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, ~~2009~~2010
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission filenumber: 1-10409

InterContinental Hotels Group PLC

(Exact name of registrant as specified in its charter)

England and Wales

(Jurisdiction of incorporation or organization)

Broadwater Park,

Denham, Buckinghamshire UB9 5HR

(Address of principal executive offices)

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


Title of each class		Name of each exchange on which registered

American Depositary Shares		New York Stock Exchange
Ordinary Shares of 1329/47 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 1329/47 pence each		~~286,976,067~~289,472,651

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No oþ

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

~~Large accelerated filer~~ þ ~~Accelerated filer~~ o


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

Item 17o Item 18 þ

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

Yes o No þ

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


US GAAP o		International Reporting Standards as issued by the International Standards Accounting Board þ		Other o

TABLE OF CONTENTS


			Page

Introduction				4
Cautionary ~~note regarding forward-looking statements~~Note Regarding Forward-Looking Statements				5

PART I
	Item 1.		Identity of Directors, ~~senior management~~Senior Management and ~~advisors~~Advisors			7
	Item 2.		Offer ~~statistics~~Statistics and ~~expected timetable~~Expected Timetable			7
	Item 3.		Key ~~information~~Information			7
			Selected Consolidated ~~financial information~~Financial Information			7
			Risk ~~factors~~Factors			11	10
	Item 4.		Information on the Company			14	13
			Summary			14	13
			Segmental ~~information~~Information			18	16
			~~Hotels~~Business Overview			20	17
			~~Soft Drinks~~			38
			Trademarks			38	37
			Organizational ~~structure~~Structure			39	37
			Property, ~~plant~~Plant and ~~equipment~~Equipment			40	38
			Environment			40	38
	Item 4A.		Unresolved ~~staff comments~~Staff Comments			41	39
	Item 5.		Operating and ~~financial review~~Financial Review and ~~prospects~~Prospects			41	39
			Critical ~~accounting policies~~Accounting Policies			42	40
			Operating ~~results~~Results			44	42
			Liquidity and ~~capital resources~~Capital Resources			53	51
	Item 6.		Directors, ~~senior management~~Senior Management and ~~employees~~Employees			55	53
			Directors and ~~senior management~~Senior Management			55	53
			Compensation			58	57
			Board ~~practices~~Practices			59	58
			Employees			62	61
		Share-based Compensation	62
		Share ~~ownership~~Ownership		63	62
	Item 7.		Major ~~shareholders~~Shareholders and ~~related party transactions~~Related Party Transactions			64	63
			Major ~~shareholders~~Shareholders			64	63
			Related ~~party transactions~~Party Transactions			64	63
	Item 8.		Financial ~~information~~Information			64	63
			Consolidated Statements and ~~other financial information~~Other Financial Information			64	63
			Significant ~~changes~~Changes			65	64
	Item 9.		The Offer and Listing			65	64
			Plan of ~~distribution~~Distribution			66	65
			Selling ~~shareholders~~Shareholders			66	65
			Dilution			66	65
			Expenses of the ~~issue~~Issue			66	65


		Page

	Item 10.	Additional ~~information~~Information	66	65
		Articles of Association	66	65
		Material ~~contracts~~Contracts	68
		Exchange ~~controls~~Controls	71
		Taxation	72	71
		Documents on ~~display~~Display	75
	Item 11.	Quantitative and ~~qualitative disclosures about market risk~~Qualitative Disclosures About Market Risk	75
	Item 12.	Description of ~~securities other than equity securities~~Securities Other Than Equity Securities	78

PART II
	Item 13.	Defaults, ~~dividend arrearages~~Dividend Arrearages and ~~delinquencies~~Delinquencies	80
	Item 14.	Material ~~modifications~~Modifications to the ~~rights~~Rights of ~~security holders~~Security Holders and ~~use~~Use of ~~proceeds~~Proceeds	80
	Item 15.	Controls and ~~procedures~~Procedures	80
	Item 16.	[Reserved]	80
	Item 16A.	Audit Committee ~~financial expert~~Financial Expert	80
	Item 16B.	Code of ~~ethics~~Ethics	80
	Item 16C.	Principal ~~accountant fees~~Accountant Fees and ~~services~~Services	81
	Item 16D.	Exemptions from the Listing Standards for Audit Committees	81
	Item 16E.	Purchases of ~~equity securities~~Equity Securities by the ~~issuer~~Issuer and ~~affiliated purchasers~~Affiliated Purchasers	81
	Item 16F.	Change in Registrant’s ~~certifying accountant~~Certifying Accountant	82
	Item 16G.	Summary of ~~significant~~Significant Corporate Governance ~~differences~~Differences from NYSE Listing Standards	82

PART III
	Item 17.	Financial Statements	83
	Item 18.	Financial Statements	84
	Item 19.	Exhibits	84
~~Exhibit 1~~EX-1
~~EX-4.A.I~~EX-4.C.I
~~EX-8~~EX-4.C.II
EX-4.C.III
Ex-8
EX-12.A
EX-12.B
EX-13.A

INTRODUCTION

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


	•	“ADR” refers to an American Depositary Receipt, being a receipt evidencing title to an ADS;

	•	“ADS” refers to an American Depositary Share, being a registered negotiable security, listed on the New York Stock Exchange, representing one InterContinental Hotels Group PLC ordinary share of 1329/47 pence each;

	•	“Board” refers to the Board of directors of InterContinental Hotels Group PLC or, where appropriate, the ~~Board~~Boards of directors 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;

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

	•	“EMEA” refers to Europe, the Middle East and Africa;

	•	“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;

	•	“ordinary share” or “share” refers, before April 14, 2003, to the ordinary shares of 28 pence each in Six Continents Limited; following that date and until December 10, 2004 to the ordinary shares of £1 each in IHL; following that date and until June 27, 2005 to the ordinary shares of 112 pence each in IHL; following that date and until June 12, 2006 to the ordinary shares of 10 pence each in IHG; following that date until June 4, 2007 to the ordinary shares of 113/7 pence each in IHG; and following June 4, 2007 to the ordinary shares of 1329/47 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” refers to the soft drinks business of InterContinental Hotels Group PLC, which the Company had through its controlling interest in Britvic and which the Company disposed of by way of an initial public offering effective December 14, 2005; and

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

References in this document to the “Companies Act” mean the Companies Act ~~1985 (as amended) or, where appropriate, the Companies Act~~ 2006 ~~in each case~~ of Great Britain; references to the “EU” mean the European Union; references in this document to “UK” refer to the United Kingdom of Great Britain and Northern Ireland; references to “US” refer to the United States of America.

The Company publishes its Consolidated Financial Statements expressed in US dollars following a management decision to change the reporting currency from sterling during 2008. The change was made to reflect the profile of the Group’s revenue and operating profit, which are primarily generated in US dollars or US dollar-linked currencies.

In this document, references to “US dollars”, “US$”, “$” or “¢” are to United States currency, references to “euro” or “€” are to the euro, the currency of the European Economic and Monetary Union, references to “pounds sterling”, “sterling”, “£”, “pence” or “p” are to UK currency. Solely for convenience, this Annual Report on

Form 20-F contains translations of certain pound sterling amounts into US dollars at specified rates. These translations should not be construed as representations that the pound sterling amounts actually represent such US dollar amounts or could be converted into US dollars at the rates indicated. The noon buying rate in The City of New York for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York on March ~~19, 2010~~25, 2011 was £1.00 = ~~$1.50.~~$1.6086. For further information on exchange rates please refer topage ~~F-20.~~F-23.

The Company’s fiscal year ends on December 31. The December 31 fiscal year end is in line with the calendar accounting year ends of the majority of comparable US and European hotel companies. IHG will continue to report on a December 31 fiscal year-end basis, as the Group believes this facilitates more meaningful comparisons with other key participants in the industry. References in this document to a particular year are to the fiscal year unless otherwise indicated. For example, references to the year ended December 31, ~~2009~~2010 are shown as ~~2009~~2010 and references to the year ended December 31, ~~2008~~2009 are shown as ~~2008,~~2009, unless otherwise specified, and references to other fiscal years are shown in a similar manner.

The Company’s Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and in accordance with IFRS as adopted by the European Union (“EU”). IFRS as adopted by the EU differs in certain respects from IFRS as issued by the ~~IASB, however,~~IASB. However, the differences have no impact on the Group’s Consolidated Financial Statements for the years presented.

In keeping with UK practice IHG believes that the reporting of profit and earnings measures before exceptional items provides additional meaningful information on underlying returns and trends to shareholders. The Group’s key performance indicators used in budgets, monthly reporting, forecasts, long-term planning and incentive plans for internal financial reporting focus primarily on profit and earnings measures before exceptional items. Throughout this document earnings per ordinary share is also calculated excluding the effect of all exceptional operating items, exceptional interest, exceptional tax and gain on disposal of assets and is referred to as adjusted earnings per ordinary share.

The Company furnishes ~~JP Morgan~~JPMorgan Chase Bank, N.A., as Depositary, with annual reports containing Consolidated Financial Statements and an independent auditor’s opinion thereon. These Consolidated Financial Statements are prepared on the basis of IFRS. The Company also furnishes to the Depositary all notices of shareholders’ meetings and other reports and communications that are made generally available to shareholders of the Company. The Depositary makes such notices, reports and communications available for inspection by registered holders of ADRs and mails to all registered holders of ADRs voting instruction cards with specific reference to the section of the Company’s website on which such notices, ~~of shareholders’ meetings received by the Depositary.~~reports and communications can be viewed. During ~~2009,~~2010, the Company reported interim financial information at June 30, ~~2009~~2010 in accordance with the Listing Rules of the UK Listing Authority. In addition, it provided quarterly financial information at March 31, ~~2009~~2010 and at September 30, ~~2009~~2010 and intends to continue to provide quarterly financial information during fiscal ~~2010.~~2011. The Consolidated Financial Statements may be found on the Company’s website at www.ihgplc.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

ThisForm 20-F contains certain forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934 with respect to the financial condition, results of operations and business of InterContinental Hotels Group and certain plans and objectives of the Board of Directors of InterContinental Hotels Group PLC with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, or other words of similar meaning. These statements are based on assumptions and assessments made by InterContinental Hotels Group’s management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Such statements in theForm 20-F include, but are not limited to, statements under the following headings; (i) “Item 4. Information on the Company”; (ii) Item 5. Operating and financial review and prospects”; (iii) “Item 8.

Financial information”; and (iv) “Item 11. Quantitative and qualitative disclosures about market risk”. Specific risks faced by the Company are described under “Item 3. Key information — Risk factors” commencing on page ~~11.~~10.

By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in, or implied by, such forward-looking statements, including, but not limited to: ~~continuing global economic uncertainty,~~ the risks involved with the Group’s reliance on the reputation of its brands and the protection of its intellectual property rights; the risks related to identifying, securing and retaining franchise and management agreements; the effect of political and economic developments; the ~~organizational~~ability to acquire and retain the right people and skills and capability to manage ~~changes in key personnel~~growth and ~~senior management;~~change; the risk of events that adversely impact domestic or international travel; the risks involved in the Group’s reliance upon its proprietary reservations system and increased competition in reservations infrastructure; the risks in relation to technology and systems; the risks of the hotel industry supply and demand cycle; the possible lack of selected development opportunities; the risks related to corporate responsibility; the risk of litigation; the risks associated with the Group’s ability to maintain adequate insurance; the risks associated with the Group’s financial stability, its ability to borrow and satisfy debt covenants; compliance with data privacy regulations; the risks related to information security; and the risks associated with funding the defined benefits under its pension plans.

PART I


ITEM 1.	*IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS*

Not applicable.


ITEM 2.	*OFFER STATISTICS AND EXPECTED TIMETABLE*

Not applicable.


ITEM 3.	*KEY INFORMATION*

SELECTED CONSOLIDATED FINANCIAL INFORMATION

Summary

The selected consolidated financial data set forth below for the years ended December 31, 2010, 2009, 2008, 2007 ~~2006~~ and ~~2005~~2006 has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and in accordance with IFRS as adopted by the European Union (“EU”), and is derived from the Consolidated Financial Statements of the Group which have been audited by its independent registered public accounting firm, Ernst & Young LLP.

IFRS as adopted by the EU differs in certain respects from IFRS as issued by the ~~IASB, however,~~IASB. However, the differences have no impact on the Group’s Consolidated Financial Statements for the years presented. The selected consolidated financial data set forth below should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report.

For the year ended December 31, 2010, the selected consolidated financial data differs from the consolidated financial statements issued to UK listing authorities on February 15, 2011, as explained in Note 1 of Notes to the Consolidated Financial Statements.

Consolidated ~~income statement data~~Income Statement Data


	Year ended December 31,															Year ended December 31,
	2009			2008			2007			2006			2005			2010			2009			2008			2007			2006
	($ million, except earnings per ordinary share)															($ million, except earnings per ordinary share)

Revenue:
Continuing operations		1,538			1,897			1,817			1,487			1,309			1,628			1,538			1,897			1,817			1,487
Discontinued operations		—			—			33			278			2,177			—			—			—			33			278

		1,538			1,897			1,850			1,765			3,486			1,628			1,538			1,897			1,850			1,765

Total operating profit before exceptional operating items:
Continuing operations		363			549			488			374			325			444			363			549			488			374
Discontinued operations		—			—			3			50			294			—			—			—			3			50

		363			549			491			424			619			444			363			549			491			424

Exceptional operating items:
Continuing operations		(373	)		(132	)		60			48			(27	)		(7	)		(373	)		(132	)		60			48
Discontinued operations		—			—			—			—			(13	)		—			—			—			—			—

		(373	)		(132	)		60			48			(40	)		(7	)		(373	)		(132	)		60			48

Total operating (loss)/profit:
Total operating profit/(loss):
Continuing operations		(10	)		417			548			422			298			437			(10	)		417			548			422
Discontinued operations		—			—			3			50			281			—			—			—			3			50

		(10	)		417			551			472			579			437			(10	)		417			551			472
Financial income		3			12			18			48			54			2			3			12			18			48
Financial expenses		(57	)		(113	)		(108	)		(68	)		(115	)		(64	)		(57	)		(113	)		(108	)		(68	)

(Loss)/profit before tax		(64	)		316			461			452			518
Profit/(loss) before tax																	375			(64	)		316			461			452

Tax:
On profit before exceptional items		(15	)		(101	)		(90	)		(97	)		(161	)		(98	)		(15	)		(101	)		(90	)		(97	)
On exceptional operating items		112			17			—			(11	)		—			1			112			17			—			(11	)
Exceptional tax credit		175			25			60			184			15			—			175			25			60			184

		272			(59	)		(30	)		76			(146	)		(97	)		272			(59	)		(30	)		76

Profit after tax		208			257			431			528			372			278			208			257			431			528
Gain on disposal of assets, net of tax*		6			5			32			226			605			2			6			5			32			226

Profit for the year		214			262			463			754			977			280			214			262			463			754

Attributable to:
Equity holders of the parent		213			262			463			754			942			280			213			262			463			754
Non-controlling interest		1			—			—			—			35			—			1			—			—			—

Profit for the year		214			262			463			754			977			280			214			262			463			754

Earnings per ordinary share:
Continuing operations:
Basic		72.6¢			89.5¢			134.1¢			127.5¢			41.1¢			96.5¢			72.6¢			89.5¢			134.1¢			127.5¢
Diluted		70.2¢			86.8¢			130.4¢			124.3¢			40.2¢			93.9¢			70.2¢			86.8¢			130.4¢			124.3¢

Total operations:
Basic		74.7¢			91.3¢			144.7¢			193.8¢			180.8¢			97.2¢			74.7¢			91.3¢			144.7¢			193.8¢
Diluted		72.2¢			88.5¢			140.7¢			189.0¢			176.7¢			94.6¢			72.2¢			88.5¢			140.7¢			189.0¢


*		Relates to discontinued operations.

Consolidated ~~statement~~Statement of ~~financial position data~~Financial Position Data


	December 31,											December 31,
	2009		2008			2007		2006		2005		2010		2009		2008			2007		2006
	($ million, except number of shares)											($ million, except number of shares)

Goodwill and intangible assets		356		445			556		516		411		358		356		445			556		516
Property, plant and equipment		1,836		1,684			1,934		1,956		2,340		1,690		1,836		1,684			1,934		1,956
Investments and other financial assets		175		195			253		251		267		178		175		195			253		251
Retirement benefit assets		12		40			49		—		—		5		12		40			49		—
Deferred tax receivable		95		—			—		—		—
Deferred tax assets													88		95		—			—		—
Current assets		419		544			710		892		1,220		466		419		544			710		892
Non-current assets classified as held for sale		—		210			115		98		481		—		—		210			115		98

Total assets		2,893		3,118			3,617		3,713		4,719		2,785		2,893		3,118			3,617		3,713

Current liabilities		1,053		1,141			1,226		1,261		1,370		943		1,040		1,141			1,226		1,261
Long-term debt		1,016		1,334			1,748		594		707		776		1,016		1,334			1,748		594
Net assets		156		1			98		1,346		1,905		278		156		1			98		1,346
Equity share capital		142		118			163		129		84		155		142		118			163		129
IHG shareholders’ equity		149		(6	)		92		1,330		1,870		271		149		(6	)		92		1,330

Number of shares in issue at period end (millions)		287		286			295		356		433		289		287		286			295		356

Dividends

InterContinental Hotels Group PLC paid an interim dividend of ~~7.3~~8.0 pence per share (equivalent to ~~12.2~~12.8 cents per ADS at the closing exchange rate of August ~~7, 2009)~~6, 2010) on October ~~2, 2009.~~1, 2010. The IHG Board has proposed a final dividend of ~~18.7~~22.0 pence per share (equivalent to ~~29.2~~35.2 cents per ADS at the closing exchange rate on February ~~12, 2010)~~11, 2011), payable on June ~~4, 2010,~~3, 2011, if approved by shareholders at the Annual General Meeting to be held on May ~~28, 2010,~~27, 2011, bringing the total IHG dividend for the year ended December 31, ~~2009~~2010 to ~~26.0~~30.0 pence per share (equivalent to ~~41.4~~48.0 cents per ADS).

The table below sets forth the amounts of interim, final and total dividends on each ordinary share in respect of each fiscal year indicated. Comparative dividends per share have been restated using the aggregate of the weighted average number of shares of InterContinental Hotels Group ~~PLC (as IHL then was) and Six Continents PLC (as Six Continents then was), adjusted to equivalent shares of InterContinental Hotels Group~~ PLC. For the purposes of showing the dollar amount per ADS in respect of the interim and final dividends for each of ~~2005,~~ 2006 and 2007, such amount is translated into US dollars per ADS at the Noon Buying Rate on the UK payment date. In respect of the interim and final dividends for each of 2008, 2009 and ~~2009~~2010 such amounts are translated from US dollars into GBP at the prevailing exchange rate immediately prior to their announcement.

Ordinary dividend


	Pence per ordinary share						$ per ADS						Pence per ordinary share						$ per ADS
	Interim		Final		Total		Interim		Final		Total		Interim		Final		Total		Interim		Final		Total

Year ended December 31,
2005		4.60		10.70		15.30		0.081		0.187		0.268
2006		5.10		13.30		18.40		0.096		0.259		0.355		5.10		13.30		18.40		0.096		0.259		0.355
2007		5.70		14.90		20.60		0.115		0.292		0.407		5.70		14.90		20.60		0.115		0.292		0.407
2008		6.40		20.20		26.60		0.122		0.292		0.414		6.40		20.20		26.60		0.122		0.292		0.414
2009		7.30		18.70		26.00		0.122		0.292		0.414		7.30		18.70		26.00		0.122		0.292		0.414
2010														8.00		22.00		30.00		0.128		0.352		0.480

Special dividend


	Pence per
	ordinary share		$ per ADS

June 2006		118.00		2.17
June 2007		200.00		4.00

~~Return of capital~~

Pence per

ordinary share $ per ADS

June 2005 165.00 2.86

109

RISK FACTORS

This section describes ~~some of~~ the principal risks that could materially affect the Group’s business. The factors below should be considered in connection with any financial and forward-looking information in thisForm 20-F and the cautionary note regarding forward-looking statements contained on pages 5 and 6.

The wider economic climate currently creates trading uncertainty for the hotel industry and the Group. In particular, over the relatively short-term, the main risks are falling consumer demand, restrictions on the availability of finance for hotel owners, and a fall in the pace of new room openings. The Group refinanced its debt in May 2008 and issued a £250 million~~seven-year~~ bond in December 2009 which was used to replace most of the $500 million bank facility that expires in November 2010. At the end of 2009 the Group was trading significantly within its banking covenants and debt facility.

~~The~~ risks below are not the only ones that the Group faces. Some risks are not yet known to ~~IHG~~the Group and some that ~~IHG~~the Group does not currently believe to be material could later turn out to be material.

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

Any event that materially damages the reputation of one or more of the Group’s brandsand/or failure to sustain the appeal of the Group’s brands to its customers could have an adverse impact on the value of that brand and subsequent revenues from that brand or business.

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

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

Given the importance of brand recognition to the Group’s business, the Group has invested considerable ~~effort~~resources in protecting its intellectual property, including registration of trademarks and domain names. However, the controls and laws are variable and subject to change. Any widespread infringement, misappropriation or weakening of the control environment could materially harm the value of the Group’s brands and its ability to develop the business.

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

The Group’s growth strategy depends on its success in identifying, securing and retaining franchise and management agreements. This is an inherent risk for the hotel industry and franchise business model. Competition with other hotel companies may generally reduce the number of suitable franchise, management and investment opportunities offered to the Group and increase the bargaining ~~power~~position of property owners seeking to become a franchisee, or engage a manager. The terms of new franchise or management agreements may not be as favorable as current arrangements and the Group may not be able to renew existing arrangements on ~~the same terms.~~similarly favorable terms or at all.

There can also be no assurance that the Group will be able to identify, retain or add franchisees to the Group system or to secure management contracts. For example, the availability of suitable sites, planning and other local regulations or the availability and affordability of finance may all restrict the supply of suitable hotel development opportunities under franchise or management agreements. In connection with entering into franchise or management agreements, the Group may be required to make investments in, or guarantee the obligations of, third parties or guarantee minimum income to third parties. There are also risks that significant franchisees or groups of franchisees may have interests that conflict, or are not aligned, with those of the Group including, for example, the unwillingness of franchisees to support brand improvement initiatives.

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

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

The Group is exposed to the inherent risks of global and regional adverse political, economic and financial market developments, including recession, inflation, availability of affordable credit and currency fluctuations that could lower revenues and reduce income. A recession reduces leisure and business travel to and from affected countries and adversely affects room ratesand/or occupancy levels and other income-generating activities. This may result in deterioration of results of operations and potentially ~~reducing~~reduce the value of properties in affected economies. The owners or potential owners of hotels franchised or managed by ~~one group~~the Group face similar risks which could adversely impact ~~IHG’s~~the Group’s ability to retain and secure franchise or management agreements. More specifically, the Group is highly exposed to the US market and, accordingly, is particularly susceptible to adverse changes in the US economy.

Further political or economic factors or regulatory action could effectively prevent the Group from receiving profits from, or selling its investments in, certain countries, or otherwise adversely affect operations. For example, changes to tax rates or legislation in the jurisdictions in which the Group operates could decrease the proportion of profits the Group is entitled to retain, or the Group’s interpretation of various tax laws and regulations may prove to be incorrect, resulting in higher than expected tax charges.

The Group requires ~~organizational~~the right people, skills and capability to manage ~~changes in key personnel~~growth and ~~senior management~~change

In order to ~~develop, support and market its products,~~remain competitive, the Group must ~~hire~~employ the right people. This includes hiring and ~~retain~~retaining highly skilled employees with particular ~~expertise.~~expertise or leadership capability. The implementation of the Group’s strategic business plans could be undermined by failure to build resilient corporate culture, recruit or retain key personnel, ~~the~~ unexpected loss of key senior employees, failures in the Group’s succession planning and incentive plans, or a failure to invest in the development of key skills.

Some of the markets in which the Group operates are experiencing economic growth and the Group must compete against other companies inside and outside the hospitality industry for suitably qualified or experienced employees. Failure to attract and retain these employees may threaten the success of the Group’s operations in these markets. Additionally, unless skills are supported by a sufficient infrastructure to enable knowledge and skills to be passed on, the Group risks losing accumulated knowledge if key employees leave the Group.

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

The room rates and occupancy levels ~~at IHG hotels~~of the Group could be adversely impacted by events that reduce domestic or international travel, such as actual or threatened acts of terrorism or war, epidemics, travel-related accidents, travel-related industrial action, increased transportation and fuel costs and natural disasters, resulting in reduced worldwide travel or other local factors impacting individual hotels. A decrease in the demand for hotel rooms as a result of such events may have an adverse impact on the Group’s operations and financial results. In addition, inadequate preparedness, contingency planning or recovery capability in relation to a major incident or crisis may prevent operational continuity and consequently impact the value of the brand or the reputation of the Group.

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

The value of the ~~Group’s~~ brands of the Group is partly derived from the ability to drive reservations through its proprietary HolidexPlus reservations system, a central repository of all hotel room inventories linked electronically to multiple sales channels including ~~IHG owned Internet~~the Group’s own websites, call centers and hotels, third-party ~~Internet~~ intermediaries and travel ~~agents, call centers and hotels.~~agents.

Lack of resilience in operational availability could lead to prolonged service disruption and may result in significant business interruption and subsequent impact on revenues. Lack of investment in these systems may also result in reduced ability to compete. Additionally, failure to maintain an appropriatee-commerce strategy and select the right partners could erode the Group’s market share.

1211

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

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

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

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

The Group may experience a lack of selected development opportunities

While the ~~strategy of the~~ Group is ~~to extend the hotel network through activities that do not involve significant amounts of its own capital,~~operating in 100 countries and territories, if the availability of suitable development sites becomes limited for ~~IHG~~the Group and its prospective hotel owners, for example, due to saturation or changing geo-political circumstances, this could adversely affect ~~its results of operations.~~the Group’s future growth pipeline.

The Group is exposed to risks related to corporate responsibility

The reputation of the Group and the value of its brands are influenced by a wide variety of factors, including the perception of key stakeholders and the communities in which the Group operates. The social and environmental impacts of business are under increasing scrutiny, and the Group is exposed to the risk of damage to its reputation if it fails to demonstrate sufficiently responsible practices, ethical behavior or fails to comply with regulatory requirements in a number of areas such as fraud, bribery and corruption, safety and security, sustainability and responsible tourism, environmental management, equality, diversity and human rights, and support for ~~the~~ local ~~community.~~communities.

The Group is exposed to the risk of litigation

The Group could be at risk of litigation from many parties, including guests, customers, joint venture partners, suppliers, employees, regulatory authorities, franchiseesand/or the owners of hotels managed by it. Claims filed in the ~~United States~~US may include requests for punitive damages as well as compensatory damages. Exposure to litigation or fines imposed by regulatory authorities may also affect the reputation of the Group.

The Group may face difficulties insuring its business

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

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

While the strategy of the Group is to extend the hotel network through activities that do not involve significant amounts of its own capital, the Group does require capital to fund some development opportunities, and to maintain and improve owned hotels. The Group is reliant on having financial strength and access to borrowing facilities to meet ~~its~~these expected capital requirements. The majority of the Group’s borrowing facilities are only available if the financial ~~covenants~~covenant in the facilities are

complied with. ~~If the Group is not~~Non-compliance with covenants could result in ~~compliance with the covenants,~~ the lenders ~~may demand the~~demanding repayment of the funds advanced. If the Group’s financial performance does not meet market expectations, it may not be able to refinance ~~its~~ existing facilities on terms ~~it considers~~considered favorable. ~~The availability of funds for future financing is, in part, dependent on conditions and liquidity in the capital markets.~~

The Group is required to comply with data privacy regulations

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

The Group is exposed to the risks related to information security

The Group is increasingly dependent upon the availability, integrity and confidentiality of information including, but not limited to, guest and ~~the ability to report appropriate~~employee credit card, financial and ~~accurate~~personal data, business performance ~~including~~and financial ~~reporting, to investors and markets.~~reporting.

The reputation and performance of the Group may be adversely affected if it fails to maintain appropriate confidentiality of information and ensure relevant controls are in place to enable the release of information only through the appropriate channels in a timely and accurate manner.

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

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

In particular, the trustees of ~~IHG’s~~the Group’s UK defined benefit plan may demand increases to the contribution rates relating to the funding of this plan, which would oblige relevant employers of the Group to contribute extra amounts. The trustees must consult the plan’s actuary and principal employer before exercising this power. In practice, contribution rates are agreed between the Group and the trustees on actuarial advice, and are set forthree-year terms. The funding implications of the last ~~such completed~~actuarial review ~~was as at March 31, 2006, and~~are disclosed in the ~~formal review as at March 31, 2009 is required~~notes to ~~be completed by June 30, 2010.~~the Group’s Consolidated Financial Statements on page F-30.


