ended   | 
|                      |  | December 31, |     |  | December 31, | 
|                      |  | 2005         |     |  | 2004         | 
|                      |  |              |     |  |              | 
|                      |  | (£ million)  |    
|Wages and salaries    |  |              | 465 |  |              |  | 570 | 
|Social security costs |  |              | 61  |  |              |  | 66  | 
|Pension costs         |  |              | 19  |  |              |  | 21  | 
|Other plans           |  |              | 15  |  |              |  | 12  | 
|                      |  |              |     |  |              | 
|                      |  |              | 560 |  |              |  | 669 | 
|                      |  |              |     |  |              | 

Employee numbers




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

Employee benefits








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



F-22



---



##### Table of Contents





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



|                                          |  |               |      |   |       |            |      |          |  |  |       |   |  |      |     |   |      |  |     |      |  |  |      |   |  |  |      |   |  |  |      |  
|----------------------------------------- |  | ------------- | ---- | - | ----- | ---------- | ---- | -------- |  |  | ----- | - |  | ---- | --- | - | ---- |  | --- | ---- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                          |  | Pension plans |      |   |       |            |      |          | 
|                                          |  |               |      |   | Post- |            |      |          |  | 
|                                          |  |               |      |   |       | employment |      |          | 
|                                          |  | UK            |      |   | US    |            |      | benefits |  |  | Total |  
|                                          |  |               |      |   |       |            |      |          |  |  |       |  
|                                          |  | 2005          |      |   | 2004  |            |      | 2005     |  |  | 2004  |   |  | 2005 |     |   | 2004 |  |     | 2005 |  |  | 2004 |  
|                                          |  |               |      |   |       |            |      |          |  |  |       |   |  |      |     |   |      |  |     |      |  |  |      |  
|                                          |  | (£ million)   |     
|Fair value of scheme assets               |  |               | 250  |   |       |            | 470  |          |  |  | 62    |   |  |      | 56  |   |      |  |    |      |  |  |     |   |  |  | 312  |   |  |  | 526  |  
|Present value of benefit obligations      |  |               | (274 | ) |       |            | (600 | )        |  |  | (103  | ) |  |      | (88 | ) |      |  | (11 | )    |  |  | (11  | ) |  |  | (388 | ) |  |  | (699 | )
|                                          |  |               |      |   |       |            |      |          |  |  |       |   |  |      |     |   |      |  |     |      |  |  |      |  
|Employee benefits liability  non-current |  |               | (24  | ) |       |            | (130 | )        |  |  | (41   | ) |  |      | (32 | ) |      |  | (11 | )    |  |  | (11  | ) |  |  | (76  | ) |  |  | (173 | )
|                                          |  |               |      |   |       |            |      |          |  |  |       |   |  |      |     |   |      |  |     |      |  |  |      |  



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



F-23



---



##### Table of Contents



|                                       |  |               |    |  |      |  |    |      |  |  |      |  |  |  |    | 
|-------------------------------------- |  | ------------- | -- |  | ---- |  | -- | ---- |  |  | ---- |  |  |  | -- | 
|                                       |  | Pension plans |   
|                                       |  |               |   
|                                       |  | UK            |    |  | US   | 
|                                       |  |               |    |  |      | 
|Post-retirement mortality (years)      |  | 2005          |    |  | 2004 |  |    | 2005 |  |  | 2004 | 
|                                       |  |               |    |  |      |  |    |      |  |  |      | 
|Current pensioners at 65 
    malea   |  |               | 21 |  |      |  | 21 |      |  |  | 17   |  |  |  | 17 | 
|Current pensioners at 65 
    femalea |  |               | 24 |  |      |  | 24 |      |  |  | 22   |  |  |  | 22 | 
|Future pensioners at 65 
    maleb    |  |               | 22 |  |      |  | 22 |      |  |  | 17   |  |  |  | 17 | 
|Future pensioners at 65 
    femaleb  |  |               | 25 |  |      |  | 25 |      |  |  | 22   |  |  |  | 22 | 






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



|  |                                                                                                   
|- | --------------------------------------------------------------------------------------------------
|b | Relates to assumptions based on longevity (in years) relating to
    an employee retiring in 2020.



|                                                       |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |   |  |  |      |   |  |  |     |  
|------------------------------------------------------ |  | ------------- | ---- | - | ----- | ---------- | --- | -------- |  |  | ----- | - |  | ---- | -- | - | ---- |  | -- | ---- |  |  | ---- | - |  |  | ---- | - |  |  | --- | -
|                                                       |  | Pension plans |      |   |       |            |     |          | 
|                                                       |  |               |      |   | Post- |            |     |          |  | 
|                                                       |  |               |      |   |       | employment |     |          | 
|                                                       |  | UK            |      |   | US    |            |     | benefits |  |  | Total |  
|                                                       |  |               |      |   |       |            |     |          |  |  |       |  
|Movement in benefit obligation                         |  | 2005          |      |   | 2004  |            |     | 2005     |  |  | 2004  |   |  | 2005 |    |   | 2004 |  |    | 2005 |  |  | 2004 |  
|                                                       |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |  
|                                                       |  | (£ million)   |     
|Benefit obligation at beginning of year                |  |               | 600  |   |       |            | 477 |          |  |  | 88    |   |  |      | 90 |   |      |  | 11 |      |  |  | 11   |   |  |  | 699  |   |  |  | 578 |  
|Current service cost                                   |  |               | 19   |   |       |            | 18  |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  | 19   |   |  |  | 18  |  
|Past service cost                                      |  |               |     |   |       |            | 1   |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  |     |   |  |  | 1   |  
|Members contributions                                 |  |               | 2    |   |       |            | 2   |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  | 2    |   |  |  | 2   |  
|Interest expense                                       |  |               | 30   |   |       |            | 27  |          |  |  | 6     |   |  |      | 5  |   |      |  | 1  |      |  |  | 1    |   |  |  | 37   |   |  |  | 33  |  
|Benefits paid                                          |  |               | (11  | ) |       |            | (12 | )        |  |  | (6    | ) |  |      | (5 | ) |      |  | (1 | )    |  |  | (1   | ) |  |  | (18  | ) |  |  | (18 | )
|Plan curtailment                                       |  |               | (7   | ) |       |            |    |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  | (7   | ) |  |  |    |  
|Deficit transferred in respect of previous acquisition |  |               |     |   |       |            | 27  |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  |     |   |  |  | 27  |  
|Actuarial loss/(gain) arising in the year              |  |               | 67   |   |       |            | 60  |          |  |  | 3     |   |  |      | 5  |   |      |  | (1 | )    |  |  | 1    |   |  |  | 69   |   |  |  | 66  |  
|Separation of Soft Drinks                              |  |               | (426 | ) |       |            |    |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  | (426 | ) |  |  |    |  
|Exchange adjustments                                   |  |               |     |   |       |            |    |          |  |  | 12    |   |  |      | (7 | ) |      |  | 1  |      |  |  | (1   | ) |  |  | 13   |   |  |  | (8  | )
|                                                       |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |  
|Benefit obligation at end of year                      |  |               | 274  |   |       |            | 600 |          |  |  | 103   |   |  |      | 88 |   |      |  | 11 |      |  |  | 11   |   |  |  | 388  |   |  |  | 699 |  
|                                                       |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |  





|                             |  |           |     |  |             |  |           |          |  |  |             |  |  |  |     | 
|---------------------------- |  | --------- | --- |  | ----------- |  | --------- | -------- |  |  | ----------- |  |  |  | --- | 
|                             |  | 2005      |     |  | 2004        | 
|                             |  |           |     |  |             | 
|                             |  | Long-term |     |  |             |  | Long-term |          |  | 
|                             |  | rate of   |     |  |             |  | rate of   |          |  | 
|                             |  | return    |     |  |             |  | return    |          |  | 
|                             |  | expected  |     |  | Value       |  |           | expected |  |  | Value       | 
|                             |  |           |     |  |             |  |           |          |  |  |             | 
|                             |  | (%)       |     |  | (£ million) |  |           | (%)      |  |  | (£ million) | 
|UK Schemes                   |  |           |     |  |             |  |           |          |  |  |             |  |  |  |     | 
|Equities                     |  |           | 7.5 |  |             |  | 138       |          |  |  | 8.0         |  |  |  | 272 | 
|Bonds                        |  |           | 4.7 |  |             |  | 110       |          |  |  | 4.9         |  |  |  | 173 | 
|Other                        |  |           | 4.1 |  |             |  | 2         |          |  |  | 8.0         |  |  |  | 25  | 
|                             |  |           |     |  |             |  |           |          |  |  |             | 
|Total market value of assets |  |           |     |  |             |  | 250       |          |  |  |             |  |  |  | 470 | 
|                             |  |           |     |  |             |  |           |          |  |  |             | 
|US Schemes                   |  |           |     |  |             |  |           |          |  |  |             |  |  |  |     | 
|Equities                     |  |           | 9.6 |  |             |  | 38        |          |  |  | 9.6         |  |  |  | 34  | 
|Fixed income                 |  |           | 5.5 |  |             |  | 24        |          |  |  | 5.5         |  |  |  | 22  | 
|                             |  |           |     |  |             |  |           |          |  |  |             | 
|Total market value of assets |  |           |     |  |             |  | 62        |          |  |  |             |  |  |  | 56  | 
|                             |  |           |     |  |             |  |           |          |  |  |             | 

F-24



---



##### Table of Contents



|                                                      |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |   |  |  |      |   |  |  |     |  
|----------------------------------------------------- |  | ------------- | ---- | - | ----- | ---------- | --- | -------- |  |  | ----- | - |  | ---- | -- | - | ---- |  | -- | ---- |  |  | ---- | - |  |  | ---- | - |  |  | --- | -
|                                                      |  | Pension plans |      |   |       |            |     |          | 
|                                                      |  |               |      |   | Post- |            |     |          |  | 
|                                                      |  |               |      |   |       | employment |     |          | 
|                                                      |  | UK            |      |   | US    |            |     | benefits |  |  | Total |  
|                                                      |  |               |      |   |       |            |     |          |  |  |       |  
|Movement in plan assets                               |  | 2005          |      |   | 2004  |            |     | 2005     |  |  | 2004  |   |  | 2005 |    |   | 2004 |  |    | 2005 |  |  | 2004 |  
|                                                      |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |  
|                                                      |  | (£ million)   |     
|Fair value of plan assets at beginning of year        |  |               | 470  |   |       |            | 353 |          |  |  | 56    |   |  |      | 48 |   |      |  |   |      |  |  |     |   |  |  | 526  |   |  |  | 401 |  
|Company contributions                                 |  |               | 45   |   |       |            | 72  |          |  |  | 2     |   |  |      | 12 |   |      |  | 1  |      |  |  | 1    |   |  |  | 48   |   |  |  | 85  |  
|Members contributions                                |  |               | 2    |   |       |            | 2   |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  | 2    |   |  |  | 2   |  
|Assets transferred in respect of previous acquisition |  |               |     |   |       |            | 14  |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  |     |   |  |  | 14  |  
|Benefits paid                                         |  |               | (11  | ) |       |            | (12 | )        |  |  | (6    | ) |  |      | (5 | ) |      |  | (1 | )    |  |  | (1   | ) |  |  | (18  | ) |  |  | (18 | )
|Expected return on assets                             |  |               | 32   |   |       |            | 27  |          |  |  | 5     |   |  |      | 4  |   |      |  |   |      |  |  |     |   |  |  | 37   |   |  |  | 31  |  
|Actuarial gain/(loss) arising in the year             |  |               | 47   |   |       |            | 14  |          |  |  | (1    | ) |  |      | 1  |   |      |  |   |      |  |  |     |   |  |  | 46   |   |  |  | 15  |  
|Separation of Soft Drinks                             |  |               | (335 | ) |       |            |    |          |  |  |      |   |  |      |   |   |      |  |   |      |  |  |     |   |  |  | (335 | ) |  |  |    |  
|Exchange adjustments                                  |  |               |     |   |       |            |    |          |  |  | 6     |   |  |      | (4 | ) |      |  |   |      |  |  |     |   |  |  | 6    |   |  |  | (4  | )
|                                                      |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |  
|Fair value of plan assets at end of year              |  |               | 250  |   |       |            | 470 |          |  |  | 62    |   |  |      | 56 |   |      |  |   |      |  |  |     |   |  |  | 312  |   |  |  | 526 |  
|                                                      |  |               |      |   |       |            |     |          |  |  |       |   |  |      |    |   |      |  |    |      |  |  |      |  



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

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

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



F-25



---



##### Table of Contents





| |                                                                        
| | -----------------------------------------------------------------------
| | Policy on remuneration of executive directors and senior
    executives





| |                            
| | ---------------------------
| | Total level of remuneration





| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | 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 main components









Basic
salary






Annual
performance bonus




F-26



---



##### Table of Contents









Executive share options


three-year one-third


F-34.






Performance restricted shares three-year






| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the increase in IHG PLC Total Shareholder Return
    (TSR) over the performance period relative to
    10 identified comparator companies: Accor, De Vere, Hilton
    Group, Hilton Hotels Corp., Host Marriott, Marriott Hotels,
    Millennium & Copthorne, NH Hotels, Sol Melia and
    Starwood Hotels; and                              
|
| |  | the cumulative annual growth (CAGR) in the number of
    rooms within the IHG system over the performance period
    relative to nine identified comparator companies: Carlson
    Hospitality Worldwide, Cendant, Choice, Hilton Group, Hilton
    Hotels Corp., Hyatt Hotels & Resorts, Marriott Hotels,
    Sol Melia and Starwood Hotels.

F-27



---



##### Table of Contents













| |                              
| | -----------------------------
| | Companies used for comparison





| |   |                                                               
| | - | --------------------------------------------------------------
| |  | size  revenue, profits and the number of people
    employed;
|
| |  | diversity and complexity of businesses;                       
|
| |  | geographical spread of businesses;                            
|
| |  | industry type; and                                            
|
| |  | relevance as:                                                 



| |                                                           
| | ----------------------------------------------------------
| | a) a potential recruitment target                         
|
| | b) a potential threat in respect of attracting IHG talent.





| |                                
| | -------------------------------
| | Policy on external appointments





| |                     
| | --------------------
| | Contracts of service



| |          
| | ---------
| | a) Policy



F-28



---



##### Table of Contents













b) Directors
contracts


|                 |  |                |         |  |                 |  |           | 
|---------------- |  | -------------- | ------- |  | --------------- |  | --------- | 
|                 |  | Contract       |         |  | Unexpired term/ | 
|Directors        |  | effective date |         |  | notice period   | 
|                 |  |                |         |  |                 | 
|Andrew Cosslett  |  |                | 2.3.05  |  |                 |  | 12 months | 
|Richard Hartman  |  |                | 4.15.03 |  |                 |  | 12 months | 
|Stevan Porter    |  |                | 4.15.03 |  |                 |  | 12 months | 
|Richard Solomons |  |                | 4.15.03 |  |                 |  | 12 months | 



Policy regarding pensions








F-29



---



##### Table of Contents



Directors
Emoluments


|                           |  |              |       |  |             |  |     |                    |  |           |          |  |           |          |       |  |  |  |       | 
|-------------------------- |  | ------------ | ----- |  | ----------- |  | --- | ------------------ |  | --------- | -------- |  | --------- | -------- | ----- |  |  |  | ----- | 
|                           |  |              |       |  |             |  |     | Total emoluments   | 
|                           |  |              |       |  |             |  |     | excluding pensions | 
|                           |  | Basic        |       |  |             |  |     |                    |  |          
|                           |  | salaries     |       |  | Performance |  |     |                    |  | 1.1.05 to |          |  | 1.1.04 to |         
|                           |  | and fees     |       |  | payments    |  |     | Benefits           |  |           | 12.31.05 |  |           | 12.31.04 |      
|                           |  |              |       |  |             |  |     |                    |  |           |          |  |           |          |      
|                           |  | (£ thousand) |      
|Executive Directors        |  |              |       |  |             |  |     |                    |  |           |          |  |           |          |       |  |  |  |       | 
|Andrew
    Cosslett(1)     |  |              | 642   |  |             |  |    |                    |  |           | 21       |  |           |          | 663   |  |  |  |      | 
|Richard Hartman            |  |              | 496   |  |             |  |    |                    |  |           | 302      |  |           |          | 798   |  |  |  | 775   | 
|Stevan
    Porter(2)       |  |              | 402   |  |             |  |    |                    |  |           | 27       |  |           |          | 429   |  |  |  | 368   | 
|Richard Solomons           |  |              | 406   |  |             |  |    |                    |  |           | 17       |  |           |          | 423   |  |  |  | 400   | 
|Non-executive Directors    |  |              |       |  |             |  |     |                    |  |           |          |  |           |          |       |  |  |  |       | 
|David
    Webster(3)       |  |              | 519   |  |             |  |    |                    |  |           | 3        |  |           |          | 522   |  |  |  | 424   | 
|David
    Kappler(4)       |  |              | 80    |  |             |  |    |                    |  |           |         |  |           |          | 80    |  |  |  | 35    | 
|Ralph
    Kugler(5)        |  |              | 50    |  |             |  |    |                    |  |           |         |  |           |          | 50    |  |  |  | 42    | 
|Jennifer
    Laing(5)      |  |              | 18    |  |             |  |    |                    |  |           |         |  |           |          | 18    |  |  |  |      | 
|Robert C.
    Larson(5)    |  |              | 50    |  |             |  |    |                    |  |           |         |  |           |          | 50    |  |  |  | 42    | 
|Jonathan
    Linen(5)      |  |              | 4     |  |             |  |    |                    |  |           |         |  |           |          | 4     |  |  |  |      | 
|Sir David
    Prosser(6)   |  |              | 65    |  |             |  |    |                    |  |           |         |  |           |          | 65    |  |  |  | 50    | 
|Sir Howard
    Stringer(5) |  |              | 50    |  |             |  |    |                    |  |           |         |  |           |          | 50    |  |  |  | 42    | 
|Former
    directors(7)    |  |              | 488   |  |             |  | 413 |                    |  |           | 16       |  |           |          | 917   |  |  |  | 1,249 | 
|                           |  |              |       |  |             |  |     |                    |  |           |          |  |           |          |      
|Total                      |  |              | 3,270 |  |             |  | 413 |                    |  |           | 386      |  |           |          | 4,069 |  |  |  | 3,427 | 
|                           |  |              |       |  |             |  |     |                    |  |           |          |  |           |          |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Andrew Cosslett joined the Company on February 3, 2005. The
    emoluments shown include a £53,737 cash payment made as
    part of his recruitment terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(2) | Emoluments for Stevan Porter include £41,140 that were
    chargeable to UK income tax and £19,088 reimbursement of
    interest and charges due to a payroll error.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) | Fees paid to David Webster represent £41,667 per month
    payable to him until May 2, 2005 in his capacity as interim
    Chief Executive and a fixed fee of £350,000 pa for his
    role as non-executive Chairman.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(4) | With effect from January 1, 2005, David Kappler is paid a
    total annual fee of £80,000, reflecting his roles as Senior
    Independent Director and Chairman of the Audit Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(5) | With effect from January 1, 2005, an annual fee of
    £50,000 is payable to each of Ralph Kugler, Robert C.
    Larson and Sir Howard Stringer. All fees due to Ralph
    Kugler are paid to Unilever. Jennifer Laing and Jonathan Linen
    are paid an annual fee of £50,000 each effective from their
    dates of appointment, respectively August 25, 2005 and
    December 1, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(6) | With effect from January 1, 2005, Sir David Prosser is paid
    a total annual fee of £65,000, reflecting his role as
    Chairman of the Remuneration Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(7) | Richard North resigned as a director and as Chief Executive on
    September 30, 2004 and ceased employment with the Company
    on December 31, 2004. The emoluments shown for 2004 are for
    the full year. This includes his participation in the Short Term
    Deferred Incentive Plan which, in accordance with plan rules,
    had to be paid in cash due to his employment ending. He was
    eligible to participate in the Short Term Deferred Incentive
    Plan for the 2005 performance year. This award was made in cash
    and pro-rated to September 30, 2005. Richard Norths
    severance arrangements also provided for him to receive a
    payment of one months basic salary in each month up to
    September 2005. Sir Ian Prosser retired on December 31,
    2003. However, he had an ongoing healthcare benefit of £840
    during the year.