ITEM 4.	*INFORMATION ON THE COMPANY*

SUMMARY

Group overview

The Group is an international hotel business which owns a portfolio of established and diverse hotel brands, including InterContinental Hotels & Resorts (“InterContinental”), Crowne Plaza Hotels & Resorts (“Crowne Plaza”), Holiday Inn Hotels & Resorts (including Holiday Inn Club Vacations) (“Holiday Inn”), Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo. ~~As at~~At December 31, ~~2009,~~2010, the Group had ~~4,438~~4,437 franchised, managed, owned and leased hotels and ~~646,679~~647,161 guest rooms in ~~over~~ 100 countries and territories around the world. The Group also manages the hotel loyalty program, Priority Club Rewards.

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

1413

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

OnAt March ~~19, 2010,~~25, 2011, InterContinental Hotels Group PLC had a market capitalization of approximately ~~£2.9~~£3.7 billion, and was included in the list of FTSE 100 companies, a list of the 100 largest companies by market capitalization on the London Stock Exchange.

~~Following a capital restructuring in June 2005,~~ InterContinental Hotels Group PLC ~~became~~is the holding company for the Group. Six Continents Limited (formerly Six Continents PLC), which was formed in 1967, is the principal subsidiary company. The Company’s corporate headquarters are in the United Kingdom, and the registered address is:

InterContinental Hotels Group PLC

Broadwater Park

Denham

Buckinghamshire UB9 5HR

Tel: +44 (0) 1895 512000

Internet address: www.ihgplc.com

InterContinental Hotels Group PLC was incorporated in Great Britain on May 21, 2004 and registered in, and operates under, the laws of England and Wales. Operations undertaken in countries other than England and Wales are subject to the laws of those countries in which they reside.

Group history and recent developments

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

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

The Group disposed of its interests in the soft drinks business by way of an initial public offering (“IPO”) of Britvic, a manufacturer and distributor of soft drinks in the United Kingdom, in December 2005.

Acquisitions and dispositions

From Separation to December 31, ~~2009, 183~~2010, 185 hotels with a net book value of ~~$5.2~~$5.3 billion have been sold, generating aggregate proceeds of ~~$5.5~~$5.6 billion. Of these ~~183~~185 hotels, ~~162~~166 hotels have remained in the ~~IHG~~Group’s global system (the number of hotels and rooms franchised, managed, owned and leased by the Group) through either franchise or management agreements. At December 31, ~~2009~~2010, the Group owned 1715 hotels.

The following provides details relating to the hotels disposed and retained pursuant to the asset disposal program.


Asset disposal program detail	Number of hotels		Proceeds		Net book value
	($ billion)

Disposed since April 2003		185		5.6		5.3
Remaining owned and leased hotels as of December 31, 2010		15		—		1.5

During 2010, the Group disposed of the Holiday Inn Lexington for $5 million and the InterContinental Buckhead, Atlanta for $105 million. During 2009, the Group disposed of the InterContinental Sao Paulo for $22 million. During 2008, the Group disposed of the Holiday Inn Jamaica for $30 million. During 2007, the Group disposed of (i) the Crowne Plaza Santiago for $21 million; (ii) its 74.11% share of the InterContinental Montreal for $34 million; and (iii) the Holiday Inn Disney Paris for $27 million.

~~Subsequent to the year end, the Holiday Inn Lexington was sold for $5.5 million on March 25, 2010.~~

The Group also divested a number of equity interests for total proceeds of $17 million, $15 million and $61 million in 2010, 2009 and ~~$114 million in 2009,~~ 2008, ~~and 2007~~ respectively. The most significant interests sold were a 31.25% interest in the

Crowne Plaza Christchurch and a 17% interest in the Crowne Plaza Amsterdam in ~~2008 and, in 2007~~2008. In 2010, a ~~15% interest in the InterContinental Chicago and a 33.3% interest in the Crowne Plaza London The City.~~loan repayment of $11 million was also received.

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

Capital expenditure in ~~2009~~2010 totaled $95 million compared with $148 million ~~including~~in 2009 and $108 million in 2008. 2009 included the $65 million ~~cost~~purchase of the Hotel Indigo San ~~Diego, compared with $108 million in 2008 and $186 million in 2007.~~Diego.

At December 31, ~~2009~~2010 capital committed, being contracts placed for expenditure on property, plant and equipment and intangible assets not provided for in the Consolidated Financial Statements, totaled $9$14 million.

On October 24, 2007 the Group announced a worldwide relaunch of its Holiday Inn brand ~~family.~~family which is now substantially complete. In support of this relaunch, ~~IHG will make~~the Group has made a non-recurring revenue investment of ~~$60~~$63 million which ~~will be~~has been charged to the Consolidated income statement as an exceptional ~~item.~~item since the 2007 relaunch. During ~~the year,~~2010, $9 million (2009 $19 million, ~~(2008~~2008 $35 million) was charged.

Asset disposal program detail
Number of hotels Proceeds Net book value
($ billion)

Disposed since April 2003 183 5.5 5.2
Remaining owned and leased hotels as of December 31, 2009 17 — 1.7

Return of funds

Since March 2004, the Group has ~~announced the return of £3.6~~returned over £3.5 billion of funds to shareholders by way of special dividends, share repurchase programs and capital ~~returns. As of March 19, 2010 IHG had returned over £3.5 billion to shareholders~~returns (see table below).

A ~~third £250~~£150 million share repurchase program was ~~completed in 2007 and the £150 million share repurchase program~~ announced on February 20, ~~2007 was commenced. At December 31, 2009 £30 million of this share repurchase program was outstanding.~~2007. During ~~2009~~2010 no shares were repurchased. By March ~~19, 2010,~~25, 2011, a total of 14.4 million shares had been repurchased under the £150 million repurchase program at an average price per share of 831 pence per share (approximately £120 million). Purchases are made under the existing authority from shareholders which will be renewed at the Company’s Annual General Meeting. Any shares repurchased under these programs will be canceled.

Since November 2008, the Company has deferred the remaining £30 million of its £150 million share repurchase program in order to preserve cash and maintain the strength of the Group’s financial position.

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

Return of funds program

Timing

Total return

Returned to date⁽ⁱ⁾

Still to be returned

£501 million special dividend

Paid in December 2004

£501m

Nil

First £250 million share buyback

Completed in 2004

£250m

Nil

£996 million capital return

Paid in July 2005

£996m

Nil

Second £250 million share buyback

Completed in 2006

£250m

Nil

£497 million special dividend

Paid in June 2006

£497m

Nil

Third £250 million share buyback

Completed in 2007

£250m

Nil

£709 million special dividend

Paid in June 2007

£709m

Nil

£150 million share buyback

Deferred

£150m

£120m

£30m

Total

£3,603m

£3,573

£30m


(i)		As of March ~~19, 2010.~~25, 2011.

Hotels

The Group is an international hotel business which owns a portfolio of established and diverse hotel brands, including InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts (including Holiday Inn Club Vacations), Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo. ~~As at~~At December 31, ~~2009,~~2010, the Group had ~~4,438~~4,437 franchised, managed, owned and leased hotels and ~~646,679~~647,161 guest rooms in ~~over~~ 100 countries and territories around the world. The Group also manages the hotel loyalty program, Priority Club Rewards.

~~Soft Drinks~~

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

1715

SEGMENTAL INFORMATION

Geographic segmentation

The following table show the Group’s revenue and operating profit before exceptional operating items and the percentage by geographical area, for the years ended December 31, 2010, 2009 ~~2008~~ and ~~2007.~~2008.


	Year ended December 31,									Year ended December 31,
	2009			2008			2007			2010			2009			2008
	($ million)									($ million)

Revenue⁽¹⁾
Americas		772			963			948			807			772			963
EMEA		397			518			492			414			397			518
Asia Pacific		245			290			260			303			245			290
Central⁽²⁾		124			126			117			104			124			126

Continuing operations		1,538			1,897			1,817
Total											1,628			1,538			1,897

Operating profit before exceptional operating items⁽¹⁾⁽³⁾
Americas		—			—			16			369			288			465
EMEA		—			—			17			125			127			171

Discontinued operations⁽³⁾		—			—			33
Asia Pacific											89			52			68
Central											(139	)		(104	)		(155	)

Total		1,538			1,897			1,850			444			363			549

Operating profit before exceptional operating items⁽¹⁾⁽⁴⁾
Americas		288			465			454
EMEA		127			171			134
Asia Pacific		52			68			63
Central⁽²⁾		(104	)		(155	)		(163	)

Continuing operations		363			549			488

Americas		—			—			2
EMEA		—			—			1

Discontinued operations⁽³⁾		—			—			3

Total		363			549			491

~~Footnotes on page 19.~~


	Year ended December 31,									Year ended December 31,
	2009			2008			2007			2010			2009			2008
	(%)									(%)

Revenue
Americas		50.2			50.8			51.2			49.6			50.2			50.8
EMEA		25.8			27.3			26.6			25.4			25.8			27.3
Asia Pacific		15.9			15.3			14.1			18.6			15.9			15.3
Central		8.1			6.6			6.3			6.4			8.1			6.6

Continuing operations		100.0			100.0			98.2

Americas		—			—			0.9
EMEA		—			—			0.9

Discontinued operations		—			—			1.8

Total		100.0			100.0			100.0			100.0			100.0			100.0

Operating profit before exceptional operating items
Americas		79.3			84.7			92.5			83.1			79.3			84.7
EMEA		35.0			31.1			27.3			28.2			35.0			31.1
Asia Pacific		14.3			12.4			12.8			20.0			14.3			12.4
Central		(28.6	)		(28.2	)		(33.2	)		(31.3	)		(28.6	)		(28.2	)

Continuing operations		100.0			100.0			99.4

Americas		—			—			0.4
EMEA		—			—			0.2

Discontinued operations		—			—			0.6

Total		100.0			100.0			100.0			100.0			100.0			100.0


(1)		The results of operations have been translated into US dollars at the average rates of exchange for the ~~period.~~year. In the case of sterling, the translation rate is $1 = ~~£0.64 (2008~~£0.65 (2009 $1 = ~~£0.55, 2007~~£0.64, 2008 $1 = ~~£0.50)~~£0.55). In the case of the euro, the translation rate is $1 = ~~€0.72 (2008~~€0.76 (2009 $1 = ~~€0.68, 2007~~€0.72, 2008 $1 = ~~€0.73)~~€0.68).

(2)		Central revenue primarily relates to Holidex ~~(IHG’s proprietary reservation system) fee income. Central operating profit includes central revenue less costs related to global functions.~~

~~(3)~~		~~Discontinued operations were all owned and leased hotels.~~

~~(4)~~		Operating profit before exceptional operating items does not include exceptional operating items for all periods presented. Exceptional operating items (charge unless otherwise noted) by region are the Americas $301 million (2008 $99 million, 2007 credit of $17 million); EMEA $22 million (2008 $21 million, 2007 credit of $21 million); Asia Pacific $7 million (2008 $2 million, 2007 credit of $17 million); and Central $43 million (2008 $10 million, 2007 credit of $5 million).

~~HOTELS~~

~~Business overview — market and competitive environment~~

The Group is an international hotel business which owns a portfolio of established and diverse hotel brands, including InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express, Staybridge Suites Candlewood Suites and Hotel Indigo. As at December 31, 2009, the Group had 4,438 franchised, managed, owned and leased hotels and 646,679 guest rooms in over 100 countries and territories around the world. The Group also manages the hotel loyalty program, Priority Club Rewards.

~~Global economic events and industry cycle~~

The economic conditions of the last year have had a significant impact on IHG and the wider hotel industry. IHG continues to monitor key trends and business fundamentals, such as revenue per available room (“RevPAR”) to ensure its strategy remains well suited to the developing environment and its capabilities and IHG believes its business is resilient. Accordingly, its strategy remains unchanged. However, IHG sees short-term risks in the pace of future openings and the recovery in consumer demands, particularly business travel.

The downturn continued to be severe in 2009, with a sharp decline in global industry RevPAR and bookings. The hotel industry has always been cyclical and there are signs that business and consumer confidence is returning and RevPAR is beginning a slow recovery. Historically, as an industry, in previous economic cycles, IHG has experienced periods of five to eight years of RevPAR growth followed by up to two years of declines in RevPAR. Demand has rarely fallen for sustained periods and it is the interplay between hotel supply and demand in the industry that drives longer-term fluctuations in RevPAR. The difference in the recovery this time is likely to be slower increases in supply due to the ongoing finance environment remaining at more ‘normal’ levels compared with 2005 to 2008, and muted demand recovery as discretionary income growth and corporate profit growth are held back by, amongst other issues, tax increases and reduced access to credit. The(the Group’s fee-based profit is partly protected from changes in hotel supply or demand due to its model of third-party ownership of hotels under the Group’s franchise and management contracts. IHG profit varies more with hotel revenue (demand) than it does with hotel profit performance. Accordingly, IHG’s share price saw some recovery and stabilization since the lows of Spring 2009, increasing by 59% in the 12 months to December 31, 2009 and those of its listed company competitors increased by an average 56% over the same period. IHG believes it is well placed over the coming year compared with competitors who own hotels, rather than simply operate them, as IHG does.

~~Market size~~

The global hotel market has an estimated room capacity of 18 million rooms. This has grown at approximately 2% per annum over the last five years. Competitors in the market include other hotel companies, both large and small, and independently owned hotels.

The market remains fragmented, with an estimated 8 million branded hotel rooms (approximately 45% of the total market). IHG has an estimated 8% share of the branded market (approximately 3% of the total market). The top six major companies, including IHG, together control approximately 41% of the branded rooms, only 18% of total hotel rooms.

Geographically, the market is more concentrated with the top 20 countries accounting for more than 80% of global hotel rooms. Within this, the United States is dominant (approximately 25% of global hotel rooms) with China, Spain and Italy being the next largest markets. The Group’s brands have more leadership positions (top three by room numbers) in the six largest geographic markets than any other major hotel company.

~~Drivers of growth~~

~~US market data historically indicates a steady increase in hotel industry revenues, broadly in line with Gross Domestic Product, with growth of approximately 1.5% per annum in real terms since 1967.~~

~~Globally, IHG believes demand is driven by a number of underlying trends:~~


	•	change in demographics — as the population ages and becomes wealthier, increased leisure time and income encourages more travel and hotel visits; younger generations are increasingly seeking work/life balance, with positive implications for increased leisure travel;

	•	~~increase in travel volumes as airline capacity grows and affordability improves, accentuated in some regions by the strength of the market positions of low-cost airlines;~~

	•	~~globalization of trade and tourism;~~

	•	~~increase in affluence and freedom to travel within emerging markets, such as China and Brazil; and~~

	•	~~increase in the preference for branded hotels amongst consumers.~~

~~Branded and unbranded markets~~


~~2009 branded hotel rooms by region as a percentage of the total market~~

~~United States~~	69	%
~~EMEA~~	34	%
~~Asia Pacific~~	29	%

~~Source: IHG Analysis, Smith Travel Research (STR).~~

Within the global market, just under half of hotel rooms are branded; however, there has been an increasing trend towards branded rooms. Over the last three years, the branded market (as represented by the nine major global branded hotel companies) has grown at a 3.8% compound annual growth rate (“CAGR”), twice as quickly as the overall market, implying an increased preference towards branded hotels. Branded companies are therefore gaining market share at the expense of unbranded companies. IHG is well positioned to benefit from this trend. Hotel owners are increasingly recognizing the benefits of franchising or managing with IHG which can offer a portfolio of brands to suit the different real estate opportunities an owner may have, together with effective revenue delivery through global reservations channels. Furthermore, hotel ownership is increasingly being separated from hotel operations, encouraging hotel owners to use third parties such as IHG Hotels to manage their hotels.

~~Other factors~~

Potential negative trends impacting hotel industry growth include the possibility of increased terrorism and increased security measures, environmental considerations and economic factors such as the longevity of the downturn.

~~IHG’s business model~~

IHG’s future growth will be achieved predominantly through franchising and managing rather than owning hotels. Approximately 641,000 rooms operating under Group brands were franchised or managed and 5,800 rooms were owned and leased as of December 31, 2009.

The franchised and managed fee-based model is attractive because it enables the Group to achieve its goals with limited capital investment at an accelerated pace. A further advantage is the reduced volatility of the fee-based income stream, compared with ownership of assets.

A key characteristic of the franchised and managed business is that it generates more cash than is required for investment in the business, with a high return on capital employed. During the year ended December 31, 2009, 87% of continuing earnings before regional and central overheads, exceptional items, interest and tax was derived from franchised and managed operations.

~~Operations~~

The Group currently operates a fee-based, asset-light business model having moved away from predominantly owning hotel properties and now focuses on its hotel franchise and management business. Through three distinct business models, which offer different growth, return, risk and reward opportunities, the Group aims to achieve growth through its contractual arrangements with third-party hotel owners who provide capital investment in hotel assets in exchange for, among other things, the Group’s expertise and brand value. The models are summarized as follows:

~~Franchised:~~ where Group companies neither own nor manage a hotel, but license the use of a Group brand and provide access to reservations systems, loyalty schemes and know-how. The Group derives revenues from a brand royalty or licensing fee, based on a percentage of room revenue. As at December 31, 2009, 75% of the Group’s rooms were franchised. The franchising business model reduces the Group’s dependence on the profitability of its franchised hotels and allows for a more predictable revenue stream. The stable income stream that results, combined with organic growth in the number of hotels operating under the Group’s brands, allows the Group to steadily increase its scale, to drive market share, and importantly, to drive efficiency throughout the business.

~~Managed:~~ where in addition to licensing the use of a Group brand, a Group company manages a hotel for third party owners. The Group derives revenues from base and incentive management fees and provides the system infrastructure necessary for the hotel to operate. Base management fees are generally a percentage of hotel revenue and incentive management fees are generally a percentage of a hotel’s gross operating profit. The terms of these agreements vary, but are often long-term (on average, 10 years or more). In certain limited circumstances the Group may provide performance guarantees to third party owners to secure management contracts. The performance guarantee may be in respect of a hotel’s gross operating profit or an “owner’s priority return”. The Group may be required to defer its incentive management fees or fund shortfalls under such guarantee arrangements.

The Group’s responsibilities under the management agreement typically include hiring, training and supervising the managers and employees that operate the hotels under the relevant brand standards. As at December 31, 2009, approximately 24% of the Group’s rooms were operated under management contracts.

~~Owned and leased:~~ where a Group company both operates and either owns or leases a hotel and, therefore, takes all the benefits and risks associated with ownership of the asset. Since 2003, the Group has sold the majority of its owned and leased portfolio. The Group now owns or leases 17 hotels representing around 1% of the Group’s rooms. The owned and leased hotels had a book value as at December 31, 2009 of $1.7 billion. The majority of this value resides in the Group’s four flagship InterContinental hotels in London, Paris, New York and Hong Kong.

In addition to the three models described, the Group may, in certain circumstances, make an equity investment in a strategic hotel development project. Such an investment is generally a minority investment and the Group will participate in a share of the benefits and risks of ownership and will enter into the associated hotel management agreement.

~~The following table shows the number of hotels and rooms franchised, managed, owned and leased by the Group as at December 31, 2009, 2008 and 2007.~~

Management

contracts and joint

Franchised ventures Owned and leased 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

2009 3,799 483,541 622 157,287 17 5,851 4,438 646,679
2008 3,585 465,967 585 148,240 16 5,644 4,186 619,851
2007 3,392 443,815 539 134,883 18 6,396 3,949 585,094

The Group sets quality and service standards for all of its hotel brands and operates a customer satisfaction and hotel quality evaluation system to ensure those standards are met or exceeded in all hotels operating under the Group’s brands. The quality evaluation system includes an assessment of both physical property and customer service standards.

~~Strategy~~

IHG is focused on its core purpose of creating ‘Great Hotels Guests Love.’ IHG seeks to deliver, among other key performance indicators (“KPIs”), enduring top quartile shareholder returns, when measured against a broad global hotel peer group.

~~For the three-year period of 2007 to 2009, IHG was fourth among its peers on total shareholder returns.~~

~~IHG has also developed and will measure itself against a collection of specific KPIs aimed at delivering the Group’s core purpose, cascaded to the hotel level.~~

~~Successful performance against various combinations of these metrics drives a significant percentage of senior management discretionary remuneration.~~

IHG’s strategy has seen significant development through 2009 as the Group moved to make its core purpose a reality, despite challenging economic circumstances. In 2009, IHG took a hard look at its operations and capabilities to focus on what really matters most to deliver ‘Great Hotels Guests Love’. IHG has backed this up with a major effort to align its people and measure the most important drivers, resulting in a clear, target-based program within its hotels to motivate teams and guide behaviours.

~~IHG’s strategy encompasses two key aspects:~~


	•	~~where IHG chooses to compete; and~~

	•	~~how the Group will win when it competes.~~

The Group’s underlying ‘Where’ strategy is that IHG will grow a portfolio of differentiated hospitality brands in select strategic countries and global key cities to maximize its scale advantage. The ‘How’ aspect of the Group’s strategy flows from the Group’s core purpose and its research at the hotel level as to what really makes a difference for guests.

~~In support of the Group’s overall strategy there are now five key priorities — one ‘Where we compete’ and four ‘How we win’.~~

To help the Group’s hotels and corporate staff measure their efforts in achieving ‘Great Hotels Guests Love’, IHG provides clear metrics aligned with the four ‘How we win’ priorities against which progress is gauged.

~~Where we compete~~


~~Strategic priorities~~		~~2009 status and developments~~
To accelerate profitable growth of our core business in the largest markets where scale really counts and also in key global gateway cities. Seek opportunities to leverage our scale in new business areas.		~~• 90% of deals signed in scale markets and key gateway cities;~~ ~~• 10 signings of Hotel Indigo and Staybridge Suites outside of North America; and~~ ~~• 439 hotels opened globally.~~
~~How we win~~

~~Strategic priorities~~		~~2009 status and developments~~
~~Financial returns~~
~~To generate higher returns for owners and IHG through revenue delivery and improved operating efficiency.~~		• Increased by four percentage points the proportion of revenue delivery through IHG global reservations channels and Priority Club Rewards (“PCR”) direct sales. These channels accounted for an average 68% of global hotel rooms revenue in 2009; ~~• Significant procurement savings made;~~ ~~• Increased use of offshore transaction processing; and~~ ~~• Technology infrastructure developed to support owner management and loyalty marketing.~~
~~Our people~~
~~To create a more efficient organisation with strong core capabilities.~~		~~• Continued cascading of ‘Great Hotels Guests Love’ in hotels and corporate offices;~~ ~~• Meeting ongoing resourcing requirements to match hotel growth in scale markets;~~ ~~• Managing employee engagement; and~~ ~~• Continued focus on attracting and retaining talent.~~
~~Guest experience~~
~~To operate a portfolio of brands attractive to both owners and guests that have clear market positions and differentiation in the eyes of the guest.~~		~~• 1,697 relaunched Holiday Inn and Holiday Inn Express hotels open around the world; and~~ ~~• Industry-leading PCR loyalty program with 48 million members, contributing $5.6 billion of global system room revenue.~~
~~Responsible business~~
~~To take an active stance on environment and community issues in order to drive increased value for IHG, owners and guests.~~		~~• Green Engage energy management system developed (patent pending); rolled out to over 900 hotels by December 31, 2009;~~ ~~• Extensive consumer research undertaken to quantify ‘green’ opportunity with consumers; and~~ ~~• Corporate Responsibility approach defined and agreed.~~

~~Segmental results by activity~~

The following table shows the Group’s continuing revenue and operating profit before exceptional operating items by activity and the percentage contribution of each activity, for the years ended December 31, 2009, 2008 and 2007.

Year ended December 31,
2009 2008 2007
($ million)

Revenue⁽¹⁾

Americas
Franchised 437 495 489
Managed 110 168 156
Owned and leased 225 300 303

772 963 948

EMEA
Franchised 83 110 81
Managed 119 168 167
Owned and leased 195 240 244

397 518 492

Asia Pacific
Franchised 11 18 16
Managed 105 113 99
Owned and leased 129 159 145

245 290 260

Central⁽²⁾
124 126 117

Total 1,538 1,897 1,817

Operating profit before exceptional operating items⁽¹⁾⁽³⁾

Americas
Franchised 364 426 425
Managed (40 ) 51 41
Owned and leased 11 55 54
Regional overheads (47 ) (67 ) (66 )

288 465 454

EMEA
Franchised 60 75 58
Managed 65 95 87
Owned and leased 33 45 33
Regional overheads (31 ) (44 ) (44 )

127 171 134

Asia Pacific
Franchised 5 8 6
Managed 44 55 46
Owned and leased 30 43 36
Regional overheads (27 ) (38 ) (25 )

52 68 63

Central⁽²⁾
(104 ) (155 ) (163 )

Total 363 549 488

~~Footnotes on page 26.~~

Year ended December 31,
2009 2008 2007
(%)

Revenue
Americas
Franchised 28.4 26.1 26.9
Managed 7.2 8.9 8.6
Owned and leased 14.6 15.8 16.7

50.2 50.8 52.2

EMEA
Franchised 5.4 5.8 4.5
Managed 7.7 8.9 9.2
Owned and leased 12.7 12.6 13.4

25.8 27.3 27.1

Asia Pacific
Franchised 0.7 0.9 0.9
Managed 6.8 6.0 5.4
Owned and leased 8.4 8.4 8.0

15.9 15.3 14.3

Central 8.1 6.6 6.4

Total 100.0 100.0 100.0

Operating profit before exceptional operating items
Americas
Franchised 100.2 77.6 87.1
Managed (11.0 ) 9.3 8.4
Owned and leased 3.0 10.0 11.0
Regional overheads (12.9 ) (12.2 ) (13.5 )

79.3 84.7 93.0

EMEA
Franchised 16.5 13.6 11.9
Managed 17.9 17.3 17.8
Owned and leased 9.1 8.2 6.8
Regional overheads (8.5 ) (8.0 ) (9.0 )

35.0 31.1 27.5

Asia Pacific
Franchised 1.4 1.5 1.2
Managed 12.1 10.0 9.4
Owned and leased 8.2 7.8 7.4
Regional overheads (7.4 ) (6.9 ) (5.1 )

14.3 12.4 12.9

Central (28.6 ) (28.2 ) (33.4 )

Total 100.0 100.0 100.0


~~(1)~~		The results of operations have been translated into US dollars at the average rates of exchange for the period. In the case of sterling, the translation rate is $1 = £0.64 (2008 $1 = £0.55, 2007 $1 = £0.50). In the case of the euro, the translation rate is $1 = €0.72 (2008 $1 = €0.68, 2007 $1 = €0.73).

~~(2)~~		~~Central revenue primarily relates to Holidex (IHG’s~~ proprietary reservation system) fee income. Central operating profit includes central revenue less costs related to global functions.

(3)		Operating profit before exceptional operating items does not include exceptional operating items for all periods presented. Exceptional operating items (charge unless otherwise noted) by region ~~are~~were the Americas $8 million (2009 $301 million, ~~(2008~~2008 $99 ~~million, 2007 credit of $17~~ million); EMEA credit of $3 million (2009 $22 million, ~~(2008 $21 million, 2007 credit of~~2008 $21 million); Asia Pacific $2 million (2009 $7 million, ~~(2008~~2008 $2 ~~million, 2007 credit of $17~~ million); and Central $nil (2009 $43 million, ~~(2008~~2008 $10 ~~million, 2007 credit of $5~~ million).

2616

BUSINESS OVERVIEW

The Group is an international hotel business which owns a portfolio of established and diverse hotel brands, including InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts (including Holiday Inn Club Vacations), Holiday Inn Express, Staybridge Suites Candlewood Suites and Hotel Indigo. At December 31, 2010, the Group had 4,437 franchised, managed, owned and leased hotels and 647,161 guest rooms in 100 countries and territories around the world. The Group also manages the hotel loyalty program, Priority Club Rewards.

Industry and market trends

2010 was a turnaround year for the global economy, with clear signs that the global recession was easing during the second half and business and consumer confidence returning. This assisted the hotel industry’s recovery from a challenging economic period. The lodging industry is cyclical, tending to reflect the state of the general economic cycle. Historically, in previous cycles the industry has experienced periods of five to eight years of growth in revenue per available room (RevPAR) followed by up to two years of decline. Demand has rarely fallen for sustained periods and it is the interplay between hotel supply and demand that drives longer-term fluctuations in RevPAR.

The expected recovery in demand took place in 2010. The more modest increases in industry pricing, or average daily rate, which along with occupancy make up RevPAR, was caused by the increase in supply of hotel rooms globally, a legacy of the growth in hotel construction which began prior to the downturn.

The sustained success of the economic recovery is likely to be determined by both the challenging choices policy makers are faced with regarding austerity measures and the issues surrounding sovereign debt, along with the response of corporations and the financial sector. Corporations will need to play an important role in the recovery through sustained investment and job creation, and the Group, with an ambitious program to open new hotels, anticipates the need to recruit approximately 160,000 people over the next few years.

The Group monitors key industry drivers and business fundamentals, such as RevPAR, to ensure its strategy remains well suited to the environment and the Group’s capabilities.

Different regions, countries and types of demand vary in the speed they recover and it is our understanding of local demand drivers, combined with a global outlook, that help us anticipate the needs of different types of guest demand and so continue to develop the business to meet these needs. As an example, the Group’s recent launch of new tools to support meetings and events in our hotels was well-timed with the earlier than anticipated recovery in this type of demand. Many commentators thought meetings and events business would remain subdued into 2011.

There are a number of external drivers from which IHG expects to benefit:


	•	global economic recovery — the global economy grew by 3.8% during 2010 (Oxford Economics), and US historic market data show that following recessions, hotel industry revenues broadly increase ahead of Gross Domestic Product (GDP) (Smith Travel Research). We expect the current recovery to be similar, and are investing in the business to capture demand as it continues to strengthen;

	•	increase in affluence and freedom to travel in emerging markets — countries such as China are increasingly significant as domestic and international travel markets. They already have a sizeable hotel industry, and the importance of hotel brands in such emerging markets is growing;

	•	rising global travel volumes — airline capacity continues to grow, with affordability of travel improving globally. Business travel is expected to recover in most markets in 2011 and leisure travellers — who have been resilient in the downturn — will continue to travel both internationally and within domestic markets;

	•	change in demographics — as the population ages and becomes wealthier in developed markets, increased leisure time and incomes encourage more travel and hotel stays; conversely, younger generations are increasingly seeking a better work/life balance, with higher expectations from those providing their accommodation. This has positive implications for increased leisure travel; and

	•	demand for branded hotels is growing faster than that for independent hotels.

Our strategy

With a portfolio of well-established brands, in the best developed and emerging markets, the Group is using its size, scale, people and expertise to realize its Vision of becoming one of the world’s great companies. The Group will be a great company when guests love to stay with us, people love to work for us, owners love our brands and investors love our performance. This strategy is measured by a series of key performance indicators around ‘‘Where we compete’’ and ‘‘How we win’’ (pages 22 and 23).

The Group’s strategy has ensured that it remains the largest hotel company in the world, by number of rooms. By grounding its operations and growth in its core purpose of creating Great Hotels Guests Love, the Company uses elements of its strategy, such as the business model of third-party ownership, to grow faster than its global competitors.

Delivering the elements of the Group’s strategy

Competing with an appropriate business model

The Group’s business model has a clear focus on franchising and managing hotels, rather than owning them outright, enabling the Group to grow at an accelerated pace, with limited capital investment. Furthermore, the Group benefits from the reduced volatility of fee-based income streams, as compared with the ownership of assets.

A key characteristic of the franchised and managed business is that it generates more cash than is required for investment in the business, with a high return on capital employed. At December 31, 2010 87% of operating profit before regional and central overheads, exceptional items, interest and tax is derived from franchised and managed operations.

Where necessary, the Group actively supports its brands by employing its own capital to showcase“best-in-class” operations through flagship assets.

The Group’s business model creates opportunities to build relationships with independent hotel owners and generate revenues by offering access to our global demand delivery systems, where guests can book their hotels through the Group’s booking channels, including branded websites and call centers. The latest example is our strategic relationship with Summit Hotel Properties Inc. (“Summit”), a US hotel investment company focused on branded hotels. On any unbranded hotel bought by Summit, the Group now has first rights to give the hotel a Group’s brand and earn fee revenues through generating demand for that hotel.

The key features of the Group’s business model are represented in the following table and charts.

Marketing and

The Group’s

Brand

distribution

Staff

Ownership

capital

income

Franchised
This is the largest part of our business: 3,783 hotels operate under franchise agreements

The Group’s
brands

The Group

Third party

None

Fee % of
rooms
revenue

Managed
The Group manages 639 hotels worldwide

The Group’s
brands

The Group

The Group
usually
supplies
general
manager as
a minimum

Third party

Low/none

Fee % of
total
revenue
plus % of
profit

Owned and leased
The Group owns 15 hotels worldwide (less than 1% of our portfolio)

The Group’s
brands

The Group

High

All
revenues
and profits

The following table shows the number of hotels and rooms franchised, managed, owned and leased by the Group as at December 31, 2010, 2009 and 2008.


					Managed
					contracts and joint
	Franchised				ventures				Owned and leased				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

2010		3,783		479,320		639		162,711		15		5,130		4,437		647,161
2009		3,799		483,541		622		157,287		17		5,851		4,438		646,679
2008		3,585		465,967		585		148,240		16		5,644		4,186		619,851

The Group’s continuing operating profit* by ownership type for the year ended December 31, 2010:

The Group’s global room count by ownership type at December 31, 2010:


*		Before regional and central overheads, exceptional items, interest and tax

Competing in developed and emerging markets

When considering open hotel rooms and those in development, the Group has leadership positions in 15 of the top 20 markets globally. These markets alone account for over 80% of global lodging spend. These include large developed markets such as the United States (“US”), United Kingdom (“UK”), and Germany, as well as emerging markets like China.

The US is the largest market for branded rooms, with 3.4 million. The segment in the US with the greatest share is midscale, with 1.3 million branded hotels rooms, and the Group’s Holiday Inn brand family is the largest operator in this segment.

The Group is also focused on growing in large markets such as the UK and Germany where it ranks second and third, respectively in terms of number of available rooms. The benefits of a large hotel presence across these high-value self-supporting markets for the Group include the ability to build relationships with the largest possible number of guests.

The Group is the largest hotel company in China, the emerging market with the greatest scale, having 0.5 million branded rooms. The Group, which was the first international chain to open hotels in the country, remains the largest, with close to 50,000 rooms. The rapid pace of openings for the Group and the wider lodging industry shows that China, and other emerging markets are behaving as the Group has seen in developed markets over the past 50 years. The strong demand drivers for hotels suggest these will remain key growth markets.

Outside the largest markets, the Group focuses on achieving presence for its biggest brands in key gateway cities which show the potential for high demand from business and leisure guests, and where its brands can generate revenue premiums.

In the hotel industry, the future supply of hotels and hotel rooms is visible through the pipeline, and the Group’s pipeline reflects the sustainability of its leadership position.

In 2010, the Group’s portfolio opened 35,744 rooms in 29 countries, and signed a further 55,598 into the pipeline, across 38 countries. The Group currently has 204,859 rooms in 1,275 hotels under development in 64 countries.

The Group’s pipeline ensures sustainable development in new and emerging markets that best suit the Company’s strengths and anticipate the future needs of customers. The Group has committed development teams ensuring a sizeable pipeline in developing markets: during 2010 the Group opened 7,253 rooms in Greater China, representing 20% of all new rooms opened by it across the globe during 2010.

The Group’s pipeline is the largest branded hotel pipeline in the world, representing 18% of all hotels under development, including those that are independent or unaffiliated.

Winning with our scale and expertise

The major benefit the Group brings to guests who stay in the Group’s portfolio of hotels, and owners who invest with us, is our system to help guests book and stay with us, and then maintain the relationship with them after they leave. This includes having hotels in key locations, great brands with consumer appeal, efficient reservations systems, global web presence, our loyalty rewards schemes, along with other elements. Together, these form the largest such ‘system’ in the industry and are the engine of our business, delivering, on average, 68% of total rooms revenue in 2010.

With continued focus on the success of this global system, we have developed“best-in-class” marketing and technology to support our hotels and drive incremental revenues.

Our focus on key geographical markets where we operate a large number of hotels, such as the US, UK, China, Middle East and Germany, means we can run hotels and our operating system with greater efficiencies, delivering more to the consumer at a lower cost.

The size of the global hotel market is estimated by the Group to be close to 20 million rooms. Competitors in the market include other branded hotel companies, both large and small, international and domestic, and independently owned hotels.

IHG remains the largest branded hotel company, with our share currently at approximately 10% of the branded rooms (Smith Travel Research), and a presence in 100 countries and territories. Leading research (Smith Travel Research) calculates that there are 6.6 million branded hotel rooms, with the remainder a combination of independent hotels, guesthouses and other types of lodging.

Although currently less than half of all hotel rooms are branded, the benefits of being part of a brand are recognized by many owners and the growth of branded rooms has exceeded the growth of unbranded rooms over the past 10 years. Raising finance is still an issue globally, and branded hotels are perceived as offering greater security through global reservations systems, loyalty schemes, and international networks. Branded hotel companies, such as the Group, are attractive to independent hotel owners and are therefore gaining market share at the expense of the unbranded portion of the industry. The Group is well positioned to benefit from this trend.

Hotel owners are increasingly recognising the benefits of franchising or managing with the Group, which can offer a portfolio of brands to suit the different real estate opportunities an owner may have, together with effective revenue delivery through global reservations channels. Furthermore, hotel ownership is increasingly being separated from hotel operations, encouraging hotel owners to use third parties, such as the Group, to manage their hotels.

Winning with our people and values

Our Vision can only be realized if we have collaborative and engaged employees, delivering the right experience to our guests through shared values and living our brands. We have extensive on-boarding, communication, development and recognition programs, aligned under our employment brand, “Room to be yourself”, providing the right environment for our people to be successful.

Our people dictate our culture, and the Group is aligned around great values which are consistently brought to life through a set of five behaviors, the “Winning Ways”:


	•	Do the right thing;

	•	Show we care;

	•	Aim Higher;

	•	Celebrate difference; and

	•	Work better together.

Business relationships with others

The Group maintains effective relationships across all aspects of its operations. The Group’s operations are not dependent upon any single customer, supplier or hotel owner due to the extent of its brands, market segments and geographical coverage. For example, the Group’s largest third-party hotel owner controls just 3% of the Group’s total room count.

The Group continued to enhance and streamline its procurement processes during 2010, and with the implementation of initiatives to combat waste and enhance relationships with suppliers, the Group is striving to ensure best-practice is employed throughout the Group. With a focus on ensuring high-quality goods and services are sourced at competitive prices, the Group strives to ensure enhanced value for the Group, our hotel owners and shareholders.

IHG is proud of its strong and important relationship with the IAHI, the Owners’ Association for owners of hotels in the Group’s seven brands across the world. IHG meets with the IAHI, in large and small groups, on a regular basis and works together to support and facilitate the continued development of the Group’s brands and systems. During 2010, the combined work of the Group and IAHI implemented several enhancements to the Group’s system.

Examples of such enhancements include:

Holiday Inn relaunch — the near completion of the $1 billion global relaunch of the Holiday Inn brand family;

InnSupply — improving purchasing efficiencies and streamlining the procurement processes across both organizations;

Way of Sales — developing“best-in-class” practices for the sales operations of both organizations, having identified critical roles for generating revenues;

Celebrate Service week — giving recognition and thanks to the many thousands of front-line employees, and emphasizing engagement through the Group’s brands; and

People Tools — enhancing the recruitment, hiring, training and retention practices across both organizations, with specific focus on reflecting the individual qualities of each brand. These tools are supplied to all hotels: managed, franchised and owned and leased.

Many jurisdictions and countries regulate the offering of franchise agreements and recent trends indicate an increase in the number of countries adopting franchise legislation. As a significant percentage of the Group’s revenue is derived from franchise fees, the Group’s continued compliance with franchise legislation is important to the successful deployment of the Group’s strategy.

Measuring our success

We measure our success in terms of shareholder value, as well as through a set of strategic priorities. These form our key performance indicators (KPIs) to ensure a consistent approach to running the business. These KPIs consist of “Where we compete”, including the appropriate business model, key target markets and consumer segments; and “How we win”, including financial returns, our people, the guest experience and responsible business.

Where we compete

How we win


Strategic priorities Financial returns To generate higher returns for owners and the Group through increased revenue share, improved operating efficiency and growing margins. Our people Creating hotels that are well run, with brands brought to life by people who are proud of the work they do. Guest experience To operate a portfolio of brands attractive to both owners and guests that have clear market positions and differentiation in the eyes of the guest. Responsible business To take a proactive stance and seek creative solutions through innovation and collaboration on environment and community issues, and to drive increased value for the Group, owners, guests and the communities where we operate.				Current status and 2010 developments • Further procurement efficiencies made; • enhanced Customer Relationship Management with new technology and campaign management tools to involve non-Priority Club Rewards (PCR) members; and • enhanced communications with PCR loyalty program members with refreshed loyalty systems. • Launched and cascaded our Vision to become one of the world’s great companies; • developed management tools to deliver a branded guest experience; • further emphasis on our culture of learning and development with industry recognition; • “Celebrate Service” week — a global event to recognize our people, in partnership with the IAHI ownership community; and • managing employee engagement. • Global pilots to identify opportunities to create branded hallmarks with guest appeal; • near completion of the Holiday Inn relaunch; and • grew our industry-leading loyalty program PCR, to 56 million members, contributing $6.5 billion of global system rooms revenue. • “Green Engage” developed (patent pending); rolled out to over 1,000 hotels by December 31, 2010; • collaborated with the University of Oxford’s Department of Plant Sciences to understand better how hotel design and development impacts the environment; and • Corporate Responsibility approach defined and agreed.		2011 priorities • Capitalize on recovery of group and meetings business; • strengthen global sales force effectiveness; • optimize revenues from third party and Group websites; • ensure the Group’s industry leading system of delivering demand and revenue to hotels retains competitive advantage; and • strengthen loyalty program, with enhanced member offer. • Cascade of branded management tools to whole hotel estate, including our franchised hotels; • ongoing partnership with IAHI ownership community for people events; • continued focus on developing skills to deliver our Vision and branding capability; and • opportunities for employees and communities to be involved with Olympics partnership. • Leverage strong position of Holiday Inn relaunch with roll-out of global marketing initiatives; • ensure growth plans of each brand aligns fully with corporate Vision; • focus on strength of Priority Club Rewards and visibly enhance offering to its members in hotels and across global reservations channels; and • increase the Group’s business from Priority Club Rewards members. • Continue to roll out “Green Engage” to our owned and managed hotels, and expand into the franchised estate in all regions; • work with stakeholders, such as Harvard University, to educate decision-makers on the Group’s economic impacts; and • continue to embed our community strategy, including establishing the “IHG Academy” program and activating our strategic partner in providing disaster recovery.

Segmental Results by Activity


	Year ended December 31,
	2010			2009			2008
	($ million)

Revenue⁽¹⁾
Americas
Franchised		465			437			495
Managed		119			110			168
Owned and leased		223			225			300

		807			772			963

EMEA
Franchised		81			83			110
Managed		130			119			168
Owned and leased		203			195			240

		414			397			518

Asia Pacific
Franchised		12			11			18
Managed		155			105			113
Owned and leased		136			129			159

		303			245			290

Central⁽²⁾		104			124			126

Total		1,628			1,538			1,897

Operating profit before exceptional operating items⁽¹⁾⁽³⁾
Americas
Franchised		392			364			426
Managed		21			(40	)		51
Owned and leased		13			11			55
Regional overheads		(57	)		(47	)		(67	)

		369			288			465

EMEA
Franchised		59			60			75
Managed		62			65			95
Owned and leased		40			33			45
Regional overheads		(36	)		(31	)		(44	)

		125			127			171

Asia Pacific
Franchised		7			5			8
Managed		73			44			55
Owned and leased		35			30			43
Regional overheads		(26	)		(27	)		(38	)

		89			52			68

Central⁽²⁾		(139	)		(104	)		(155	)

Total		444			363			549

Footnotes on page 25.


	Year ended December 31,
	2010			2009			2008
	(%)

Revenue
Americas
Franchised		28.6			28.4			26.1
Managed		7.3			7.2			8.9
Owned and leased		13.7			14.6			15.8

		49.6			50.2			50.8

EMEA
Franchised		5.0			5.4			5.8
Managed		8.0			7.7			8.9
Owned and leased		12.4			12.7			12.6

		25.4			25.8			27.3

Asia Pacific
Franchised		0.7			0.7			0.9
Managed		9.5			6.8			6.0
Owned and leased		8.4			8.4			8.4

		18.6			15.9			15.3

Central		6.4			8.1			6.6

Total		100.0			100.0			100.0

Operating profit before exceptional operating items
Americas
Franchised		88.3			100.2			77.6
Managed		4.7			(11.0	)		9.3
Owned and leased		2.9			3.0			10.0
Regional overheads		(12.8	)		(12.9	)		(12.2	)

		83.1			79.3			84.7

EMEA
Franchised		13.3			16.5			13.6
Managed		14.0			17.9			17.3
Owned and leased		9.0			9.1			8.2
Regional overheads		(8.1	)		(8.5	)		(8.0	)

		28.2			35.0			31.1

Asia Pacific
Franchised		1.6			1.4			1.5
Managed		16.4			12.1			10.0
Owned and leased		7.9			8.2			7.8
Regional overheads		(5.9	)		(7.4	)		(6.9	)

		20.0			14.3			12.4

Central		(31.3	)		(28.6	)		(28.2	)

Total		100.0			100.0			100.0


(1)		The results of operations have been translated into US dollars at the average rates of exchange for the year. In the case of sterling, the translation rate $1 = £0.65 (2009 $1 = £0.64, 2008 $1 = £0.55). In the case of the euro, the translation rate is $1 = €0.76 (2009 $1 = €0.72, 2008 $1 = €0.68).

(2)		Central revenue primarily relates to Holidex (the Group’s proprietary reservation system) fee income. Central operating profit includes central revenue less costs related to global functions.

(3)		Operating profit before exceptional operating items does not include exceptional operating items for all periods presented. Exceptional operating items (charge unless otherwise noted) by region were the Americas $8 million (2009 $301 million, 2008 $99 million); EMEA credit of $3 million (2009 $22 million, 2008 $21 million); Asia Pacific $2 million (2009 $7 million, 2008 $2 million); and Central $nil (2009 $43 million, 2008 $10 million).

Global ~~system~~System

~~Hotels operated under IHG brands are, pursuant~~In addition to ~~terms~~management or franchise fees, hotels within ~~their contracts, subject to~~the Group’s system pay cash assessments and contributions which are collected by the Group for specific use within the System Fund (the “Fund”). The Fund also receives proceeds from the sale of Priority Club Rewards points. The Fund is managed for the ~~provision~~benefit of ~~brand~~hotels in the system with the objective of driving revenues for the hotels. The Fund is used to pay for marketing, ~~reservations systems and~~ the Priority Club Rewards loyalty ~~program. These assessments, typically based upon room revenue, are pooled for~~program and the ~~collective benefit of all hotels by brand or geography into the System Funds.~~global reservations system.

Priority Club Rewards: The Group’s worldwide loyalty scheme, Priority Club Rewards, is the largest of its kind in the hotel industry. Members enjoy a variety of privileges and rewards as they stay at the Group’s hotels around the world. The global system room revenue generated from Priority Club Rewards members during ~~2009~~2010 was ~~$5.6~~$6.6 billion. Priority Club Rewards membership reached 4856 million customers as at December 31, ~~2009,~~2010, compared to 4248 million as at December 31, ~~2008.~~2009.

Central ~~reservation system technology:~~Reservations System Technology: The Group operates the HolidexPlus reservations system. The HolidexPlus system receives ~~reservation~~reservations requests entered on terminals located at most of ~~its reservation~~the Group’s reservations centers, as well as from global distribution systems operated by a number of major corporations and travel agents. Where local hotel systems allow, the HolidexPlus system immediately confirms reservations or indicates alternative accommodation available within the Group’s network. Confirmations are transmitted electronically to the hotel for which the reservation is made.

Reservations ~~call centers:~~Call Centers: The Group operates 10 reservations call centers around the world which enable it to sell in local languages in many countries and offer a high quality service to customers.

Internet: The Group introduced electronic hotel reservations in 1995. The Internet is an important communications, branding and distribution channel for hotel sales. During ~~2009, the Internet channels continued to show strong growth, with~~2010, 24%~~, (20%~~ (24% in ~~2008)~~2009) of global system room revenue booked via the Internet through various branded websites, such as www.intercontinental.com and www.holidayinn.com, as well as certified third parties.

~~IHG~~The Group has established standards for working with ~~third party~~third-party intermediaries — ~~on-line~~online travel distributors — who sell or re-sell the Group’s branded hotel rooms via their Internet sites. Under the standards, certified distributors are required to respect the Group’s trademarks, ensure reservations are guaranteed through an automated and common confirmation process, and clearly present fees to customers.

~~The Group estimates that, during 2009,~~During 2010, global system room revenue booked through ~~IHG’s~~the Group’s global systems (which includes Priority Club ~~Reward~~Rewards members, central ~~reservation~~reservations and call centers, global distribution systems and the Internet) ~~increased by four percentage points to~~was 68% (68% in 2009).

Sales and ~~marketing~~Marketing

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

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Global ~~brands~~Brands

Brands ~~overview~~Overview

The ~~Group’s~~Group offers hotel brands that appeal to guests with different needs and tastes. This requires a portfolio ~~includes seven established and diverse brands. These~~of large global brands, ~~cover several market segments ranging from upscale~~growing alongside innovative new brands to ~~midscale (limited service) and all brands except for Candlewood Suites operate internationally. Candlewood Suites operates exclusively in~~meet the ~~Americas.~~unique experiences our guests desire.

At December 31, 2009
Brands
Room numbers Hotels

InterContinental 56,121 166
Crowne Plaza 100,994 366
Holiday Inn 243,460 1,325
Holiday Inn Express 188,007 2,069
Staybridge Suites 19,885 182
Candlewood Suites 25,283 254
Hotel Indigo 4,030 33
Other 8,899 43

Total 646,679 4,438

The hotel industry is usually split into segments based upon price point and consumer expectations. The Group is focused on the three segments that together generate over 90% of branded hotel revenues: midscale (broadly 3 star hotels), upscale (mostly 4 star), and luxury (5 star).


	At December 31, 2010
Brands	Room numbers		Hotels

InterContinental Hotels & Resorts		58,429		171
Crowne Plaza Hotels & Resorts		106,155		388
Holiday Inn Hotels & Resorts⁽¹⁾		230,117		1,247
Holiday Inn Express		191,228		2,075
Staybridge Suites		20,762		188
Candlewood Suites		28,253		288
Hotel Indigo		4,548		38
Other		7,669		42

Total		647,161		4,437


(1)		Includes Holiday Inn Club Vacations (2,892 rooms, 6 hotels)

InterContinental Hotels & Resorts


	Americas		EMEA		Asia Pacific
	total		total		total		Americas		EMEA		Asia Pacific

Average room rate $⁽¹⁾		152.72		213.57		163.27		158.54		232.90		174.76
Room numbers⁽²⁾		18,499		20,586		17,036		19,120		20,111		19,198


(1)		For the year ended December 31, ~~2009;~~2010; quoted at constant US$ exchange rate. Average room rate is for comparable InterContinental hotels.

(2)		~~As at~~At December 31, ~~2009.~~2010.

InterContinental Hotels & Resorts (“InterContinental”) is the Group’s ~~upper-upscale brand. InterContinental branded hotels are~~5-star brand located in major cities ~~and leisure destinations~~ in over 60 ~~countries. Each hotel offers high-class~~countries worldwide. With over 60 years’ experience, the brand’s understanding of high quality, understated service and outstanding facilities, ~~and services aimed at~~coupled with a genuine interest in our guests differentiate it in a competitive segment. The philosophy of the ~~discerning business and leisure traveler. The~~ brand ~~strives~~is to ~~provide~~enable every guest to maximize the enjoyment of their stay — specializing in engaging guests with ~~memorable~~the destination by sharing local knowledge to create authentic experiences ~~which also give a sense of each hotel’s location. These hotels blend luxury with a celebration of local culture~~that enrich our guests’ lives and ~~heritage which is reflected in everything from décor to dining.~~help them broaden their outlook.

InterContinental hotels are principally managed by the Group. ~~As at~~At December 31, ~~2009,~~2010, there were ~~166~~171 InterContinental hotels which represented 9% of the Group’s total hotel rooms. During ~~2009, 12~~2010, nine InterContinental hotels were added to the portfolio, while ~~five~~four hotels were removed.

Crowne Plaza Hotels & Resorts


	Americas		EMEA		Asia Pacific
	total		total		total		Americas		EMEA		Asia Pacific

Average room rate $⁽¹⁾		100.92		141.32		98.56		101.94		140.39		105.16
Room numbers⁽²⁾		55,690		22,157		23,147		57,073		22,941		26,141


(1)		For the year ended December 31, ~~2009;~~2010; quoted at constant US$ exchange rate. Average room rate is for comparable Crowne Plaza hotels.

(2)		~~As at~~At December 31, ~~2009.~~2010.

Crowne Plaza ~~is located~~Hotels & Resorts (“Crowne Plaza”), in ~~more than 55 countries. Mainly sited~~the upscale, 4 star segment, specializes in ~~principal cities, these hotels offer high quality accommodation for leisure and business travelers who appreciate style, a sociable environment, excellent meeting facilities and~~offeringstate-of-the-art business ~~technology.~~and meeting facilities that provide productive, successful and energizing experiences to guests who believe travel is fun and rewarding.

The majority of Crowne Plaza hotels are operated under franchise ~~agreements. As at~~agreements in the US and Europe, and managed in other markets by the Group. At December 31, ~~2009,~~2010, there were ~~366~~388 Crowne Plaza hotels which represented 16% of the Group’s total hotel rooms. During ~~2009, 32~~2010, 29 Crowne Plaza hotels were added to the portfolio, while ~~eight~~seven hotels were removed.

The Holiday Inn Family of Brands

Americas
EMEA
Asia Pacific
total total total

Average room rate $⁽¹⁾
92.41 105.86 79.04
Room numbers⁽²⁾⁽³⁾
161,093 53,372 28,995

The Holiday Inn family of brands is the world’s largest midscale hotel brand family by number of rooms, and the Group’s most significant operation. Focused around a relaxed atmosphere, the brands are designed to support both business travellers and families. During 2010, the brand family neared completion of a $1 billion refresh, updating their image by upgrading facilities, service and amenities, ensuring the brands continue to remain competitive within their midscale markets. The Holiday Inn family was the first international hotel chain to open in China in 1984 and the first hotel chain to launch a direct bookings website in 1995.

Holiday Inn Hotels & Resorts


	Americas		EMEA		Asia Pacific

Average room rate $⁽¹⁾		95.12		115.51		88.57
Room numbers⁽²⁾⁽³⁾		147,575		52,945		29,597


(1)		For the year ended December 31, ~~2009;~~2010; quoted at constant US$ exchange rate. Average room rate is for comparable Holiday Inn hotels.

(2)		~~As at~~At December 31, ~~2009.~~2010.

(3)		The Americas total includes Holiday Inn Club Vacations (2,892 rooms).

Holiday Inn ~~is the Group’s midscale full service brand. One of the world’s most recognised brands, it is aimed at both business travellers and families.~~

~~In 2008, the Group launched~~Hotels & Resorts (including Holiday Inn Club ~~Vacations, which gave the Group its first presence in the timeshare market. The first~~ Vacations) (“Holiday ~~Inn Club Vacations opened in Florida, in December 2008. Holiday Inn Club Vacations is operated on a franchise basis with no capital investment from the Group.~~

In 2007, the Group announced a worldwide relaunch of the Holiday Inn and Holiday Inn Express brands. The relaunch program has been designed to give the Holiday Inn brand a refreshed and contemporary brand image by upgrading certain hotel facilities and amenities. All Holiday Inn hotels open or under development are expected to have implemented the relaunch program by the end of 2010. As at December 31, 2009, 1,697 hotels operating under the Holiday Inn or the Holiday Inn Express brands had completed the implementation of the relaunch program.

~~Holiday Inn hotels~~Inn”) are predominantly operated under franchise agreements. ~~As at~~At December 31, ~~2009,~~2010, there were ~~1,325~~1,247 Holiday Inn hotels which represented ~~38%~~36% of the Group’s total hotel rooms, of which ~~66%~~64% were located in the Americas. During ~~2009, 66~~2010, 53 Holiday Inn hotels were added to the portfolio, while 95131 hotels were removed.

Holiday Inn Express


	Americas		EMEA		Asia Pacific
	total		total		total		Americas		EMEA		Asia Pacific

Average room rate $⁽¹⁾		94.56		86.43		49.35		95.55		95.18		45.70
Room numbers⁽²⁾		158,284		23,259		6,464		159,867		23,706		7,655


(1)		For the year ended December 31, ~~2009;~~2010; quoted at constant US$ exchange rate. Average room rate is for comparable Holiday Inn Express hotels.