F-33.




F-30



---



##### Table of Contents



Long-term Reward


Performance Restricted Share
Plan (PRSP)






|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  |         |     |  |  |            |  |  |  |         |    
|---------------- |  | ----------- | ------- | ------- | --------------- |  | ------- | ----- |  | --------- | ----------- |  | ------------- | --------- | ------ | --------- | -------- |  | ------- | -------- | ------- |  | ----------- | ------ |  | -------- | -------- | --- | --------- | ----------- | ------- | ----------- |  |  | ------- | --- |  |  | ---------- |  |  |  | ------- | ---
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         | Maximum  |         |  | Expected    |       
|                 |  |             |         | Maximum |                 |  |         |       |  |           | PRSP shares |  |               |           |        |           |          |  |         | Maximum  |         |  | value based |        |  | value    |         
|                 |  | Maximum     |         |         | PRSP shares     |  |         |       |  | Market    |             |  | vested during |           |        | Market    |          |  |         |          | Actual/ |  |             | PRSP   |  |          | on share |     |           | based on    |        
|                 |  | PRSP        |         |         | awarded during  |  |         |       |  | price per |             |  | the year      |           |        | price per |          |  |         |          | planned |  |             | shares |  |          | price of |     |           | share price |        
|                 |  | shares held |         |         | the year 1.1.05 |  |         | Award |  |           | share at    |  |               | 1.1.05 to |        |           | share at |  |         | Value at |         |  | vesting     |        |  | held at  |          |     | 839.5p at |             |         | of 839.5p   | 
|                 |  | at 1.1.05   |         |         | to 12.31.05     |  |         | date  |  |           | award       |  |               | 12.31.05  |        |           | vesting  |  |         | vesting  |         |  | date        |        |  | 12.31.05 |          |     | 12.31.05  |             |         | at 12.31.05 | 
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               | £         |        |           |          |  |         |          | £       |  |             | £      | 
|Directors        |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  |         |     |  |  |            |  |  |  |         |    
|Andrew Cosslett  |  |             |         |         |                 |  | 68,216  | (2)   |  |           | 4.1.05      |  |               |           | 617.5  | p         |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.3.06  |             |  |  | 68,216  |     |  |  | 572,674    |  |  |  | 245,105 | (8)
|                 |  |             |         |         |                 |  | 136,432 | (3)   |  |           | 4.1.05      |  |               |           | 617.5  | p         |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.9.07  |             |  |  | 136,432 |     |  |  | 1,145,347  |  |  |  |         |    
|                 |  |             |         |         |                 |  | 276,200 | (4)   |  |           | 6.29.05     |  |               |           | 706    | p         |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.7.08  |             |  |  | 276,200 |     |  |  | 2,318,699  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Total            |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  | 480,848 |     |  |  | 4,036,720  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Richard Hartman  |  |             | 111,930 | (1)     |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  | 67,158  |          |         |  | 660p        |        |  |          | 443,243  |     |           |             | 3.11.05 |             |  |  |        |     |  |  |            |  |  |  |         |    
|                 |  |             | 167,900 | (2)     |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.3.06  |             |  |  | 167,900 |     |  |  | 1,409,521  |  |  |  | 603,275 | (8)
|                 |  |             | 165,130 | (3)     |                 |  |         |       |  |           | 6.24.04     |  |               |           | 549.5p |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.9.07  |             |  |  | 165,130 |     |  |  | 1,386,267  |  |  |  |         |    
|                 |  |             |         |         |                 |  | 214,870 | (4)   |  |           | 6.29.05     |  |               |           | 706p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.7.08  |             |  |  | 214,870 |     |  |  | 1,803,834  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  |         |     |  |  |            |  |  |  |         |    
|Total            |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  | 547,900 |     |  |  | 4,599,622  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Stevan Porter    |  |             | 113,810 | (1)     |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  | 68,286  |          |         |  | 660p        |        |  |          | 450,688  | (7) |           |             | 3.11.05 |             |  |  |        |     |  |  |            |  |  |  |         |    
|                 |  |             | 170,710 | (2)     |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.3.06  |             |  |  | 170,710 |     |  |  | 1,433,111  |  |  |  | 613,372 | (8)
|                 |  |             | 142,290 | (3)     |                 |  |         |       |  |           | 6.24.04     |  |               |           | 549.5p |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.9.07  |             |  |  | 142,290 |     |  |  | 1,194,525  |  |  |  |         |    
|                 |  |             |         |         |                 |  | 174,900 | (4)   |  |           | 6.29.05     |  |               |           | 706p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.7.08  |             |  |  | 174,900 |     |  |  | 1,468,286  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Total            |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  | 487,900 |     |  |  | 4,095,922  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Richard Solomons |  |             | 110,110 | (1)     |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  | 66,066  |          |         |  | 660p        |        |  |          | 436,036  |     |           |             | 3.11.05 |             |  |  |        |     |  |  |            |  |  |  |         |    
|                 |  |             | 165,160 | (2)     |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.3.06  |             |  |  | 165,160 |     |  |  | 1,386,519  |  |  |  | 593,431 | (8)
|                 |  |             | 144,990 | (3)     |                 |  |         |       |  |           | 6.24.04     |  |               |           | 549.5p |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.9.07  |             |  |  | 144,990 |     |  |  | 1,217,192  |  |  |  |         |    
|                 |  |             |         |         |                 |  | 176,550 | (4)   |  |           | 6.29.05     |  |               |           | 706p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.7.08  |             |  |  | 176,550 |     |  |  | 1,482,138  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  |         |     |  |  |            |  |  |  |         |    
|Total            |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  | 486,700 |     |  |  | 4,085,849  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Former Directors |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  |         |     |  |  |            |  |  |  |         |    
|Richard North    |  |             | 188,760 | (1)     |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  | 113,256 |          |         |  | 660p        |        |  |          | 747,490  |     |           |             | 3.11.05 |             |  |  |        |     |  |  |            |  |  |  |         |    
|                 |  |             | 283,140 | (2)(5)  |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.3.06  |             |  |  | 259,545 | (4) |  |  | 2,178,881  |  |  |  | 932,562 | (8)
|                 |  |             | 248,560 | (3)(5)  |                 |  |         |       |  |           | 6.24.04     |  |               |           | 549.5p |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.9.07  |             |  |  | 144,993 | (4) |  |  | 1,217,217  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  |         |     |  |  |            |  |  |  |         |    
|Total            |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  | 404,538 |     |  |  | 3,396,098  |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Sir Ian Prosser  |  |             | 65,410  | (1)(6)  |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  | 39,246  |          |         |  | 660p        |        |  |          | 259,024  |     |           |             | 3.11.05 |             |  |  |        |     |  |  |            |  |  |  |         |    
|                 |  |             | 65,410  | (2)(6)  |                 |  |         |       |  |           | 6.18.03     |  |               |           | 445p   |           |          |  |        |          |         |  |             |        |  |          |          |     |           |             | 3.3.06  |             |  |  | 65,410  |     |  |  | 549,117    |  |  |  | 235,023 | (8)
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Total            |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  | 65,410  |     |  |  | 549,117    |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 
|Total            |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             |  |  |         |     |  |  | 20,763,328 |  |  |  |         |    
|                 |  |             |         |         |                 |  |         |       |  |           |             |  |               |           |        |           |          |  |         |          |         |  |             |        |  |          |          |     |           |             |         |             | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This transitional award was based on performance to
    December 31, 2004 where the performance measure related to
    the Companys Total Shareholder Return (TSR)
    against a group of 11 other comparator companies. The number of
    shares released was graded, according to where the Company
    finished in the comparator group, with 100% of the award being
    released for first or second position and 20% of the award being
    released for sixth place. The Company finished in fourth place
    and accordingly 60% of the award vested on March 11, 2005.

F-31



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##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This award is based on performance to December 31, 2005
    where the performance measure relates to both the Companys
    TSR against a group of 11 other comparator companies and growth
    in return on capital employed (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 sixth place; and b) growth in
    ROCE, with 50% of the award being released for 80% growth and
    10% of the award being released for 30% growth.
|   
|(3) | 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 10 other comparator companies and growth
    in ROCE.                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(4) | 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 10 other comparator companies and
    cumulative annual growth of rooms in the IHG system against a
    group of nine other comparator companies.                                                                                                                                                                                                                                                                                                                                  
|   
|(5) | Richard Norths awards were pro-rated to reflect his
    contractual service during the applicable performance periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(6) | Sir Ian Prossers awards were pro-rated to reflect his
    actual service during the applicable performance periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(7) | The value of Stevan Porters shares at vesting includes
    £43,190 that was chargeable to UK income tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(8) | 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, with 29,196; 71,861; 73,063 and
    70,688 shares released to Messrs Cosslett, Hartman, Porter and
    Solomons respectively.                                                                                                                                                                                                                                                                                                                                                  

Short Term Deferred
Incentive Plan (STDIP)






|                 |  |            |         |  |              |              |         |       |       |  |          |  |  |  |         | 
|---------------- |  | ---------- | ------- |  | ------------ | ------------ | ------- | ----- | ----- |  | -------- |  |  |  | ------- | 
|                 |  |            |         |  |              | Market price |         |       |      
|                 |  |            |         |  |              | per share at |         |       | Value | 
|                 |  | Award date |         |  | No of shares |              |         | award |       |  | on award | 
|                 |  |            |         |  |              |              |         |       |       |  |          | 
|                 |  |            |         |  |              |              |         | £     |      
|Andrew Cosslett  |  |            | 3.08.06 |  |              |              | 105,276 |       |       |  | 853.67   |  |  |  | 898,709 | 
|Richard Hartman  |  |            | 3.08.06 |  |              |              | 64,518  |       |       |  | 853.67   |  |  |  | 550,771 | 
|Stevan Porter    |  |            | 3.08.06 |  |              |              | 67,557  |       |       |  | 853.67   |  |  |  | 576,714 | 
|Richard Solomons |  |            | 3.08.06 |  |              |              | 67,296  |       |       |  | 853.67   |  |  |  | 574,486 | 

F-32



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##### Table of Contents





|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  |        |  |  |  |         |     |  |  |         | 
|---------------- |  | ------- |  | ------- | --------- |  | ------ | ----- |  | --------- | -------- |  | -------- | --------- | ------ | - | ------- | --------- | - | -------- |  |  | -------- | -------- |  | -------- |  | ----- | -------- |  |  | --------- |  |  | ------ |  |  |  | ------- | --- |  |  | ------- | 
|                 |  |         |  | STDIP   |           |  |        |       |  |           | STDIP    |  |          |           |        |   |         |           |   |          |  |  |          |         
|                 |  |         |  | shares  |           |  |        |       |  |           | shares   |  |          |           |        |   |         |           |   |          |  |  |          | Value    | 
|                 |  |         |  | awarded |           |  |        |       |  |           | vested   |  |          |           |        |   |         |           |   |          |  |  |          | based on | 
|                 |  | STDIP   |  |         | during    |  |        |       |  | Market    |          |  | during   |           |        |   |         | Market    |   |          |  |  | STDIP    |          |  |          |  | share |         
|                 |  | shares  |  |         | the year  |  |        |       |  | price per |          |  | the year |           |        |   |         | price per |   |          |  |  | shares   |          |  | Planned  |  |       | price of | 
|                 |  | held at |  |         | 1.1.05 to |  |        | Award |  |           | share at |  |          | 1.1.05 to |        |   | Vesting |           |   | share at |  |  | Value at |          |  | held at  |  |       | vesting  |  |  | 839.5p at | 
|                 |  | 1.1.05  |  |         | 12.31.05  |  |        | date  |  |           | award    |  |          | 12.31.05  |        |   | date    |           |   | vesting  |  |  | vesting  |          |  | 12.31.05 |  |       | date     |  |  | 12.31.05  | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        | £ |         |           |   |          |  |  | £        |         
|Directors        |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  |        |  |  |  |         |     |  |  |         | 
|Andrew Cosslett  |  |         |  |         |           |  | 79,832 | (1)   |  |           | 4.1.05   |  |          |           | 617.5p |   |         |           |  |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 39,916 |  |  |  | 4.1.06  |     |  |  | 335,095 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 39,916 |  |  |  | 4.1.07  |     |  |  | 335,095 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|Total            |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 79,832 |  |  |  |         |     |  |  | 670,190 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|Richard Hartman  |  |         |  |         |           |  | 88,341 | (2)   |  |           | 3.16.05  |  |          |           | 654p   |   |         |           |  |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 29,447 |  |  |  | 3.16.06 | (5) |  |  | 247,208 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 29,447 |  |  |  | 3.16.07 |     |  |  | 247,208 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 29,447 |  |  |  | 3.16.08 |     |  |  | 247,208 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|Total            |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 88,341 |  |  |  |         |     |  |  | 741,624 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|Stevan Porter    |  |         |  |         |           |  | 80,934 | (3)   |  |           | 3.16.05  |  |          |           | 654p   |   |         |           |  |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 26,978 |  |  |  | 3.16.06 | (5) |  |  | 226,481 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 26,978 |  |  |  | 3.16.07 |     |  |  | 226,481 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 26,978 |  |  |  | 3.16.08 |     |  |  | 226,481 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|Total            |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 80,934 |  |  |  |         |     |  |  | 679,443 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|Richard Solomons |  |         |  |         |           |  | 87,061 | (4)   |  |           | 3.16.05  |  |          |           | 654p   |   |         |           |  |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 29,020 |  |  |  | 3.16.06 | (5) |  |  | 243,623 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 29,020 |  |  |  | 3.16.07 |     |  |  | 243,623 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 29,021 |  |  |  | 3.16.08 |     |  |  | 243,632 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 
|Total            |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           |  |  | 87,061 |  |  |  |         |     |  |  | 730,878 | 
|                 |  |         |  |         |           |  |        |       |  |           |          |  |          |           |        |   |         |           |   |          |  |  |          |          |  |          |  |       |          |  |  |           | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This special award was made to Andrew Cosslett as part of his
    overall recruitment terms. The shares will vest in equal
    portions on the first and second anniversary of the award date,
    subject to his continued employment until that time.                                                                                                                                                                                                                                                   
|   
|(2) | This award was based on financial year 2004 performance and the
    bonus target was 50% of base salary. Richard Hartman was awarded
    70% (maximum) of his bonus target for EPS performance, 49% of
    his bonus target for EMEA earnings before interest and tax
    (EBIT) performance and 45% of his bonus target for his personal
    performance. Richard Hartmans total bonus was therefore
    164% of his bonus target. One matching share was awarded for
    every two bonus shares earned.
|   
|(3) | This award was based on financial year 2004 performance and the
    bonus target was 50% of base salary. Stevan Porter was awarded
    70% (maximum) of his bonus target for EPS performance, 70%
    (maximum) of his bonus target for the Americas EBIT performance
    and 60% (maximum) of his bonus target for his personal
    performance. Stevan Porters total bonus was therefore 200%
    (maximum) of his bonus target. One matching share was awarded
    for every two bonus shares earned. 
|   
|(4) | This award was based on financial year 2004 performance and the
    bonus target was 50% of base salary. Richard Solomons was
    awarded 70% (maximum) of his bonus target for EPS performance,
    70% (maximum) of his bonus target for Company EBIT performance
    and 60% (maximum) of his bonus target for his personal
    performance. Richard Solomons total bonus was therefore
    200% (maximum) of his bonus target. One matching share was
    awarded for every two bonus shares earned. 
|   
|(5) | On March 16, 2006 being the first anniversary of award, the
    shares detailed in the table above were duly released to the
    individuals concerned.                                                                                                                                                                                                                                                                                                                                                   

F-33



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##### Table of Contents



Share Options


|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  |        |  |  |  |        | 
|---------------- |  | ---------------------------- | ------- |  | ---------- |  | ------- | ---------- |  |  | ---------- | ------- |  | -------- | ------- |  | ------- |  | ------- | ------ |  |  | ------ |  |  |  | ------ | 
|                 |  | Ordinary shares under option |         |  |            |  |        
|                 |  |                              |         |  | Weighted   |  |         |           
|                 |  | Options held at              |         |  | Granted    |  |         | Lapsed     |  |  | Exercised  |         |  | Options  |         |  | average |  |         |       
|                 |  | 1.1.05 or date               |         |  | during the |  |         | during the |  |  | during the |         |  | held at  |         |  | option  |  |         | Option | 
|Directors        |  | of appointment               |         |  | year       |  |         | year       |  |  | year       |         |  | 12.31.05 |         |  | price   |  |         | price  | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            | (pence) |  |          | (pence) | 
|Andrew Cosslett  |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  |        |  |  |  |        | 
|                 |  |                              |         |  |            |  | 157,300 |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  |        |  |  |  | 619.83 | 
|b                |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  | 157,300 |        |  |  |        |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|Total            |  |                              |         |  |            |  | 157,300 |            |  |  |           |         |  |          |        |  |         |  | 157,300 |        |  |  | 619.83 |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|                
|Richard Hartman  |  |                              | 834,022 |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  | 435.70 |  |  |  |        | 
|                 |  |                              |         |  |            |  | 118,810 |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  |        |  |  |  | 619.83 | 
|a                |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  | 364,388 |        |  |  | 398.99 |  |  |  |        | 
|b                |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  | 588,444 |        |  |  | 495.61 |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|Total            |  |                              | 834,022 |  |            |  | 118,810 |            |  |  |           |         |  |          |        |  |         |  | 952,832 |        |  |  | 458.66 |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|                
|Stevan Porter    |  |                              | 658,319 |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  | 449.47 |  |  |  |        | 
|                 |  |                              |         |  |            |  | 96,370  |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  |        |  |  |  | 619.83 | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          | 178,176 |  |         |  |         |        |  |  |        |  |  |  | 409.36 | 
|b                |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  | 576,513 |        |  |  | 490.34 |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|Total            |  |                              | 658,319 |  |            |  | 96,370  |            |  |  |           |         |  |          | 178,176 |  |         |  | 576,513 |        |  |  | 490.34 |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|                
|Richard Solomons |  |                              | 813,360 |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  | 426.49 |  |  |  |        | 
|                 |  |                              |         |  |            |  | 100,550 |            |  |  |            |         |  |          |         |  |         |  |         |        |  |  |        |  |  |  | 619.83 | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          | 357,545 |  |         |  |         |        |  |  | 375.24 |  |  |  |        | 
|b                |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  | 574,365 |        |  |  | 492.24 |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 
|Total            |  |                              | 831,360 |  |            |  | 100,550 |            |  |  |           |         |  |          | 357,545 |  |         |  | 574,365 |        |  |  | 492.24 |  |  |  |        | 
|                 |  |                              |         |  |            |  |         |            |  |  |            |         |  |          |         |  |         |  |         |        | 






|    |                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------
|(a) | Where the options are exercisable and the market price per share
    at December 31, 2005 was above the option price; and
|   
|(b) | Where options are not yet exercisable. A performance condition
    has to be met before these options can be exercised.  