(2)		~~As at~~At December 31, ~~2009.~~2010.

Holiday Inn Express is the Group’s midscale limited service brand. Convenience, comfort and value make Holiday Inn Express a popular choice with guests and hotel owners. Contemporary guest rooms and bathrooms, a complimentary breakfast and easily accessible locations make Holiday Inn Express an ideal choice for people on the road. Holiday Inn Express was also relaunched in 2007.

Holiday Inn Express hotels are almost entirely operated under franchise agreements. ~~As at~~At December 31, ~~2009,~~2010, there were ~~2,069~~2,075 Holiday Inn Express hotels worldwide which represented ~~29%~~30% of the Group’s total hotel rooms, of which 84% were located in the Americas. During ~~2009, 213~~2010, 122 new Holiday Inn Express hotels were added to the portfolio, while 76116 hotels were removed.

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Staybridge Suites


	Americas		EMEA
	total		total		Americas		EMEA

Average room rate $⁽¹⁾		97.24		—		94.16		112.18
Room numbers⁽²⁾		19,320		565		20,014		748


(1)		For the year ended December 31, ~~2009;~~2010; quoted at constant US$ exchange rate. Average room rate is for comparable Staybridge Suites hotels.

(2)		~~As at~~At December 31, ~~2009.~~2010.

Staybridge Suites is anthe Group’s upscale ~~hotel~~extended stay brand, offering ~~services~~a sociable, family-like atmosphere. It was the fastest upper-tier extended stay brand to reach the 50-hotel and ~~amenities designed specifically~~100-hotel milestones, and was ranked highest in the prestigious J.D. Power and Associates’ 2009 North America Hotel Guest Satisfaction Index Study for ~~those on~~ extended ~~travel. Residential in style,~~stay hotels. In 2008 Staybridge Suites ~~branded hotels provide studios~~opened its first EMEA hotel in Liverpool and ~~suites, kitchens, living rooms~~has since opened properties in Cairo, Abu Dhabi and ~~work areas, and high-speed internet access for business and leisure guests.~~Newcastle.

The Staybridge Suites brand is principally operated under management contracts and franchise agreements. ~~As at~~At December 31, ~~2009~~2010 there were ~~182~~188 Staybridge Suites hotels, which represented 3% of the Group’s total hotel rooms, of which ~~97% (178~~96% (183 hotels) were located in the Americas. During ~~2009, 30~~2010, seven hotels were added to the portfolio, and ~~no hotels were~~one hotel was removed.

Candlewood Suites


	Americas
	~~total~~

Average room rate $⁽¹⁾		~~65.68~~62.30
Room numbers⁽²⁾		~~25,283~~28,253


(1)		For the year ended December 31, ~~2009;~~2010; quoted at constant US$ exchange rate. Average room rate is for comparable Candlewood Suites hotels.

(2)		~~As at~~At December 31, ~~2009.~~2010.

~~Designed for guest stays of a week or longer,~~ Candlewood Suites ~~branded hotels offer studios and one bedroom suites with well equipped kitchens, spacious work areas and an array of convenient amenities. This~~is the Group’s midscale extended stay brand that gives its guests all the essentials they need for a home-like stay at great value. Shortly after being acquired by IHG in 2003, Candlewood Suites won J.D. Power’s award for highest extended stay guest satisfaction in North America in 2004 whilst also ranking first in the Market Metrix Hospitality Index survey for customer satisfaction. Candlewood Suites continues to ~~grow rapidly~~lead the way in midscale extended stay lodging, with the ~~Americas.~~most properties under development.

The Candlewood Suites brand is operated under management contracts and franchise agreements. ~~Hospitality Properties Trust (“HPT”) is a major owner of Candlewood Suites properties and the Group manages all 76 of HPT’s Candlewood Suites properties under a 20 year agreement. As at~~At December 31, ~~2009,~~2010, there were ~~254~~288 Candlewood Suites hotels, which represented 4% of the Group’s total rooms, all of which were located in the Americas. During ~~2009, 50~~2010, 35 hotels were added to the portfolio, and ~~no hotels were~~one hotel was removed.

Hotel Indigo


	Americas		EMEA
	total		total		Americas		EMEA		Asia Pacific

Average room rate $⁽¹⁾		105.89		—		104.36		204.65		—
Room numbers⁽²⁾		3,966		64		4,254		110		184


(1)		For the year ended December 31, ~~2009;~~2010; quoted at constant US$ exchange rate. Average room rate is for comparable Hotel Indigo hotels.

(2)		~~As at~~At December 31, ~~2009.~~2010.

Hotel Indigo is the ~~industry’s first~~Group’s boutique and youngest brand, launched in 2004, and focuses on a guest that appreciates art and design and that is seeking affordable luxury. Hotel Indigo provides guests with the refreshing design and intimate service synonymous with a boutique along with the consistency, reliability, and accessibility of a branded ~~boutique~~ hotel. Each hotel is unique and reflects its local neighborhood with local murals and images, a vibrant color palette and locally sourced and seasonal menu items.

The Hotel Indigo brand is aimed at style-conscious guests who want peaceful and affordable luxury combined with all the knowledge, experience and operating systems that an international hotel company can offer. Inspired by lifestyle retailing, it features seasonal changes, inviting service, inspiring artwork, casual dining, airy guest rooms and~~24-hour~~ ~~business amenities.~~

~~As at~~principally operated under franchise agreements. At December 31, ~~2009,~~2010, there were 3338 Hotel Indigo hotels, 3235 located in the Americas. During ~~2009, 12~~2010, five hotels were added to the portfolio, and ~~one hotel was~~no hotels were removed.

Geographical ~~analysis~~Analysis

Although it has worldwide hotel operations, the Group is most dependent on the Americas for operating profit, reflecting the structure of the branded global hotel market. The Americas region generated ~~62%~~63% of the Group’s operating profit before central overheads and exceptional operating items during ~~2009.~~2010.

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


	Americas		EMEA		Asia Pacific		Americas		EMEA		Asia Pacific
	(% of total)						(% of total)

Room numbers⁽¹⁾		69		19		12		68		19		13
Regional operating profit (before central overheads and exceptional operating items)⁽²⁾		62		27		11		63		22		15


(1)		~~As at~~At December 31, ~~2009.~~2010.

(2)		For the year ended December 31, ~~2009.~~2010.

Americas

In the Americas, the largest proportion of rooms is operated under the franchise business model ~~(approximately 89%~~(89% of rooms in the Americas operate under this model) primarily in the midscale segment (Holiday Inn and Holiday Inn Express). Similarly, in the upscale segment, Crowne Plaza is predominantly franchised, whereas the majority of the InterContinental branded hotels are operated under franchise and management agreements. With ~~3,479~~3,458 hotels (439,375 rooms), the Americas represented ~~78%~~68% of the Group’s ~~hotels~~room count and ~~62%~~63% of the Group’s operating profit before central ~~costs~~overheads and exceptional operating items during the year ended December 31, ~~2009.~~2010. The key profit producing region is the United States, although the Group is also represented in each of Latin America, Canada, Mexico and the Caribbean.

EMEA

In EMEA, the largest proportion of rooms is operated under the franchise business model primarily in the midscale segment (Holiday Inn and Holiday Inn Express). Similarly, in the upscale segment, Crowne Plaza is predominantly franchised whereas the majority of the InterContinental branded hotels are operated under management agreements. Comprising ~~695~~694 hotels (120,852 rooms) at the end of ~~2009,~~2010, EMEA represented ~~approximately 27%~~22% of the Group’s operating profit before central ~~costs~~overheads and exceptional operating items during the year ended December 31, ~~2009.~~2010. Profits are primarily generated from hotels in the United Kingdom, Continental European gateway cities and the Middle East portfolio.

Asia Pacific

In Asia Pacific, the largest proportion of rooms are operated under the managed business model. The majority of hotels are in the midscale and upscale segments. Comprising ~~264~~285 hotels as(86,934 rooms) at December 31, ~~2009,~~2010, Asia Pacific represents ~~approximately 11%~~15% of the Group’s operating profit before central ~~costs~~overheads and exceptional operating items during the year ended December 31, ~~2009.~~2010. The Chinese tourism market continues to grow, with the country ~~due~~forecast to become one of the world’s biggest tourist destinations within 10 years. ~~As at~~At December 31, ~~2009~~2010 the Group had ~~125~~145 hotels in Greater China and a further ~~138~~147 hotels in development.

3130

it is chaired by an independent Non-Executive Director. The Committee leads the ~~principal duties proposed as good practice~~process for Board appointments and ~~referred to in the Combined Code. The Nomination Committee~~ nominates candidates for approval by the ~~Board, candidates for appointment to the~~ Board. The ~~Nomination~~balance of skills, experience, independence and knowledge of Board members is evaluated in order to define the requirements for a particular appointment. The Committee generally engages external consultants to advise on candidates for Board ~~appointments. Candidate profiles~~appointments and appointments are made on merit, against objective ~~selection~~ criteria, ~~are prepared in advance~~including ability to commit time, and with due regard for the benefits of ~~any engagements.~~diversity, including gender. The ~~Nomination~~ Committee also has responsibility for succession planning and assists in identifying and developing the role of the Senior Independent Director.

During 2010 the Committee discussed succession planning for both the Executive Committee and the Board of Directors, considered and recommended new Executive Director appointments, which have now been implemented, and considered the appointment of an additional Non-Executive Director.

Corporate Responsibility Committee

~~In February 2009 the~~The Corporate Responsibility Committee, ~~was established. It is~~ chaired by Jennifer ~~Laing. During 2009~~Laing, was established in February 2009. The other Committee member during 2010 was Ralph Kugler. Graham Allan joined the Committee in January 2011. Meetings are regularly attended by other members of the Board and Executive Committee. The Corporate Responsibility Committee ~~member was Ralph Kugler.~~ensures that the Company has in place the right policies, management and measurement systems to enable it to deliver against its strategy.

Disclosure Committee

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

General Purposes Committee

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

A description of the significant ways in which the Company’s actual corporate governance practices differ from the New York Stock Exchange corporate governance requirements followed by US companies can be found on page 82.

EMPLOYEES

The Group directly employed an average of ~~7,556~~7,858 people worldwide in the year ended December 31, ~~2009.~~2010. Of these, ~~approximately 95%~~96% were employed on a full-time basis and 5%4% were employed on a part-time basis.

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


	Americas		EMEA		Asia Pacific		Central		Total		Americas		EMEA		Asia Pacific		Central		Total

2010												3,309		1,795		1,517		1,237		7,858

2009		3,229		1,712		1,410		1,205		7,556		3,229		1,712		1,410		1,205		7,556

2008		3,384		1,824		1,470		1,271		7,949		3,384		1,824		1,470		1,271		7,949

2007		3,602		2,100		1,514		1,150		8,366

The costs of the above employees are borne by the Group. In addition, the Group employs 4,489 (2009 4,561, ~~(2008 4,353, 2007 4,003)~~2008 4,353) people who work in managed hotels or directly on behalf of the System ~~Funds~~Fund and whose costs of $282 million (2009 $267 million, ~~(2008~~2008 $272 ~~million, 2007 $247~~ million) are borne by those hotels or by the ~~Funds.~~Fund.

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

In the United Kingdom there is in place a national minimum wage under the National Minimum Wage Act. At December 31, ~~2009,~~2010, the minimum wage for individuals between 18 and under the age of 2221 was ~~£4.83~~£4.92 per hour and ~~£5.80~~£5.93 per hour for individuals age 2221 and above. This particularly impacts businesses in the hospitality and retailing sectors. Compliance with the National Minimum Wage Act is being monitored by the Low Pay Commission, an independent statutory body established by the UK Government.

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

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

6261

SHARE-BASED COMPENSATION

During 2010, conditional rights over 2,602,773 shares were awarded to employees under the Long Term Incentive Plan. No awards were granted under the Annual Bonus Plan or Executive Share Option Plan. Details regarding the option pricing model and assumptions used to determine the fair value of the awards is included in Note 26 of Notes to the Consolidated Financial Statements.

SHARE OWNERSHIP

The interests of the directors and officers of the Group at March ~~19, 2010 were as follows:~~25, 2011 were:

Ordinary shares

% of shares

Ordinary shares

% of shares

of 1329/47 pence

outstanding

of 1329/47 pence

outstanding⁽⁴⁾

Directors

James Abrahamson

146,759

N/A

Graham Allan

Nil

N/A

2,000

N/A

Andrew Cosslett

496,133

0.17

622,718

0.21

David Kappler

1,400

N/A

1,400

N/A

Kirk Kinsell

109,547

⁽²⁾

N/A

Ralph Kugler

1,169

N/A

1,169

N/A

Jennifer Laing

3,373

N/A

3,998

N/A

Jonathan Linen

7,343

⁽¹⁾

N/A

7,343

⁽¹⁾

N/A

Richard Solomons

371,522

0.13

252,166

N/A

David Webster

34,117

0.01

34,905

N/A

Ying Yeh

Nil

N/A

Nil

N/A

Officers

Jim Abrahamson

52,203

0.02

Tom Conophy

111,087

0.04

93,071

N/A

Kirk Kinsell

63,136

⁽²⁾

0.02

Tracy Robbins

96,902

0.03

43,108

N/A

Tom Seddon

54,678

⁽³⁾

0.02

54,678

⁽³⁾

N/A

George Turner

13,000

N/A

35,182

N/A


(1)		Held as American Depositary Shares (ADSs).

(2)		637 of which are held as ADSs.

(3)		24,000 of which are held as ADSs.

(4)		Where no figure is given the shareholding represents less than 0.1% of shares outstanding.

The above shareholdings are all beneficial interests. The percentage of ordinary share capital owned by each of the directors is negligible.

The directors’ interests as at December 31, ~~2009~~2010 in options to subscribe for shares in InterContinental Hotels Group PLC are set out onpage ~~F-42.~~F-48.

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

The Company announced on March 16, 2011 that Andrew Cosslett will step down as Chief Executive on June 30, 2011, and will be succeeded by Richard Solomons. A Director since 2003 and currently Chief Financial Officer and Head of Commercial Development, Richard Solomons will start in his new position as Chief Executive on July 1, 2011.

6362


ITEM 7.	*MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS*

MAJOR SHAREHOLDERS

As far as is known to management, IHG is not directly or indirectly owned or controlled by another corporation or by any government. As at the dates shown, the Company had been notified, in accordance with the Disclosure and ~~under the provisions~~Transparency Rules of the UK ~~Disclosure Rules and Transparency Rules, the Company has been advised~~Financial Services Authority, of the following ~~interests~~significant holdings of voting rights in its ~~shares, being greater than 3% of its issued share capital:~~ordinary shares:


	March 19, 2010					March 23, 2009					March 14, 2008					March 25, 2011					March 19, 2010					March 23, 2009
	Number of		Percent			Number of		Percent			Number of		Percent			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			shares/ADSs		of class			shares/ADSs		of class			shares/ADSs		of class

Ellerman Corporation Limited		29,921,742		10.00	%		29,921,742		10.00	%		29,921,742		10.00	%		N/A		N/A			29,921,742		10.39	%		29,921,742		10.48	%
Southeastern Asset Management, Inc.		14,860,671		5.17	%		N/A etc.										N/A		N/A			14,860,671		5.16	%		N/A		N/A
FIL Limited (Fidelity International)		14,687,743		5.14	%		N/A		N/A			N/A		N/A			N/A		N/A			14,687,743		5.10	%		N/A		N/A
Cedar Rock Capital Limited		14,923,417		5.07	%		14,923,417		5.07	%		14,923,417		5.07	%		14,923,417		5.15	%		14,923,417		5.18	%		14,923,417		5.23	%
JP Morgan Asset Management Holdings Inc.																	14,592,363		5.03	%		N/A		N/A			N/A		N/A
Blackrock, Inc.		14,434,598		5.02	%		N/A etc.										14,505,612		5.00	%		14,434,598		5.01	%		N/A		N/A
Morgan Stanley Institutional Securities Group & Global Wealth Management		N/A		N/A			N/A		N/A			13,551,634		4.60	%
Capital Research and Management Company																	14,495,664		5.00	%		N/A		N/A			N/A		N/A
Legal & General Group Plc		11,336,113		3.96	%		11,416,590		3.99	%		12,179,257		4.09	%		N/A		N/A	%		11,336,113		3.94	%		11,416,590		4.00	%
Lloyds Banking Group plc		13,619,563		3.84	%		13,619,563		3.84	%		13,619,563		3.84	%		N/A		N/A			13,619,563		4.73	%		13,619,563		4.77	%

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

As of March ~~19, 2010, 9,610,149~~25, 2011, 15,035,669 ADSs equivalent to ~~9,610,149~~15,035,669 ordinary shares, or approximately ~~3.3%~~5.18% of the total ordinary shares in issue, were outstanding and were held by ~~1,027~~1,024 holders. Since certain ordinary shares are registered in the names of nominees, the number of shareholders of record may not be representative of the number of beneficial owners.

As of March ~~19, 2010,~~25, 2011, there were a total of ~~57,406~~54,074 record holders of ordinary shares, of whom ~~360~~353 had registered addresses in the United States and held a total of ~~1,197,812~~1,540,796 ordinary shares ~~(0.42%~~(0.53% of the total issued).

RELATED PARTY TRANSACTIONS

The Company has not entered into any related party transactions or loans for the period beginning January 1, ~~2009~~2010 up to March ~~19, 2010.~~25, 2011.


ITEM 8.	*FINANCIAL INFORMATION*

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial Statements

See “Item 18. Financial Statements”.

Legal ~~proceedings~~Proceedings

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

Notwithstanding the above, Holiday Hospitality Franchising, Inc., a Group company, is defending a lawsuit filed by Hotel Associates, Inc., a former franchisee, regarding an unfavorable ruling on appeal on February 23, 2011. The final outcome is not yet known, however, a litigation provision for $22 million has been reflected in the

Consolidated Financial Statements for the year ended December 31, 2010, further details of which are set out in Note 1 of Notes to the Consolidated Financial Statements onpage F-13.

Dividends

See “Item 3. Key information — Dividends”.

SIGNIFICANT CHANGES

~~None.~~Except as otherwise stated in this Form 20-F, there have been no significant changes subsequent to December 31, 2010.


ITEM 9.	*THE OFFER AND LISTING*

The principal trading market for the Company’s ordinary shares is the London Stock Exchange on which InterContinental Hotels Group PLC shares are traded. The ordinary shares are also listed on the New York Stock Exchange trading in the form of ADSs evidenced by ADRs. Each ADS represents one ordinary share. InterContinental Hotels Group PLC has a sponsored ADR facility with JP Morgan Chase Bank, N.A. as Depositary.

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


	£ per								£ per
	ordinary share				$ per ADS				ordinary share				$ per ADS
Year ended December 31,	High		Low		High		Low		High		Low		High		Low

2005		8.42		6.12		14.53		11.49
2006		12.65		8.07		26.27		14.40		12.65		8.07		26.27		14.40
2007		14.20		8.73		32.59		17.37		14.20		8.73		32.59		17.37
2008		8.84		4.48		17.40		6.52		8.84		4.48		17.40		6.52
2009		9.04		4.46		14.67		6.04		9.04		4.46		14.67		6.04
2010										12.66		8.87		20.04		13.84


	£ per								£ per
	ordinary share				$ per ADS				ordinary share				$ per ADS
Year ended December 31,	High		Low		High		Low		High		Low		High		Low

2008
First quarter		8.84		6.44		17.40		13.26
Second quarter		8.65		6.68		16.80		13.15
Third quarter		7.87		6.16		14.76		11.53
Fourth quarter		6.75		4.48		12.08		6.52
2009
First quarter		6.22		4.46		9.33		6.04		6.22		4.46		9.33		6.04
Second quarter		6.90		5.59		11.19		8.20		6.90		5.59		11.19		8.20
Third quarter		8.27		5.92		13.74		9.57		8.27		5.92		13.74		9.57
Fourth quarter		9.04		7.64		14.67		12.26		9.04		7.64		14.67		12.26
2010
First quarter (through March 19, 2010)		10.19		8.87		15.41		13.84
First quarter										10.46		8.87		15.71		13.84
Second quarter										12.24		10.23		18.34		14.86
Third quarter										11.99		9.82		18.49		15.24
Fourth quarter										12.66		10.81		20.04		17.20
2011 First quarter (through March 25, 2011)										14.35		12.28		23.28		19.60

£ per

ordinary share $ per ADS
Month ended
High Low High Low

September 2009 8.27 7.31 13.74 11.82
October 2009 8.57 7.64 13.95 12.26
November 2009 8.57 7.85 14.45 12.71
December 2009 9.04 8.55 14.67 14.02
January 2010 9.37 8.99 15.41 14.27
February 2010 9.20 8.87 14.59 13.84
March 2010 (through to March 19, 2010) 10.19 9.46 15.35 14.28

6564


	£ per
	ordinary share				$ per ADS
Month ended	High		Low		High		Low

September 2010		11.50		10.43		18.17		16.16
October 2010		12.25		11.27		19.35		17.89
November 2010		12.22		10.81		20.04		17.20
December 2010		12.66		11.55		19.73		18.29
January 2011		13.53		12.43		21.86		19.73
February 2011		14.35		13.03		23.28		21.35
March 2011 (through to March 25, 2011)		13.39		12.28		22.03		19.60

Fluctuations in the exchange rates between pounds sterling and the US dollar will affect the dollar equivalent of the pounds sterling price of the ordinary shares on the London Stock Exchange and, as a result, are likely to affect the market price of ADSs.

PLAN OF DISTRIBUTION

Not applicable.

SELLING SHAREHOLDERS

Not applicable.

DILUTION

Not applicable.

EXPENSES OF THE ISSUE

Not applicable.


ITEM 10.	*ADDITIONAL INFORMATION*

ARTICLES OF ASSOCIATION

The Company’s articles of association were adopted at the Annual General Meeting held on May 28, 2010.

The following summarizes material rights of holders of the Company’s ordinary shares under the material provisions of the Company’s articles of association and English law. This summary is qualified in its entirety by reference to the Companies Act and the Company’s articles of association. The Company’s articles of association are filed as an exhibit to this 20-F.

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

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

Principal ~~objects~~Objects

The Company is incorporated under the name InterContinental Hotels Group PLC and is registered in England and Wales with registered number 5134420. The Company’s articles of association do not restrict its objects.

Directors

Under the Company’s articles of association, a director may not vote in respect of any proposal in which he, or any person connected with him, has any material interest other than by virtue of his interests in securities of, or otherwise in or through, the Company. This is subject to certain exceptions relating to proposals (a) indemnifying

him in respect of obligations incurred on behalf of the Company, (b) indemnifying a third party in respect of obligations of the Company for which the director has assumed responsibility under an indemnity or guarantee, (c) relating to an offer of securities in which he will be interested as an underwriter, (d) concerning another body corporate in which the director is beneficially interested in less than one percent of the issued shares of any class of shares of such a body corporate, (e) relating to an employee benefit in which the director will share equally with other employees and (f) relating to liability insurance that the Company is empowered to purchase for the benefit of directors of the Company in respect of actions undertaken as directors (or officers) of the Company.

The directors are empowered to exercise all the powers of the Company to borrow money, subject to the limitation that the aggregate amount of all moneys borrowed by the Company and its subsidiaries shall not exceed an amount equal to three times the Company’s share capital and consolidated reserves, unless sanctioned by an ordinary resolution of the Company.

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

Rights ~~attaching~~Attaching to ~~shares~~Shares

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

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

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

Voting ~~rights~~Rights

Voting at any general meeting of shareholders is by a show of hands unless a poll, which is a written vote, is duly demanded. On a show of hands, every shareholder who is present in person or by proxy at a general meeting has one vote regardless of the number of shares held. On a poll, every shareholder who is present in person or by proxy has one vote for every 1329/47 pence in nominal amount of the shares held by that shareholder. A poll may be demanded by any of the following:


	•	the chairman of the meeting;

	•	at least five shareholders present in person or by proxy and 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 beenpaid-up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

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

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

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


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

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

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

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

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

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

~~Each~~The articles of association specify that each Director shall retire every three years at the Annual General Meeting and unless otherwise decided by the Directors, shall be eligible for re-election. However, the new UK Corporate Governance Code recommends that all Directors of FTSE 350 companies submit themselves for election or re-election (as appropriate) by shareholders every year. Although IHG is not obliged to follow this recommendation until its Annual General Meeting in 2012, the Board has decided to submit the appointment of all its Directors for shareholder approval in 2011. Therefore, all Directors will retire and offer themselves for election or re-election at the next Annual General Meeting.

Variation of ~~rights~~Rights

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

Rights in a~~winding-up~~Winding-up

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


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

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

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

Limitations on ~~voting~~Voting and ~~shareholding~~Shareholding

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

MATERIAL CONTRACTS

The following contracts have been entered into otherwise than in the course of ordinary business by members of the Group either (i) in the two years immediately preceding the date of this document in the case of contracts which are or may be material or (ii) which contain provisions under which any Group member has any obligation or entitlement which is material to the Group as at the date of this document. To the extent that these agreements include representations, warranties and indemnities, such provisions are considered standard in an agreement of that nature, save to the extent identified below.

£750,000,000 Euro Medium Term Note Program

1. On November 27, 2009, a trust deed (the “Trust Deed”) was executed by InterContinental Hotels Group PLC as issuer (the “Issuer”), Six Continents Limited and InterContinental Hotels Limited as guarantors (the “Guarantors”) and HSBC Corporate Trustee Company (UK) Limited as trustee (the “Trustee”), in accordance with which the Issuer established a Euro medium term note program (the “Program”) pursuant to which the Issuer may issue notes (“Notes”) unconditionally and irrevocably guaranteed by the Guarantors, up to a maximum nominal amount from time to time outstanding of £750,000,000 (or its equivalent in other currencies).

Notes are to be issued in series (each a “Series”) in bearer form. Each Series may comprise one or more tranches (each a “Tranche”) issued on different issue dates. Notes may be issued either (1) pursuant to the Base Prospectus dated November 27, 2009 (the “Base Prospectus”) as amendedand/or supplemented by a document setting out the final terms (the “Final Terms”) of the Notes or (2) pursuant to a separate prospectus specific to such Tranche (the “Drawdown Prospectus”). The terms and conditions applicable to any particular Tranche of Notes will be the Terms and Conditions of the Notes as supplemented, amendedand/or replaced to the extent described in the relevant Final Terms or, as the case may be, the relevant Drawdown Prospectus.

Under the Trust Deed, each of the Issuer and the Guarantors has given certain customary covenants in favor of the Trustee.

Final Terms were issued on December 9, 2009 in respect of the issue of a Tranche of £250,000,000 6 per cent Notes due December 9, 2016. These Final Terms stipulate that the holders of the Notes have the right to repayment if the Notes (a) become non-investment grade within the period commencing on the date of announcement of a change of control and ending 90 days after the change of control (the “Change of Control Period”) and are not subsequently, within the Change of Control Period, reinstated to investment grade; (b) are downgraded from a non-investment grade and are not reinstated to its earlier credit rating or better within the Change of Control Period; or (c) are not credit rated and do not become investment-grade credit rated by the end of the Change of Control Period. Further details of the Program and the Notes are set out in the Base Prospectus, a copy of which is available (as is a copy of Final Terms dated December 7, 2009) on the Company’s website at www.ihgplc.com. These Notes are referred to as “£250 million 6% bonds” in the Consolidated Financial Statements.

2. On November 27, 2009, the Issuer and the Guarantors entered into an agency agreement (the “Agency Agreement”) with HSBC Bank PLC as principal paying agent and the Trustee, pursuant to which the Issuer and the Guarantors appointed paying agents and calculation agents in connection with the Program and the Notes.

Under the Agency Agreement, each of the Issuer and the Guarantors has given a customary indemnity in favor of the paying agents and the calculation agents.

3. On November 27, 2009, the Issuer and the Guarantors entered into a dealer agreement (the “Dealer Agreement”) with Barclays Bank PLC, HSBC Bank PLC and The Royal Bank of Scotland PLC as arrangers (the “Arrangers”) and Barclays Bank PLC, HSBC Bank PLC, Lloyds TSB Bank PLC, Merrill Lynch International,

Société Générale and The Royal Bank of Scotland PLC as dealers (the “Dealers”), pursuant to which the Dealers were appointed in connection with the Program and the Notes.

Under the Dealer Agreement, each of the Issuer and the Guarantors has given customary warranties and indemnities in favor of the Dealers.

~~IHG~~Syndicated Facility ~~Agreement~~

On May 2, 2008, InterContinental Hotels Group PLC signed the Syndicated Facility, which comprises a five year $2,100 million bank facility agreement ~~(the “IHG Facility Agreement”)~~ with Bank of America N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Barclays Capital, HSBC Bank plc, Lloyds TSB Bank plc, The Royal Bank of Scotland plc, Société Générale Corporate & Investment Banking and WestLB AG, London Branch, all acting as mandated lead arrangers and underwriters and HSBC Bank plc as agent bank.

The facility was split into a $1.6 billion five year revolving credit facility and a $500 million 30 month term loan facility. The term loan reduced to $85 million in December 2009 following repayment of $415 million. The outstanding sum of $85 million was repaid in full in September 2010.

The interest margin payable on borrowings under the ~~IHG~~Syndicated Facility ~~Agreement~~ is linked to IHG’s consolidated net debt to consolidated EBITDA ratio. The margin can vary between LIBOR + 0.475% and LIBOR + 1.05% depending on the level of the ratio.

Disposal to Hospitality Properties Trust (“HPT”)

On December 17, 2004, BHR Texas L.P., InterContinental Hotels Group Resources, Inc., Crowne Plaza LAX, LLC, Crowne Plaza Hilton Head Holding Company, Holiday Pacific Partners Limited Partnership, 220 Bloor Street Hotel Inc. and Staybridge Markham, Inc. (together, the “Vendors”) entered into a Purchase and Sale Agreement (as amended and

restated on February 9, 2005) with HPT IHG — 2 Properties Trust (“HPT IHG-2”), pursuant to which HPT IHG-2 purchased from the Vendors 12 hotels situated in the United States and Canada. On the same date, Six Continents International Holdings B.V. (“SIH”), entered into a Stock Purchase Agreement (as amended and restated on February 9, 2005) with HPT IHG-2, pursuant to which HPT IHG-2 purchased from SIH all of the shares in Crowne Plaza (Puerto Rico) Inc., which is the owner of a hotel in Puerto Rico. The total consideration payable by HPT IHG-2 for the sales amounted to ~~US$425~~$425 million, before transaction costs, equivalent to net book value (of which ~~US$395~~$395 million was received upon the main completion of the sale on February 16, 2005, with the remaining ~~US$30~~$30 million received upon the completion of the sale of the InterContinental Hotel in Austin, on June 1, 2005). The Group continues to manage the hotels.

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

In connection with the disposals referred to above ~~IHG has~~and as part of both prior and subsequent transactions with HPT in relation to managed hotels, the Group agreed to guarantee certain amounts payable to HPT ~~IHG~~TRS IHG-1, HPT TRS IHG-2 and HPT ~~IHG-2 in relation to~~TRS IHG-3 (being subsidiaries of the ~~managed hotels sold by the Group to~~ HPT ~~IHG and HPT IHG-2.~~group). The guarantee is for a maximum amount of $125 million, of which ~~$60~~$118 million had been utilized at December 31, ~~2009~~2010, and requires amounts to be paid by IHG to HPT ~~IHGand/or~~TRS IHG-1, HPT TRS IHG-2 ~~(and/or their designated affiliate)~~and HPT TRS IHG-3 irrespective of the revenue generated by the relevant hotels. The guarantee may be terminated if certain financial tests are met. In addition to the guarantee, the Group paid a deposit to HPT in three transactions between July 2003 and December 2006 in the aggregate amount of $37 million which may be used by HPT to supplement any shortfall between the amounts required to be paid and the amounts actually paid by the Group to HPT (or its affiliates) if the maximum amount of the guarantee has been met.

UK Hotels Disposal

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

the hotels LRG indirectly acquired under the SPA (the “LRG Hotels”) and which remained to be completed or performed, or remained in force, after completion of the sale of the LRG Shares to LRG.

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

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

Australasian Hotels Disposals

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

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

~~Disposal to Dabicam SAS~~

On September 8, 2005, a sale and purchase agreement (“SPA”) was entered into between BHR Holdings BV, a wholly owned subsidiary of IHG, and Dabicam SAS, an affiliate of GIC Real Estate Pte. Ltd. Under the SPA the seller agreed to sell the InterContinental Hotel Paris. The agreed sale price for the hotel was €315 million. The hotel is no longer operated under an IHG Hotels brand. Under the SPA the sellers gave certain customary warranties and

indemnities to the purchaser. Following receipt of shareholder approval, in connection with the sale, at an Extraordinary General Meeting of IHG on October 26, 2005 the sale was completed on November 1, 2005.

Britvic Underwriting Agreement

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

Disposal to Westbridge

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

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

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

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

Disposal to Morgan Stanley Real Estate Funds

On July 13, 2006 a sale and purchase agreement (“SPA”) was entered into between BHR Holdings BV and other wholly owned subsidiaries of IHG as sellers (BHR Holdings BV being the principal seller) and a subsidiary of Morgan Stanley Real Estate Funds MSREF VI Danube BV. Under the SPA the sellers agreed to sell seven

InterContinental branded hotels situated across Europe in France, Germany, the Netherlands, Austria, Hungary, Italy and Spain.

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

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

EXCHANGE CONTROLS

There are no restrictions on dividend payments to US citizens.

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

There are no restrictions under the articles of association or under English law that limit the right of non-resident or foreign owners to hold or vote the ordinary shares. However, under current English law, ordinary shares or ADSs may not be owned by a Prohibited Person. In addition, the Company’s articles of association contain certain limitations on the voting and other rights of any holder of ordinary shares, whose holding may, in the opinion

of the directors, result in the loss or failure to secure the reinstatement of any license or franchise from any US governmental agency held by Six Continents Hotels Inc or any subsidiary thereof.

TAXATION

This section provides a summary of the material US federal income tax and UK tax consequences to US holders, as defined below, of owning and disposing of ordinary shares or ADSs of the Company. This section addresses only the tax position of a US holder who holds ordinary shares or ADSs as capital assets. This section does not, however, discuss the tax consequences of members of special classes of holders subject to special rules, such as


	•	certain financial institutions;

	•	insurance companies;

	•	dealers and traders in securities or foreign currencies;

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

	•	persons whose functional currency for US federal income tax purposes is not the US dollar;

	•	partnerships or other entities classified as partnerships for US federal income tax purposes;

	•	persons liable for the alternative minimum tax;

	•	tax-exempt organizations;

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

	•	holders that, directly or indirectly, hold 10% or more of the Company’s voting stock.

This section does not generally deal with the position of a US holder who is resident or ordinarily resident in the United Kingdom for UK tax purposes or who is subject to UK taxation on capital gains or income by virtue of carrying on a trade, profession or vocation in the United Kingdom through a branch, agency or permanent establishment and such ADSs or ordinary shares are or have been used, held or acquired for the purposes of such trade, profession or vocation.

A US holder is a beneficial owner of ordinary shares or ADSs who is for US federal income tax purposes (i) aan individual citizen or resident of the US, (ii) a US domestic corporation, or other entity taxable as a corporation,

created or organized in or under the laws of the United States or any political subdivision thereof; (iii) an estate whose income is subject to US federal income tax regardless of its source, or (iv) a trust if a US court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, and on UK tax laws and published practice of the UK HM Revenue and Customs, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis.

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

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

Investors should consult their own tax advisors 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.

Taxation of ~~dividends~~Dividends

United Kingdom ~~taxation~~Taxation

Under current UK tax law, the Company will not be required to withhold tax at source from dividend payments it makes.

A US holder who is not resident or ordinarily resident for United Kingdom tax purposes in the United Kingdom will generally not be liable for UK taxation on dividends received in respect of the ADSs or ordinary shares.

United States ~~federal income taxation~~Federal Income Taxation

Subject to the passive foreign investment company (“PFIC”) rules discussed below, a US holder is subject to US federal income taxation on the gross amount of any dividend paid by the Company out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). Distributions in excess of the Company’s current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a return of capital to the extent of the US holder’s basis in the shares or ADSs and thereafter as capital gain. Because the Company has not historically maintained, and does not currently maintain, books in accordance with US tax principles, the Company does not expect to be in a position to determine whether any distribution will be in excess of the Company’s current and accumulated earnings and profits as computed for US federal income tax purposes. As a result, the Company expects that amounts distributed will be reported to the Internal Revenue Service as dividends.

Subject to applicable limitations and the discussion above regarding concerns expressed by the US Treasury, dividends paid to a non-corporate US holder in taxable years beginning before January 1, ~~2011~~2013 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15%. The Company expects that dividends paid by the Company with respect to the shares or ADSs will constitute qualified dividend income. U.S. Holders should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to be taxed at this favorable rate.

Dividends must be included in income when the US holder, in the case of shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend, and will not be eligible for the dividends-received

deduction generally allowed to US corporations in respect of dividends received from other US corporations. For foreign tax credit limitation purposes, dividends will generally be income from sources outside the United States.

The amount of any dividend paid in pounds will be the US dollar value of the pound sterling payments made, determined at the spot pound sterling/US dollar rate on the date the dividend distribution is includible in income, regardless of whether the payment is in fact converted into US dollars. If the dividend is converted into US dollars on the date of receipt, a US holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in income to the date the payment is converted into US dollars will be treated as ordinary income or loss and, for foreign tax credit limitation purposes, from sources within the United States.

Taxation of ~~capital gains~~Capital Gains

United Kingdom ~~taxation~~Taxation

A US holder who is not resident or ordinarily resident for UK tax purposes in the United Kingdom will not generally be liable for UK taxation on capital gains realized or accrued on the sale or other disposal of ADSs or ordinary shares.

A US holder of ADSs or ordinary shares who is an individual and who, broadly, has temporarily ceased to be resident or ordinarily resident in the UK or has become temporarily treated as non-resident for UK tax purposes for a period of less than five years of assessment and who disposes of ordinary shares or ADSs during that period may, for

the year of assessment when that individual becomes resident again in the UK, also be liable to UK tax on capital gains (subject to any available exemption or relief), notwithstanding the fact that such US holder was not resident or ordinarily resident in the United Kingdom at the time of the sale or other disposal.

United States ~~federal income taxation~~Federal Income Taxation

Subject to the PFIC rules discussed below, a US holder that sells or otherwise disposes of ordinary shares or ADSs will recognize a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realized and its tax basis, determined in US dollars, in the ordinary shares or ADSs. Such capital gain or loss will be long-term capital gain or loss where the holder has a holding period greater than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The deductibility of losses is subject to limitations.

PFIC ~~rules~~Rules

The Company believes that it was not a PFIC for US federal income tax purposes for its ~~2009~~2010 taxable year. However, this conclusion is an annual factual determination and thus may be subject to change. If the Company were to be treated as a PFIC, gain realized on the sale or other disposition of ordinary shares or ADSs would in general not be treated as capital gain. Instead, gain would be treated as if the US holder had realized such gain ratably over the holding period for the ordinary shares or ADSs and, to the extent allocated to the taxable year of the sale or other exchange and to any year before the Company became a PFIC, would be taxed as ordinary income. The amount allocated to each other taxable year would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, similar rules would apply to any “excess distribution” received on the ordinary shares or ADSs (generally, the excess of any distribution received on the ordinary shares or ADSs during the taxable year over 125% of the average amount of distributions received during a specified prior period), and the preferential rate for “qualified dividend income” received by certain non-corporate US holders would not apply. Certain elections may be available (including amarket-to-market election) to US holders that would result in alternative treatments of the ordinary shares or ADSs. Pursuant to legislation enacted in 2010, if the Company were to be treated as a PFIC in any taxable year, a US holder may be required to file an annual report with the Internal Revenue Service containing such information as the Treasury Department may require.

Additional ~~tax considerations~~Tax Considerations

United States ~~backup withholding~~Backup Withholding and ~~information reporting~~Information Reporting

Payments of dividends and other proceeds with respect to ADSs and ordinary shares may be reported to the IRS and to the US holder. Backup withholding may apply to these payments if the US holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to report all interest and dividends required to be shown on its US federal income tax returns. Certain US holders (including, among others, corporations) are not subject to backup withholding. US holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.

United Kingdom ~~inheritance tax~~Inheritance Tax

An individual who is neither domiciled nor deemed domiciled in the UK (under certain UK rules relating to previous domicile or long residence) is only chargeable to UK inheritance tax to the extent the individual owns assets situated in the UK. As a matter of UK law, it is not clear whether the situs of an ADS for UK inheritance tax purposes is determined by the place where the depositary is established and records the entitlements of the depositholders, or by the situs of the underlying share which the ADS represents.

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

was not a UK national. Where ADSs are subject to both UK inheritance tax and to US federal gift or estate tax, the Estate and Gift Tax Convention generally provides for either a credit against US federal tax liabilities for UK inheritance tax paid or for a credit against UK inheritance tax liabilities for US federal tax paid, as the case may be.

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

The transfer of ordinary shares will generally be liable to stamp duty at the rate of 0.5% of the amount or value of the consideration given (rounded up to the nearest £5). An unconditional agreement to transfer ordinary shares will generally be subject to SDRT at 0.5% of the agreed consideration. However, if within the period of six years of the date of such agreement becoming unconditional an instrument of transfer is executed pursuant to the agreement and duly stamped, any liability to SDRT will usually be repaid, if already paid, or canceled. The liability to pay stamp duty or SDRT is generally satisfied by the purchaser or transferee.

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

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

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

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

DOCUMENTS ON DISPLAY

It is possible to read and copy documents referred to in this Annual Report onForm 20-F that have been filed with the SEC at the SEC’s public reference room located at 100 F Street, NE Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The Company’s SEC filings since May 22, 2002 are also publicly available through the SEC’s website located at www.sec.gov.


ITEM 11.	*QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK*

Exchange and ~~interest rate risk,~~Interest Rate Risk, and ~~financial instruments~~Financial Instruments

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

Treasury ~~risk management~~Risk Management

The treasury function seeks to reduce the financial risk of the Group and manages liquidity to meet all foreseeable cash needs. Treasury activities include money market investments, spot and forward foreign exchange instruments, currency options, currency swaps, interest rate swaps and options and forward rate agreements. One of the primary objectives of the Group’s treasury risk management policy is to mitigate the adverse impact of movements in interest rates and foreign exchange rates.

Credit ~~risk~~Risk

Credit risk on treasury transactions is minimized by operating a policy on the investment of surplus cash that generally restricts counterparties to those with an A credit rating or better or those providing adequate security.

Notwithstanding that counterparties must have an A credit rating or better, during periods of significant financial market turmoil, counterparty exposure limits are significantly reduced and counterparty credit exposure reviews are broadened to include the relative placing of credit default swap pricings.

The Group trades only with recognized, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures.

In respect of credit risk arising from financial assets, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Most of the Group’s surplus funds are held in the United Kingdom or United States and there are no material funds where repatriation is restricted as a result of foreign exchange regulations.

Interest ~~rate risk~~Rate Risk

Interest rate exposure is managed within parameters that stipulate that fixed rate borrowings should normally account for no less than 25% and no more than 75% of net borrowings for each major currency. This is achieved through the use of interest rate ~~swaps~~swaps. Due to relatively low interest rates and ~~options and forward~~the level of the Group’s debt, 100% of borrowings were fixed rate ~~agreements.~~debt or had been swapped into fixed rate borrowings at December 31, 2010.

At December 31, ~~2009,~~2010, the Group held interest rate swaps (swapping floating for fixed) with notional principals of ~~$250~~$100 million and €75 million ~~(2008~~(2009 $250 ~~million, £75~~ million and €75 million). ~~The Group did not hold any forward-starting~~These swaps are held to fix the interest ~~rate swaps at~~payable on borrowings under the Syndicated Facility. At December 31, ~~2009 (2008 interest rate swaps with notional principals of~~2010, $100 million ~~£75 million~~of US dollar borrowings were fixed at 1.99% until May 2012 and €75 ~~million).~~million of euro borrowings were fixed at 5.25% until June 2011.

Based on the year-end net debt position and given the underlying maturity profile of investments, borrowings and hedging instruments at ~~that date,~~December 31, 2010, a one percentage point rise in US dollar interest rates would increase the annual net interest charge by approximately $nil (2009 $0.8 million, ~~(2008~~2008 $4.7 ~~million, 2007 $5.8~~ million). A similar rise

in euro and sterling interest rates would increase the annual net interest charge by approximately $nil (2009 $1.1 million, ~~(2008 $1.2 million, 2007~~2008 $1.2 million) and $nil ~~(2008~~(2009 $nil, 2008 $0.9 ~~million, 2007 $3.2~~ million), respectively.

Currency ~~risk~~Risk

The US dollar is the predominant currency of the Group’s revenue and cash flows. Movements in foreign exchange rates can affect the Group’s reported profits, net assets and interest cover. To hedge translation exposure, wherever possible, the Group matches the currency of its debt (either directly or via derivatives) to ~~match~~ the currency of its net assets, ~~whilst~~while maximizing the amount of US dollars borrowed to reflect the predominant trading currency. At December 31, ~~2009,~~2010, the Group held currency swaps ~~designated as net investment hedges~~ with a principal of $415 million ~~(2008 $nil)~~(2009 $415 million) and ~~a fair value~~short dated foreign exchange swaps with principals of ~~$13~~€75 million ~~liability (2008 $nil)~~(2009 nil) and HK$ 70 million (2009 nil).

The Group is exposed to foreign currency risk on income streams denominated in foreign currencies. ~~When appropriate,~~From time to time, the Group hedges a portion of forecast foreign currency income by taking out forward exchange contracts. The designated risk is the spot foreign exchange risk. ~~Forward~~There were no such contracts ~~are held~~in place at ~~fair value in the Consolidated statement of financial position as other financial assets and other payables.~~either December 31, 2010 or December 31, 2009.

A general strengthening of the US dollar (specifically a five cent fall in the sterling: US dollar rate) would increase the Group’s profit before tax by an estimated $3.5 million (2009 $1.6 million, ~~(2008~~2008 $4.0 ~~million, 2007 $2.9~~ million) and ~~increase~~decrease net assets by an estimated $5.6 million (2009 $4.1 million, ~~(2008 decrease of~~2008 $1.1 ~~million, 2007 increase of $6.1~~ million). Similarly, a five cent fall in the euro: US dollar rate would reduce the Group’s profit before tax by an estimated $1.4 million (2009 $0.7 million, ~~(2008~~2008 $2.0 ~~million, 2007 $1.6~~ million) and decrease net assets by an estimated $8.2 million (2009 $4.5 million, ~~(2008~~2008 $4.3 ~~million, 2007 $5.9~~ million).

~~Quantitative information about market risk~~

Interest ~~rate sensitivity~~Rate Sensitivity

The tables below provide information about the Group’s derivative and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps, currency swaps and debt obligations. For long-term debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps and currency swaps, the table presents notional amounts and weighted average interest rates by expected maturity dates. Weighted average variable rates are based on rates set on the last day of the period. The actual currencies of the instruments are indicated in parentheses.

At December 31, ~~2009~~2010


	Expected to mature before December 31,																					Expected to mature before December 31,
	2010			2011			2012			2013			Thereafter			Total			Fair value⁽ⁱ⁾			2011			2012			2013			2014		Thereafter			Total			Fair value⁽ⁱ⁾
	($ million, except percentages)																					($ million, except percentages)

Long-term debt:
Fixed rate public bonds (sterling)		—			—			—			—			402			402			402			—			—			—			—		385			385			404
Fixed rate payable														6.0	%		6.0	%																6.0	%		6.0	%
Fixed rate lease debt (US dollar)		—			—			—			—			204			204			206			—			—			—			—		206			206			217
Fixed rate payable														9.7	%		9.7	%																9.7	%		9.7	%
Variable rate bank debt (various currencies)		90			—			5			421			—			516			516			1			5			197			—		—			203			203
Average interest rate payable		0.8	%					5.3	%		1.0	%					1.0	%					0.9	%		5.3	%		1.2	%							1.3	%

	(local currency million, except percentages)

Interest rate swaps:
Principal (US dollar)		150			—			100			—			—			250			(1	)
Fixed rate payable		0.7	%					2.0	%								1.2	%
Variable rate receivable		0.2	%					0.3	%								0.2	%
Principal (euro)		—			75			—			—			—			75			(6	)
Fixed rate payable					5.3	%											5.3	%
Variable rate receivable					0.7	%											0.7	%

	(local currency million, except percentages)

Currency swaps:
Principal receivable (sterling)		—			—			—			—			250			250			(13	)
Fixed rate receivable														6.0	%		6.0	%
Principal payable (US dollar)		—			—			—			—			415			415
Fixed rate payable														6.2	%		6.2	%


	(local currency million, except percentages)

Interest rate swaps:
Principal (US dollar)		—		100		—	—	—	100		(2	)
Fixed rate payable				2.0	%				2.0	%
Variable rate receivable				0.3	%				0.3	%
Principal (euro)		75		—		—	—	—	75		(2	)
Fixed rate payable		5.3	%						5.3	%
Variable rate receivable		1.0	%						1.0	%


	(local currency million, except percentages)

Currency swaps:
Principal receivable (sterling)		—	—	—	—	250		250		(38	)
Fixed rate receivable						6.0	%	6.0	%
Principal payable (US dollar)		—	—	—	—	415		415
Fixed rate payable						6.2	%	6.2	%


(i)		Represents the net present value of the expected cash flows discounted at current market rates of interest, except for the public bonds which are shown at market value.


ITEM 12.	*DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES*

Fees and ~~charges payable~~Charges Payable to a ~~depositary~~Depositary


Category (as defined by SEC)	Depositary actions	Associated fee

(a) Depositing or substituting the underlying shares	Each person to whom ADRs are issued against deposits of Shares, including deposits and issuances in respect of:	$5 for each 100 ADSs (or portion thereof)
	• share distributions, stock split, rights, merger
	• Exchange of securities or any other transactions or event or other distribution affecting the ADSs or the Deposited Securities	~~$5 for each 100 ADSs (or portion thereof)~~
(b) Receiving or distributing dividends	• Distribution of stock dividends	$5 for each 100 ADSs (or portion thereof)
	• Distribution of cash	$0.02 or less per ADS (or portion thereof)*
(c) Selling or exercising rights	Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities	$5.00 for each 100 ADSs (or portion thereof)
(d) Withdrawing an underlying security	Acceptance of ADRs surrendered for withdrawal of deposited securities	$5.00 for each 100 ADSs (or portion thereof)
(e) Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts	$1.50 per ADS
(f) General depositary services, particularly those charged on an annual basis	• Other services performed by the depositary in administering the ADRs	$0.02 per ADS (or portion thereof)* not more than once each calendar year and payable at the sole discretion of the depositary by billing Holders or by deducting such charge from one or more cash dividends or other cash distributions
(g) Expenses of the depositary	Expenses incurred on behalf of Holders in connection with: • Compliance with foreign exchange control regulations or any law or regulation relating to foreign investment ~~• The depositary’s or its custodian’s compliance with applicable law, rule or regulation~~ ~~• Stock transfer or other taxes and other governmental charges~~ ~~• Cable, telex, facsimile transmission/delivery~~ ~~• transfer or registration fees in connection with the deposit and withdrawal of Deposited Securities~~ ~~• Expenses of the depositary in connection with the conversion of foreign currency into US dollars (which are paid out of such foreign currency)~~ ~~• Any other charge payable by depositary or its agents~~	Expenses payable at the sole discretion of the depositary by billing Holders or by deducting charges from one or more cash dividends or other cash distributions ~~$20~~ $20 per transaction
	• The depositary’s or its custodian’s compliance with applicable law, rule or regulation
	• Stock transfer or other taxes and other governmental charges
	• Cable, telex, facsimile transmission/delivery
	• transfer or registration fees in connection with the deposit and withdrawal of Deposited Securities
	• Expenses of the depositary in connection with the conversion of foreign currency into US dollars (which are paid out of such foreign currency)
	• Any other charge payable by depositary or its agents


*		These fees are not currently being charged by the depositary.

Fees and ~~charges payable~~Charges Payable by a ~~depositary~~Depositary

Direct ~~payments~~Payments

~~JP Morgan~~JPMorgan Chase Bank, N.A. is the depositary for IHG’s ADS program. The depositary’s principal executive office is at: ~~Four~~1 Chase Manhattan Plaza, Floor 58, New York, ~~Plaza, New York 10004,~~NY10005-1401, United States of America. The depositary, has agreed to reimburse certain reasonable Company expenses related to the Company’s ADR Program and incurred by the Company in connection with the ADR Program. In the year ended 2009, the depositary reimbursed $270,000. The amounts the depositary reimbursed are not perforce related to the fees collected by the depositary from ADR holders. The table below sets forth the types of expenses that J.P. Morgan has agreed to reimburse and the amounts reimbursed inDuring the year ended December 31, ~~2009.~~



~~Category of expenses~~		~~Amount reimbursed for fiscal year ended December 31, 2009~~ ~~$000~~
~~Legal, accounting and other fees incurred in connection with preparation of Form 20-F and ongoing SEC compliance and listing requirements~~		~~178~~
~~Investor relations~~		37
~~Advertising and public relations~~		55

2010 the Company received $296,016.62 from the depositary in respect of legal, accounting and other fees incurred in connection with preparation of Form 20-F and ongoing SEC compliance and listing requirements, investor relations programs and advertising and public relations expenditure.

Indirect ~~payments~~Payments

As part of its service to the Company, ~~J.P. Morgan~~JPMorgan has agreed to waive fees for the standard costs associated with the administration of the ADR Program, associated operating expenses and investor relations ~~advice estimated to total $20,000. The table below sets forth the fees that J.P. Morgan has agreed to waive and/or expenses that J.P. Morgan has agreed to pay in~~advice. In the year ended December 31, ~~2009.~~



~~Category of expenses~~		~~Amount waived or paid for fiscal year ended December 31, 2009~~
		~~$000~~
~~Fees waived~~		20

2010, JPMorgan agreed to waive fees and expenses amounting to $20,000.

PART II


ITEM 13.	*DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES*

None.


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

None.


ITEM 15.	*CONTROLS AND PROCEDURES*

Disclosure ~~controls~~Controls and ~~procedures~~Procedures

As at the end of the period covered by this report, the Group carried out an evaluation under the supervision and with the participation of the Group’s management, including the Chief Executive and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined inRules 13a-15(c) and15d-15(e)). These are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the specified periods. Based on that evaluation, the Chief Executive and Chief Financial Officer concluded that the Group’s disclosure controls and procedures were effective.

Management’s ~~report~~Report on ~~internal control over financial reporting~~Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-15(f) or15d-15(f) promulgated under the Securities Exchange Act of 1934.

Management has issued a report on the effectiveness of the Group’s Internal Control over Financial reporting as at December 31, ~~2009.~~2010. This report appears onpage F-1 of the Group’s Consolidated Financial Statements contained in this Annual Report.

Ernst & Young LLP, an independent registered public accounting firm, has issued an attestation report on the Company’s internal control over financial reporting. This report appears onpage F-2 of the Group’s Consolidated Financial Statements contained in this Annual Report.

Changes in ~~internal control over financial reporting~~Internal Control Over Financial Reporting

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


ITEM 16.	*[RESERVED]*


ITEM 16A.	*AUDIT COMMITTEE FINANCIAL EXPERT*

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


ITEM 16B.	*CODE OF ETHICS*

The Board has adopted a global Code of Ethics and Business Conduct that applies to all directors, officers and employees of the Group, including the Chief Executive and Chief Financial Officer. This Code of Ethics has been signed by the Chief Executive and the Chief Financial Officer of the Company and by the Group Financial Controller and regional financial heads. The Company has published its Code of Ethics and Business Conduct on its website www.ihgplc.com.


ITEM 16C.	*PRINCIPAL ACCOUNTANT FEES AND SERVICES*

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


					Year ended December 31,
	Year ended December 31,				2010		2009
	2009		2008		($ million)
	($ million)
Audit fees		4.2		3.3		3.8		4.2
Audit related fees		1.8		3.2		2.0		1.8
Tax fees		1.7		1.0		2.1		1.7

Total		7.7		7.5		7.9		7.7

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

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

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


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

Not applicable.