F-34



---



##### Table of Contents



Directors
Shareholdings


|                        |  |                                   |        |     |                                   |  |        |    
|----------------------- |  | --------------------------------- | ------ | --- | --------------------------------- |  | ------ | ---
|                        |  | December 31, 2005                 |        |     | January 1, 2005(1)                | 
|                        |  | InterContinental Hotels Group PLC |        |     | InterContinental Hotels Group PLC | 
|                        |  | ordinary shares of 10p(4)         |        |     | ordinary shares of 112p(2)(4)     | 
|                        |  |                                   |        |     |                                   | 
|Executive Directors     |  |                                   |        |     |                                   |  |        |    
|Andrew Cosslett         |  |                                   | 7,332  |     |                                   |  |       |    
|Richard Hartman         |  |                                   | 70,117 |     |                                   |  | 45,247 |    
|Stevan Porter           |  |                                   | 64,589 |     |                                   |  | 88,077 |    
|Richard Solomons        |  |                                   | 60,339 |     |                                   |  | 16,031 |    
|Non-executive Directors |  |                                   |        |     |                                   |  |        |    
|David Kappler           |  |                                   | 1,908  |     |                                   |  | 2,602  |    
|Ralph Kugler            |  |                                   | 654    |     |                                   |  | 892    |    
|Jennifer Laing          |  |                                   |       |     |                                   |  |       |    
|Robert C. Larson        |  |                                   | 7,857  | (3) |                                   |  | 10,714 | (3)
|Jonathan Linen          |  |                                   |       |     |                                   |  |       |    
|Sir David Prosser       |  |                                   | 3,273  |     |                                   |  | 4,464  |    
|Sir Howard Stringer     |  |                                   | 5,548  |     |                                   |  | 7,566  |    
|David Webster           |  |                                   | 31,823 |     |                                   |  | 13,395 |    






|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Or date of appointment, if later.                                                                                                                                                                                                                                                                                                            
|   
|(2) | These share interests were in InterContinental Hotels Group PLC
    112p ordinary shares prior to the capital reorganization
    effective from June 27, 2005. For every 15 existing
    InterContinental Hotels Group PLC shares held on June 24,
    2005, shareholders received 11 new ordinary shares of
    10p each and £24.75 in cash.
|   
|(3) | Held in the form of American Depositary Receipts.                                                                                                                                                                                                                                                                                            
|   
|(4) | 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.                                                                                                                     





Directors
Pensions










F-35



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##### Table of Contents







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 | 
|                 |  | Dec 31, 2005 |    |            | in the year   |                |                     | Jan 1, 2005    |          |              | Dec 31, 2005 |   |          | contributions |           |          | pension    |  |          | pension    |  |  | Dec 31, 2005 | 
|                 |  |              |    |            |               |                |                     |                |          |              |              |   |          |               |           |          |            |  |          |            |  |  |              | 
|                 |  |              |    |            |               | £              |                     |                | £        |              |              | £ |          |               |           |          |            |  |         
|                 |  |              |    | (note 1)   |               |                |                     |                |          |              |              |   | (note 2) |               |           | (note 3) |            |  | (note 4) |           
|                 |  |              |    | £          |               |                |                     |                |          |              |              |   | £ pa     |               |           | £ pa     |            |  | £ pa     |           
|Directors        |  |              |    |            |               |                |                     |                |          |              |              |   |          |               |           |          |            |  |          |            |  |  |              |  |  |  |        |  |  |  |         | 
|Andrew Cosslett  |  |              | 50 |            |               |                | 14,400              |                |          |              | Nil          |   |          |               | 266,900   |          |            |  | 252,500  |            |  |  | 19,700       |  |  |  | 19,700 |  |  |  | 19,700  | 
|Richard Hartman  |  |              | 59 |            |               |                | 15,700              |                |          |              | 1,189,800    |   |          |               | 1,848,200 |          |            |  | 642,700  |            |  |  | 23,400       |  |  |  | 21,500 |  |  |  | 86,600  | 
|Richard Solomons |  |              | 44 |            |               |                | 15,700              |                |          |              | 834,100      |   |          |               | 1,227,100 |          |            |  | 377,300  |            |  |  | 22,500       |  |  |  | 19,600 |  |  |  | 119,300 | 






|        |                                                                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|note 1: | Contributions paid in the year by the Directors under the terms
    of the plans.                                                                                      
|       
|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, 2005.                                                   



|                           |  |     |                           |  |        |  |       |  |  |               |  |  |        |  |  |  |       | 
|-------------------------- |  | --- | ------------------------- |  | ------ |  | ----- |  |  | ------------- |  |  | ------ |  |  |  | ----- | 
|Directors contribution to |  |     | Companys contribution to | 
|                           |  | DCP |                           |  | 401(k) |  |       |  |  | DCP           |  |  | 401(k) | 
|                           |  |     |                           |  |        |  |       |  |  |               |  |  |        | 
|                           |  |     |                           | 
|                           |  | £   |                           |  | £      |  |       |  |  | £             |  |  | £      | 
|Stevan Porter              |  |     | 20,300                    |  |        |  | 5,800 |  |  | Stevan Porter |  |  | 59,400 |  |  |  | 4,700 | 
|                           |  |    



|         |                                                     
|-------- | ----------------------------------------------------
|Note 4  | Auditors Remuneration paid to Ernst & Young
    LLP

|                   |  |              |     |  |              |  |     | 
|------------------ |  | ------------ | --- |  | ------------ |  | --- | 
|                   |  | Year ended   |     |  | Year ended   | 
|                   |  | December 31, |     |  | December 31, | 
|                   |  | 2005         |     |  | 2004         | 
|                   |  |              |     |  |              | 
|                   |  | (£ million)  |    
|Audit fees         |  |              | 3.9 |  |              |  | 3.8 | 
|Audit related fees |  |              | 2.7 |  |              |  | 1.6 | 
|Tax fees           |  |              | 0.6 |  |              |  | 0.5 | 
|                   |  |              |     |  |              | 
|                   |  |              | 7.2 |  |              |  | 5.9 | 
|                   |  |              |     |  |              | 





F-36



---



##### Table of Contents





|         |              
|-------- | -------------
|Note 5  | Special Items

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








|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)    |  | Property, plant and equipment were written down by
    £7 million (2004 £48 million) following an
    impairment review of the hotel estate.                                                                                                                                                                                                                                                                                     
|      
|(ii)   |  | Restructuring costs relate to the delivery of the further
    restructuring of the Hotels business.                                                                                                                                                                                                                                                                                                                              
|      
|(iii)  |  | Damage to properties resulting from fire and natural disasters.                                                                                                                                                                                                                                                                                                                                                                  
|      
|(iv)   |  | A curtailment gain arose as a result of the sale of UK hotel
    properties.                                                                                                                                                                                                                                                                                                                                                     
|      
|(v)    |  | 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.                                                                                                                                                                                                                
|      
|(vi)   |  | Relates to an impairment in value of associate investments.                                                                                                                                                                                                                                                                                                                                                                      
|      
|(vii)  |  | Relates to interest on special tax refunds.                                                                                                                                                                                                                                                                                                                                                                                      
|      
|(viii) |  | Relates to costs of closing out currency swaps and costs related
    to refinancing the Companys debt.                                                                                                                                                                                                                                                                                                                          
|      
|(ix)   |  | Relates to premiums paid on the repurchase of the Companys
    public debt.                                                                                                                                                                                                                                                                                                                                                     
|      
|(x)    |  | Represents the release of provisions relating to tax matters
    which have been settled or in respect of which the relevant
    statutory limitation period has expired, principally relating to
    acquisitions (including provisions relating to pre-acquisition
    periods) and disposals, intra-group financing and, in 2004, the
    recognition of a deferred tax asset of £83 million in
    respect of capital losses.

F-37



---



##### Table of Contents



Note 6  Finance costs


|                                                                         |  |              |    |  |              |  |     | 
|------------------------------------------------------------------------ |  | ------------ | -- |  | ------------ |  | --- | 
|                                                                         |  | Year ended   |    |  | Year ended   | 
|                                                                         |  | December 31, |    |  | December 31, | 
|                                                                         |  | 2005         |    |  | 2004         | 
|                                                                         |  |              |    |  |              | 
|                                                                         |  | (£ million)  |   
|Financial income                                                         |  |              |    |  |              |  |     | 
|Interest on tax refunds                                                  |  |              |   |  |              |  | 22  | 
|Interest income                                                          |  |              | 30 |  |              |  | 48  | 
|                                                                         |  |              |    |  |              | 
|                                                                         |  |              | 30 |  |              |  | 70  | 
|                                                                         |  |              |    |  |              | 
|Financial expenses                                                       |  |              |    |  |              |  |     | 
|Financial expense on early settlement of debt                            |  |              |   |  |              |  | 17  | 
|Costs of closing out currency swaps and refinancing the
    Groups debt |  |              |   |  |              |  | 16  | 
|Interest expense  Hotels                                                |  |              | 54 |  |              |  | 70  | 
|Interest expense  Soft Drinks                                           |  |              | 9  |  |              |  |    | 
|                                                                         |  |              |    |  |              | 
|                                                                         |  |              | 63 |  |              |  | 103 | 
|                                                                         |  |              |    |  |              | 

Note 7  Tax




| |           
| | ----------
| | Income tax

|                                      |                                                                          |              |     |     |              |  |     |     |  
|------------------------------------- | ------------------------------------------------------------------------ | ------------ | --- | --- | ------------ |  | --- | --- | -
|                                      |                                                                          | Year ended   |     |     | Year ended   | 
|                                      |                                                                          | December 31, |     |     | December 31, | 
|                                      |                                                                          | 2005         |     |     | 2004         | 
|                                      |                                                                          |              |     |     |              | 
|                                      |                                                                          | (£ million)  |    
|UK corporation tax at 30% (2004 30%): |                                                                          |              |     |     |              |  |     |    
|                                      | Current period                                                           |              |     | 11  |              |  |     | 23  |  
|                                      | Adjustments in respect of prior periods                                  |              |     | (6  | )            |  |     | (48 | )
|                                      |                                                                          |              |     |     |              | 
|                                      |                                                                          |              | 5   |     |              |  | (25 | )  
|                                      |                                                                          |              |     |     |              | 
|Foreign tax:                          |                                                                          |              |     |     |              |  |     |    
|                                      | Current period                                                           |              |     | 149 |              |  |     | 62  |  
|                                      | Benefit of tax losses on which no deferred tax
    previously recognized |              |     | (2  | )            |  |     | (9  | )
|                                      | Adjustments in respect of prior periods                                  |              |     | (19 | )            |  |     | (82 | )
|                                      |                                                                          |              |     |     |              | 
|                                      |                                                                          |              | 128 |     |              |  | (29 | )  
|                                      |                                                                          |              |     |     |              | 
|Total current tax                     |                                                                          |              | 133 |     |              |  | (54 | )  
|                                      |                                                                          |              |     |     |              | 

F-38



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##### Table of Contents



|                                                                                                            |                                                          |                                      |                                                    |     |              |   |      |      |      |     |  
|----------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------------ | -------------------------------------------------- | --- | ------------ | - | ---- | ---- | ---- | --- | -
|                                                                                                            |                                                          | Year ended                           |                                                    |     | Year ended   |  
|                                                                                                            |                                                          | December 31,                         |                                                    |     | December 31, |  
|                                                                                                            |                                                          | 2005                                 |                                                    |     | 2004         |  
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|                                                                                                            |                                                          | (£ million)                          |                                                   
|Deferred tax:                                                                                               |                                                          |                                      |                                                    |     |              |   |      |     
|                                                                                                            | Origination and reversal of temporary differences        |                                      |                                                    | (3  | )            |   |      | 18   |     
|                                                                                                            | Changes in tax rates                                     |                                      |                                                    | (2  | )            |   |      | (11  | )   
|                                                                                                            | Adjustments to estimated recoverable deferred tax assets |                                      |                                                    | 1   |              |   |      | 12   |     
|                                                                                                            | Adjustments in respect of prior periods                  |                                      |                                                    | (11 | )            |   |      | (96  | )   
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|Total deferred tax                                                                                          |                                                          |                                      | (15                                                | )   |              |   | (77  | )   
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|Total income tax on profit for the year                                                                     |                                                          |                                      | 118                                                |     |              |   | (131 | )   
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|Further analyzed as tax relating to:                                                                        |                                                          |                                      |                                                    |     |              |   |      |     
|                                                                                                            | Profit before special items                              |                                      |                                                    | 88  |              |   |      | 56   |     
|                                                                                                            | Special items (Note 5):                                  |                                      |                                                    |     |              |   |      |      |     
|                                                                                                            |                                                          | Other operating income and expenses: |                                                    |     |              |   |      |      |      |    
|                                                                                                            |                                                          |                                      | 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)            |                                                    |     | (8           | ) |      |      | (161 | )  
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|Tax charge /(credit)                                                                                        |                                                          |                                      | 80                                                 |     |              |   | (127 | )   
|Gain on disposal of assets                                                                                  |                                                          |                                      | 38                                                 |     |              |   | (4   | )   
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|                                                                                                            |                                                          |                                      | 118                                                |     |              |   | (131 | )   
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|The tax charge /(credit), excluding gain on disposal of assets,
    can be further analyzed as relating to: |                                                          |                                      |                                                    |     |              |   |      |     
|                                                                                                            | Profit on continuing operations                          |                                      |                                                    | 28  |              |   |      | (194 | )   
|                                                                                                            | Profit on discontinued operations                        |                                      |                                                    | 52  |              |   |      | 67   |     
|                                                                                                            |                                                          |                                      |                                                    |     |              |  
|                                                                                                            |                                                          |                                      | 80                                                 |     |              |   | (127 | )   
|                                                                                                            |                                                          |                                      |                                                    |     |              |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | Represents the release of provisions relating to tax matters
    which have been settled or in respect of which the relevant
    statutory limitation period has expired, principally relating to
    acquisitions (including provisions relating to pre-acquisition
    periods) and disposals, intra-group financing and, in 2004, the
    recognition of a deferred tax asset of £83 million in
    respect of capital losses.

F-39



---



##### Table of Contents





| |                    
| | -------------------
| | Tax reconciliations



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

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

Note 8  Dividends paid and proposed


|                      |                                   |                   |       |       |              |  |       |              |  |  |              |    |  |  |     |     | 
|--------------------- | --------------------------------- | ----------------- | ----- | ----- | ------------ |  | ----- | ------------ |  |  | ------------ | -- |  |  | --- | --- | 
|                      |                                   | Year ended        |       |       | Year ended   |  |       | Year ended   |  |  | Year ended   |   
|                      |                                   | December 31,      |       |       | December 31, |  |       | December 31, |  |  | December 31, |   
|                      |                                   | 2005              |       |       | 2004         |  |       | 2005         |  |  | 2004         |   
|                      |                                   |                   |       |       |              |  |       |              |  |  |              |   
|                      |                                   | (pence per share) |       |       | (£ million)  | 
|Paid during the year: |                                   |                   |       |       |              |  |       |              |  |  |              |    |  |  |     |    
|                      | Final (declared in previous year) |                   |       | 10.00 |              |  |       | 9.45         |  |  |              | 61 |  |  |     | 70  | 
|                      | Interim                           |                   |       | 4.60  |              |  |       | 4.30         |  |  |              | 20 |  |  |     | 29  | 
|                      | Special interim                   |                   |       |      |              |  |       | 72.00        |  |  |              |   |  |  |     | 501 | 
|                      |                                   |                   |       |       |              |  |       |              |  |  |              |   
|                      |                                   |                   | 14.60 |       |              |  | 85.75 |              |  |  | 81           |    |  |  | 600 |    
|                      |                                   |                   |       |       |              |  |       |              |  |  |              |   



|      |  |  |       |  |  |  |       |  |  |  |    |  |  |  |    | 
|----- |  |  | ----- |  |  |  | ----- |  |  |  | -- |  |  |  | -- | 
|Final |  |  | 10.70 |  |  |  | 10.00 |  |  |  | 46 |  |  |  | 62 | 
|      |  |  |       |  |  |  |       |  |  |  |    | 



Note 9  Earnings per ordinary share








F-40



---



##### Table of Contents





|                                                                              |                                              |              |      |    |              |  |            |            |   |  |       |      |   |  |      |      |  
|----------------------------------------------------------------------------- | -------------------------------------------- | ------------ | ---- | -- | ------------ |  | ---------- | ---------- | - |  | ----- | ---- | - |  | ---- | ---- | -
|                                                                              |                                              | Year ended   |      |    | Year ended   | 
|                                                                              |                                              | December 31, |      |    | December 31, | 
|                                                                              |                                              | 2005         |      |    | 2004         | 
|                                                                              |                                              |              |      |    |              | 
|                                                                              |                                              | Continuing   |      |    |              |  | Continuing |            |   | 
|                                                                              |                                              | operations   |      |    | Total        |  |            | operations |   |  | Total |     
|                                                                              |                                              |              |      |    |              |  |            |            |   |  |       |     
|                                                                              |                                              | (£ million)  |     
|Basic earnings per share                                                      |                                              |              |      |    |              |  |            |            |   |  |       |      |   |  |      |     
|Profit available for equity holders                                           |                                              |              | 116  |    |              |  | 496        |            |   |  | 246   |      |   |  | 383  |     
|Basic weighted average number of ordinary shares (millions)                   |                                              |              | 521  |    |              |  | 521        |            |   |  | 710   |      |   |  | 710  |     
|Basic earnings per share (pence)                                              |                                              |              | 22.3 |    |              |  | 95.2       |            |   |  | 34.6  |      |   |  | 53.9 |     
|                                                                              |                                              |              |      |    |              |  |            |            |   |  |       |     
|Adjusted earnings per share                                                   |                                              |              |      |    |              |  |            |            |   |  |       |      |   |  |      |     
|Profit available for equity holders                                           |                                              |              | 116  |    |              |  | 496        |            |   |  | 246   |      |   |  | 383  |     
|Less adjusting items:                                                         |                                              |              |      |    |              |  |            |            |   |  |       |      |   |  |      |     
|                                                                              | Other operating income and expenses (Note 5) |              |      | 22 |              |  |            | 22         |   |  |       | 49   |   |  |      | 49   |  
|                                                                              | Financing (Note 5)                           |              |      |   |              |  |            |           |   |  |       | 11   |   |  |      | 11   |  
|                                                                              | Tax (Note 5)                                 |              |      | (8 | )            |  |            | (8         | ) |  |       | (183 | ) |  |      | (183 | )
|                                                                              | Gain on disposal of assets, net of tax       |              |      |   |              |  |            | (311       | ) |  |       |     |   |  |      | (19  | )
|                                                                              |                                              |              |      |    |              |  |            |            |   |  |       |     
|Adjusted earnings                                                             |                                              |              | 130  |    |              |  | 199        |            |   |  | 123   |      |   |  | 241  |     
|Basic weighted average number of ordinary shares (millions)                   |                                              |              | 521  |    |              |  | 521        |            |   |  | 710   |      |   |  | 710  |     
|Adjusted earnings per share (pence)                                           |                                              |              | 24.9 |    |              |  | 38.2       |            |   |  | 17.3  |      |   |  | 33.9 |     
|                                                                              |                                              |              |      |    |              |  |            |            |   |  |       |     
|Diluted earnings per share                                                    |                                              |              |      |    |              |  |            |            |   |  |       |      |   |  |      |     
|Profit available for equity holders                                           |                                              |              | 116  |    |              |  | 496        |            |   |  | 246   |      |   |  | 383  |     
|Diluted weighted average number of ordinary shares (millions)
    (see below) |                                              |              | 533  |    |              |  | 533        |            |   |  | 718   |      |   |  | 718  |     
|Diluted earnings per share (pence)                                            |                                              |              | 21.8 |    |              |  | 93.1       |            |   |  | 34.3  |      |   |  | 53.3 |     
|                                                                              |                                              |              |      |    |              |  |            |            |   |  |       |     

|                                                              |                                                                 |            |     |     |      |  |     |     | 
|------------------------------------------------------------- | --------------------------------------------------------------- | ---------- | --- | --- | ---- |  | --- | --- | 
|                                                              |                                                                 | 2005       |     |     | 2004 | 
|                                                              |                                                                 |            |     |     |      | 
|                                                              |                                                                 | (millions) |    
|Diluted weighted average of ordinary shares is calculated as: |                                                                 |            |     |     |      |  |     |    
|                                                              | Basic weighted average number of ordinary shares                |            |     | 521 |      |  |     | 710 | 
|                                                              | Dilutive potential ordinary shares  employee share
    options |            |     | 12  |      |  |     | 8   | 
|                                                              |                                                                 |            |     |     |      | 
|                                                              |                                                                 |            | 533 |     |      |  | 718 |    
|                                                              |                                                                 |            |     |     |      | 



F-41



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##### Table of Contents



Note 10  Property, Plant and Equipment


|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |      |   |  |       |        |  
|----------------------------------- | --------------------------------------------------------------- | ----------- | ----- | ------ | ------------ |  | ----- | --------- | - |  | ----- | ---- | - |  | ----- | ------ | -
|                                    |                                                                 | Land        |       |        | Fixtures,    |  |       |           |   | 
|                                    |                                                                 | and         |       |        | fittings and |  |       | Plant and |   |  |      
|                                    |                                                                 | buildings   |       |        | equipment    |  |       | machinery |   |  | Total |     
|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |     
|                                    |                                                                 | (£ million) |      
|Year ended December 31, 2004        |                                                                 |             |       |        |              |  |       |           |   |  |       |      |   |  |       |       
|Cost:                               |                                                                 |             |       |        |              |  |       |           |   |  |       |      |   |  |       |       
|At January 1, 2004                  |                                                                 |             | 3,004 |        |              |  | 1,635 |           |   |  | 165   |      |   |  | 4,804 |       
|                                    | Exchange and other adjustments                                  |             |       | (59    | )            |  |       | (34       | ) |  |       |     |   |  |       | (93    | )
|                                    | Additions                                                       |             |       | 50     |              |  |       | 140       |   |  |       | 27   |   |  |       | 217    |  
|                                    | Net transfers to non-current assets classified as held for sale |             |       | (1,471 | )            |  |       | (667      | ) |  |       |     |   |  |       | (2,138 | )
|                                    | Disposals                                                       |             |       | (83    | )            |  |       | (89       | ) |  |       | (10  | ) |  |       | (182   | )
|                                    | Impairment                                                      |             |       | (20    | )            |  |       |          |   |  |       |     |   |  |       | (20    | )
|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |     
|At December 31, 2004                |                                                                 |             | 1,421 |        |              |  | 985   |           |   |  | 182   |      |   |  | 2,588 |       
|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |     
|Depreciation:                       |                                                                 |             |       |        |              |  |       |           |   |  |       |      |   |  |       |       
|At January 1, 2004                  |                                                                 |             | 168   |        |              |  | 608   |           |   |  | 97    |      |   |  | 873   |       
|                                    | Exchange and other adjustments                                  |             |       | (6     | )            |  |       | (9        | ) |  |       |     |   |  |       | (15    | )
|                                    | Provided                                                        |             |       | 12     |              |  |       | 131       |   |  |       | 18   |   |  |       | 161    |  
|                                    | Net transfers to non-current assets classified as held for sale |             |       | (59    | )            |  |       | (253      | ) |  |       |     |   |  |       | (312   | )
|                                    | On disposals                                                    |             |       | (11    | )            |  |       | (52       | ) |  |       | (10  | ) |  |       | (73    | )
|                                    | Impairment                                                      |             |       | 28     |              |  |       |          |   |  |       |     |   |  |       | 28     |  
|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |     
|At December 31, 2004                |                                                                 |             | 132   |        |              |  | 425   |           |   |  | 105   |      |   |  | 662   |       
|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |     
|Net book value at December 31, 2004 |                                                                 |             | 1,289 |        |              |  | 560   |           |   |  | 77    |      |   |  | 1,926 |       
|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |     
|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 |       
|                                    |                                                                 |             |       |        |              |  |       |           |   |  |       |     

F-42



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##### Table of Contents





Note 11  Held for Sale and Discontinued
Operations




| |       
| | ------
| | Hotels



|                                          |  |              |       |   |      |  |     |  
|----------------------------------------- |  | ------------ | ----- | - | ---- |  | --- | -
|                                          |  | Year ended   |      
|                                          |  | December 31, |      
|                                          |  |              |      
|Net assets of hotels on disposal          |  | 2005         |       |   | 2004 | 
|                                          |  |              |       |   |      | 
|                                          |  | (£ million)  |      
|Property, plant and equipment             |  |              | 1,961 |   |      |  | 100 |  
|Goodwill                                  |  |              | 20    |   |      |  |    |  
|Net working capital                       |  |              | 1     |   |      |  | (1  | )
|Cash and cash equivalents                 |  |              | 16    |   |      |  |    |  
|Deferred tax payable                      |  |              | (121  | ) |      |  | (5  | )
|Minority equity interest                  |  |              |      |   |      |  | (11 | )
|                                          |  |              |       |   |      | 
|Companys share of net assets disposed of |  |              | 1,877 |   |      |  | 83  |  
|                                          |  |              |       |   |      | 
|Net cash inflow                           |  |              |       |   |      |  |     |  
|Cash consideration (net of costs paid)    |  |              | 1,832 |   |      |  | 101 |  
|Cash disposed of                          |  |              | (16   | ) |      |  |    |  
|                                          |  |              |       |   |      | 
|                                          |  |              | 1,816 |   |      |  | 101 |  
|                                          |  |              |       |   |      | 
|Total consideration                       |  |              |       |   |      |  |     |  
|Cash consideration (net of cost paid)     |  |              | 1,832 |   |      |  | 101 |  
|Deferred consideration                    |  |              | 40    |   |      |  |    |  
|Management contract value                 |  |              | 82    |   |      |  |    |  
|Tax (charge)/credit                       |  |              | (38   | ) |      |  | 4   |  
|Other                                     |  |              | (12   | ) |      |  | (3  | )
|                                          |  |              |       |   |      | 
|                                          |  |              | 1,904 |   |      |  | 102 |  
|                                          |  |              |       |   |      | 

|                                                |                               |              |  |     |      |  |  |       |  
|----------------------------------------------- | ----------------------------- | ------------ |  | --- | ---- |  |  | ----- | -
|                                                |                               | Year ended   | 
|                                                |                               | December 31, | 
|Assets and liabilities held for sale            |                               | 2005         |  |     | 2004 | 
|                                                |                               |              |  |     |      | 
|                                                |                               | (£ million)  | 
|Non-current assets classified as held for sale: |                               |              |  |     |      |  |  |      
|                                                | Property, plant and equipment |              |  | 279 |      |  |  | 1,826 |  
|                                                |                               |              |  |     |      | 
|Liabilities classified as held for sale:        |                               |              |  |     |      |  |  |      
|                                                | Deferred tax payable          |              |  | (34 | )    |  |  | (148  | )
|                                                |                               |              |  |     |      | 

F-43



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##### Table of Contents



|                                                                |  |              |     |   |      |  |     |  
|--------------------------------------------------------------- |  | ------------ | --- | - | ---- |  | --- | -
|                                                                |  | Year ended   |    
|                                                                |  | December 31, |    
|Cash flows related to discontinued operations                   |  | 2005         |     |   | 2004 | 
|                                                                |  |              |     |   |      | 
|                                                                |  | (£ million)  |    
|Operating profit before interest, depreciation and amortization |  |              | 94  |   |      |  | 203 |  
|Investing activities                                            |  |              | (44 | ) |      |  | (78 | )
|Financing activities                                            |  |              | (13 | ) |      |  | (3  | )

Soft Drinks




|                                               |  |             |      |  
|---------------------------------------------- |  | ----------- | ---- | -
|Net liabilities of Soft Drinks on disposal     |  | 2005        |     
|                                               |  |             |     
|                                               |  | (£ million) |     
|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 payable                           |  |             | 8    |  
|Minority equity interest                       |  |             | 66   |  
|                                               |  |             |     
|Companys share of net liabilities disposed of |  |             | (65  | )
|                                               |  |             |     
|Net cash inflow                                |  |             |      |  
|Cash consideration (net of costs paid)         |  |             | 221  |  
|Cash disposed of                               |  |             | (1   | )
|                                               |  |             |     
|                                               |  |             | 220  |  
|                                               |  |             |     
|Total consideration                            |  |             |      |  
|Cash consideration (net of costs paid)         |  |             | 221  |  
|Other                                          |  |             | (2   | )
|                                               |  |             |     
|                                               |  |             | 219  |  
|                                               |  |             |     

|                                                                |  |             |     |   |      |  |     |  
|--------------------------------------------------------------- |  | ----------- | --- | - | ---- |  | --- | -
|Cash flows related to discontinued operations                   |  | 2005        |     |   | 2004 | 
|                                                                |  |             |     |   |      | 
|                                                                |  | (£ million) |    
|Operating profit before interest, depreciation and amortization |  |             | 115 |   |      |  | 123 |  
|Investing activities                                            |  |             | (47 | ) |      |  | (70 | )
|Financing activities                                            |  |             | 162 |   |      |  | (25 | )

F-44



---



##### Table of Contents



Note 12  Goodwill


|                             |                                |             |     |     |  
|---------------------------- | ------------------------------ | ----------- | --- | --- | -
|                             |                                | Goodwill    |    
|                             |                                |             |    
|                             |                                | (£ million) |    
|Year ended December 31, 2004 |                                |             |     |    
|Cost:                        |                                |             |     |    
|At January 1, 2004           |                                |             | 158 |    
|                             | Exchange and other adjustments |             |     | (6  | )
|                             |                                |             |    
|At December 31, 2004         |                                |             | 152 |    
|                             |                                |             |    
|Year ended December 31, 2005 |                                |             |     |    
|Cost:                        |                                |             |     |    
|At January 1, 2005           |                                |             | 152 |    
|                             | Disposals                      |             |     | (44 | )
|                             | Exchange and other adjustments |             |     | 10  |  
|                             |                                |             |    
|At December 31, 2005         |                                |             | 118 |    
|                             |                                |             |    



|            |                                                                          |             |     |    |      |  |     |    | 
|----------- | ------------------------------------------------------------------------ | ----------- | --- | -- | ---- |  | --- | -- | 
|            |                                                                          | 2005        |     |    | 2004 | 
|            |                                                                          |             |     |    |      | 
|            |                                                                          | (£ million) |    
|Hotels      |                                                                          |             |     |    |      |  |     |   
|            | Americas managed and franchised operations (comprising several
    CGUs) |             |     | 82 |      |  |     | 75 | 
|            | Asia Pacific managed and franchised operations                           |             |     | 36 |      |  |     | 53 | 
|Soft Drinks |                                                                          |             |    |    |      |  | 24  |   
|            |                                                                          |             |     |    |      | 
|            |                                                                          |             | 118 |    |      |  | 152 |   
|            |                                                                          |             |     |    |      | 



Americas managed and
franchised operations




Asia Pacific managed and
franchised operations






F-45



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##### Table of Contents



Note 13  Intangible assets


|                                    |                                |          |    |             |           |  |       |             |  |  |       |    |   |  |     |     |  
|----------------------------------- | ------------------------------ | -------- | -- | ----------- | --------- |  | ----- | ----------- |  |  | ----- | -- | - |  | --- | --- | -
|                                    |                                |          |    | Management  |           |  | Other |             |  | 
|                                    |                                | Software |    |             | contracts |  |       | intangibles |  |  | Total |   
|                                    |                                |          |    |             |           |  |       |             |  |  |       |   
|                                    |                                |          |    | (£ million) |           |  |      
|Year ended December 31, 2004        |                                |          |    |             |           |  |       |             |  |  |       |    |   |  |     |    
|Cost:                               |                                |          |    |             |           |  |       |             |  |  |       |    |   |  |     |    
|At January 1, 2004                  |                                |          | 22 |             |           |  |      |             |  |  | 23    |    |   |  | 45  |    
|                                    | Additions                      |          |    | 32          |           |  |       |            |  |  |       | 1  |   |  |     | 33  |  
|                                    | Exchange and other adjustments |          |    | (2          | )         |  |       |            |  |  |       | (2 | ) |  |     | (4  | )
|                                    |                                |          |    |             |           |  |       |             |  |  |       |   
|At December 31, 2004                |                                |          | 52 |             |           |  |      |             |  |  | 22    |    |   |  | 74  |    
|                                    |                                |          |    |             |           |  |       |             |  |  |       |   
|Amortization:                       |                                |          |    |             |           |  |       |             |  |  |       |    |   |  |     |    
|At January 1, 2004                  |                                |          | 2  |             |           |  |      |             |  |  | 7     |    |   |  | 9   |    
|                                    | Provided                       |          |    | 12          |           |  |       |            |  |  |       |   |   |  |     | 12  |  
|                                    | Exchange and other adjustments |          |    | (1          | )         |  |       |            |  |  |       |   |   |  |     | (1  | )
|                                    |                                |          |    |             |           |  |       |             |  |  |       |   
|At December 31, 2004                |                                |          | 13 |             |           |  |      |             |  |  | 7     |    |   |  | 20  |    
|                                    |                                |          |    |             |           |  |       |             |  |  |       |   
|Net book value at December 31, 2004 |                                |          | 39 |             |           |  |      |             |  |  | 15    |    |   |  | 54  |    
|                                    |                                |          |    |             |           |  |       |             |  |  |       |   
|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 |    
|                                    |                                |          |    |             |           |  |       |             |  |  |       |   

F-46



---



##### Table of Contents



Note 14  Investments in associates




|                                        |  |              |     |   |              |  |     |  
|--------------------------------------- |  | ------------ | --- | - | ------------ |  | --- | -
|                                        |  | Year ended   |     |   | Year ended   | 
|                                        |  | December 31, |     |   | December 31, | 
|                                        |  | 2005         |     |   | 2004         | 
|                                        |  |              |     |   |              | 
|                                        |  | (£ million)  |    
|Share of associates balance sheet      |  |              |     |   |              |  |     |  
|Current assets                          |  |              | 4   |   |              |  | 5   |  
|Non-current assets                      |  |              | 93  |   |              |  | 92  |  
|Current liabilities                     |  |              | (9  | ) |              |  | (7  | )
|Non-current liabilities                 |  |              | (46 | ) |              |  | (48 | )
|                                        |  |              |     |   |              | 
|Net assets                              |  |              | 42  |   |              |  | 42  |  
|                                        |  |              |     |   |              | 
|Share of associates revenue and profit |  |              |     |   |              |  |     |  
|Revenue                                 |  |              | 18  |   |              |  | 14  |  
|Net profit                              |  |              | 1   |   |              |  |    |  
|                                        |  |              |     |   |              | 
|Related party transactions              |  |              |     |   |              |  |     |  
|Revenue from related parties            |  |              | 3   |   |              |  | 3   |  
|Amounts owed by related parties         |  |              | 2   |   |              |  | 1   |  
|                                        |  |              |     |   |              | 

Note 15  Other Financial Assets


|                                     |  |              |     |  |              |  |    | 
|------------------------------------ |  | ------------ | --- |  | ------------ |  | -- | 
|                                     |  | Year ended   |     |  | Year ended   | 
|                                     |  | December 31, |     |  | December 31, | 
|                                     |  | 2005         |     |  | 2004         | 
|                                     |  |              |     |  |              | 
|                                     |  | (£ million)  |    
|Non-current                          |  |              |     |  |              |  |    | 
|Equity securities available-for-sale |  |              | 41  |  |              |  | 19 | 
|Other                                |  |              | 72  |  |              |  | 61 | 
|                                     |  |              |     |  |              | 
|                                     |  |              | 113 |  |              |  | 80 | 
|                                     |  |              |     |  |              | 
|Current                              |  |              |     |  |              |  |    | 
|Equity securities available-for-sale |  |              | 104 |  |              |  | 80 | 
|Derivatives                          |  |              | 2   |  |              |  |   | 
|                                     |  |              |     |  |              | 
|                                     |  |              | 106 |  |              |  | 80 | 
|                                     |  |              |     |  |              | 





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Note 16  Inventories


|                  |  |              |   |  |              |  |    | 
|----------------- |  | ------------ | - |  | ------------ |  | -- | 
|                  |  | Year ended   |   |  | Year ended   | 
|                  |  | December 31, |   |  | December 31, | 
|                  |  | 2005         |   |  | 2004         | 
|                  |  |              |   |  |              | 
|                  |  | (£ million)  |  
|Raw materials     |  |              |  |  |              |  | 9  | 
|Finished goods    |  |              | 2 |  |              |  | 23 | 
|Consumable stores |  |              | 1 |  |              |  | 10 | 
|                  |  |              |   |  |              | 
|                  |  |              | 3 |  |              |  | 42 | 
|                  |  |              |   |  |              | 

Note 17  Trade and other receivables


|                  |  |              |     |  |              |  |     | 
|----------------- |  | ------------ | --- |  | ------------ |  | --- | 
|                  |  | Year ended   |     |  | Year ended   | 
|                  |  | December 31, |     |  | December 31, | 
|                  |  | 2005         |     |  | 2004         | 
|                  |  |              |     |  |              | 
|                  |  | (£ million)  |    
|Trade receivables |  |              | 160 |  |              |  | 285 | 
|Other receivables |  |              | 66  |  |              |  | 58  | 
|Other prepayments |  |              | 26  |  |              |  | 47  | 
|                  |  |              |     |  |              | 
|                  |  |              | 252 |  |              |  | 390 | 
|                  |  |              |     |  |              | 



Note 18  Cash and cash equivalents


|                         |  |              |     |  |              |  |    | 
|------------------------ |  | ------------ | --- |  | ------------ |  | -- | 
|                         |  | Year ended   |     |  | Year ended   | 
|                         |  | December 31, |     |  | December 31, | 
|                         |  | 2005         |     |  | 2004         | 
|                         |  |              |     |  |              | 
|                         |  | (£ million)  |    
|Cash at bank and in hand |  |              | 34  |  |              |  | 32 | 
|Short-term deposits      |  |              | 290 |  |              |  | 40 | 
|                         |  |              |     |  |              | 
|                         |  |              | 324 |  |              |  | 72 | 
|                         |  |              |     |  |              | 



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Note 19  Trade and other payables


|                                      |  |              |     |  |              |  |     | 
|------------------------------------- |  | ------------ | --- |  | ------------ |  | --- | 
|                                      |  | Year ended   |     |  | Year ended   | 
|                                      |  | December 31, |     |  | December 31, | 
|                                      |  | 2005         |     |  | 2004         | 
|                                      |  |              |     |  |              | 
|                                      |  | (£ million)  |    
|Current                               |  |              |     |  |              |  |     | 
|Trade payables                        |  |              | 84  |  |              |  | 159 | 
|Other tax and social security payable |  |              | 12  |  |              |  | 50  | 
|Other payables                        |  |              | 174 |  |              |  | 187 | 
|Accruals                              |  |              | 186 |  |              |  | 232 | 
|Derivatives                           |  |              | 6   |  |              |  |    | 
|Provisions (Note 24)                  |  |              | 6   |  |              |  | 5   | 
|                                      |  |              |     |  |              | 
|                                      |  |              | 468 |  |              |  | 633 | 
|                                      |  |              |     |  |              | 
|Non-current                           |  |              |     |  |              |  |     | 
|Other payables                        |  |              | 107 |  |              |  | 97  | 
|Provisions (Note 24)                  |  |              |    |  |              |  | 6   | 
|                                      |  |              |     |  |              | 
|                                      |  |              | 107 |  |              |  | 103 | 
|                                      |  |              |     |  |              | 

Note 20  Loans and other borrowings


|                           |  |                   |   |  |                   |  |     |       |  |            |        |  |           |        |    |  |       |  |       |  |  |  |       | 
|-------------------------- |  | ----------------- | - |  | ----------------- |  | --- | ----- |  | ---------- | ------ |  | --------- | ------ | -- |  | ----- |  | ----- |  |  |  | ----- | 
|                           |  | December 31, 2005 |   |  | December 31, 2004 | 
|                           |  |                   |   |  |                   | 
|                           |  | Due within        |   |  | Due after         |  |     |       |  | Due within |        |  | Due after |        |    | 
|                           |  | 1 year            |   |  | 1 year            |  |     | Total |  |            | 1 year |  |           | 1 year |    |  | Total | 
|                           |  |                   |   |  |                   |  |     |       |  |            |        |  |           |        |    |  |       | 
|                           |  | (£ million)       |  
|Secured bank loans         |  |                   | 2 |  |                   |  | 36  |       |  |            | 38     |  |           |        | 2  |  |       |  | 49    |  |  |  | 51    | 
|Unsecured bank loans       |  |                   |  |  |                   |  | 374 |       |  |            | 374    |  |           |        | 12 |  |       |  | 1,104 |  |  |  | 1,116 | 
|Other unsecured borrowings |  |                   |  |  |                   |  |    |       |  |            |       |  |           |        | 18 |  |       |  | 3     |  |  |  | 21    | 
|                           |  |                   |   |  |                   |  |     |       |  |            |        |  |           |        |    |  |       | 
|Total borrowings           |  |                   | 2 |  |                   |  | 410 |       |  |            | 412    |  |           |        | 32 |  |       |  | 1,156 |  |  |  | 1,188 | 
|                           |  |                   |   |  |                   |  |     |       |  |            |        |  |           |        |    |  |       | 



| |                   
| | ------------------
| | Secured bank loans





| |                     
| | --------------------
| | Unsecured bank loans





| |                           
| | --------------------------
| | Other unsecured borrowings