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

Period of fiscal year
(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

units) purchased (or unit or programs plans or programs
Month 1 (no purchases in this month) 0 0.00 0. 38,694,043
Month 2 (no purchases in this month) 0 0.00 0 38,694,043
Month 3 (no purchases in this month) 0 0.00 0 38,694,043
Month 4 (no purchases in this month) 0 0.00 0 38,694,043
Month 5 (no purchases in this month) 0 0.00 0 38,694,043
Month 6 (no purchases in this month) 0 0.00 0 28,557,390 *
Month 7 (no purchases in this month) 0 0.00 0 28,557,390
Month 8 (no purchases in this month) 0 0.00 0 28,557,390
Month 9 (no purchases in this month) 0 0.00 0 28,557,390
Month 10 (no purchases in this month) 0 0.00 0 28,557,390
Month 11 (no purchases in this month) 0 0.00 0 28,557,390
Month 12 (no purchases in this month) 0 0.00 0 28,557,390


							(d) Maximum
					(c) Total number		number (or
					of shares (or		approximate dollar
			(b) Average		units) purchased		value) of shares (or
	(a) Total number		price paid		as part of publicly		units) that may yet be
	of shares (or		per share		announced plans		purchased under the
Period of fiscal year	units) purchased		(or unit)		or programs		plans or programs

Month 1 (no purchases in this month)		866,100		£9.24		0		28,557,390
Month 2 (no purchases in this month)		500,000		£8.98		0		28,557,390
Month 3 (no purchases in this month)		215,900		£9.71		0		28,557,390
Month 4 (no purchases in this month)		0		0.00		0		28,557,390
Month 5 (no purchases in this month)		0		0.00		0		28,557,390
Month 6 (no purchases in this month)		0		0.00		0		28,777,533	*
Month 7 (no purchases in this month)		0		0.00		0		28,777,533
Month 8 (no purchases in this month)		0		0.00		0		28,777,533
Month 9 (no purchases in this month)		0		0.00		0		28,777,533
Month 10 (no purchases in this month)		27,000		£11.53		0		28,777,533
Month 11 (no purchases in this month)		0		0.00		0		28,777,533
Month 12 (no purchases in this month)		1,500,000		£12.32		0		28,777,533


*		Reflects the resolution passed at the ~~company’s~~Company’s Annual General Meeting held on May ~~29, 2009.~~28, 2010.

The first share repurchase program was announced on March 11, 2004 with the intention to repurchase £250 million worth of shares. A second £250 million share repurchase program followed, announced September 9,

2004. A third £250 million share repurchase program was announced on September 8, 2005. These programs were completed on December 20, 2004, April 11, 2006, and June 28, 2007 respectively.

On February 20, 2007, the Company announced a fourth, £150 million share repurchase program. The Company deferred the remaining £30 million of its £150 million share repurchasing program in November 2008 in order to preserve cash and maintain the strength of the Group’s financial position. No shares were repurchased in ~~2009.~~2010. By March ~~19, 2010,~~25, 2011, 14,446,554 shares had been repurchased at an average price of 831 pence per share (approximately £120 million).

During fiscal ~~2009, 521,000~~2010, 3,109,000 ordinary shares were purchased by the Company’s Employee Share Ownership Trust at prices ranging from ~~599~~892 pence to ~~820~~1232 pence per share, for the purpose of satisfying future share awards to employees.


ITEM 16F.	*CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT*

Not applicable.


ITEM 16G.	*SUMMARY OF SIGNIFICANT CORPORATE GOVERNANCE DIFFERENCES FROM NYSE LISTING STANDARDS*

The Group is committed to compliance with the principles of corporate governance and aims to follow the corporate governance practices specified in the Combined Code on Corporate Governance, the “Combined Code” issued by the Financial Services Authority in the United Kingdom.

IHG has also adopted the corporate governance requirements of the US Sarbanes-Oxley Act and related rules and of the NYSE, to the extent that they are applicable to it as a foreign private issuer. As a foreign private issuer IHG is required to disclose any significant ways in which its corporate governance practices differ from those followed by US companies. These are as follows:

Basis of regulation

The Combined Code contains a series of principles and provisions. It is not, however, mandatory for companies to follow these principles. Instead, companies must disclose how they have applied them and disclose, if applicable, any areas of non-compliance along with an explanation for the non-compliance. In contrast, US companies listed on the NYSE are required to adopt and disclose corporate governance guidelines adopted by the NYSE. IHG’s statement of compliance with the UK Combined Code’s requirements for ~~2009~~2010 is contained in the Company’s Annual Report and Financial Statements for the year ended December 31, ~~2009.~~2010.

Independent Directors

The Combined Code’s principles recommend that at least half the Board, excluding the Chairman, should consist of independent Non-Executive Directors. As at March ~~19, 2010~~25, 2011 the Board consisted of the Chairman, independent at the time of his appointment, ~~two~~four Executive Directors and six independent Non-Executive Directors. NYSE listing rules applicable to US companies state that companies must have a majority of independent directors. The NYSE set out five bright line tests for director independence. The Board’s ~~judgement~~judgment is that all of its Non-Executive Directors are independent. However it did not explicitly take into consideration the NYSE’s tests in reaching this determination.

Chairman and Chief Executive

The Combined Code recommends that the Chairman and Chief Executive should not be the same individual to ensure that there is a clear division of responsibility for the running of the Company’s business. There is no corresponding requirement for US companies. The roles of Chairman and Chief Executive were, as at March ~~19, 2010~~25, 2011 and throughout ~~2009~~2010 fulfilled by separate individuals.

Committees

The Company has a number of Board Committees which are similar in purpose and constitution to those required for domestic companies under NYSE rules. The Remuneration, Audit and Nomination Committees consist

only of Non-Executive Directors. The NYSE requires US companies to have a nominating/corporate governance

committee composed entirely of independent directors. The committee is responsible for identifying individuals qualified to become Board members and to recommend to the Board a set of corporate governance principles. As the Company is subject to the Combined Code, the Company’s Nomination Committee is only responsible for nominating, for approval of the Board, candidates for appointment to the Board, though it also assists in developing the role of the Senior Independent Director. The Company’s Nomination Committee consists of the Company Chairman and all the independent Non-Executive Directors. The Chairman of the Company is not a member of either of the Remuneration or the Audit Committees. The Audit Committee is chaired by an independent Non-Executive Director who, in the Board’s view, has the experience and qualifications to satisfy the criteria under US rules for an “audit committee financial expert”.

Non-Executive Director ~~meetings~~Meetings

Non-management directors of US companies must meet on a regular basis without management present, and independent directors must meet separately at least once per year. The Company’s Non-Executive Directors have met without Executive Directors being present, and intend to continue this practice, before every Board meeting if possible.

Shareholder approval of ~~equity compensation plans~~Equity Compensation Plans

The NYSE rules require that shareholders must be given the opportunity to vote on all equity compensation plans and material revisions to those plans. The Company complies with UK requirements which are similar to the NYSE rules. The Board does not, however, explicitly take into consideration the NYSE’s detailed definition of “material revisions”.

Code of Ethics

The NYSE requires companies to adopt a code of business conduct and ethics, applicable to directors, officers and employees. Any waivers granted to directors or officers under such a code must be promptly disclosed. The Company’s Code of Ethics, applicable to all directors, officers and employees, is available on the Company’s website. No waivers have been granted under this Code.

Compliance Certification

Each Chief Executive of a US company must certify to the NYSE each year that he or she is not aware of any violation by the Company of any NYSE corporate governance listing standard. As the Company is a foreign private issuer, the Company’s Chief Executive is not required to make this certification. However he is required to notify the NYSE promptly in writing after any of the Company’s Executive Officers become aware of any ~~material~~ non-compliance with those NYSE corporate governance rules applicable to the Company.

PART III


ITEM 17.	*FINANCIAL STATEMENTS*

Not applicable.


ITEM 18.	*FINANCIAL STATEMENTS*

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


	Page

Management’s Report on Internal Control over Financial Reporting		F-1
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting		F-2
Report and Consent of Independent Registered Public Accounting Firm		~~F-4~~F-3
Financial Statements
Consolidated income statement for the years ended December 31, 2010, 2009 ~~2008~~ and ~~2007~~2008		F-5
Consolidated statement of comprehensive income for the years ended December 31, 2010, 2009 ~~2008~~ and ~~2007~~2008		F-6
Consolidated statement of changes in equity for the years ended December 31, 2010, 2009 ~~2008~~ and ~~2007~~2008		F-7
Consolidated statement of financial position for the years ended December 31, ~~2009~~2010 and ~~2008~~2009		~~F-9~~F-11
Consolidated statement of cash flows for the years ended December 31, 2010, 2009 ~~2008~~ and ~~2007~~2008		~~F-10~~F-12
Notes to the Consolidated Financial Statements		~~F-11~~F-13
Schedule for the years ended December 31, 2010, 2009 ~~2008, 2007, 2006~~ and ~~2005~~2008
Schedule II — Valuation and Qualifying Accounts		S-1


ITEM 19.	*EXHIBITS*

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


Exhibit 1		Articles of Association of IHG
Exhibit 4(a)(i)		Trust Deed dated November 27, 2009 relating to a £750 million Euro Medium Term Note Program, among InterContinental Hotels Group PLC, Six Continents Limited, InterContinental Hotels Limited and HSBC Corporate Trustee Company (UK) ~~Limited.~~Limited incorporated by reference to Exhibit 4(a)(i) of the InterContinental Hotels Group PLC Annual Report onForm 20-F (fileNo. 1-10409) dated April 1, 2010).
Exhibit 4(a)(ii)		$2,100 million Facility Agreement dated May 2, 2008 among Bank of America N.A., Bank of Tokyo-Mitsubishi UFJ Ltd., Barclays Capital, HSBC Bank plc, Lloyds TSB Bank plc, The Royal Bank of Scotland plc, Société Générale Corporate & Investment Banking and West LB AG (incorporated by reference to Exhibit 4(a)(i) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (FileNo. 1-10409) dated April 7, 2009)
Exhibit 4(b)(i)		Sale and Purchase Agreement dated March 10, 2006 among BHR Luxembourg S.à.r.l., Others, Cooperatie Westbridge Europe I.U.A., Others and Westbridge Hospitality Fund L.P. relating to a portfolio of certain companies and businesses in continental Europe (incorporated by reference to Exhibit 4(b)(viii) of the InterContinental Hotels Group PLC Annual Report onForm 20-F (FileNo. 1-10409) dated March 31, 2006)
Exhibit 4(b)(ii)		Sale and Purchase Agreement dated July 13, 2006 between BHR Holdings BV and MSREF VI Danube BV relating to the sale of certain companies and businesses in continental Europe and Side Letter dated September 5, 2006 (incorporated by reference to Exhibit 4(b)(ix) of the InterContinental Hotels Group PLC Annual Report onForm 20-F (FileNo. 1-10409) dated March 30, 2007)
Exhibit 4(c)(i)		James Abrahamson’s service contract dated January 5, 2009, as amended by a letter dated July 5, 2010.
Exhibit 4(c)(ii)		Kirk Kinsell’s service contract commencing on August 1, 2010, as amended by a letter dated July 5, 2010.
Exhibit 4(c)(iii)		Richard Solomons’ service contract dated March 16, 2011, commencing on July 1, 2011.


Exhibit 4(c)(iv)		Richard Solomons’ service contract dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(iv) of InterContinental Hotels Group PLC Annual Report onForm 20-F (FileNo. 1-10409) dated April 8, 2004)
Exhibit 4(c)~~(ii)~~(v)		Richard Solomons’ letter of appointment dated April 2005, effective from June 27, 2005 on completion of the Scheme of Arrangement and the introduction of the new parent company to the Group (incorporated by reference to Exhibit 4(c)(vi) of the InterContinental Hotels Group PLC Annual Report onForm 20-F (FileNo. 1-10409) dated March 31, 2006)
Exhibit 4(c)~~(iii)~~(vi)		Andrew Cosslett’s service contract dated December 13, 2004 (incorporated by reference to Exhibit 4(c)(v) of InterContinental Hotels Group PLC Annual Report onForm 20-F (FileNo. 1-10409) dated May 3, 2005)


Exhibit 4(c)~~(iv)~~(vii)		Andrew Cosslett’s letter of appointment dated April 2005, effective from June 27, 2005 on completion of the Scheme of Arrangement and the introduction of the new parent company to the Group (incorporated by reference to Exhibit 4(c)(viii) of the InterContinental Hotels Group PLC Annual Report onForm 20-F (FileNo. 1-10409) dated March 31, 2006)
Exhibit 8		List of Subsidiaries
Exhibit 12(a)		Certification of Andrew Cosslett filed pursuant to 17 CFR 240.13a-14(a)
Exhibit 12(b)		Certification of Richard Solomons filed pursuant to 17 CFR 240.13a-14(a)
Exhibit 13(a)		Certification of Andrew Cosslett and Richard Solomons furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.1350
Exhibit 15(a)		Consent of Ernst & Young LLP (included onpage F-4)

MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of InterContinental Hotels Group PLC (“Company” and together with its subsidiaries the “Group”) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined inRule 13a-15(f) or15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Group’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements for external purposes in accordance with generally accepted accounting principles.

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

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

In connection with the preparation of the Group’s annual Consolidated Financial Statements, management has undertaken an assessment of the effectiveness of the Group’s internal control over financial reporting as of December 31, ~~2009~~2010 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO”).

Based on this assessment, management has concluded that as of December 31, ~~2009,~~2010, the Group’s internal control over financial reporting is effective based on those criteria.

Ernst & Young LLP, the independent registered public accounting firm that audited the Group’s Consolidated Financial Statements, has issued an attestation report on the Group’s internal control over financial reporting, a copy of which appears on the next page of this Annual Report.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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

We have audited InterContinental Hotels Group PLC’s internal control over financial reporting as of December 31, ~~2009~~2010 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). InterContinental Hotels Group PLC’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanyingForm 20-F. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.

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

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

In our opinion, InterContinental Hotels Group PLC maintained, in all material ~~aspects,~~respects, effective internal control over financial reporting as of December 31, ~~2009,~~2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying Consolidated statements of financial position of InterContinental Hotels Group PLC as of December 31, ~~2009~~2010 and ~~2008,~~2009, and the related Consolidated income statements, Consolidated statements of comprehensive income, Consolidated statements of changes in equity and Consolidated statements of cash flows for each of the three years in the period ended December 31, ~~2009,~~2010, and the financial statement schedule listed in the Index at Item 18.Financial Statements, and our report dated April ~~1, 2010~~11, 2011 expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

London, England

April ~~1, 2010~~

11, 2011

F-2

INTERCONTINENTAL HOTELS GROUP PLC

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying Consolidated statements of financial position of InterContinental Hotels Group PLC as of December 31, ~~2009~~2010 and ~~2008,~~2009, and the related Consolidated income statements, Consolidated statements of comprehensive income, Consolidated statements of changes in equity and Consolidated statements of cash flows for each of the three years in the period ended December 31, ~~2009.~~2010. Our audits also included the financial statements schedule listed in the Index at Item 18. These financial statements and schedule are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of InterContinental Hotels Group PLC at December 31, ~~2009~~2010 and ~~2008,~~2009, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended December 31, ~~2009,~~2010, in accordance with International Financial Reporting Standards as adopted by the European Union and International Financial Reporting Standards as issued by the International Accounting Standards Board. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of InterContinental Hotels Group PLC’s internal control over financial reporting as of December 31, ~~2009,~~2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April ~~1, 2010~~11, 2011 expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

London, England

April ~~1, 2010~~

11, 2011

F-3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements(Form F-3No. 333-108084 andForm S-8 Nos.333-01572,333-08336,333-99785,333-104691 and333-126139) of InterContinental Hotels Group PLC of the reference to our name in “Item 3. Key information” and our reports dated April ~~1, 2010,~~11, 2011, with respect to the Consolidated Financial Statements and Schedule of InterContinental Hotels Group PLC, and the effectiveness of internal control over financial reporting of InterContinental Hotels Group PLC, included in this Annual Report(Form 20-F) for the year ended December 31, ~~2009.~~2010.

ERNST & YOUNG LLP

London, England

April ~~1, 2010~~11, 2011

F-4

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED INCOME STATEMENT


	Year ended December 31,									Year ended December 31,									Year ended December 31,									Year ended December 31,									Year ended December 31,									Year ended December 31,
	2009									2008									2007									2010									2009									2008
	Before			Exceptional						Before			Exceptional						Before			Exceptional						Before			Exceptional						Before			Exceptional						Before			Exceptional
	exceptional			items						exceptional			items						exceptional			items						exceptional			items						exceptional			items						exceptional			items
	items			(Note 5)			Total			items			(Note 5)			Total			items			(Note 5)			Total			items			(Note 5)			Total			items			(Note 5)			Total			items			(Note 5)			Total
	($ million)																											($ million)

Revenue (Note 2)		1,538			—			1,538			1,897			—			1,897			1,817			—			1,817			1,628			—			1,628			1,538			—			1,538			1,897			—			1,897
Cost of sales		(769	)		(91	)		(860	)		(852	)		—			(852	)		(856	)		—			(856	)		(753	)		—			(753	)		(769	)		(91	)		(860	)		(852	)		—			(852	)
Administrative expenses		(303	)		(83	)		(386	)		(400	)		(59	)		(459	)		(377	)		(14	)		(391	)		(331	)		(35	)		(366	)		(303	)		(83	)		(386	)		(400	)		(59	)		(459	)
Other operating income and expenses		6			(2	)		4			14			25			39			16			70			86			8			35			43			6			(2	)		4			14			25			39

		472			(176	)		296			659			(34	)		625			600			56			656			552			—			552			472			(176	)		296			659			(34	)		625
Depreciation and amortization (Note 2)		(109	)		—			(109	)		(110	)		(2	)		(112	)		(112	)		(2	)		(114	)		(108	)		—			(108	)		(109	)		—			(109	)		(110	)		(2	)		(112	)
Impairment (Note 2)		—			(197	)		(197	)		—			(96	)		(96	)		—			6			6			—			(7	)		(7	)		—			(197	)		(197	)		—			(96	)		(96	)

Operating (loss)/profit (Note 2)		363			(373	)		(10	)		549			(132	)		417			488			60			548
Operating profit/(loss) (Note 2)																													444			(7	)		437			363			(373	)		(10	)		549			(132	)		417
Financial income (Note 6)		3			—			3			12			—			12			18			—			18			2			—			2			3			—			3			12			—			12
Financial expenses (Note 6)		(57	)		—			(57	)		(113	)		—			(113	)		(108	)		—			(108	)		(64	)		—			(64	)		(57	)		—			(57	)		(113	)		—			(113	)

(Loss)/profit before tax		309			(373	)		(64	)		448			(132	)		316			398			60			458
Profit/(loss) before tax																													382			(7	)		375			309			(373	)		(64	)		448			(132	)		316
Tax (Note 7)		(15	)		287			272			(101	)		42			(59	)		(89	)		60			(29	)		(98	)		1			(97	)		(15	)		287			272			(101	)		42			(59	)

Profit for the year from continuing operations		294			(86	)		208			347			(90	)		257			309			120			429			284			(6	)		278			294			(86	)		208			347			(90	)		257
Profit for the year from discontinued operations (Note 11)		—			6			6			—			5			5			2			32			34			—			2			2			—			6			6			—			5			5

Profit for the year		294			(80	)		214			347			(85	)		262			311			152			463			284			(4	)		280			294			(80	)		214			347			(85	)		262

Attributable to:
Equity holders of the parent		293			(80	)		213			347			(85	)		262			311			152			463			284			(4	)		280			293			(80	)		213			347			(85	)		262
Non-controlling interest		1			—			1			—			—			—			—			—			—			—			—			—			1			—			1			—			—			—

																													284			(4	)		280			294			(80	)		214			347			(85	)		262

Earnings per ordinary share (Note 9)
Continuing operations:
Basic								72.6¢									89.5¢									134.1¢									96.5¢									72.6¢									89.5¢
Diluted								70.2¢									86.8¢									130.4¢									93.9¢									70.2¢									86.8¢
Total operations:
Basic								74.7¢									91.3¢									144.7¢									97.2¢									74.7¢									91.3¢
Diluted								72.2¢									88.5¢									140.7¢									94.6¢									72.2¢									88.5¢

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

F-5

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


	Year ended			Year ended			Year ended			Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2009			2008			2007			2010			2009			2008
	($ million)									($ million)

Profit for the year		214			262			463			280			214			262

Other comprehensive income
Available-for-sale financial assets:
Gains/(losses) on valuation		11			(4	)		8			17			11			(4	)
Losses/(gains) reclassified to income on impairment/disposal		4			(17	)		(20	)		1			4			(17	)
Cash flow hedges:
Losses arising during the year		(7	)		(14	)		(2	)		(4	)		(7	)		(14	)
Reclassified to financial expenses		11			2			(2	)		6			11			2
Defined benefit pension plans:
Actuarial (losses)/gains, net of related tax credit of $1m (2008 $13m, 2007 $nil)		(57	)		(23	)		25
Decrease/(increase) in asset restriction on plans in surplus		21			(14	)		(17	)
Exchange differences on retranslation of foreign operations, including related tax credit of $4m (2008 $1m, 2007 $nil)		43			(56	)		25
Actuarial losses, net of related tax credit of $7m (2009 $1m, 2008 $13m)											(38	)		(57	)		(23	)
Change in asset restriction on plans in surplus and liability in respect of funding commitments, net of related tax credit of $10m (2009 $nil, 2008 $nil)											(38	)		21			(14	)
Exchange differences on retranslation of foreign operations, including related tax credit of $1m (2009 $4m, 2008 $1m)											(4	)		43			(56	)
Tax related to pension contributions		—			8			11			7			—			8

Other comprehensive income/(loss) for the year		26			(118	)		28
Other comprehensive (loss)/income for the year											(53	)		26			(118	)

Total comprehensive income for the year		240			144			491
Total comprehensive income for the year attributable to equity holders of the parent											227			240			144

Attributable to:
Equity holders of the parent		240			144			489
Non-controlling interest		—			—			2

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

F-6

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


	Share capital						Retained earnings and other reserves																																			Retained earnings and other reserves
													Shares																																			Shares
													held by						Unrealized																		Share Capital											held by						Unrealized
	Number									Capital			employee						gains and			Currency						IHG			Non-						Number								Capital			employee						gains and			Currency						IHG			Non-
	of			Nominal			Share			redemption			share			Other			losses			translation			Retained			shareholders’			controlling			Total			of		Nominal			Share			redemption			share			Other			losses			translation			Retained			shareholders’			controlling		Total
	shares⁽ⁱ⁾			value⁽ⁱ⁾			premium⁽ⁱⁱ⁾			reserve⁽ⁱⁱ⁾			trusts⁽ⁱⁱⁱ⁾			reserves^(iv)			reserve^(v)			reserve^(vi)			earnings			equity			interest			equity			shares⁽ⁱ⁾		value⁽ⁱ⁾			premium⁽ⁱⁱ⁾			reserve⁽ⁱⁱ⁾			trusts⁽ⁱⁱⁱ⁾			reserves^(iv)			reserve^(v)			reserve^(vi)			earnings			equity			interest		equity
	($ million, number of shares — millions)																																				($ million, number of shares — millions)

At January 1, 2007		356			80			49			8			(33	)		(2,914	)		53			209			3,878			1,330			16			1,346
Total comprehensive income for the year		—			—			—			—			—			—			(16	)		24			481			489			2			491
Issue of ordinary shares		4			1			31			—			—			—			—			—			—			32			—			32
Repurchase of shares		(8	)		(2	)		—			—			—			—			—			—			(160	)		(162	)		—			(162	)
Share capital consolidation		(57	)		—			—			—			—			—			—			—			—			—			—			—
Transfer to capital redemption reserve		—			—			—			2			—			—			—			—			(2	)		—			—			—
Purchase of own shares by employee share trusts		—			—			—			—			(138	)		—			—			—			—			(138	)		—			(138	)
Release of own shares by employee share trusts		—			—			—			—			89			—			—			—			(80	)		9			—			9
Equity-settled share-based cost		—			—			—			—			—			—			—			—			60			60			—			60
Tax related to share schemes		—			—			—			—			—			—			—			—			(4	)		(4	)		—			(4	)
Disposals		—			—			—			—			—			—			—			—			—			—			(12	)		(12	)
Equity dividends paid		—			—			—			—			—			—			—			—			(1,524	)		(1,524	)		—			(1,524	)
Exchange and other adjustments		—			2			2			—			(1	)		(4	)		1			—			—			—			—			—
At January 1, 2010																																						287		63			79			11			(4	)		(2,900	)		29			215			2,656			149			7		156
																		��
At December 31, 2007		295			81			82			10			(83	)		(2,918	)		38			233			2,649			92			6			98
Total comprehensive income for the year		—			—			—			—			—			—			(29	)		(61	)		234			144			—			144
Issue of ordinary shares		—			—			2			—			—			—			—			—			—			2			—			2
Repurchase of shares		(9	)		(3	)		—			—			—			—			—			—			(136	)		(139	)		—			(139	)
Transfer to capital redemption reserve		—			—			—			3			—			—			—			—			(3	)		—			—			—
Purchase of own shares by employee share trusts		—			—			—			—			(24	)		—			—			—			—			(24	)		—			(24	)
Release of own shares by employee share trusts		—			—			—			—			39			—			—			—			(53	)		(14	)		—			(14	)
Equity-settled share-based cost		—			—			—			—			—			—			—			—			49			49			—			49
Tax related to share schemes		—			—			—			—			—			—			—			—			2			2			—			2
Equity dividends paid		—			—			—			—			—			—			—			—			(118	)		(118	)		—			(118	)
Exchange and other adjustments		—			(21	)		(23	)		(3	)		19			28			—			—			—			—			1			1
Profit for the year																																						—		—			—			—			—			—			—			—			280			280			—		280
Other comprehensive income:
Gains on valuation ofavailable-for-sale financial assets																																						—		—			—			—			—			—			17			—			—			17			—		17
Losses reclassified to income on impairment ofavailable-for-sale financial assets																																						—		—			—			—			—			—			1			—			—			1			—		1
Losses on cash flow hedges																																						—		—			—			—			—			—			(4	)		—			—			(4	)		—		(4	)
Amounts reclassified to financial expenses on cash flow hedges																																						—		—			—			—			—			—			6			—			—			6			—		6
Actuarial losses on defined benefit pension plans																																						—		—			—			—			—			—			—			—			(38	)		(38	)		—		(38	)
Change in asset restriction on pension plans in surplus and liability in respect of funding commitments																																						—		—			—			—			—			—			—			—			(38	)		(38	)		—		(38	)
Exchange differences on retranslation of foreign operations																																						—		—			—			—			—			—			—			(4	)		—			(4	)		—		(4	)
Tax related to pension contributions																																						—		—			—			—			—			—			—			—			7			7			—		7

At December 31, 2008		286			57			61			10			(49	)		(2,890	)		9			172			2,624			(6	)		7			1
Total other comprehensive income																																						—		—			—			—			—			—			20			(4	)		(69	)		(53	)		—		(53	)

Total comprehensive income for the year		—			—			—			—			—			—			20			43			177			240			—			240			—		—			—			—			—			—			20			(4	)		211			227			—		227
Issue of ordinary shares		1			—			11			—			—			—			—			—			—			11			—			11			2		1			18			—			—			—			—			—			—			19			—		19
Purchase of own shares by employee share trusts		—			—			—			—			(6	)		—			—			—			—			(6	)		—			(6	)		—		—			—			—			(53	)		—			—			—			—			(53	)		—		(53	)
Release of own shares by employee share trusts		—			—			—			—			55			—			—			—			(61	)		(6	)		—			(6	)		—		—			—			—			21			—			—			—			(26	)		(5	)		—		(5	)
Equity-settled share-based cost		—			—			—			—			—			—			—			—			24			24			—			24			—		—			—			—			—			—			—			—			33			33			—		33
Tax related to share schemes		—			—			—			—			—			—			—			—			10			10			—			10			—		—			—			—			—			—			—			—			22			22			—		22
Equity dividends paid		—			—			—			—			—			—			—			—			(118	)		(118	)		—			(118	)		—		—			—			—			—			—			—			—			(121	)		(121	)		—		(121	)
Exchange and other adjustments		—			6			7			1			(4	)		(10	)		—			—			—			—			—			—
Exchange																																						—		(3	)		(3	)		(1	)		1			6			—			—			—			—			—		—

At December 31, 2009		287			63			79			11			(4	)		(2,900	)		29			215			2,656			149			7			156
At December 31, 2010																																						289		61			94			10			(35	)		(2,894	)		49			211			2,775			271			7		278

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

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

F-7

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY — (Continued)


					Retained earnings and other reserves
									Shares
	Share Capital								held by						Unrealized
	Number						Capital		employee						gains and			Currency					IHG			Non-
	of		Nominal		Share		redemption		share			Other			losses			translation		Retained			shareholders’			controlling			Total
	shares⁽ⁱ⁾		value⁽ⁱ⁾		premium⁽ⁱⁱ⁾		reserve⁽ⁱⁱ⁾		trusts⁽ⁱⁱⁱ⁾			reserves^(iv)			reserve^(v)			reserve^(vi)		earnings			equity			interest			equity
	($ million, number of shares — millions)

At January 1, 2009		286		57		61		10		(49	)		(2,890	)		9			172		2,624			(6	)		7			1

Profit for the year		—		—		—		—		—			—			—			—		213			213			1			214
Other comprehensive income:
Gains on valuation ofavailable-for-sale financial assets		—		—		—		—		—			—			11			—		—			11			—			11
Losses reclassified to income on impairment ofavailable-for-sale financial assets		—		—		—		—		—			—			4			—		—			4			—			4
Losses on cash flow hedges		—		—		—		—		—			—			(7	)		—		—			(7	)		—			(7	)
Amounts reclassified to financial expenses on cash flow hedges		—		—		—		—		—			—			11			—		—			11			—			11
Actuarial losses on defined benefit pension plans		—		—		—		—		—			—			—			—		(57	)		(57	)		—			(57	)
Change in asset restriction on pension plans in surplus		—		—		—		—		—			—			—			—		21			21			—			21
Exchange differences on retranslation of foreign operations		—		—		—		—		—			—			1			43		—			44			(1	)		43

Total other comprehensive income		—		—		—		—		—			—			20			43		(36	)		27			(1	)		26

Total comprehensive income for the year		—		—		—		—		—			—			20			43		177			240			—			240
Issue of ordinary shares		1		—		11		—		—			—			—			—		—			11			—			11
Purchase of own shares by employee share trusts		—		—		—		—		(6	)		—			—			—		—			(6	)		—			(6	)
Release of own shares by employee share trusts		—		—		—		—		55			—			—			—		(61	)		(6	)		—			(6	)
Equity-settled share-based cost		—		—		—		—		—			—			—			—		24			24			—			24
Tax related to share schemes		—		—		—		—		—			—			—			—		10			10			—			10
Equity dividends paid		—		—		—		—		—			—			—			—		(118	)		(118	)		—			(118	)
Exchange		—		6		7		1		(4	)		(10	)		—			—		—			—			—			—

At December 31, 2009		287		63		79		11		(4	)		(2,900	)		29			215		2,656			149			7			156

All items are shown net of tax.