F-49



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##### Table of Contents



|                             |  |                   |     |  |                   |  |     |       |  |  |          |  |  |            |       |  |       |  |     |  |  |  |       | 
|---------------------------- |  | ----------------- | --- |  | ----------------- |  | --- | ----- |  |  | -------- |  |  | ---------- | ----- |  | ----- |  | --- |  |  |  | ----- | 
|                             |  | December 31, 2005 |     |  | December 31, 2004 | 
|                             |  |                   |     |  |                   | 
|                             |  | Utilized          |     |  | Unutilized        |  |     | Total |  |  | Utilized |  |  | Unutilized |       |  | Total | 
|                             |  |                   |     |  |                   |  |     |       |  |  |          |  |  |            |       |  |       | 
|                             |  | (£ million)       |    
|Facilities provided by banks |  |                   |     |  |                   |  |     |       |  |  |          |  |  |            |       |  |       |  |     |  |  |  |       | 
|Committed                    |  |                   | 412 |  |                   |  | 751 |       |  |  | 1,163    |  |  |            | 1,155 |  |       |  | 542 |  |  |  | 1,697 | 
|Uncommitted                  |  |                   |    |  |                   |  | 14  |       |  |  | 14       |  |  |            | 14    |  |       |  | 50  |  |  |  | 64    | 
|                             |  |                   |     |  |                   |  |     |       |  |  |          |  |  |            |       |  |       | 
|                             |  |                   | 412 |  |                   |  | 765 |       |  |  | 1,177    |  |  |            | 1,169 |  |       |  | 592 |  |  |  | 1,761 | 
|                             |  |                   |     |  |                   |  |     |       |  |  |          |  |  |            |       |  |       | 

|                              |                                     |              |     |     |      |  |     |     | 
|----------------------------- | ----------------------------------- | ------------ | --- | --- | ---- |  | --- | --- | 
|                              |                                     | December 31, |    
|                              |                                     |              |    
|                              |                                     | 2005         |     |     | 2004 | 
|                              |                                     |              |     |     |      | 
|                              |                                     | (£ million)  |    
|Unutilized facilities expire: |                                     |              |     |     |      |  |     |    
|                              | within one year                     |              |     | 39  |      |  |     | 90  | 
|                              | after one year but before two years |              |     |    |      |  |     | 500 | 
|                              | after two years                     |              |     | 726 |      |  |     | 2   | 
|                              |                                     |              |     |     |      | 
|                              |                                     |              | 765 |     |      |  | 592 |    
|                              |                                     |              |     |     |      | 

Note 21  Financial risk management
policies




| |                      
| | ---------------------
| | Financial instruments

















F-50



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##### Table of Contents







| |              
| | -------------
| | Sensitivities







| |        
| | -------
| | Hedging



| |                   
| | ------------------
| | Interest rate risk

 




| |                      
| | ---------------------
| | Foreign currency risk











| |                                               
| | ----------------------------------------------
| | Hedge of net investment in a foreign operation



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##### Table of Contents



Note 22  Financial Instruments




| |                   
| | ------------------
| | Interest rate risk



|                              |                                 |               |         |       |             |                    |      |           |  |  |          |     |   |           |    |           |         |  |    |    |  |  |   |   | 
|----------------------------- | ------------------------------- | ------------- | ------- | ----- | ----------- | ------------------ | ---- | --------- |  |  | -------- | --- | - | --------- | -- | --------- | ------- |  | -- | -- |  |  | - | - | 
|                              |                                 |               |         |       |             | Repricing analysis |     
|                              |                                 |               |         | Total |             |                    |      |          
|                              |                                 | Effective     |         |       | carrying    |                    |      | Less than |  |  | 6 months |     |   |           |    | More than |        
|As at December 31, 2005       |                                 | interest rate |         |       | amount      |                    |      | 6 months  |  |  | - 1 year |     |   | 1-2 years |    |           | 2 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 IR swaps*      |               |         | (0.4  | )           |                    |      |           |  |  |          | (55 | ) |           |    |          |         |  |    | 55 |  |  |   |  | 
|                              | US dollar floating rate         |               |         | 4.7   |             |                    |      | 162       |  |  |          | 162 |   |           |    |          |         |  |    |   |  |  |   |  | 
|                              |  effect of US dollar IR 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.

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|                                                        |                  |          |        |          |            |             |   |           |             |  |        |                        |         |      |            |         |      |            |      |          |   |  |     |     |  |  |     |     | 
|------------------------------------------------------- | ---------------- | -------- | ------ | -------- | ---------- | ----------- | - | --------- | ----------- |  | ------ | ---------------------- | ------- | ---- | ---------- | ------- | ---- | ---------- | ---- | -------- | - |  | --- | --- |  |  | --- | --- | 
|                                                        |                  |          |        |          |            |             |   |           |             |  |        | Interest at fixed rate |        
|                                                        |                  |          |        |          |            |             |   |           |             |  |        |                        |        
|                                                        |                  |          |        |          |            |             |   |           |             |  |        | Weighted               |        
|                                                        |                  |          |        |          |            |             |   | Principal |             |  |        |                        | average |     
|                                                        |                  |          |        | Currency |            |             |   |           |             |  |        | Weighted               |         |      | period for |        
|                                                        |                  |          |        | swap     |            |             |   |           | At variable |  |        | At fixed               |         |      | average    |         |      | which rate |     
|As at December 31, 2004                                 |                  | Net debt |        |          | agreements |             |   | Total     |             |  | rate*  |                        |         | rate |            |         | rate |            |      | is fixed |  
|                                                        |                  |          |        |          |            |             |   |           |             |  |        |                        |         |      |            |         |      |            |      |          |  
|                                                        |                  |          |        |          |            | (£ million) |   |           |             |  |        |                        | %       |      |            | (years) |     
|Current asset investments and cash at bank and in hand: |                  |          |        |          |            |             |   |           |             |  |        |                        |         |      |            |         |      |            |      |          |   |  |     |     |  |  |     |    
|                                                        | Sterling         |          |        | 26       |            |             |   | 339       |             |  |        | 365                    |         |      |            | 365     |      |            |      |         |   |  |     |    |  |  |     |    | 
|                                                        | US dollar        |          |        | 29       |            |             |   |          |             |  |        | 29                     |         |      |            | 29      |      |            |      |         |   |  |     |    |  |  |     |    | 
|                                                        | Other            |          |        | 28       |            |             |   |          |             |  |        | 28                     |         |      |            | 28      |      |            |      |         |   |  |     |    |  |  |     |    | 
|Borrowings:                                             |                  |          |        |          |            |             |   |           |             |  |        |                        |         |      |            |         |      |            |      |          |   |  |     |     |  |  |     |    
|                                                        | Sterling         |          |        | (247     | )          |             |   |          |             |  |        | (247                   | )       |      |            | (244    | )    |            |      | (3       | ) |  |     |    |  |  |     | 5.0 | 
|                                                        | US dollar        |          |        | (283     | )          |             |   | (52       | )           |  |        | (335                   | )       |      |            | (231    | )    |            |      | (104     | ) |  |     | 4.6 |  |  |     | 1.7 | 
|                                                        | Euro             |          |        | (560     | )          |             |   | (239      | )           |  |        | (799                   | )       |      |            | (596    | )    |            |      | (203     | ) |  |     | 3.6 |  |  |     | 1.0 | 
|                                                        | Hong Kong dollar |          |        | (69      | )          |             |   |          |             |  |        | (69                    | )       |      |            | (49     | )    |            |      | (20      | ) |  |     | 1.5 |  |  |     | 0.8 | 
|                                                        | Other            |          |        | (40      | )          |             |   | (48       | )           |  |        | (88                    | )       |      |            | (64     | )    |            |      | (24      | ) |  |     | 5.4 |  |  |     | 0.7 | 
|                                                        |                  |          |        |          |            |             |   |           |             |  |        |                        |         |      |            |         |      |            |      |          |  
|                                                        |                  |          | (1,116 | )        |            |             |  |           |             |  | (1,116 | )                      |         |      | (762       | )       |      |            | (354 | )        |   |  | 3.9 |     |  |  | 1.2 |    
|                                                        |                  |          |        |          |            |             |   |           |             |  |        |                        |         |      |            |         |      |            |      |          |  






|  |                                                 
|- | ------------------------------------------------
|* | Primarily based on the relevant inter-bank rate.





| |            
| | -----------
| | Fair values



|                                               |  |              |      |   |              |  |          |       |  |  |            |   |  |  |        |  
|---------------------------------------------- |  | ------------ | ---- | - | ------------ |  | -------- | ----- |  |  | ---------- | - |  |  | ------ | -
|                                               |  | December 31, |      |   | December 31, | 
|                                               |  | 2005         |      |   | 2004*        | 
|                                               |  |              |      |   |              | 
|                                               |  | Carrying     |      |   |              |  | Carrying |       |  | 
|                                               |  | value        |      |   | Fair value   |  |          | value |  |  | Fair value |  
|                                               |  |              |      |   |              |  |          |       |  |  |            |  
|                                               |  | (£ million)  |     
|Financial assets                               |  |              |      |   |              |  |          |       |  |  |            |   |  |  |        |  
|Cash and cash equivalents (Note 18)            |  |              | 324  |   |              |  | 324      |       |  |  | 72         |   |  |  | 72     |  
|Equity securities available-for-sale (Note 15) |  |              | 145  |   |              |  | 145      |       |  |  | 99         |   |  |  | 102    |  
|Cash flow hedging derivatives (Note 15)        |  |              | 2    |   |              |  | 2        |       |  |  |           |   |  |  | 9      |  
|Other financial assets (Note 15)               |  |              | 72   |   |              |  | 72       |       |  |  | 61         |   |  |  | 61     |  
|                                               |  |              |      |   |              |  |          |       |  |  |            |  
|Financial liabilities                          |  |              |      |   |              |  |          |       |  |  |            |   |  |  |        |  
|Borrowings (Note 20)                           |  |              | (412 | ) |              |  | (412     | )     |  |  | (1,188     | ) |  |  | (1,188 | )
|Cash flow hedging derivatives (Note 19)        |  |              | (6   | ) |              |  | (6       | )     |  |  |           |   |  |  | (3     | )






|  |                                     
|- | ------------------------------------
|* | 2004 book value is based on UK GAAP.

F-53



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##### Table of Contents





| |                              
| | -----------------------------
| | Unrecognized gains and losses



|                                                                   |  |             |    |   |        |  |     |       |  |  |     |  
|------------------------------------------------------------------ |  | ----------- | -- | - | ------ |  | --- | ----- |  |  | --- | -
|                                                                   |  | Gains       |    |   | Losses |  |     | Total | 
|                                                                   |  |             |    |   |        |  |     |       | 
|                                                                   |  | (£ million) |   
|Unrecognized at January 1, 2004                                    |  |             | 4  |   |        |  | (30 | )     |  |  | (26 | )
|Recognized in the year                                             |  |             | (1 | ) |        |  | 21  |       |  |  | 20  |  
|Arising in the year but not recognized                             |  |             | 6  |   |        |  | 6   |       |  |  | 12  |  
|                                                                   |  |             |    |   |        |  |     |       | 
|Unrecognized at December 31, 2004                                  |  |             | 9  |   |        |  | (3  | )     |  |  | 6   |  
|                                                                   |  |             |    |   |        |  |     |       | 
|Expected to be recognized in the year ending December 31,
    2005 |  |             | 9  |   |        |  | (1  | )     |  |  | 8   |  
|Expected to be recognized thereafter                               |  |             |   |   |        |  | (2  | )     |  |  | (2  | )

Note 23  Share-Based Payments




| |                                   
| | ----------------------------------
| | Short Term Deferred Incentive Plan





| |                                  
| | ---------------------------------
| | Performance Restricted Share Plan





| |                            
| | ---------------------------
| | Executive Share Option Plan





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##### Table of Contents





| |               
| | --------------
| | Sharesave Plan





| |                                
| | -------------------------------
| | US Employee Stock Purchase Plan





| |                                    
| | -----------------------------------
| | Former Six Continents Share Schemes









|                                 |  |                     |         |  |                        |  |           |                 |  |  |           | 
|-------------------------------- |  | ------------------- | ------- |  | ---------------------- |  | --------- | --------------- |  |  | --------- | 
|                                 |  | Short Term Deferred |         |  | Performance Restricted |  |           | Executive Share | 
|                                 |  | Incentive Plan      |         |  | Share Plan             |  |           | Option Plan     | 
|                                 |  |                     |         |  |                        |  |           |                 | 
|Number of shares awarded in 2005 |  |                     | 624,508 |  |                        |  | 5,173,633 |                 |  |  | 2,104,570 | 

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|                             |  |                     |       |                        |  |                 |       |   |  |  |       |  
|---------------------------- |  | ------------------- | ----- | ---------------------- |  | --------------- | ----- | - |  |  | ----- | -
|                             |  | Short Term Deferred |       | Performance Restricted |  | Executive Share
|2005                         |  | Incentive Plan      |       | Share Plan             |  | Option Plan    
|                             |  |                     |       |                        |  |                
|Valuation model              |  | Binomial            |       | Monte Carlo            |  | Binomial       
|                             |  |                     |       | Simulation and         |  |                
|                             |  |                     |       | Binomial               |  |                
|Weighted average share price |  |                     | 652.8 | p                      |  |                 | 702.0 | p |  |  | 627.0 | p
|Exercise price               |  |                     |       |                        |  |                 |       |   |  |  | 620.0 | p
|Expected dividend yield      |  |                     | 2.73  | %                      |  |                 | 3.18  | % |  |  | 3.62  | %
|Risk-free interest rate      |  |                     |       |                        |  |                 |       |   |  |  | 4.69  | %
|Volatility(a)                |  |                     |       |                        |  |                 |       |   |  |  | 28    | %
|Term
    (years)(b)          |  |                     | 2.0   |                        |  |                 | 3.0   |   |  |  | 6.5   |  

|                             |  |                     |       |                        |  |                 |       |   |  |  |       |  
|---------------------------- |  | ------------------- | ----- | ---------------------- |  | --------------- | ----- | - |  |  | ----- | -
|                             |  | Short Term Deferred |       | Performance Restricted |  | Executive Share
|2004                         |  | Incentive Plan      |       | Share Plan             |  | Option Plan    
|                             |  |                     |       |                        |  |                
|Valuation model              |  | Binomial            |       | Monte Carlo            |  | Binomial       
|                             |  |                     |       | Simulation and         |  |                
|                             |  |                     |       | Binomial               |  |                
|Weighted average share price |  |                     | 498.0 | p                      |  |                 | 550.0 | p |  |  | 494.0 | p
|Exercise price               |  |                     |       |                        |  |                 |       |   |  |  | 494.0 | p
|Expected dividend yield      |  |                     | 3.74  | %                      |  |                 | 3.49  | % |  |  | 3.81  | %
|Risk-free interest rate      |  |                     |       |                        |  |                 |       |   |  |  | 4.73  | %
|Volatility(a)                |  |                     |       |                        |  |                 |       |   |  |  | 31.33 | %
|Term
    (years)(b)          |  |                     | 2.8   |                        |  |                 | 3.0   |   |  |  | 6.5   |  






|    |  |                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | 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.
|   
|(b) |  | The expected term of the options is taken to the mid point
    between vesting and lapse, as historical exercise patterns have
    shown this to be appropriate.                     

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|                                                 |  |                     |       |   |                        |  |        |  
|------------------------------------------------ |  | ------------------- | ----- | - | ---------------------- |  | ------ | -
|                                                 |  | Short Term Deferred |       |   | Performance Restricted | 
|                                                 |  | Incentive Plan      |       |   | Share Plan             | 
|                                                 |  |                     |       |   |                        | 
|                                                 |  | Number of shares    |       |   | Number of shares       | 
|                                                 |  | thousands           |       |   | 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 |  
|                                                 |  |                     |       |   |                        | 
|Fair value of options granted during the period  |  |                     |       |   |                        |  |        |  
|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, 2005                             |  |                     | 1.1   |   |                        |  | 1.2    |  
|At December 31, 2004                             |  |                     | 1.7   |   |                        |  | 1.0    |  



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|                                                    |  |                |       |          |                             |  |       |              |          |  |           |  |  |                 |        |   |              |  |             |  |  |  |       | 
|--------------------------------------------------- |  | -------------- | ----- | -------- | --------------------------- |  | ----- | ------------ | -------- |  | --------- |  |  | --------------- | ------ | - | ------------ |  | ----------- |  |  |  | ----- | 
|                                                    |  | Sharesave Plan |       |          | Executive Share Option Plan | 
|                                                    |  |                |       |          |                             | 
|                                                    |  |                |       | Weighted |                             |  |       |              | Weighted | 
|                                                    |  | Number         |       |          | Range of                    |  |       | average      |          |  | Number    |  |  | Range of option |        |   | average      | 
|                                                    |  | of shares      |       |          | option prices               |  |       | option price |          |  | of shares |  |  | prices          |        |   | option price | 
|                                                    |  |                |       |          |                             |  |       |              |          |  |           |  |  |                 |        |   |              | 
|                                                    |  | thousands      |       |          | pence                       |  |       | pence        |          |  | thousands |  |  | pence           |        |   | pence        | 
|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     |  |  |                 | 26,741 |   |              |  | 308.5-593.3 |  |  |  | 447.6 | 
|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     |  |  |                 | 22,619 |   |              |  | 308.5-619.8 |  |  |  | 465.4 | 
|                                                    |  |                |       |          |                             |  |       |              |          |  |           |  |  |                 |        |   |              | 
|Options exercisable                                 |  |                |       |          |                             |  |       |              |          |  |           |  |  |                 |        |   |              |  |             |  |  |  |       | 
|At December 31, 2005                                |  |                |      |          |                             |  |      |              |          |  |          |  |  |                 | 8,710  |   |              |  | 308.5-619.8 |  |  |  | 434.3 | 
|At December 31, 2004                                |  |                |      |          |                             |  |      |              |          |  |          |  |  |                 | 12,569 |   |              |  | 308.5-593.3 |  |  |  | 426.4 | 
|                                                    |  |                |       |          |                             |  |       |              |          |  |           |  |  |                 |        |   |              | 
|Fair value of options granted
    during the period |  |                |       |          |                             |  |       |              |          |  |           |  |  |                 |        |   |              |  |             |  |  |  |       | 
|At December 31, 2005                                |  |                |      |          |                             |  |       |              |          |  |           |  |  |                 | 164.0  | p |              |  |             |  |  |  |       | 
|At December 31, 2004                                |  |                |      |          |                             |  |       |              |          |  |           |  |  |                 | 136.0  | p |              |  |             |  |  |  |       | 







|                                 |                             |                     |        |          |                     |  |          |              |  |  |             |          |  |              |       |  |  |  |       |  | 
|-------------------------------- | --------------------------- | ------------------- | ------ | -------- | ------------------- |  | -------- | ------------ |  |  | ----------- | -------- |  | ------------ | ----- |  |  |  | ----- |  | 
|                                 |                             | 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                            |                             |                     | 864    |          |                     |  | 1.9      |              |  |  | 420.5       |          |  |              |      |  |  |  |      | 
|                                 |                             |                     |        |          |                     |  |          |              |  |  |             |          |  |              |      
|                                 | Executive Share Option Plan |                     |        |          |                     |  |          |              |  |  |             |          |  |              |       |  |  |  |       |  | 
|308.5 to 353.8                   |                             |                     | 1,734  |          |                     |  | 4.6      |              |  |  | 342.7       |          |  |              | 1,734 |  |  |  | 342.7 | 
|353.9 to 498.0                   |                             |                     | 18,526 |          |                     |  | 7.0      |              |  |  | 457.8       |          |  |              | 6,315 |  |  |  | 441.8 | 
|498.1 to 619.8                   |                             |                     | 2,359  |          |                     |  | 7.9      |              |  |  | 614.9       |          |  |              | 661   |  |  |  | 602.2 | 
|                                 |                             |                     |        |          |                     |  |          |              |  |  |             |          |  |              |      
|                                 |                             |                     | 22,619 |          |                     |  | 6.9      |              |  |  | 465.4       |          |  |              | 8,710 |  |  |  | 434.3 | 
|                                 |                             |                     |        |          |                     |  |          |              |  |  |             |          |  |              |      

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Note 24  Provisions


|                                   |             |                   |    |   |              |  |    |       |  |  |    |    | 
|---------------------------------- | ----------- | ----------------- | -- | - | ------------ |  | -- | ----- |  |  | -- | -- | 
|                                   |             | Hotels            |    |   |              |  |   
|                                   |             | reorganisation(a) |    |   | Onerous      |  |    | Total | 
|                                   |             |                   |    |   | contracts(b) |  |    |       | 
|                                   |             |                   |    |   |              |  |   
|                                   |             | (£ 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  |   
|                                   |             |                   |    |   |              |  |    |       | 






|    |  |                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Relates to the Hotels reorganization charged to the
    non-operating special item in 2003 and is expected to be largely
    utilized in the year to December 31, 2006.
|   
|(b) |  | Primarily relates to onerous fixed lease contracts acquired with
    the InterContinental hotels business and having expiry dates to
    2006.                         

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  |  
|                                           |  |             |      |   |            |  |     |        |  |          |          |       |            |            |     |           |              |  |     |       | 






|  |                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Other short-term temporary differences relate primarily to
    provisions and accruals, investments in associates and joint
    ventures and share-based payments.

|               |                                         |             |     |     |      |  |     |     | 
|-------------- | --------------------------------------- | ----------- | --- | --- | ---- |  | --- | --- | 
|               |                                         | 2005        |     |     | 2004 | 
|               |                                         |             |     |     |      | 
|               |                                         | (£ million) |    
|Analyzed as:   |                                         |             |     |     |      |  |     |    
|               | Deferred tax payable                    |             |     | 210 |      |  |     | 234 | 
|               | Liabilities classified as held for sale |             |     | 34  |      |  |     | 148 | 
|               |                                         |             |     |     |      | 
|At 31 December |                                         |             | 244 |     |      |  | 382 |    
|               |                                         |             |     |     |      | 



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Note 26  Operating leases






|                     |  |              |     |  |              |  |       | 
|-------------------- |  | ------------ | --- |  | ------------ |  | ----- | 
|                     |  | December 31, |     |  | December 31, | 
|                     |  | 2005         |     |  | 2004         | 
|                     |  |              |     |  |              | 
|                     |  | (£ million)  |    
|Due within one year  |  |              | 36  |  |              |  | 55    | 
|One to two years     |  |              | 31  |  |              |  | 51    | 
|Two to three years   |  |              | 25  |  |              |  | 47    | 
|Three to four years  |  |              | 19  |  |              |  | 38    | 
|Four to five years   |  |              | 14  |  |              |  | 31    | 
|More than five years |  |              | 149 |  |              |  | 884   | 
|                     |  |              |     |  |              | 
|                     |  |              | 274 |  |              |  | 1,106 | 
|                     |  |              |     |  |              | 



Note 27  Capital commitments


|                                                                                                                   |  |              |    |  |              |  |    | 
|------------------------------------------------------------------------------------------------------------------ |  | ------------ | -- |  | ------------ |  | -- | 
|                                                                                                                   |  | December 31, |    |  | December 31, | 
|                                                                                                                   |  | 2005         |    |  | 2004         | 
|                                                                                                                   |  |              |    |  |              | 
|                                                                                                                   |  | (£ million)  |   
|Contracts placed for expenditure on property, plant and
    equipment not provided for in the financial statements |  |              | 76 |  |              |  | 53 | 
|                                                                                                                   |  |              |    |  |              | 

Note 28  Contingencies




|           |  |              |    |  |              |  |   | 
|---------- |  | ------------ | -- |  | ------------ |  | - | 
|           |  | December 31, |    |  | December 31, | 
|           |  | 2005         |    |  | 2004         | 
|           |  |              |    |  |              | 
|           |  | (£ million)  |   
|Guarantees |  |              | 20 |  |              |  | 9 | 
|           |  |              |    |  |              | 





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##### Table of Contents







Note 29  Related party disclosures




|                                               |  |              |      |  |              |  |      | 
|---------------------------------------------- |  | ------------ | ---- |  | ------------ |  | ---- | 
|                                               |  | December 31, |      |  | December 31, | 
|                                               |  | 2005         |      |  | 2004         | 
|                                               |  |              |      |  |              | 
|                                               |  | (£ million)  |     
|Total compensation of key management personnel |  |              |      |  |              |  |      | 
|Short-term employment benefits                 |  |              | 6.5  |  |              |  | 5.5  | 
|Post-employment benefits                       |  |              | 0.2  |  |              |  | 0.2  | 
|Termination benefits                           |  |              | 0.8  |  |              |  | 0.8  | 
|Equity compensation benefits                   |  |              | 6.9  |  |              |  | 4.1  | 
|                                               |  |              |      |  |              | 
|                                               |  |              | 14.4 |  |              |  | 10.6 | 
|                                               |  |              |      |  |              | 



Note 30  Transition to IFRS




| |                 
| | ----------------
| | Income statement

|                                              |                              |                              |        |     |               |  |     |      |   |  |        |     | 
|--------------------------------------------- | ---------------------------- | ---------------------------- | ------ | --- | ------------- |  | --- | ---- | - |  | ------ | --- | 
|                                              |                              | Year ended December 31, 2004 |       
|                                              |                              |                              |       
|                                              |                              | UK GAAP                      |        |     | Remeasurement |  |     | IFRS |  
|                                              |                              |                              |        |     |               |  |     |      |  
|                                              |                              | (£ million)                  |       
|Revenue                                       |                              |                              | 2,204  |     |               |  |    |      |   |  | 2,204  |    
|Cost of sales                                 |                              |                              | (1,477 | )   |               |  |    |      |   |  | (1,477 | )  
|Administrative expenses                       |                              |                              | (198   | )   |               |  | (10 | )    |   |  | (208   | )  
|                                              |                              |                              |        |     |               |  |     |      |  
|                                              |                              |                              | 529    |     |               |  | (10 | )    |   |  | 519    |    
|Depreciation and amortization                 |                              |                              | (198   | )   |               |  | 25  |      |   |  | (173   | )  
|Other operating income and expenses           |                              |                              | (29    | )   |               |  | (20 | )    |   |  | (49    | )  
|                                              |                              |                              |        |     |               |  |     |      |  
|Operating profit                              |                              |                              | 302    |     |               |  | (5  | )    |   |  | 297    |    
|Financial income                              |                              |                              | 70     |     |               |  |    |      |   |  | 70     |    
|Financial expenses                            |                              |                              | (103   | )   |               |  |    |      |   |  | (103   | )  
|                                              |                              |                              |        |     |               |  |     |      |  
|Profit before tax                             |                              |                              | 269    |     |               |  | (5  | )    |   |  | 264    |    
|Tax                                           |                              |                              | 117    |     |               |  | 10  |      |   |  | 127    |    
|                                              |                              |                              |        |     |               |  |     |      |  
|Profit after tax                              |                              |                              | 386    |     |               |  | 5   |      |   |  | 391    |    
|(Loss)/gain on disposal of assets, net of tax |                              |                              | (59    | )   |               |  | 78  |      |   |  | 19     |    
|                                              |                              |                              |        |     |               |  |     |      |  
|Profit available for shareholders             |                              |                              | 327    |     |               |  | 83  |      |   |  | 410    |    
|                                              |                              |                              |        |     |               |  |     |      |  
|Attributable to:                              |                              |                              |        |     |               |  |     |      |   |  |        |    
|                                              | Equity holders of the parent |                              |        | 299 |               |  |     | 84   |   |  |        | 383 | 
|                                              | Minority equity interest     |                              |        | 28  |               |  |     | (1   | ) |  |        | 27  | 
|                                              |                              |                              |        |     |               |  |     |      |  
|Profit for the year                           |                              |                              | 327    |     |               |  | 83  |      |   |  | 410    |    
|                                              |                              |                              |        |     |               |  |     |      |  

F-61



---



##### Table of Contents





| |                               
| | ------------------------------
| | Income statement remeasurement



| |                        
| | -----------------------
| | Administrative expenses







| |                              
| | -----------------------------
| | Depreciation and amortization





| |                                    
| | -----------------------------------
| | Other operating income and expenses





| |                   
| | ------------------
| | Income tax expense





| |                              
| | -----------------------------
| | (Loss)/gain on sale of assets



F-62



---



##### Table of Contents



Balance Sheet


|                              |  |                 |        |   |               |  |      |                   |  |  |      |   |  |  |        |  
|----------------------------- |  | --------------- | ------ | - | ------------- |  | ---- | ----------------- |  |  | ---- | - |  |  | ------ | -
|                              |  | January 1, 2004 |       
|                              |  |                 |       
|                              |  | UK GAAP         |        |   | Remeasurement |  |      | Reclassifications |  |  | IFRS |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|                              |  | (£ million)     |       
|ASSETS                        |  |                 |        |   |               |  |      |                   |  |  |      |   |  |  |        |  
|Property, plant and equipment |  |                 | 3,951  |   |               |  |     |                   |  |  | (20  | ) |  |  | 3,931  |  
|Goodwill                      |  |                 | 158    |   |               |  |     |                   |  |  |     |   |  |  | 158    |  
|Intangible assets             |  |                 |       |   |               |  |     |                   |  |  | 36   |   |  |  | 36     |  
|Investment in associates      |  |                 | 53     |   |               |  |     |                   |  |  |     |   |  |  | 53     |  
|Other financial assets        |  |                 | 119    |   |               |  |     |                   |  |  | 25   |   |  |  | 144    |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Total non-current assets      |  |                 | 4,281  |   |               |  |     |                   |  |  | 41   |   |  |  | 4,322  |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Inventories                   |  |                 | 44     |   |               |  |     |                   |  |  |     |   |  |  | 44     |  
|Trade and other receivables   |  |                 | 486    |   |               |  | (47  | )                 |  |  | (41  | ) |  |  | 398    |  
|Current tax receivable        |  |                 | 37     |   |               |  |     |                   |  |  |     |   |  |  | 37     |  
|Cash and cash equivalents     |  |                 | 432    |   |               |  |     |                   |  |  | (21  | ) |  |  | 411    |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Total current assets          |  |                 | 999    |   |               |  | (47  | )                 |  |  | (62  | ) |  |  | 890    |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Total assets                  |  |                 | 5,280  |   |               |  | (47  | )                 |  |  | (21  | ) |  |  | 5,212  |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|LIABILITIES                   |  |                 |        |   |               |  |      |                   |  |  |      |   |  |  |        |  
|Short-term borrowings         |  |                 | (13    | ) |               |  |     |                   |  |  | 6    |   |  |  | (7     | )
|Trade and other payables      |  |                 | (683   | ) |               |  | 86   |                   |  |  | (22  | ) |  |  | (619   | )
|Current tax payable           |  |                 | (389   | ) |               |  |     |                   |  |  |     |   |  |  | (389   | )
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Total current liabilities     |  |                 | (1,085 | ) |               |  | 86   |                   |  |  | (16  | ) |  |  | (1,015 | )
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Loans and other borrowings    |  |                 | (988   | ) |               |  |     |                   |  |  | 15   |   |  |  | (973   | )
|Employee benefits             |  |                 |       |   |               |  | (177 | )                 |  |  |     |   |  |  | (177   | )
|Provisions and other payables |  |                 | (176   | ) |               |  | 46   |                   |  |  | 22   |   |  |  | (108   | )
|Deferred tax payable          |  |                 | (314   | ) |               |  | (163 | )                 |  |  |     |   |  |  | (477   | )
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Total non-current liabilities |  |                 | (1,478 | ) |               |  | (294 | )                 |  |  | 37   |   |  |  | (1,735 | )
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Total liabilities             |  |                 | (2,563 | ) |               |  | (208 | )                 |  |  | 21   |   |  |  | (2,750 | )
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Net assets                    |  |                 | 2,717  |   |               |  | (255 | )                 |  |  |     |   |  |  | 2,462  |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|EQUITY                        |  |                 |        |   |               |  |      |                   |  |  |      |   |  |  |        |  
|IHG shareholders equity      |  |                 | 2,554  |   |               |  | (215 | )                 |  |  | (16  | ) |  |  | 2,323  |  
|Minority equity interest      |  |                 | 163    |   |               |  | (40  | )                 |  |  | 16   |   |  |  | 139    |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  
|Total equity                  |  |                 | 2,717  |   |               |  | (255 | )                 |  |  |     |   |  |  | 2,462  |  
|                              |  |                 |        |   |               |  |      |                   |  |  |      |  

F-63



---



##### Table of Contents



Balance Sheet


|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |   |  |  |        |  
|--------------------------------------------------- |  | ----------------- | ------ | - | ------------- |  | ------ | ----------------- |  |  | ---- | - |  |  | ------ | -
|                                                    |  | December 31, 2004 |       
|                                                    |  |                   |       
|                                                    |  | UK GAAP           |        |   | Remeasurement |  |        | Reclassifications |  |  | IFRS |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|                                                    |  | (£ million)       |       
|ASSETS                                              |  |                   |        |   |               |  |        |                   |  |  |      |   |  |  |        |  
|Property, plant and equipment                       |  |                   | 3,776  |   |               |  | (1,811 | )                 |  |  | (39  | ) |  |  | 1,926  |  
|Goodwill                                            |  |                   | 142    |   |               |  | 10     |                   |  |  |     |   |  |  | 152    |  
|Intangible assets                                   |  |                   |       |   |               |  |       |                   |  |  | 54   |   |  |  | 54     |  
|Investment in associates                            |  |                   | 42     |   |               |  |       |                   |  |  |     |   |  |  | 42     |  
|Other financial assets                              |  |                   | 57     |   |               |  |       |                   |  |  | 23   |   |  |  | 80     |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Total non-current assets                            |  |                   | 4,017  |   |               |  | (1,801 | )                 |  |  | 38   |   |  |  | 2,254  |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Inventories                                         |  |                   | 42     |   |               |  |       |                   |  |  |     |   |  |  | 42     |  
|Trade and other receivables                         |  |                   | 542    |   |               |  | (110   | )                 |  |  | (42  | ) |  |  | 390    |  
|Current tax receivable                              |  |                   | 14     |   |               |  |       |                   |  |  |     |   |  |  | 14     |  
|Cash and cash equivalents                           |  |                   | 83     |   |               |  |       |                   |  |  | (11  | ) |  |  | 72     |  
|Other financial assets                              |  |                   | 76     |   |               |  |       |                   |  |  | 4    |   |  |  | 80     |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Total current assets                                |  |                   | 757    |   |               |  | (110   | )                 |  |  | (49  | ) |  |  | 598    |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Non-current assets classified as held for sale      |  |                   |       |   |               |  | 1,826  |                   |  |  |     |   |  |  | 1,826  |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Total assets                                        |  |                   | 4,774  |   |               |  | (85    | )                 |  |  | (11  | ) |  |  | 4,678  |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|LIABILITIES                                         |  |                   |        |   |               |  |        |                   |  |  |      |   |  |  |        |  
|Short-term borrowings                               |  |                   | (43    | ) |               |  |       |                   |  |  | 11   |   |  |  | (32    | )
|Trade and other payables                            |  |                   | (709   | ) |               |  | 81     |                   |  |  | (5   | ) |  |  | (633   | )
|Current tax payable                                 |  |                   | (261   | ) |               |  |       |                   |  |  |     |   |  |  | (261   | )
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Total current liabilities                           |  |                   | (1,013 | ) |               |  | 81     |                   |  |  | 6    |   |  |  | (926   | )
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Loans and other borrowings                          |  |                   | (1,156 | ) |               |  |       |                   |  |  |     |   |  |  | (1,156 | )
|Employee benefits                                   |  |                   |       |   |               |  | (173   | )                 |  |  |     |   |  |  | (173   | )
|Provisions and other payables                       |  |                   | (230   | ) |               |  | 122    |                   |  |  | 5    |   |  |  | (103   | )
|Deferred tax payable                                |  |                   | (248   | ) |               |  | 14     |                   |  |  |     |   |  |  | (234   | )
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Total non-current liabilities                       |  |                   | (1,634 | ) |               |  | (37    | )                 |  |  | 5    |   |  |  | (1,666 | )
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Non-current liabilities classified as held for sale |  |                   |       |   |               |  | (148   | )                 |  |  |     |   |  |  | (148   | )
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Total liabilities                                   |  |                   | (2,647 | ) |               |  | (104   | )                 |  |  | 11   |   |  |  | (2,740 | )
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Net assets                                          |  |                   | 2,127  |   |               |  | (189   | )                 |  |  |     |   |  |  | 1,938  |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|EQUITY                                              |  |                   |        |   |               |  |        |                   |  |  |      |   |  |  |        |  
|IHG shareholders equity                            |  |                   | 1,977  |   |               |  | (137   | )                 |  |  | (19  | ) |  |  | 1,821  |  
|Minority equity interest                            |  |                   | 150    |   |               |  | (52    | )                 |  |  | 19   |   |  |  | 117    |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  
|Total equity                                        |  |                   | 2,127  |   |               |  | (189   | )                 |  |  |     |   |  |  | 1,938  |  
|                                                    |  |                   |        |   |               |  |        |                   |  |  |      |  

F-64



---



##### Table of Contents





| |                            
| | ---------------------------
| | Balance Sheet Remeasurement

Held for sale








| |         
| | --------
| | Goodwill





| |                             
| | ----------------------------
| | Employee benefit obligations





| |                              
| | -----------------------------
| | Provisions and other payables





| |             
| | ------------
| | Deferred tax







| |                                
| | -------------------------------
| | Balance Sheet Reclassifications



| |         
| | --------
| | Software





| |                        
| | -----------------------
| | Other intangible assets





| |                       
| | ----------------------
| | Other financial assets





| |                          
| | -------------------------
| | Cash and cash equivalents



F-65



---



##### Table of Contents





| |                         
| | ------------------------
| | Trade and other payables





Cash flow




Adoption of IAS 39




Note 31  Post balance sheet events







|          |                                                                                                                                   
|--------- | ----------------------------------------------------------------------------------------------------------------------------------
|Note 32  | Differences between International Financial Reporting
    Standards and United States Generally Accepted Accounting
    Principles









| |                             
| | ----------------------------
| | Classification of borrowings



F-66



---



##### Table of Contents





| |         
| | --------
| | Pensions











| |                  
| | -----------------
| | Intangible assets













| |                              
| | -----------------------------
| | Property, plant and equipment





F-67



---



##### Table of Contents











| |            
| | -----------
| | Staff costs





| |             
| | ------------
| | Deferred tax





F-68



---



##### Table of Contents





| |                                             
| | --------------------------------------------
| | Derivative financial instruments and hedging





| |           
| | ----------
| | Guarantees





| |                                     
| | ------------------------------------
| | Assets and liabilities held for sale





| |                        
| | -----------------------
| | Discontinued operations



F-69



---



##### Table of Contents





| |                                      
| | -------------------------------------
| | Net income in accordance with US GAAP



|                                                                    |                                               |                      |      |      |              |   |     |     |     |  
|------------------------------------------------------------------- | --------------------------------------------- | -------------------- | ---- | ---- | ------------ | - | --- | --- | --- | -
|                                                                    |                                               | Year ended           |      |      | Year ended   |  
|                                                                    |                                               | December 31,         |      |      | December 31, |  
|                                                                    |                                               | 2005                 |      |      | 2004         |  
|                                                                    |                                               |                      |      |      |              |  
|                                                                    |                                               | (£ million)          |     
|Profit available for IHG equity holders in accordance with
    IFRS |                                               |                      | 496  |      |              |   | 383 |    
|Adjustments:                                                        |                                               |                      |      |      |              |   |     |    
|                                                                    | Amortization of intangible assets             |                      |      | (1   | )            |   |     | (3  | )  
|                                                                    | Impairment of property, plant and equipment   |                      |      | (17  | )            |   |     | 30  |    
|                                                                    | Disposal of property, plant and equipment     |                      |      | (107 | )            |   |     | 5   |    
|                                                                    | Depreciation of property, plant and equipment |                      |      | (31  | )            |   |     | (20 | )  
|                                                                    | Deferred revenue                              |                      |      | 15   |              |   |     | 5   |    
|                                                                    | Gain on held for sale equity investment       |                      |      |     |              |   |     | (28 | )  
|                                                                    | Pension costs                                 |                      |      | (20  | )            |   |     | (9  | )  
|                                                                    | Staff costs                                   |                      |      | (1   | )            |   |     | 2   |    
|                                                                    | Change in fair value of
    derivatives(i)    |                      |      | 6    |              |   |     | 52  |    
|                                                                    | Provisions                                    |                      |      | (3   | )            |   |     | (5  | )  
|                                                                    | Deferred tax:                                 |                      |      |      |              |   |     |     |    
|                                                                    |                                               | on above adjustments |      |      | 16           |   |     |     | 4   |  
|                                                                    |                                               | methodology          |      |      | (2           | ) |     |     | (79 | )
|                                                                    |                                               |                      |      |      |              |  
|                                                                    |                                               |                      | (145 | )    |              |   | (46 | )  
|                                                                    | Minority share of above adjustments           |                      |      | 4    |              |   |     | 3   |    
|                                                                    |                                               |                      |      |      |              |  
|                                                                    |                                               |                      | (141 | )    |              |   | (43 | )  
|                                                                    |                                               |                      |      |      |              |  
|Net income in accordance with US GAAP                               |                                               |                      | 355  |      |              |   | 340 |    
|                                                                    |                                               |                      |      |      |              |  

See page F-71
for footnotes.