F-8

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY — (Continued)


							Retained earnings and other reserves
													Shares
	Share Capital												held by						Unrealized
	Number									Capital			employee						gains and			Currency						IHG			Non-
	of			Nominal			Share			redemption			share			Other			losses			translation			Retained			shareholders’			controlling		Total
	shares⁽ⁱ⁾			value⁽ⁱ⁾			premium⁽ⁱⁱ⁾			reserve⁽ⁱⁱ⁾			trusts⁽ⁱⁱⁱ⁾			reserves^(iv)			reserve^(v)			reserve^(vi)			earnings			equity			interest		equity
	($ million, number of shares — millions)

At January 1, 2008		295			81			82			10			(83	)		(2,918	)		38			233			2,649			92			6		98


Profit for the year		—			—			—			—			—			—			—			—			262			262			—		262
Other comprehensive income:
Losses on valuation ofavailable-for-sale financial assets		—			—			—			—			—			—			(4	)		—			—			(4	)		—		(4	)
Gains reclassified to income on disposal ofavailable-for-sale financial assets		—			—			—			—			—			—			(17	)		—			—			(17	)		—		(17	)
Losses on cash flow hedges		—			—			—			—			—			—			(14	)		—			—			(14	)		—		(14	)
Amounts reclassified to financial expenses on cash flow hedges		—			—			—			—			—			—			2			—			—			2			—		2
Actuarial losses on defined benefit pension plans		—			—			—			—			—			—			—			—			(23	)		(23	)		—		(23	)
Change in asset restriction on pension plans in surplus		—			—			—			—			—			—			—			—			(14	)		(14	)		—		(14	)
Exchange differences on retranslation of foreign operations		—			—			—			—			—			—			4			(61	)		1			(56	)		—		(56	)
Tax related to pension contributions		—			—			—			—			—			—			—			—			8			8			—		8

Total other comprehensive income		—			—			—			—			—			—			(29	)		(61	)		(28	)		(118	)		—		(118	)

Total comprehensive income for the year		—			—			—			—			—			—			(29	)		(61	)		234			144			—		144
Issue of ordinary shares		—			—			2			—			—			—			—			—			—			2			—		2
Repurchase of shares		(9	)		(3	)		—			—			—			—			—			—			(136	)		(139	)		—		(139	)
Transfer to capital redemption reserve		—			—			—			3			—			—			—			—			(3	)		—			—		—
Purchase of own shares by employee share trusts		—			—			—			—			(24	)		—			—			—			—			(24	)		—		(24	)
Release of own shares by employee share trusts		—			—			—			—			39			—			—			—			(53	)		(14	)		—		(14	)
Equity-settled share-based cost		—			—			—			—			—			—			—			—			49			49			—		49
Tax related to share schemes		—			—			—			—			—			—			—			—			2			2			—		2
Equity dividends paid		—			—			—			—			—			—			—			—			(118	)		(118	)		—		(118	)
Exchange and other adjustments		—			(21	)		(23	)		(3	)		19			28			—			—			—			—			1		1

At December 31, 2008		286			57			61			10			(49	)		(2,890	)		9			172			2,624			(6	)		7		1

All items are shown net of tax.

At December 31, 2007 the authorized share capital was £160,050,000 comprising 1,175,000,000 ordinary shares of 1329/47 pence each and one redeemable preference share of £50,000.

F-9


(i)		The Company was incorporated and registered in England and Wales with registered number 5134420 on May 21, 2004 as a limited company under the Companies Act 1985 with the name Hackremco (No. 2154) Limited. On March 24, 2005 Hackremco (No. 2154) Limited changed its name to New InterContinental Hotels Group Limited. On April 27, 2005 New InterContinental Hotels Group Limitedre-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 June 1, 2006, shareholders approved a share capital consolidation on the basis of seven new ordinary shares for every eight existing ordinary shares. This provided for all the authorized ordinary shares of 10 pence each (whether issued or unissued) to be consolidated into new ordinary shares of 113/7 pence each. The share capital consolidation became effective on June 12, 2006.

		On June 1, 2007, shareholders approved a share capital consolidation on the basis of 47 new ordinary shares for every 56 existing ordinary shares. This provided for all the authorized ordinary shares of 113/7 pence each (whether issued or unissued) to be consolidated into new ordinary shares of 1329/47 pence each. The share capital consolidation became effective on June 4, 2007.

		At September 30, 2009, the authorized share capital was £160,050,000, comprising 1,175,000,000 ordinary shares of 1329/47 pence each and one redeemable preference share of £50,000. As a result of the resolution passed at the Annual General Meeting on May 29, 2009 amending the ~~Articles~~articles of association in line with the Companies Act 2006, from October 1, 2009 the Company no longer has an authorized share capital.

		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 third of which was completed in the first half of 2007. In June 2007, a further £150 million share repurchase program commenced.

		During 2008, 9,219,325 (2007 7,724,844) ordinary shares were repurchased and canceled under the authorities granted by shareholders at the Extraordinary General Meeting held on June 1, 2007 and at the Annual General Meeting held on May 30, 2008. The Company deferred its £150 million share repurchase program in November 2008 in order to preserve cash and maintain the strength of the Group’s financial position. No shares were repurchased in 2010 or 2009.

		The authority given to the Company at the Annual General Meeting on May ~~29, 2009~~28, 2010 to purchase its own shares was still valid at December 31, ~~2009.~~2010. A resolution to renew the authority will be put to shareholders at the Annual General Meeting on May ~~28, 2010.~~27, 2011.

(ii)		The share premium reserve and capital redemption reserve are not distributable. The share premium reserve has a balance of $94 million (2009 $79 million, ~~(2008~~2008 $61 ~~million, 2007 $82~~ million) representing the amount of proceeds received for shares in excess of their nominal value. The capital redemption reserve maintains the nominal value of the equity share capital of the Company when shares are repurchased or canceled.

(iii)		The shares held by employee share trusts comprises $34.6 million (2009 $3.8 million, ~~(2008~~2008 $49.2 ~~million, 2007 $82.6~~ million) in respect of 1.9 million (2009 0.3 million, ~~(2008~~2008 3.0 ~~million, 2007 3.4~~ million) InterContinental Hotels Group PLC ordinary shares held by employee share trusts, with a market value at December 31, ~~2009~~2010 of $37 million (2009 $4 million, ~~(2008~~2008 $25 ~~million, 2007 $60~~ million).

(iv)		Other reserves comprises the merger and revaluation reserves previously recognized under UK GAAP, together with the reserve arising as a consequence of the Group’s capital reorganization in June 2005. Following the change in presentational currency to the US dollar in 2008, this reserve also includes exchange differences arising on the retranslation to period-end exchange rates of equity share capital, the capital redemption reserve and shares held by employee share trusts.

(v)		The unrealized gains and losses reserve records movements to fair value ofavailable-for-sale financial assets and the effective portion of the cumulative net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred.

		The fair value of cash flow hedging instruments outstanding at December 31, ~~2009~~2010 was a $4 million liability (2009 $7 million, ~~liability (2008~~2008 $10 ~~million liability, 2007 $3 million liability)~~million).

(vi)		The currency translation reserve records the movement in exchange differences arising from the translation of the financial statements of foreign operations and exchange differences on foreign currency borrowings and derivative instruments that provide a hedge against net investments in foreign operations. On adoption of IFRS, cumulative exchange differences were deemed to be $nil as permitted by IFRS 1.

		During the year ended December 31, 2009, the impact of hedging net investments in foreign operations was to increase the amount recorded in the currency translation reserve by $8 million (2008 reduce by $96 million, 2007 reduce by $14 million). The fair value of derivative instruments designated as hedges of net investments in foreign operations outstanding at December 31, ~~2009~~2010 was a $40 million liability (2009 $13 million, ~~liability (2008 $nil, 2007~~2008 $nil).

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

~~F-8~~

~~INTERCONTINENTAL HOTELS GROUP PLC~~

~~CONSOLIDATED STATEMENT OF~~

~~FINANCIAL POSITION~~

December 31,
December 31,

2009 2008
($ million)

ASSETS

Property, plant and equipment — (Note 10) 1,836 1,684
Goodwill — (Note 12) 82 143
Intangible assets — (Note 13) 274 302
Investment in associates — (Note 14) 45 43
Retirement benefit assets — (Note 3) 12 40
Other financial assets — (Note 15) 130 152
Deferred tax receivable — (Note 25) 95 —

Total non-current assets
2,474 2,364

Inventories — (Note 16) 4 4
Trade and other receivables — (Note 17) 335 412
Current tax receivable 35 36
Cash and cash equivalents — (Note 18) 40 82
Other financial assets — (Note 15) 5 10

Total current assets
419 544

Non-current assets classified as held for sale — (Note 11) — 210

Total assets (Note 2)
2,893 3,118

LIABILITIES

Loans and other borrowings — (Note 21) (106 ) (21 )
Trade and other payables — (Note 19) (688 ) (746 )
Provisions — (Note 20) (65 ) —
Current tax payable (194 ) (374 )

Total current liabilities
(1,053 ) (1,141 )

Loans and other borrowings — (Note 21) (1,016 ) (1,334 )
Retirement benefit obligations — (Note 3) (142 ) (129 )
Trade and other payables — (Note 19) (408 ) (392 )
Deferred tax payable — (Note 25) (118 ) (117 )

Total non-current liabilities
(1,684 ) (1,972 )

Liabilities classified as held for sale — (Note 11) — (4 )

Total liabilities (Note 2)
(2,737 ) (3,117 )

Net assets
156 1

EQUITY

Equity share capital 142 118
Capital redemption reserve 11 10
Shares held by employee share trusts (4 ) (49 )
Other reserves (2,900 ) (2,890 )
Unrealized gains and losses reserve 29 9
Currency translation reserve 215 172
Retained earnings 2,656 2,624

IHG shareholders’ equity
149 (6 )
Non-controlling interest
7 7

Total equity
156 1

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

~~F-9~~

~~INTERCONTINENTAL HOTELS GROUP PLC~~

~~CONSOLIDATED STATEMENT OF CASH FLOWS~~

Year ended
Year ended
Year ended

December 31,
December 31,
December 31,

2009 2008 2007
($ million)

Profit for the year
214 262 463
Adjustments for:
Net financial expenses 54 101 90
Income tax (credit)/charge (272 ) 59 30
Depreciation and amortization 109 112 116
Impairment 197 96 (6 )
Other exceptional operating items 176 34 (56 )
Gain on disposal of assets, net of tax (6 ) (5 ) (32 )
Equity-settled share-based cost, net of payments 14 31 48
Other items 1 3 (4 )

Operating cash flow before movements in working capital 487 693 649
Decrease/(increase) in trade and other receivables 58 42 (30 )
Increase in trade and other payables 1 81 52
Retirement benefit contributions, net of cost (2 ) (27 ) (66 )
Cash flows relating to exceptional operating items (60 ) (49 ) —

Cash flow from operations
484 740 605
Interest paid (53 ) (112 ) (84 )
Interest received 2 12 18
Tax (paid)/received on operating activities (1 ) 1 (74 )

Net cash from operating activities
432 641 465

Cash flow from investing activities

Purchases of property, plant and equipment (100 ) (53 ) (114 )
Purchases of intangible assets (33 ) (49 ) (40 )
Investment in associates and other financial assets (15 ) (6 ) (32 )
Disposal of assets, net of costs and cash disposed of 20 25 97
Proceeds from associates and other financial assets 15 61 114
Tax paid on disposals (1 ) (3 ) (64 )

Net cash from investing activities
(114 ) (25 ) (39 )

Cash flow from financing activities

Proceeds from the issue of share capital 11 2 32
Purchase of own shares — (139 ) (162 )
Purchase of own shares by employee share trusts (8 ) (22 ) (138 )
Proceeds on release of own shares by employee share trusts 2 2 21
Dividends paid to shareholders (118 ) (118 ) (1,524 )
Issue of £250m 6% bonds 411 — —
(Decrease)/increase in other borrowings (660 ) (316 ) 1,108

Net cash from financing activities
(362 ) (591 ) (663 )

Net movement in cash and cash equivalents in the year
(44 ) 25 (237 )
Cash and cash equivalents at beginning of the year 82 105 351
Exchange rate effects 2 (48 ) (9 )

Cash and cash equivalents at end of the year
40 82 105

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

F-10

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION


	At		At
	December 31,		December 31,
	2010		2009
	($ million)

ASSETS
Property, plant and equipment — (Note 10)		1,690		1,836
Goodwill — (Note 12)		92		82
Intangible assets — (Note 13)		266		274
Investment in associates — (Note 14)		43		45
Retirement benefit assets — (Note 3)		5		12
Other financial assets — (Note 15)		135		130
Deferred tax assets — (Note 25)		88		95

Total non-current assets		2,319		2,474

Inventories — (Note 16)		4		4
Trade and other receivables — (Note 17)		371		335
Current tax receivable		13		35
Cash and cash equivalents — (Note 18)		78		40
Other financial assets — (Note 15)		—		5

Total current assets		466		419

Total assets (Note 2)		2,785		2,893

LIABILITIES
Loans and other borrowings — (Note 22)		(18)		(106)
Derivative financial instruments — (Note 23)		(6)		(7)
Trade and other payables — (Note 19)		(722)		(668)
Provisions — (Note 20)		(30)		(65)
Current tax payable		(167)		(194)

Total current liabilities		(943)		(1,040)

Loans and other borrowings — (Note 22)		(776)		(1,016)
Derivative financial instruments — (Note 23)		(38)		(13)
Retirement benefit obligations — (Note 3)		(200)		(142)
Trade and other payables — (Note 19)		(464)		(408)
Provisions (Note 20)		(2)		—
Deferred tax liabilities — (Note 25)		(84)		(118)

Total non-current liabilities		(1,564)		(1,697)

Total liabilities (Note 2)		(2,507)		(2,737)

Net assets		278		156

EQUITY
Equity share capital		155		142
Capital redemption reserve		10		11
Shares held by employee share trusts		(35)		(4)
Other reserves		(2,894)		(2,900)
Unrealized gains and losses reserve		49		29
Currency translation reserve		211		215
Retained earnings		2,775		2,656

IHG shareholders’ equity		271		149
Non-controlling interest		7		7

Total equity		278		156

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

F-11

INTERCONTINENTAL HOTELS GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS


	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2010			2009			2008
	($ million)

Profit for the year		280			214			262
Adjustments for:
Net financial expenses		62			54			101
Income tax charge/(credit)		97			(272	)		59
Depreciation and amortization		108			109			112
Impairment		7			197			96
Other exceptional operating items		—			176			34
Gain on disposal of assets, net of tax		(2	)		(6	)		(5	)
Equity-settled share-based cost, net of payments		26			14			31
Other items		1			1			3

Operating cash flow before movements in working capital		579			487			693
(Increase)/decrease in trade and other receivables		(35	)		58			42
Net change in loyalty program liability and System Fund surplus		10			42			55
Increase/(decrease) in other trade and other payables		131			(41	)		26
Utilization of provisions		(54	)		—			—
Retirement benefit contributions, net of cost		(27	)		(2	)		(27	)
Cash flows relating to exceptional operating items		(21	)		(60	)		(49	)

Cash flow from operations		583			484			740
Interest paid		(59	)		(53	)		(112	)
Interest received		2			2			12
Tax (paid)/received on operating activities		(64	)		(1	)		1

Net cash from operating activities		462			432			641

Cash flow from investing activities
Purchases of property, plant and equipment		(62	)		(100	)		(53	)
Purchases of intangible assets		(29	)		(33	)		(49	)
Investment in associates and other financial assets		(4	)		(15	)		(6	)
Disposal of assets, net of costs and cash disposed of		107			20			25
Proceeds from associates and other financial assets		28			15			61
Tax paid on disposals		(4	)		(1	)		(3	)

Net cash from investing activities		36			(114	)		(25	)

Cash flow from financing activities
Proceeds from the issue of share capital		19			11			2
Purchase of own shares		—			—			(139	)
Purchase of own shares by employee share trusts		(53	)		(8	)		(22	)
Proceeds on release of own shares by employee share trusts		—			2			2
Dividends paid to shareholders		(121	)		(118	)		(118	)
Issue of £250m 6% bonds		—			411			—
Decrease in other borrowings		(292	)		(660	)		(316	)

Net cash from financing activities		(447	)		(362	)		(591	)

Net movement in cash and cash equivalents in the year		51			(44	)		25
Cash and cash equivalents at beginning of the year		40			82			105
Exchange rate effects		(13	)		2			(48	)

Cash and cash equivalents at end of the year		78			40			82

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

F-12


Note 1 —	Accounting policies

General information

The ~~Consolidated Financial Statements~~consolidated financial statements of InterContinental Hotels Group PLC (the “Group” or “IHG”) for the year ended December 31, ~~2009~~2010 were authorized for issue to the UK listing authorities in accordance with a resolution of the Directors on February ~~15, 2010.~~14, 2011. InterContinental Hotels Group PLC (the “Company”) is incorporated in Great Britain and registered in England and Wales.

On February 23, 2011, the Group received an unfavorable court judgment in respect of a prior year litigation claim. As required by IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and IAS 10 “Events after the Reporting Period”, the Consolidated Financial Statements for the year ended December 31, 2010, authorized by the Directors on April 11, 2011, for issue on Form 20-F include a litigation provision of $22 million ($13 million net of tax) to reflect this adjusting post balance sheet event.

The impact of the above adjusting post balance sheet event is summarized as follows:


	Consolidated Financial
	Statements authorized on
	February 14, 2011		April 11, 2011

Profit before tax ($ million)		397		375
Profit for the year ($ million)		293		280
Net assets ($ million)		291		278
Basic earnings per share (cents)		101.7		97.2
Diluted earnings per share (cents)		99.0		94.6

As the provision has been recorded as an exceptional item, there was no impact on results before exceptional items and adjusted earnings per share.

Summary of significant accounting policies

Basis of preparation

The Consolidated Financial Statements of IHG have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and in accordance with IFRS as adopted by the European Union (“EU”), and as applied in accordance with the provisions of the Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB, however, the differences have no impact on the Group’s Consolidated Financial Statements for the years presented.

Changes in accounting policies

With effect from January 1, ~~2009,~~2010, the Group has implemented ~~International Accounting Standard (“IAS”) 1~~the following new accounting standards, amendments and interpretations. None of these have had a material impact on the Group’s financial performance or position during the year and there has been no requirement to restate prior year comparatives.

IFRS 3 (Revised) ~~— “Presentation~~“Business Combinations” changes the accounting for transaction costs, the valuation of non-controlling interests, the initial recognition and subsequent measurement of contingent consideration, and business combinations achieved in stages. These changes will impact the amount of goodwill recognized and the reported results in the period when an acquisition occurs and future reported results. These changes only apply to new acquisitions and there have been none during the year.

IAS 27 (Revised) “Consolidated and Separate Financial Statements”, requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and such transactions no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost; any remaining interest in the entity is remeasured to fair value with a gain or loss recognized in profit or loss.

IFRIC 17 “Distribution of Non-cash assets to Owners” provides guidance on accounting for arrangements where non-cash assets are distributed to shareholders.

F-13

IAS ~~23 (Revised)~~39 (amendment) “Financial Instruments: Recognition and Measurement — ~~“Borrowing Costs”, Amendment~~Eligible Hedged Items” clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. The amendment also specifies that inflation is not a separately identifiable risk and cannot be designated as the hedged risk unless it represents a contractually specified cash flow.

IFRS 2 —(amendment) “Share-based Payment: ~~Vesting Conditions~~Group Cash-settled Share-based Payment Arrangements” provides guidance on accounting for inter-group cash-settled share-based payment transactions in the separate financial statements of an entity.

IFRS 5 (amendment) “Non-current Assets Held for Sale and ~~Cancellations”, Amendment to~~Discontinued Operations” clarifies that disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in IFRS ~~7 “Financial Instruments: Disclosures”,~~ 5.

IFRS 8 —(amendment) “Operating Segments”~~, International Financial Reporting Interpretations Committee Interpretation (“IFRIC”) 13 — “Customer Loyalty Programmes”~~ clarifies that segment assets and liabilities need only be reported when included in information reviewed by the chief operating decision maker.

IAS 7 (amendment) “Statement of Cash Flows” states that only expenditure resulting in recognition of an asset can be presented as a cash flow from investing activities.

IAS 17 (amendment) “Leases” clarifies that a lease of land should be classified as an operating or finance lease in accordance with the economic substance of the arrangement.

IAS 36 (amendment) “Impairment of Assets” clarifies that the largest permitted unit for allocation of goodwill is the IFRS 8 operating segment before aggregation for reporting purposes.

IFRIC 16 —(amendment) “Hedges of a Net Investment in a Foreign Operation”. removes the restriction on a hedged foreign operation holding the hedging instruments.

~~IAS 1 (Revised) — “Presentation of Financial Statements” has resulted~~Changes in ~~the introduction of the “Statement~~presentation

The Consolidated statement of changes in equity” as a primary financial statement. The revised standard also introduces the “Statement of comprehensive income”, presented either in a single statement or two linked statements. The Group has adopted the two statement approach.

IAS 23 (Revised) — “Borrowing Costs” requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset from January 1, 2009. The Group’s previous policy was to expense all borrowing costs as incurred. In accordance with the transitional provisions of IAS 23, the revised standardequity has been ~~adopted on a prospective basis and applied~~expanded to ~~projects commencing after January 1, 2009. No borrowing costs have been capitalized in the year.~~

~~Amendment to IFRS 2 — “Share-based Payment: Vesting Conditions and Cancellations” clarifies the definitions~~include an analysis of ~~vesting conditions and prescribes the treatment for canceled awards. The amendment has not impacted the Group’s financial performance or position.~~

~~Amendment to IFRS 7 “Financial Instruments: Disclosures” requires additional disclosures about fair value measurement and liquidity risk.~~other comprehensive income by each component of equity. The additional ~~and revised disclosures are~~information is presented ~~in Note 23.~~

~~IFRS 8 “Operating Segments” replaces IAS 14 “Segment Reporting”. The Group has concluded that the reportable segments determined~~ in accordance with ~~IFRS 8 are the same as the business segments previously reported under IAS 14. On adoption of IFRS 8, certain liabilities have been reclassified to Central functions as explained~~best practice and will become mandatory in ~~Note 2.~~2011.

~~IFRIC 13 “Customer Loyalty Programmes” requires customer loyalty credits to be accounted for as a separate component~~The fair values of ~~a sales transaction. The adoption of IFRIC 13 has not had a material impact~~derivative financial instruments are presented separately on the face of the Consolidated statement of financial ~~statements.~~position for the first time (previously included within current “Trade and other payables”) due to their increased materiality and in accordance with best practice.

~~IFRIC 16 “Hedges~~Net debt has been redefined to include the exchange element of ~~a Net Investment in a Foreign Operation” is applied prospectively from January 1, 2009 and has not impacted~~ the ~~effectiveness~~fair value of currency swaps that fix the value of the Group’s ~~net investment hedging arrangements.~~

~~There~~£250m 6% bonds. This change has been ~~no requirement~~made to ~~restate prior year comparatives as a result of adopting any~~reflect the commercial rationale of the ~~above.~~hedging relationship. See Notes 23 and 24 for further details.

~~F-11~~

Presentational currency

The Consolidated Financial Statements are presented in millions of US dollars following a management decision to change the reporting currency from sterling during 2008. The change was made to reflect the profile of the Group’s revenue and operating profit which are primarily generated in US dollars or US dollar-linked currencies.

The currency translation reserve was set to nil at January 1, 2004 on transition to IFRS and this reserve ~~has been re-presented~~is presented on the basis that the Group has reported in US dollars since this date. Equity share capital, the capital redemption reserve and shares held by employee share trusts are translated into US dollars at the rates of exchange on the last day of the period; the resultant exchange differences are recorded in other reserves.

The functional currency of the parent company remains sterling since this is a non-trading holding company located in the United Kingdom that has sterling denominated share capital and whose primary activity is the payment and receipt of interest on sterling denominated external borrowings and inter-company balances.

F-14

Basis of consolidation

The Consolidated Financial Statements comprise the financial statements of the parent company and entities controlled by the Company. All intra-group balances and transactions have been eliminated.

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

Foreign currencies

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

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

Property, plant and equipment

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

Borrowing costs attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to prepare for its intended use or sale are capitalized as part of the asset cost. All other borrowing costs are expensed as incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

~~Borrowing costs relating to assets where construction commenced on or after January 1, 2009 are capitalized. Borrowing~~ However, all borrowing costs relating to projects commencing before ~~this date are~~January 1, 2009 were expensed.

Repairs and maintenance costs are expensed as incurred.

~~F-12~~

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


Buildings		lesser of 50 years and unexpired term of lease; and
Fixtures, fittings and equipment		three to 25 years.

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

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

On adoption of IFRS, the Group retained previous revaluations of property, plant and equipment at deemed cost as permitted by IFRS 1 “First-time Adoption of International Financial Reporting ~~Standards.”~~Standards”.

F-15

Goodwill

Goodwill arises on consolidation and is recorded at cost, being the excess of the cost of acquisition over the fair value at the date of acquisition of the Group’s share of identifiable assets, liabilities and contingent liabilities. With effect from January 1, 2010, transaction costs are expensed and therefore not included in the cost of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is tested for impairment at least annually by comparing carrying values of cash-generating units with their recoverable amounts. Impairment losses cannot be subsequently reversed.

Intangible assets

Software

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

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

Management contracts

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

Other intangible assets

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

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

Associates

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

~~F-13~~

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

Financial assets

The Group classifies its financial assets into one of the two following categories: loans and receivables oravailable-for-sale financial assets. Management determines the classification of financial assets on initial recognition and they are subsequently held at amortized cost (loans and receivables) or fair value(available-for-sale financial assets). Interest on loans and receivables is calculated using the effective interest rate method and is recognized in the income statement as interest income.

Changes in fair values ofavailable-for-sale financial assets are recorded directly in equity within the unrealized gains and losses reserve. On disposal, the accumulated fair value adjustments recognized in equity are recycled to the income statement. Dividends fromavailable-for-sale financial assets are recognized in the income statement as other operating income and expenses.

F-16

Financial assets are ~~tested~~assessed for impairment at each period-end date. In the case of an equity investment classified asavailable-for-sale, a significant or prolonged decline in fair value below cost is evidence that the asset is impaired. If anavailable-for-sale financial asset is impaired, the difference between original cost and fair value is transferred from equity to the income statement to the extent of any cumulative loss recorded in equity, with any excess charged directly to the income statement.

~~Financial liabilities~~

~~Financial liabilities~~ Impairment losses on equity instruments are ~~measured at amortized cost using~~not reversed through the ~~effective interest rate method. A financial liability is derecognized when the obligation under the liability expires, is discharged or canceled.~~income statement.