F-70



---



##### Table of Contents





|                                                            |                         |                         |        |       |              |  |        |       | 
|----------------------------------------------------------- | ----------------------- | ----------------------- | ------ | ----- | ------------ |  | ------ | ----- | 
|                                                            |                         | Year ended              |        |       | Year ended   | 
|                                                            |                         | December 31,            |        |       | December 31, | 
|                                                            |                         | 2005                    |        |       | 2004         | 
|                                                            |                         |                         |        |       |              | 
|                                                            |                         | (£ million,             |       
|                                                            |                         | except per ADS amounts) |       
|Net sales                                                   |                         |                         | 1,521  |       |              |  | 1,606  |      
|Operating and administrative expenses                       |                         |                         | (1,323 | )     |              |  | (1,374 | )    
|Financial income and financial expenses                     |                         |                         | (24    | )     |              |  | (33    | )    
|                                                            |                         |                         |        |       |              | 
|Income before income tax expense and minority interest      |                         |                         | 174    |       |              |  | 199    |      
|                                                            |                         |                         |        |       |              | 
|Income tax (expense)/credit                                 |                         |                         | (56    | )     |              |  | 79     |      
|(Loss)/gain on disposal of assets, net of
    tax(iv)       |                         |                         | (14    | )     |              |  | 3      |      
|Minority interest                                           |                         |                         |       |       |              |  | (24    | )    
|                                                            |                         |                         |        |       |              | 
|Income from continuing operations                           |                         |                         | 104    |       |              |  | 257    |      
|Discontinued operations:                                    |                         |                         |        |       |              |  |        |      
|Result for period, net of tax and financial
    expenses(v) |                         |                         | 41     |       |              |  | 62     |      
|Surplus on disposal, net of
    tax(vi)                     |                         |                         | 210    |       |              |  | 21     |      
|                                                            |                         |                         |        |       |              | 
|Net income                                                  |                         |                         | 355    |       |              |  | 340    |      
|                                                            |                         |                         |        |       |              | 
|Per ordinary share and American Depositary Share            |                         |                         |        |       |              |  |        |      
|Basic(ii)                                                   |                         |                         |        |       |              |  |        |      
|                                                            | Continuing operations   |                         |        | 20.0p |              |  |        | 36.2p | 
|                                                            | Discontinued operations |                         |        | 48.2p |              |  |        | 11.7p | 
|                                                            |                         |                         |        |       |              | 
|Net income                                                  |                         |                         | 68.2p  |       |              |  | 47.9p  |      
|                                                            |                         |                         |        |       |              | 
|Diluted(iii)                                                |                         |                         |        |       |              |  |        |      
|                                                            | Continuing operations   |                         |        | 19.5p |              |  |        | 35.7p | 
|                                                            | Discontinued operations |                         |        | 47.1p |              |  |        | 11.5p | 
|                                                            |                         |                         |        |       |              | 
|Net income                                                  |                         |                         | 66.6p  |       |              |  | 47.2p  |      
|                                                            |                         |                         |        |       |              | 






|      |                                                                                                                                                                                                                                                                                                                                                                                                          
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)   | Comprises net gains in the fair value of derivatives that do not
    qualify for hedge accounting of £6 million (2004
    £50 million) and net gains reclassified from other
    comprehensive income of £nil (2004 £2 million).                                                                                                                                                                         
|     
|(ii)  | Calculated by dividing net income in accordance with
    US GAAP of £355 million (2004
    £340 million) by 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 of £355 million income 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 533 million
    (2004 720 million).
|     
|(iv)  | Tax charge for the year ended December 31, 2005 of
    £3 million (2004 £2 million credit).                                                                                                                                                                                                                                                                                                              
|     
|(v)   | Tax charge for the year ended December 31, 2005 of
    £17 million (2004 £29 million). Financial
    expenses for the year ended December 31, 2005 of
    £9 million (2004 £1 million).                                                                                                                                                                                                                  
|     
|(vi)  | Tax charge for the year ended December 31, 2005 of
    £28 million (2004 £3 million credit).                                                                                                                                                                                                                                                                                                             

F-71



---



##### Table of Contents





| |                     
| | --------------------
| | Comprehensive income



|                                                                                                     |  |              |      |   |              |  |     |  
|---------------------------------------------------------------------------------------------------- |  | ------------ | ---- | - | ------------ |  | --- | -
|                                                                                                     |  | Year ended   |      |   | Year ended   | 
|                                                                                                     |  | December 31, |      |   | December 31, | 
|                                                                                                     |  | 2005         |      |   | 2004         | 
|                                                                                                     |  |              |      |   |              | 
|                                                                                                     |  | (£ million)  |     
|Net income in accordance with US GAAP                                                                |  |              | 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 credit of
    £20 million (2004 £1 million charge)             |  |              | (48  | ) |              |  | 8   |  
|Change in valuation of marketable securities, net of tax of
    £6 million (2004 £3 million)         |  |              | 9    |   |              |  | 29  |  
|Change in fair value of derivatives, net of tax credit of
    £2 million (2004 £nil million)         |  |              | (4   | ) |              |  | (2  | )
|Currency translation differences                                                                     |  |              | (132 | ) |              |  | 83  |  
|                                                                                                     |  |              |      |   |              | 
|                                                                                                     |  |              | (126 | ) |              |  | 118 |  
|                                                                                                     |  |              |      |   |              | 
|Comprehensive income in accordance with US GAAP                                                      |  |              | 229  |   |              |  | 458 |  
|                                                                                                     |  |              |      |   |              | 



|                     |  |             |     |   |              |  |    |                |  |  |             |   |  |       |      |   |  |  |      |  
|-------------------- |  | ----------- | --- | - | ------------ |  | -- | -------------- |  |  | ----------- | - |  | ----- | ---- | - |  |  | ---- | -
|                     |  | Minimum     |     |   | Change in    |  |    | Derivative     |  |  |             |   | 
|                     |  | pension     |     |   | valuation of |  |    | financial      |  |  | Currency    |   |  |      
|                     |  | liability   |     |   | marketable   |  |    | instruments    |  |  | translation |   |  |      
|                     |  | adjustment  |     |   | securities   |  |    | gains/(losses) |  |  | differences |   |  | Total |     
|                     |  |             |     |   |              |  |    |                |  |  |             |   |  |       |     
|                     |  | (£ million) |    
|At December 31, 2003 |  |             | (51 | ) |              |  | 2  |                |  |  | 4           |   |  |       | 10   |   |  |  | (35  | )
|Movement in the year |  |             | 8   |   |              |  | 29 |                |  |  | (2          | ) |  |       | 83   |   |  |  | 118  |  
|                     |  |             |     |   |              |  |    |                |  |  |             |   |  |       |     
|At December 31, 2004 |  |             | (43 | ) |              |  | 31 |                |  |  | 2           |   |  |       | 93   |   |  |  | 83   |  
|Movement in the year |  |             | 1   |   |              |  | 9  |                |  |  | (4          | ) |  |       | (149 | ) |  |  | (143 | )
|                     |  |             |     |   |              |  |    |                |  |  |             |   |  |       |     
|At December 31, 2005 |  |             | (42 | ) |              |  | 40 |                |  |  | (2          | ) |  |       | (56  | ) |  |  | (60  | )
|                     |  |             |     |   |              |  |    |                |  |  |             |   |  |       |     



F-72



---



##### Table of Contents





| |                                                    
| | ---------------------------------------------------
| | Shareholders equity in accordance with US
    GAAP



|                                                    |                                                |                                          |                      |     |              |      |       |        |       |      |  
|--------------------------------------------------- | ---------------------------------------------- | ---------------------------------------- | -------------------- | --- | ------------ | ---- | ----- | ------ | ----- | ---- | -
|                                                    |                                                | December 31,                             |                      |     | December 31, |     
|                                                    |                                                | 2005                                     |                      |     | 2004         |     
|                                                    |                                                |                                          |                      |     |              |     
|                                                    |                                                | (£ million)                              |                     
|IHG shareholders equity in accordance with IFRS    |                                                |                                          | 1,084                |     |              |      | 1,821 |       
|                                                    |                                                |                                          |                      |     |              |     
|Adjustments:                                        |                                                |                                          |                      |     |              |      |       |       
|                                                    | Intangible assets:                             |                                          |                      |     |              |      |       |        |      
|                                                    |                                                | Cost: goodwill                           |                      |     | 761          |      |       |        | 781   |     
|                                                    |                                                | other intangible assets                  |                      |     | 655          |      |       |        | 612   |     
|                                                    |                                                | Accumulated amortization                 |                      |     | (260         | )    |       |        | (217  | )   
|                                                    |                                                |                                          |                      |     |              |     
|                                                    |                                                |                                          | 1,156                |     |              |      | 1,176 |       
|                                                    | Intangible asset  minimum pension liability   |                                          |                      | 1   |              |      |       | 3      |      
|                                                    |                                                |                                          |                      |     |              |     
|                                                    |                                                |                                          | 1,157                |     |              |      | 1,179 |       
|                                                    | Property, plant and equipment:                 |                                          |                      |     |              |      |       |        |      
|                                                    |                                                | Cost                                     |                      |     | 327          |      |       |        | (29   | )   
|                                                    |                                                | Assets classified as held for sale       |                      |     | 21           |      |       |        | 1,526 |     
|                                                    |                                                | Accumulated depreciation                 |                      |     | (19          | )    |       |        | 31    |     
|                                                    |                                                |                                          |                      |     |              |     
|                                                    |                                                |                                          | 329                  |     |              |      | 1,528 |       
|                                                    | Other financial assets                         |                                          |                      | (14 | )            |      |       | 3      |      
|                                                    | Non-current assets classified as held for sale |                                          |                      | (21 | )            |      |       | (1,526 | )    
|                                                    | Current assets:                                |                                          |                      |     |              |      |       |        |      
|                                                    |                                                | Pension prepayment                       |                      |     |             |      |       |        | 57    |     
|                                                    |                                                | Other receivables                        |                      |     | 31           |      |       |        | 22    |     
|                                                    |                                                | Derivatives                              |                      |     |             |      |       |        | 9     |     
|                                                    | Current liabilities:                           |                                          |                      |     |              |      |       |        |      
|                                                    |                                                | Deferred income on property transactions |                      |     | (15          | )    |       |        | (5    | )   
|                                                    |                                                | Other payables                           |                      |     | 8            |      |       |        | 10    |     
|                                                    |                                                | Derivatives                              |                      |     |             |      |       |        | (1    | )   
|                                                    | Non-current liabilities:                       |                                          |                      |     |              |      |       |        |      
|                                                    |                                                | Deferred income on property transactions |                      |     | (309         | )    |       |        | (73   | )   
|                                                    |                                                | Other payables                           |                      |     | (41          | )    |       |        | (26   | )   
|                                                    |                                                | Derivatives                              |                      |     |             |      |       |        | (2    | )   
|                                                    |                                                | Provisions                               |                      |     | 4            |      |       |        | 8     |     
|                                                    |                                                | Employee benefits                        |                      |     | 15           |      |       |        | 77    |     
|                                                    |                                                | Deferred tax payable:                    |                      |     |              |      |       |        |       |     
|                                                    |                                                |                                          | on above adjustments |     |              | (204 | )     |        |       | (357 | )
|                                                    |                                                |                                          | methodology          |     |              | (10  | )     |        |       |     |  
|                                                    | Liabilities held for sale                      |                                          |                      | 1   |              |      |       | 148    |      
|                                                    |                                                |                                          |                      |     |              |     
|                                                    |                                                |                                          | 931                  |     |              |      | 1,051 |       
|                                                    | Minority share of above adjustments            |                                          |                      |    |              |      |       | (76    | )    
|                                                    |                                                |                                          |                      |     |              |     
|                                                    |                                                |                                          | 931                  |     |              |      | 975   |       
|                                                    |                                                |                                          |                      |     |              |     
|IHG shareholders equity in accordance with US GAAP |                                                |                                          | 2,015                |     |              |      | 2,796 |       
|                                                    |                                                |                                          |                      |     |              |     

F-73



---



##### Table of Contents





| |                                                                                
| | -------------------------------------------------------------------------------
| | Additional information required by US GAAP in respect of
    earnings per share



|                                                                           |                                                                         |                         |      |     |              |  |      |     | 
|-------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----------------------- | ---- | --- | ------------ |  | ---- | --- | 
|                                                                           |                                                                         | Year ended              |      |     | Year ended   | 
|                                                                           |                                                                         | December 31,            |      |     | December 31, | 
|                                                                           |                                                                         | 2005                    |      |     | 2004         | 
|                                                                           |                                                                         |                         |      |     |              | 
|                                                                           |                                                                         | (£ million,             |     
|                                                                           |                                                                         | except per ADS amounts) |     
|Numerator:                                                                 |                                                                         |                         |      |     |              |  |      |    
|                                                                           | Numerator for basic and diluted earnings per ordinary share and
    ADS |                         |      | 104 |              |  |      | 257 | 
|                                                                           |                                                                         |                         |      |     |              | 
|Denominator:                                                               |                                                                         |                         |      |     |              |  |      |    
|                                                                           | Denominator for basic earnings per ordinary share and ADS               |                         |      | 521 |              |  |      | 710 | 
|                                                                           | Effect of dilutive securities:                                          |                         |      |     |              |  |      |     | 
|                                                                           | Employee options and restricted stock awards                            |                         |      | 12  |              |  |      | 10  | 
|                                                                           |                                                                         |                         |      |     |              | 
|                                                                           | Denominator for diluted earnings per ordinary share and ADS             |                         |      | 533 |              |  |      | 720 | 
|                                                                           |                                                                         |                         |      |     |              | 
|Basic earnings per ordinary share and ADS from continuing
    operations   |                                                                         |                         | 20.0 | p   |              |  | 36.2 | p  
|                                                                           |                                                                         |                         |      |     |              | 
|Diluted earnings per ordinary share and ADS from continuing
    operations |                                                                         |                         | 19.5 | p   |              |  | 35.7 | p  
|                                                                           |                                                                         |                         |      |     |              | 



| |                                     
| | ------------------------------------
| | Consolidated statement of cash flows







|                                                 |                             |              |        |     |              |  |      |     | 
|------------------------------------------------ | --------------------------- | ------------ | ------ | --- | ------------ |  | ---- | --- | 
|                                                 |                             | Year ended   |        |     | Year ended   | 
|                                                 |                             | December 31, |        |     | December 31, | 
|                                                 |                             | 2005         |        |     | 2004         | 
|                                                 |                             |              |        |     |              | 
|                                                 |                             | (£ million)  |       
|Cash inflow from operating activities            |                             |              | 302    |     |              |  | 444  |    
|Cash outflow on investing activities             |                             |              | 1,863  |     |              |  | (151 | )  
|Cash outflow from financing activities           |                             |              | (1,906 | )   |              |  | (631 | )  
|                                                 |                             |              |        |     |              | 
|Increase/(decrease) in cash and cash equivalents |                             |              | 259    |     |              |  | (338 | )  
|Effect of foreign exchange rate changes          |                             |              | (7     | )   |              |  | (1   | )  
|Cash and cash equivalents                        |                             |              |        |     |              |  |      |    
|                                                 | At start of the fiscal year |              |        | 72  |              |  |      | 411 | 
|                                                 |                             |              |        |     |              | 
|                                                 | At end of the fiscal year   |              |        | 324 |              |  |      | 72  | 
|                                                 |                             |              |        |     |              | 

F-74



---



##### Table of Contents





| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | Additional information required by US GAAP in respect of
    the Groups principal pension plans



|                               |  |                     |     |   |                     |  |     |                            |  |  |              |   |  |              |    |   |              |  |   |  |  |  |   | 
|------------------------------ |  | ------------------- | --- | - | ------------------- |  | --- | -------------------------- |  |  | ------------ | - |  | ------------ | -- | - | ------------ |  | - |  |  |  | - | 
|                               |  | UK pension benefits |     |   | US pension 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, | 
|                               |  | 2005                |     |   | 2004                |  |     | 2005                       |  |  | 2004         |   |  | 2005         |    |   | 2004         | 
|                               |  |                     |     |   |                     |  |     |                            |  |  |              |   |  |              |    |   |              | 
|                               |  | (£ million)         |    
|Service cost                   |  |                     | 20  |   |                     |  | 17  |                            |  |  |             |   |  |              |   |   |              |  |  |  |  |  |  | 
|Interest cost                  |  |                     | 30  |   |                     |  | 26  |                            |  |  | 5            |   |  |              | 5  |   |              |  | 1 |  |  |  | 1 | 
|Expected return on plan assets |  |                     | (33 | ) |                     |  | (25 | )                          |  |  | (4           | ) |  |              | (4 | ) |              |  |  |  |  |  |  | 
|Net amortization and deferral  |  |                     | 5   |   |                     |  | 7   |                            |  |  |             |   |  |              |   |   |              |  |  |  |  |  |  | 
|Recognized net actuarial gain  |  |                     |    |   |                     |  |    |                            |  |  | 2            |   |  |              | 2  |   |              |  |  |  |  |  |  | 
|                               |  |                     |     |   |                     |  |     |                            |  |  |              |   |  |              |    |   |              | 
|Net periodic pension cost      |  |                     | 22  |   |                     |  | 25  |                            |  |  | 3            |   |  |              | 3  |   |              |  | 1 |  |  |  | 1 | 
|                               |  |                     |     |   |                     |  |     |                            |  |  |              |   |  |              |    |   |              | 



|                                                 |  |                     |       |  |                     |  |       |                            |  |  |              |  |  |              |       |  |              |  |       |  |  |  |       | 
|------------------------------------------------ |  | ------------------- | ----- |  | ------------------- |  | ----- | -------------------------- |  |  | ------------ |  |  | ------------ | ----- |  | ------------ |  | ----- |  |  |  | ----- | 
|                                                 |  | UK pension benefits |       |  | US pension 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, | 
|                                                 |  | 2005                |       |  | 2004                |  |       | 2005                       |  |  | 2004         |  |  | 2005         |       |  | 2004         | 
|                                                 |  |                     |       |  |                     |  |       |                            |  |  |              |  |  |              |       |  |              | 
|Expected long-term rate of return on plan assets |  |                     | 5.80% |  |                     |  | 6.90% |                            |  |  | 8.00%        |  |  |              | 8.00% |  |              |  |      |  |  |  |      | 
|Discount rate                                    |  |                     | 4.70% |  |                     |  | 5.30% |                            |  |  | 5.50%        |  |  |              | 5.75% |  |              |  | 5.50% |  |  |  | 5.75% | 
|Expected long-term rate of earnings increases    |  |                     | 4.30% |  |                     |  | 4.30% |                            |  |  | 3.50%        |  |  |              | 3.50% |  |              |  | 4.00% |  |  |  | 4.00% | 





|                                                    |  |      |      |   |      |  |      |  
|--------------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                                                    |  | 2005 |      |   | 2004 | 
|                                                    |  |      |      |   |      | 
|Health care cost trend rate assumed for next year   |  |      | 9.0  | % |      |  | 9.5  | %
|Rate that the cost trend rate gradually declines to |  |      | 4.5  | % |      |  | 4.5  | %
|Year that rate reaches the assumed ultimate rate    |  |      | 2015 |   |      |  | 2014 |  





F-75



---



##### Table of Contents



|                                        |                                        |                      |     |      |                      |  |     |                            |   |  |              |    |   |              |    |    |              |  |    |    |   |  |    |    |  
|--------------------------------------- | -------------------------------------- | -------------------- | --- | ---- | -------------------- |  | --- | -------------------------- | - |  | ------------ | -- | - | ------------ | -- | -- | ------------ |  | -- | -- | - |  | -- | -- | -
|                                        |                                        | 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            |                                        | 2005                 |     |      | 2004                 |  |     | 2005                       |   |  | 2004         |    |   | 2005         |    |    | 2004         | 
|                                        |                                        |                      |     |      |                      |  |     |                            |   |  |              |    |   |              |    |    |              | 
|                                        |                                        | (£ million)          |    
|Benefit obligation at beginning of year |                                        |                      | 600 |      |                      |  | 477 |                            |   |  | 89           |    |   |              | 90 |    |              |  | 11 |    |   |  | 12 |   
|                                        | Service cost                           |                      |     | 20   |                      |  |     | 17                         |   |  |              |   |   |              |    |   |              |  |    |   |   |  |    |   |  
|                                        | Members contributions                  |                      |     | 2    |                      |  |     |                           |   |  |              |   |   |              |    |   |              |  |    |   |   |  |    |   |  
|                                        | Interest expense                       |                      |     | 30   |                      |  |     | 26                         |   |  |              | 5  |   |              |    | 5  |              |  |    | 1  |   |  |    | 1  |  
|                                        | Benefits paid                          |                      |     | (11  | )                    |  |     | (12                        | ) |  |              | (6 | ) |              |    | (5 | )            |  |    | (1 | ) |  |    | (1 | )
|                                        | Curtailments                           |                      |     | (7   | )                    |  |     |                           |   |  |              |   |   |              |    |   |              |  |    |   |   |  |    |   |  
|                                        | Age-related national insurance rebates |                      |     |     |                      |  |     | 5                          |   |  |              |   |   |              |    |   |              |  |    |   |   |  |    |   |  
|                                        | Bulk transfer to scheme                |                      |     |     |                      |  |     | 27                         |   |  |              |   |   |              |    |   |              |  |    |   |   |  |    |   |  
|                                        | Actuarial loss arising in the year     |                      |     | 67   |                      |  |     | 60                         |   |  |              | 3  |   |              |    | 5  |              |  |    |   |   |  |    |   |  
|                                        | Separation of Britvic                  |                      |     | (426 | )                    |  |     |                           |   |  |              |   |   |              |    |   |              |  |    |   |   |  |    |   |  
|                                        | Exchange                               |                      |     |     |                      |  |     |                           |   |  |              | 11 |   |              |    | (6 | )            |  |    | 1  |   |  |    | (1 | )
|                                        |                                        |                      |     |      |                      |  |     |                            |   |  |              |    |   |              |    |    |              | 
|Benefit obligation at end of year       |                                        |                      | 275 |      |                      |  | 600 |                            |   |  | 102          |    |   |              | 89 |    |              |  | 12 |    |   |  | 11 |   
|                                        |                                        |                      |     |      |                      |  |     |                            |   |  |              |    |   |              |    |    |              | 



|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              |  |     |    |   |  |     |    |  
|---------------------------------------------- | ----------------------- | -------------------- | ---- | ---- | -------------------- |  | ---- | -------------------------- | - |  | ------------ | -- | - | ------------ | --- | -- | ------------ |  | --- | -- | - |  | --- | -- | -
|                                               |                         | 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                         |                         | 2005                 |      |      | 2004                 |  |      | 2005                       |   |  | 2004         |    |   | 2005         |     |    | 2004         | 
|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              | 
|                                               |                         | (£ million)          |     
|Fair value of plan assets at beginning of year |                         |                      | 472  |      |                      |  | 355  |                            |   |  | 55           |    |   |              | 48  |    |              |  |    |    |   |  |    |   
|                                               | Contributions payable   |                      |      | 46   |                      |  |      | 72                         |   |  |              | 2  |   |              |     | 11 |              |  |     | 1  |   |  |     | 1  |  
|                                               | Members contributions   |                      |      | 2    |                      |  |      | 5                          |   |  |              |   |   |              |     |   |              |  |     |   |   |  |     |   |  
|                                               | Benefits paid           |                      |      | (11  | )                    |  |      | (12                        | ) |  |              | (6 | ) |              |     | (5 | )            |  |     | (1 | ) |  |     | (1 | )
|                                               | Bulk Transfer to scheme |                      |      |     |                      |  |      | 14                         |   |  |              |   |   |              |     |   |              |  |     |   |   |  |     |   |  
|                                               | Actual return on assets |                      |      | 77   |                      |  |      | 38                         |   |  |              | 3  |   |              |     | 5  |              |  |     |   |   |  |     |   |  
|                                               | Separation of Britvic   |                      |      | (335 | )                    |  |      |                           |   |  |              |   |   |              |     |   |              |  |     |   |   |  |     |   |  
|                                               | Exchange                |                      |      |     |                      |  |      |                           |   |  |              | 7  |   |              |     | (4 | )            |  |     |   |   |  |     |   |  
|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              | 
|Fair value of plan assets at end of year       |                         |                      | 251  |      |                      |  | 472  |                            |   |  | 61           |    |   |              | 55  |    |              |  |    |    |   |  |    |   
|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              | 
|Accumulated benefit obligation (all vested)    |                         |                      | 264  |      |                      |  | 519  |                            |   |  | 100          |    |   |              | 87  |    |              |  |    |    |   |  |    |   
|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              | 
|Fair value of plan assets                      |                         |                      | 251  |      |                      |  | 472  |                            |   |  | 61           |    |   |              | 55  |    |              |  |    |    |   |  |    |   
|Projected benefit obligation                   |                         |                      | (275 | )    |                      |  | (600 | )                          |   |  | (102         | )  |   |              | (89 | )  |              |  | (12 | )  |   |  | (11 | ) 
|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              | 
|Net plan obligation                            |                         |                      | (24  | )    |                      |  | (128 | )                          |   |  | (41          | )  |   |              | (34 | )  |              |  | (12 | )  |   |  | (11 | ) 
|Unrecognized prior service cost                |                         |                      | 1    |      |                      |  | 5    |                            |   |  |             |    |   |              |    |    |              |  |    |    |   |  |    |   
|Unrecognized net loss                          |                         |                      | 76   |      |                      |  | 199  |                            |   |  | 27           |    |   |              | 23  |    |              |  | 3   |    |   |  | 3   |   
|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              | 
|Net amount recognized                          |                         |                      | 53   |      |                      |  | 76   |                            |   |  | (14          | )  |   |              | (11 | )  |              |  | (9  | )  |   |  | (8  | ) 
|                                               |                         |                      |      |      |                      |  |      |                            |   |  |              |    |   |              |     |    |              | 

F-76



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##### Table of Contents



|                                                        |  |                      |     |   |                      |  |     |                            |  |  |              |   |  |              |     |   |              |  |    |   |  |  |    |  
|------------------------------------------------------- |  | -------------------- | --- | - | -------------------- |  | --- | -------------------------- |  |  | ------------ | - |  | ------------ | --- | - | ------------ |  | -- | - |  |  | -- | -
|                                                        |  | 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                                  |  | 2005                 |     |   | 2004                 |  |     | 2005                       |  |  | 2004         |   |  | 2005         |     |   | 2004         | 
|                                                        |  |                      |     |   |                      |  |     |                            |  |  |              |   |  |              |     |   |              | 
|                                                        |  | (£ million)          |    
|The amounts recognized in the balance sheet consist of: |  |                      |     |   |                      |  |     |                            |  |  |              |   |  |              |     |   |              |  |    |   |  |  |    |  
|Prepaid pension cost                                    |  |                      |    |   |                      |  | 57  |                            |  |  |             |   |  |              |    |   |              |  |   |   |  |  |   |  
|Accrued pension cost                                    |  |                      | (13 | ) |                      |  | (54 | )                          |  |  | (39          | ) |  |              | (31 | ) |              |  | (9 | ) |  |  | (8 | )
|Pension costs                                           |  |                      |    |   |                      |  |    |                            |  |  |             |   |  |              |    |   |              |  |   |   |  |  |   |  
|Intangible asset                                        |  |                      | 1   |   |                      |  | 3   |                            |  |  |             |   |  |              |    |   |              |  |   |   |  |  |   |  
|Other comprehensive income (before tax)                 |  |                      | 65  |   |                      |  | 70  |                            |  |  | 25           |   |  |              | 20  |   |              |  |   |   |  |  |   |  
|                                                        |  |                      |     |   |                      |  |     |                            |  |  |              |   |  |              |     |   |              | 
|Net amount recognized                                   |  |                      | 53  |   |                      |  | 76  |                            |  |  | (14          | ) |  |              | (11 | ) |              |  | (9 | ) |  |  | (8 | )
|                                                        |  |                      |     |   |                      |  |     |                            |  |  |              |   |  |              |     |   |              | 



| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Additional information required by US GAAP in respect of
    accounting for the impairment of fixed assets and fixed assets
    to be disposed of



|                                                  |  |              |    |  |              |  |     |  
|------------------------------------------------- |  | ------------ | -- |  | ------------ |  | --- | -
|                                                  |  | Year ended   |    |  | Year ended   | 
|                                                  |  | December 31, |    |  | December 31, | 
|                                                  |  | 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:         |  |              |    |  |              |  |     |  
|Charge for the year under IFRS                    |  |              | 7  |  |              |  | 48  |  
|Adjustment to impairment recognized under US GAAP |  |              | 17 |  |              |  | (30 | )
|                                                  |  |              |    |  |              | 
|                                                  |  |              | 24 |  |              |  | 18  |  
|                                                  |  |              |    |  |              | 
|Charged against:                                  |  |              |    |  |              |  |     |  
|Intangible assets  goodwill                      |  |              |   |  |              |  |    |  
|Property, plant and equipment                     |  |              | 24 |  |              |  | 18  |  
|                                                  |  |              |    |  |              | 
|                                                  |  |              | 24 |  |              |  | 18  |  
|                                                  |  |              |    |  |              | 









F-77



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##### Table of Contents





| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Additional information required by US GAAP in respect of
    accounting for deferred gains

long-term




| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Additional information required by US GAAP in respect of
    accounting for intangible assets subject to amortization



|                                 |  |                   |    |             |                   |  |          |       |  |  |      |             |  |              |          |  |       |  |      |   |  |  |    | 
|-------------------------------- |  | ----------------- | -- | ----------- | ----------------- |  | -------- | ----- |  |  | ---- | ----------- |  | ------------ | -------- |  | ----- |  | ---- | - |  |  | -- | 
|                                 |  | December 31, 2005 |    |             | December 31, 2004 | 
|                                 |  |                   |    |             |                   | 
|                                 |  |                   |    | Accumulated |                   |  | Net book |       |  |  |      | Accumulated |  |              | Net book | 
|                                 |  | Cost              |    |             | amortization      |  |          | value |  |  | Cost |             |  | amortization |          |  | value | 
|                                 |  |                   |    |             |                   |  |          |       |  |  |      |             |  |              |          |  |       | 
|                                 |  | (£ million)       |   
|Management & franchise contracts |  |                   | 96 |             |                   |  | (42      | )     |  |  | 54   |             |  |              | 329      |  |       |  | (277 | ) |  |  | 52 | 
|Other                            |  |                   |   |             |                   |  |         |       |  |  |     |             |  |              | 4        |  |       |  | (1   | ) |  |  | 3  | 
|                                 |  |                   |    |             |                   |  |          |       |  |  |      |             |  |              |          |  |       | 
|Total                            |  |                   | 96 |             |                   |  | (42      | )     |  |  | 54   |             |  |              | 333      |  |       |  | (278 | ) |  |  | 55 | 
|                                 |  |                   |    |             |                   |  |          |       |  |  |      |             |  |              |          |  |       | 





| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | Additional information required by US GAAP in respect of
    accounting for intangible assets not subject to
    amortization

|           |  |                   |       |  |                   |  |   |       |  |  |        |  |  |             |       |  |       |  |     |  |  |  |       | 
|---------- |  | ----------------- | ----- |  | ----------------- |  | - | ----- |  |  | ------ |  |  | ----------- | ----- |  | ----- |  | --- |  |  |  | ----- | 
|           |  | December 31, 2005 |       |  | December 31, 2004 | 
|           |  |                   |       |  |                   | 
|           |  | Hotels            |       |  | Soft drinks       |  |   | Total |  |  | Hotels |  |  | Soft drinks |       |  | Total | 
|           |  |                   |       |  |                   |  |   |       |  |  |        |  |  |             |       |  |       | 
|           |  | (£ million)       |      
|Goodwill   |  |                   | 811   |  |                   |  |  |       |  |  | 811    |  |  |             | 840   |  |       |  | 124 |  |  |  | 964   | 
|Trademarks |  |                   | 530   |  |                   |  |  |       |  |  | 530    |  |  |             | 474   |  |       |  |    |  |  |  | 474   | 
|           |  |                   |       |  |                   |  |   |       |  |  |        |  |  |             |       |  |       | 
|Total      |  |                   | 1,341 |  |                   |  |  |       |  |  | 1,341  |  |  |             | 1,314 |  |       |  | 124 |  |  |  | 1,438 | 
|           |  |                   |       |  |                   |  |   |       |  |  |        |  |  |             |       |  |       | 



| |                                                                      
| | ---------------------------------------------------------------------
| | 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   | 
|               |  | December 31, |    |  | December 31, | 
|               |  | 2005         |    |  | 2004         | 
|               |  |              |    |  |              | 
|               |  | (£ million)  |   
|Current taxes  |  |              | 59 |  |              |  | (60 | )
|Deferred taxes |  |              |   |  |              |  | 7   |  
|               |  |              |    |  |              | 
|Total          |  |              | 59 |  |              |  | (53 | )
|               |  |              |    |  |              | 

F-78



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##### Table of Contents





| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Reconciliation of UK statutory tax rate to US GAAP tax
    charge on income from continuing operations

|                                                          |  |              |       |   |              |  |       |  
|--------------------------------------------------------- |  | ------------ | ----- | - | ------------ |  | ----- | -
|                                                          |  | Year ended   |       |   | Year ended   | 
|                                                          |  | December 31, |       |   | December 31, | 
|                                                          |  | 2005         |       |   | 2004         | 
|                                                          |  |              |       |   |              | 
|                                                          |  | (%)          |      
|UK corporate tax standard rate                            |  |              | 30.0  |   |              |  | 30.0  |  
|Permanent differences                                     |  |              | 11.1  |   |              |  | 1.1   |  
|Net effect of different rates of tax in overseas business |  |              | 10.2  |   |              |  | 6.7   |  
|Adjustment to tax charge in respect of prior periods      |  |              | (16.6 | ) |              |  | (20.4 | )
|Other                                                     |  |              | (1.2  | ) |              |  | (0.2  | )
|Special items                                             |  |              | 3.0   |   |              |  | (35.5 | )
|                                                          |  |              |       |   |              | 
|Effective current tax rate on continuing operations       |  |              | 36.5  |   |              |  | (18.3 | )
|                                                          |  |              |       |   |              | 





Deferred
tax in accordance with US GAAP


|                                             |  |              |      |  
|-------------------------------------------- |  | ------------ | ---- | -
|                                             |  | Deferred tax |     
|                                             |  |              |     
|                                             |  | (£ 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  |  
|                                             |  |              |     






|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

F-79



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##### Table of Contents





|                          |                                                                               |              |      |      |              |  |      |      |  
|------------------------- | ----------------------------------------------------------------------------- | ------------ | ---- | ---- | ------------ |  | ---- | ---- | -
|                          |                                                                               | December 31, |      |      | December 31, | 
|                          |                                                                               | 2005         |      |      | 2004         | 
|                          |                                                                               |              |      |      |              | 
|                          |                                                                               | (£ million)  |     
|Deferred tax liabilities: |                                                                               |              |      |      |              |  |      |     
|                          | Excess of book value over taxation value of property, plant and
    equipment |              |      | 242  |              |  |      | 452  |  
|                          | Taxation effect of deferred gains                                             |              |      | 122  |              |  |      | 122  |  
|                          | Intangible assets                                                             |              |      | 163  |              |  |      | 138  |  
|                          | Investments in associates, joint ventures and partnerships                    |              |      | 41   |              |  |      |     |  
|                          | Other temporary differences                                                   |              |      | 96   |              |  |      | 75   |  
|                          |                                                                               |              |      |      |              | 
|                          |                                                                               |              | 664  |      |              |  | 787  |     
|                          |                                                                               |              |      |      |              | 
|Deferred tax assets:      |                                                                               |              |      |      |              |  |      |     
|                          | Taxation effect of losses carried forward                                     |              |      | (123 | )            |  |      | (113 | )
|                          | Taxation effect of employee benefits                                          |              |      | (14  | )            |  |      | (6   | )
|                          | Other temporary differences                                                   |              |      | (70  | )            |  |      | (77  | )
|                          |                                                                               |              |      |      |              | 
|                          |                                                                               |              | (207 | )    |              |  | (196 | )   
|                          |                                                                               |              |      |      |              | 
|                          |                                                                               |              | 457  |      |              |  | 591  |     
|                          |                                                                               |              |      |      |              | 
|Of which:                 |                                                                               |              |      |      |              |  |      |     
|                          | Current                                                                       |              |      | (40  | )            |  |      | (45  | )
|                          | Non-current                                                                   |              |      | 497  |              |  |      | 636  |  
|                          |                                                                               |              |      |      |              | 
|                          |                                                                               |              | 457  |      |              |  | 591  |     
|                          |                                                                               |              |      |      |              | 









| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | 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   |  
|                             |  |             |    |   |            |  |    |       |  |  |       |  

F-80



---



##### Table of Contents





| |                           
| | --------------------------
| | Variable Interest Entities









| |                         
| | ------------------------
| | New Accounting Standards





F-81



---



##### Table of Contents



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, 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



---



##### Table of Contents



SIGNATURES


20-F




| |                                  
| | ---------------------------------
| | INTERCONTINENTAL HOTELS GROUP PLC
| | (Registrant)                     



| |     |                     
| | --- | --------------------
| | By: | /s/ Richard Solomons

| |                          
| | -------------------------
| |                          
| | Name: Richard Solomons   
| | Title:   Finance Director