Inventories

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

Trade receivables

Trade receivables are recorded at their original amount less provision for impairment. It is the Group’s policy to provide for 100% of the previous month’s aged receivables balances which are more than 180 days past due. Adjustments to the policy may be made due to specific or exceptional circumstances when collection is no longer considered probable. The carrying amount of the receivable is reduced through the use of a provision account and movements in the provision are recognized in the income statement within cost of sales. When a previously provided trade receivable is uncollectable, it is written off against the provision.

Cash and cash equivalents

Cash comprises cash in hand and demand deposits.

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

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

Assets held for sale

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

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

~~F-14~~

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

Financial liabilities

Financial liabilities are measured at amortized cost using the effective interest rate method. A financial liability is derecognized when the obligation under the liability expires, is discharged or canceled.

Trade payables

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

Bank and other borrowings

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

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

F-17

Derivative financial instruments and hedging

Derivatives are initially recognized and subsequently remeasured at fair value. The method of recognizing the remeasurement depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income and the unrealized gains and losses reserve to the extent that the hedges are effective. When the hedged item is recognized, the cumulative gains and losses on the related hedging instrument are reclassified to the income statement.

Changes in the fair value of derivatives designated as net investment hedges are recorded in other comprehensive income and the currency translation reserve to the extent that the hedges are effective. The cumulative gains and losses remain in equity until a foreign operation is sold, at which point they are reclassified to the income statement.

Changes in the fair value of derivatives which have either not been designated as hedging instruments or relate to the ineffective portion of hedges are recognized immediately in the income statement.

Documentation outlining the measurement and effectiveness of any hedging arrangements is maintained throughout the life of the hedge relationship.

Interest arising from currency derivatives and interest rate swaps is recorded in financial income or expenses on a net basis over the term of the agreement, unless the accounting treatment for the hedging relationship requires the interest to be taken to reserves.

Self insurance

The Group ~~is self-insured~~undertakes self insurance for various insurable risks including property damage/business interruption, fidelity guarantee, general liability, workers’ ~~compensation~~compensation/employers’ liability and employee medical and dental ~~coverage.~~coverage from time to time in line with economic conditions and trends within the global insurance market. Insurance reserves for self insurance include projected settlements for known and incurred but not reported claims. Projected settlements are estimated based on historical trends and actuarial data.

Provisions

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

An onerous contract provision is recognized when the unavoidable costs of meeting the obligations under ~~the~~a contract exceed the economic benefits expected to be received under it.

~~Bank and other borrowings~~

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

~~Derivative financial instruments and hedging~~

Derivatives designated as hedging instruments are accounted for in line with the nature of the hedging arrangement. The Group’s detailed accounting policies with respect to hedging instruments are set out in Note 22. Documentation outlining the measurement and effectiveness of the hedging arrangement is maintained throughout the life of the hedge relationship. Any ineffective element of a hedge arrangement is recognized in financial income or expenses.

Interest arising from currency derivatives and interest rate swaps is taken to financial income or expenses on a net basis over the term of the agreement, unless the accounting treatment for the hedging relationship requires the interest to be taken to reserves.

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

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

Taxes

Current tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities including interest. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period.

~~F-15~~

Deferred tax

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

F-18

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

Deferred tax is calculated at the tax rates that are expected to apply in the periods in which the asset or liability will be settled, based on rates enacted or substantively enacted at the end of the reporting period.

Retirement benefits

Defined contribution plans

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

Defined benefit plans

Plan assets are measured at fair value and plan liabilities are measured on an actuarial basis, using the projected unit credit method and discounting at an interest rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the plan liabilities. The difference between the value of plan assets and liabilities at the period-end date is the amount of surplus or deficit recorded in the statement of financial position as an asset or liability. An asset is recognized when the employer has an unconditional right to use the surplus at some point during the life of the plan or on its wind up. If a refund would be subject to a tax other than income tax, as is the case in the United Kingdom, the asset is recorded at the amount net of tax. A liability is also recorded for any such tax that would be payable in respect of funding commitments based on the accounting assumption that the related payments increase the asset.

The service cost of providing pension benefits to employees for the year is charged to the income statement. The cost of making improvements to pensions is recognized in the income statement on a straight-line basis over the period during which any increase in benefits vests. To the extent that improvements in benefits vest immediately, the cost is recognized immediately as an expense.

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

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

Revenue recognition

Revenue is the gross inflow of economic benefits received and receivable by the Group on its own account where those inflows result in increases in equity.

Revenue is derived from the following sources: franchise fees; management fees; owned and leased properties and other revenues which are ancillary to the Group’s operations, including technology fee income.

Generally, revenue represents sales (excluding VAT and similar taxes) of goods and services, net of discounts, provided in the normal course of business and recognized when services have been rendered. The following is a description of the composition of revenues of the Group.

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

~~F-16~~

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

F-19

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

Share-based payments

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

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

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

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

Leases

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

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

Disposal of non-current assets

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


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

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

	•	can reliably measure and will actually receive the proceeds.

Discontinued operations

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

~~F-17~~

Exceptional items

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

F-20

Use of accounting estimates and judgments

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

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


	•	Trade receivables — a provision for impairment of trade receivables is made on the basis of historical experience and other factors considered relevant by management.

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

	•	System ~~Funds~~Fund — Inin addition to management or franchise fees, hotels within the IHG system pay cash assessments and contributions which are collected by IHG for specific use within the System ~~Funds~~Fund (the ~~“Funds”~~“Fund”). ~~Under~~The Fund also receives proceeds from the ~~governance~~sale of Priority Club Rewards points. IHG exerts significant influence over the operation of the ~~IAHI,~~Fund, however the ~~Owners’ Association, IHG operates~~Fund is managed for the ~~Funds on behalf~~benefit of ~~hotel owners~~hotels in the system with the objective of driving revenues for ~~their~~the hotels. The ~~Funds are~~Fund is used to pay for marketing, the Priority Club Rewards loyalty program and the global reservation system. The ~~Funds are~~Fund is planned to operate at breakeven with any short-term timing surplus or deficit carried in ~~IHG’s~~the Consolidated statement of financial position within working capital.

As all Fund ~~assessments are~~income is designated for specific purposes and dodoes not result in a profit or loss for the Group, the revenue recognition criteria as outlined in the accounting policy above are not met and therefore the ~~revenue~~income and expenses of the ~~Funds~~Fund are not included in the Consolidated income statement.

The assets and liabilities relating to the ~~Funds~~Fund are included in the appropriate headings in the Consolidated statement of financial position ~~because~~as the related legal, but not beneficial, rights and obligations rest with the Group. These assets and liabilities include the Priority Club Rewards liability, short-term timing surpluses and deficits and any receivables and payables related to the ~~Funds.~~Fund.

The cash flows relating to the Fund are reported within ‘‘cash flow from operations’’ in the Consolidated statement of cash flows due to the close interrelationship between the Fund and the trading operations of the Group.

Further information on the ~~Funds~~Fund is included in Note 31.


	•	Loyalty program — ~~The~~the hotel loyalty program, Priority Club Rewards, enables members to earn points, funded through hotel assessments, during each qualifying stay at an IHG branded hotel and redeem points at a later date for free accommodation or other benefits. The future redemption liability is included in trade and other payables and is estimated using eventual redemption rates determined by actuarial methods and points values. Actuarial gains and losses on the future redemption liability are borne by the System ~~Funds~~Fund and any resulting changes in the liability would correspondingly adjust the amount of short-term timing differences held in the Consolidated statement of financial position.

	•	Retirement and other post-employment benefits — the cost of defined benefit pension plans and other post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making

~~F-18~~


		assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases.


	•	Tax — provisions for tax accruals require judgments on the interpretation of tax legislation, developments in tax case law and the potential outcomes of tax audits and appeals. In addition, deferred tax assets are recognized for unused tax attributes to the extent that it is probable that taxable profit will be available

F-21


		against which they can be utilized. Judgment is required as to the amount that can be recognized based on the likely amount and timing of future taxable profits, taking into account expected tax planning. Deferred tax balances are dependent on management’s expectations regarding the manner and timing of recovery of the related assets.


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

New standards ~~and interpretations~~issued but not effective

The ~~IASB and IFRIC have issued the~~ following accounting standards, amendments and interpretations with an effective date after the date of these financial ~~statements. They~~statements have not been adopted early by the Group and will be adopted in accordance with the effective date. The Directors do not anticipate that the adoption of these standards, amendments and interpretations will have a material impact on the Group’s reported income or net assets in the period of adoption.


~~IFRS 2~~		~~Share-based Payment (Amendment)~~ ~~Effective from January 1, 2010~~
~~IFRS 3R~~		~~Business Combinations~~ ~~Effective from July 1, 2009~~
~~IFRS 5~~		~~Non-current Assets Held for Sale and Discontinued Operations (Amendment)~~ ~~Effective from July 1, 2009~~
~~IAS 27R~~		~~Consolidated and Separate Financial Statements Effective from July 1, 2009~~
~~IAS 39~~		~~Financial Instruments: Recognition and Measurement (Amendment)~~ ~~Effective from July 1, 2009~~
~~IFRIC 17~~		~~Distribution of Non-cash Assets to Owners Effective from July 1, 2009~~

IFRS 9 “Financial Instruments: Classification and Measurement” which is effective from January 1, 2013, introduces new requirements for classifying and measuring financial assets and for measuring financial liabilities at fair value through profit or loss.

IAS 24 (amendment) “Related Party Disclosures” which is effective from January 1, 2011, clarifies and simplifies the definition of a related party.

IFRIC 14 (amendment) “Prepayments of a Minimum Funding Requirement” which is effective from January 1, 2011 with retrospective application, permits an entity to treat the prepayment of a minimum funding requirement as an asset.

IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” which is effective from July 1, 2010, clarifies that equity instruments issued to a creditor to extinguish a financial liability are measured at fair value with any gain or loss recognized immediately in profit or loss.

IFRS 7 (amendment) “Financial Instruments: Disclosures”, which is effective from January 1, 2011, amends the credit risk disclosures for financial assets.

IFRIC 13 (amendment) “Customer Loyalty Programmes”, which is effective from January 1, 2011, clarifies that when the fair value of an award is measured based on redemption value, the amount of discounts granted to customers not in the loyalty program should be taken into account.

Note: the effective dates are in respect of accounting periods beginning on or after the date shown and so will be effective for the Group from January 1, ~~2010.~~2011, other than IFRS 9 which will be effective for the Group from January 1, 2013.

~~F-19~~F-22

~~Note 2 — Exchange rates and Segmental information~~


Note 2 —	Exchange Rates and Segmental Information

Exchange ~~rates~~Rates

The results of operations have been translated into US dollars at the average rates of exchange for the year. In the case of sterling, the translation rate is $1 = ~~£0.64 (2008~~£0.65 (2009 $1 = ~~£0.55, 2007~~£0.64, 2008 $1 = ~~£0.50)~~£0.55). In the case of the euro, the translation rate is $1 = ~~€0.72 (2008~~€0.76 (2009 $1 = ~~€0.68, 2007~~€0.72, 2008 $1 = ~~€0.73)~~€0.68).

Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the ~~period.~~year. In the case of sterling, the translation rate is $1 = ~~£0.62 (2008~~£0.64 (2009 $1 = ~~£0.69, 2007~~£0.62, 2008 $1 = ~~£0.50)~~£0.69). In the case of the euro, the translation rate is $1 = ~~€0.69 (2008~~€0.75 (2009 $1 = ~~€0.71, 2007~~€0.69, 2008 $1 = ~~€0.68)~~€0.71).

Segmental ~~information~~Information

The management of the Group’s operations, excluding Central functions, is organized within three geographical regions:

Americas;

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

Asia Pacific.

These, together with Central functions, comprise the Group’s four reportable segments.

The Asia Pacific reportable segment comprises the aggregation of two operating segments, Greater China and Asia Australasia. Central functions include costs of global functions, including technology, sales and marketing, finance, human resources and corporate services; revenue arises principally from technology fee income. Central liabilities include the loyalty program liability and the cumulative short-term System Fund ~~surplus which were allocated to the geographical segments prior to the adoption of IFRS 8.~~surplus.

Each of the geographical regions derives its revenues from either franchising, managing or owning hotels and additional segmental disclosures are provided accordingly.

Management monitors the operating results of the geographical regions and Central functions separately for the purpose of making decisions about resource allocation and performance assessment. Segmental performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the Consolidated Financial Statements, excluding exceptional items. Group financing and income taxes are managed on a group basis and are not allocated to reportable segments.

~~F-20~~F-23

Segmental Information

Year ended December 31, 2010

Revenue


					Asia
	Americas		EMEA		Pacific		Central		Group
	($ million)

Franchised		465		81		12		—		558
Managed		119		130		155		—		404
Owned and leased		223		203		136		—		562
Central		—		—		—		104		104

Total revenue*		807		414		303		104		1,628

Segmental result


							Asia
	Americas			EMEA			Pacific			Central			Group
	($ million)

Franchised		392			59			7			—			458
Managed		21			62			73			—			156
Owned and leased		13			40			35			—			88
Regional and central		(57	)		(36	)		(26	)		(139	)		(258	)

Reportable segments’ operating profit		369			125			89			(139	)		444
Exceptional operating items (Note 5)		(8	)		3			(2	)		—			(7	)

Operating profit*		361			128			87			(139	)		437


	Continuing			Discontinued		Group
	($ million)

Reportable segments’ operating profit		444			—		444
Exceptional operating items		(7	)		—		(7	)

Operating profit		437			—		437
Net finance costs		(62	)		—		(62	)

Profit before tax		375			—		375
Tax		(97	)		—		(97	)

Profit after tax		278			—		278
Gain on disposal of assets, net of tax		—			2		2

Profit for the year		278			2		280


*		Relates to continuing operations.

F-24

Year ended December 31, 2010

Assets and liabilities


							Asia
	Americas			EMEA			Pacific			Central			Group
	($ million)

Segment assets		891			856			665			194			2,606

Unallocated assets:
Deferred tax assets														88
Current tax receivable														13
Cash and cash equivalents														78

Total assets														2,785

Segment liabilities		(474	)		(290	)		(86	)		(568	)		(1,418	)

Unallocated liabilities:
Current tax payable														(167	)
Deferred tax liabilities														(84	)
Loans and other borrowings														(794	)
Derivatives														(44	)

Total liabilities														(2,507	)

Other segmental information


					Asia
	Americas		EMEA		Pacific		Central		Group
	($ million)

Capital expenditure (see below)		37		8		12		40		97
Non-cash items:
Onerous management contracts		—		3		—		—		3
Litigation		22		—		—		—		22
Depreciation and amortization⁽ⁱ⁾		33		25		30		20		108
Impairment losses		7		—		—		—		7
Share-based payments cost		—		—		—		32		32


(i)		Included in the $108 million of depreciation and amortization is $31 million relating to administrative expenses and $77 million relating to cost of sales.

Reconciliation of capital expenditure


						Asia
	Americas		EMEA			Pacific			Central		Group
	($ million)

Capital expenditure per management reporting		37		8			12			40		97
Management contract acquired on disposal		5		—			—			—		5
Timing differences		—		(1	)		(4	)		—		(5	)

Capital expenditure per the financial statements		42		7			8			40		97

Comprising additions to:
Property, plant and equipment		27		6			3			23		59
Intangible assets		11		1			5			17		34
Other financial assets		4		—			—			—		4

		42		7			8			40		97

F-25

Segmental Information

Year ended December 31, 2009

Revenue


					Asia
	Americas		EMEA		Pacific		Central		Group
	($ million)

Franchised		437		83		11		—		531
Managed		110		119		105		—		334
Owned and leased		225		195		129		—		549
Central		—		—		—		124		124

Total revenue*		772		397		245		124		1,538

Segmental result


							Asia															Asia
	Americas			EMEA			Pacific			Central			Group			Americas			EMEA			Pacific			Central			Group
	($ million)															($ million)

Franchised		364			60			5			—			429			364			60			5			—			429
Managed		(40	)		65			44			—			69			(40	)		65			44			—			69
Owned and leased		11			33			30			—			74			11			33			30			—			74
Regional and central		(47	)		(31	)		(27	)		(104	)		(209	)		(47	)		(31	)		(27	)		(104	)		(209	)

Reportable segments’ operating profit		288			127			52			(104	)		363			288			127			52			(104	)		363
Exceptional operating items — (Note 5)		(301	)		(22	)		(7	)		(43	)		(373	)
Exceptional operating items (Note 5)																	(301	)		(22	)		(7	)		(43	)		(373	)

Operating loss*		(13	)		105			45			(147	)		(10	)		(13	)		105			45			(147	)		(10	)


	Continuing			Discontinued		Group
	($ million)

Reportable segments’ operating profit		363			—		363
Exceptional operating items		(373	)		—		(373	)

Operating loss		(10	)		—		(10	)
Net finance costs		(54	)		—		(54	)

Loss before tax		(64	)		—		(64	)
Tax		272			—		272

Profit after tax		208			—		208
Gain on disposal of assets, net of tax		—			6		6

Profit for the year		208			6		214


*		Relates to continuing operations.

~~F-21~~F-26

Year ended December 31, 2009

Assets and liabilities


							Asia															Asia
	Americas			EMEA			Pacific			Central			Group			Americas			EMEA			Pacific			Central			Group
	($ million)															($ million)

Segment assets		970			926			631			196			2,723			970			926			631			196			2,723


Unallocated assets:
Deferred tax receivable														95
Deferred tax assets																													95
Current tax receivable														35															35
Cash and cash equivalents														40															40

Total assets														2,893															2,893

Segment liabilities		(417	)		(236	)		(63	)		(567	)		(1,283	)		(417	)		(236	)		(63	)		(567	)		(1,283	)

Unallocated liabilities:
Current tax payable														(194	)														(194	)
Deferred tax payable														(118	)
Deferred tax liabilities																													(118	)
Loans and other borrowings														(1,122	)														(1,122	)
Derivatives														(20	)														(20	)

Total liabilities														(2,737	)														(2,737	)

Other segmental information


					Asia										Asia
	Americas		EMEA		Pacific		Central		Group		Americas		EMEA		Pacific		Central		Group
	($ million)										($ million)

Capital expenditure(see below)		80		5		14		37		136
Capital expenditure (see below)												80		5		14		37		136
Non-cash items:
Onerous management contracts		91		—		—		—		91		91		—		—		—		91
Depreciation and amortization⁽ⁱ⁾		33		29		28		19		109		33		29		28		19		109
Impairment losses		189		8		—		—		197		189		8		—		—		197
Share-based payments costs												—		—		—		22		22


(i)		Included in the $109 million of depreciation and amortization is $29 million relating to administrative expenses and $80 million relating to cost of sales.

Reconciliation of capital expenditure


						Asia
	Americas			EMEA		Pacific		Central		Group
	($ million)

Capital expenditure per management reporting		80			5		14		37		136
Timing differences		(45	)		1		1		—		(43	)

Capital expenditure per the financial statements		35			6		15		37		93

Comprising additions to:
Property, plant and equipment		29			6		9		13		57
Intangible assets		6			—		3		24		33
Investment in associates		—			—		3		—		3

		35			6		15		37		93

~~F-22~~F-27

Segmental ~~information~~Information

Year ended December 31, 2008

Revenue


					Asia
	Americas		EMEA		Pacific		Central		Group
	($ million)

Franchised		495		110		18		—		623
Managed		168		168		113		—		449
Owned and leased		300		240		159		—		699
Central		—		—		—		126		126

Total revenue*		963		518		290		126		1,897

Segmental result


							Asia															Asia
	Americas			EMEA			Pacific			Central			Group			Americas			EMEA			Pacific			Central			Group
	($ million)															($ million)

Franchised		426			75			8			—			509			426			75			8			—			509
Managed		51			95			55			—			201			51			95			55			—			201
Owned and leased		55			45			43			—			143			55			45			43			—			143
Regional and central		(67	)		(44	)		(38	)		(155	)		(304	)		(67	)		(44	)		(38	)		(155	)		(304	)

Reportable segments’ operating profit		465			171			68			(155	)		549			465			171			68			(155	)		549
Exceptional operating items — (Note 5)		(99	)		(21	)		(2	)		(10	)		(132	)
Exceptional operating items (Note 5)																	(99	)		(21	)		(2	)		(10	)		(132	)

Operating profit*		366			150			66			(165	)		417			366			150			66			(165	)		417


	Continuing			Discontinued		Group
	($ million)

Reportable segments’ operating profit		549			—		549
Exceptional operating items		(132	)		—		(132	)

Operating profit		417			—		417
Net finance costs		(101	)		—		(101	)

Profit before tax		316			—		316
Tax		(59	)		—		(59	)

Profit after tax		257			—		257
Gain on disposal of assets, net of tax		—			5		5

Profit for the year		257			5		262


*		Relates to continuing operations.

~~F-23~~F-28

Year ended December 31, 2008

~~Assets and liabilities~~

Asia

Americas EMEA Pacific Central Group
($ million)

Segment assets 1,031 957 613 189 2,790
Non-current assets classified as held for sale 209 1 — — 210

1,240 958 613 189 3,000

Unallocated assets:
Current tax receivable 36
Cash and cash equivalents 82

Total assets
3,118

Segment liabilities (429 ) (257 ) (63 ) (508 ) (1,257 )
Liabilities classified as held for sale (4 ) — — — (4 )

(433 ) (257 ) (63 ) (508 ) (1,261 )

Unallocated liabilities:
Current tax payable (374 )
Deferred tax payable (117 )
Loans and other borrowings (1,355 )
Derivatives (10 )

Total liabilities
(3,117 )

Other segmental information


					Asia										Asia
	Americas		EMEA		Pacific		Central		Group		Americas		EMEA		Pacific		Central		Group
	($ million)										($ million)

Capital expenditure(see below)		51		5		13		74		143
Capital expenditure (see below)												51		5		13		74		143
Non-cash items:
Depreciation and amortization⁽ⁱ⁾		31		35		26		20		112		31		35		26		20		112
Impairment losses		75		21		—		—		96		75		21		—		—		96
Share-based payments costs												—		—		—		47		47


(i)		Included in the $112 million of depreciation and amortization is $32 million relating to administrative expenses and $80 million relating to cost of sales.

~~Central liabilities include the loyalty program liability and the cumulative short-term System Fund surplus which were allocated to the geographical segments prior to the adoption of IFRS 8.~~

~~Reconciliation of capital expenditure~~

Asia

Americas EMEA Pacific Central Group
($ million)

Capital expenditure per management reporting
51 5 13 74 143
Timing differences — — 4 — 4
Exchange and other adjustments (1 ) (3 ) (2 ) 2 (4 )

Capital expenditure per the financial statements
50 2 15 76 143

Comprising additions to:
Property, plant and equipment 43 2 10 36 91
Intangible assets 7 — 2 40 49
Investment in associates — — 3 — 3

50 2 15 76 143

~~F-24~~

~~Segmental information~~

~~Year ended December 31, 2007~~

~~Revenue~~

Asia

Americas EMEA Pacific Central Group
($ million)

Franchised 489 81 16 — 586
Managed 156 167 99 — 422
Owned and leased 303 244 145 — 692
Central — — — 117 117

Continuing operations
948 492 260 117 1,817
Discontinued operations — owned and leased 16 17 — — 33

964 509 260 117 1,850

~~Segmental result~~

Asia

Americas EMEA Pacific Central Group
($ million)

Franchised 425 58 6 — 489
Managed 41 87 46 — 174
Owned and leased 54 33 36 — 123
Regional and central (66 ) (44 ) (25 ) (163 ) (298 )

Continuing operations 454 134 63 (163 ) 488
Exceptional operating items 17 21 17 5 60

Operating profit
471 155 80 (158 ) 548
Discontinued operations — owned and leased 2 1 — — 3

473 156 80 (158 ) 551

Continuing Discontinued Group
($ million)

Operating profit before exceptional items 488 3 491
Exceptional operating items 60 — 60

Operating profit
548 3 551
Net finance costs (90 ) — (90 )

Profit before tax 458 3 461
Tax (29 ) (1 ) (30 )

Profit after tax 429 2 431
Gain on disposal of assets, net of tax — 32 32

Profit for the year
429 34 463

~~F-25~~

~~Year ended December 31, 2007~~

~~Other segmental information~~

Asia

Americas EMEA Pacific Central Group
($ million)

Continuing operations:
Capital expenditure 52 36 45 46 179
Non-cash items:
Depreciation and amortization⁽ⁱ⁾
34 35 22 23 114
Reversal of previously recorded impairment — — 6 — 6
Discontinued operations:
Capital expenditure — 1 — — 1
Non-cash items:
Depreciation and amortization⁽ⁱ⁾
— 2 — — 2


~~(i)~~		~~Included in the $116 million of depreciation and amortization is $35 million relating to administrative expenses and $81 million relating to cost of sales.~~

Geographical information


	Year ended December 31,						Year ended December 31,
	2009		2008		2007		2010		2009		2008
	($ million)						($ million)

Revenue:
United Kingdom		125		173		164		130		125		173
United States		678		819		808		706		678		819
Rest of World		735		905		878		792		735		905

Total revenue per Consolidated income statement		1,538		1,897		1,850		1,628		1,538		1,897

For the purposes of the above table, hotel revenue is determined according to the location of the hotel and other revenue is attributed to the country of origin. In addition to the United Kingdom, revenue relating to an individual country is separately disclosed when it represents 10% or more of total revenue.


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Non-current assets
Non-current assets:
United Kingdom		389		363		366		389
United States		805		758		726		805
France		376		368		344		376
People’s Republic of China		354		357
People’s Republic of China (including Hong Kong)						335		354
Rest of World		313		326		320		313

Total		2,237		2,172		2,091		2,237

For the purposes of the above table, non-current assets comprise property, plant and equipment, goodwill, intangible assets and investments in associates. Non-current assets relating to an individual country are separately disclosed when they represent 10% or more of total non-current assets, as defined above.

~~F-26~~F-29


Note 3 —	Staff costs and Directors’ emoluments

With regards to this note,pages F-30 toF-35 andF-44 toF-48 are audited. PagesF-36 toF-43 are unaudited.

Staff


	Year ended December 31,						Year ended December 31,
	2009		2008		2007		2010		2009		2008
	($ million)						($ million)

Costs:
Wages and salaries		441		549		551		535		441		549
Social security costs		45		55		61		34		45		55
Pension and other post-retirement benefits:
Defined benefit plans		12		8		8		9		12		8
Defined contribution plans		26		30		25		19		26		30

		524		642		645		597		524		642

Average number of employees, including part-time employees:


	Year ended December 31,						Year ended December 31,
	2009		2008		2007		2010		2009		2008
	(Number)						(Number)

Americas		3,229		3,384		3,602		3,309		3,229		3,384
EMEA		1,712		1,824		2,100		1,795		1,712		1,824
Asia Pacific		1,410		1,470		1,514		1,517		1,410		1,470
Central		1,205		1,271		1,150		1,237		1,205		1,271

		7,556		7,949		8,366		7,858		7,556		7,949

The costs of the above employees are borne by IHG. In addition, the Group employs 4,489 (2009 4,561, ~~(2008 4,353, 2007 4,003)~~2008 4,353) people who work in managed hotels or directly on behalf of the System ~~Funds~~Fund and whose costs of $282 million (2009 $267 million, ~~(2008~~2008 $272 ~~million, 2007 $247~~ million) are borne by those hotels or by the ~~Funds.~~Fund.

Retirement benefits

Retirement and death in service benefits are provided for eligible Group employees in the United Kingdom principally by the InterContinental Hotels UK Pension Plan. The plan, which is funded and HM Revenue & Customs registered, covers approximately 500 (2009 460, ~~(2008 460, 2007 440)~~2008 460) employees, of which 140 (2009 150, ~~(2008 170, 2007 200)~~2008 170) are in the defined benefit section which provides pensions based on final salaries and 360 (2009 310, ~~(2008 290, 2007 240)~~2008 290) are in the defined contribution section. The defined benefit section of the plan closed to new entrants during 2002 with new members provided with defined contribution arrangements. The assets of the plan are held in self-administered trust funds separate from the Group’s assets. In addition, there are unfunded UK pension arrangements for certain members affected by the lifetime allowance. The Group also maintains the following US-based defined benefit plans; the funded InterContinental Hotels Pension Plan, unfunded InterContinental Hotels non-qualified pension plans and post-employment benefits schemes. These plans are now closed to new members. The Group also operates a number of minor pension schemes outside the United Kingdom, the most significant of which is a defined contribution scheme in the United States; there is no material difference between the pension costs of, and contributions to, these schemes.

~~F-27~~F-30

In respect of the defined benefit plans, the amounts recognized in the Consolidated income statement, in administrative expenses, are:


																																																				Post-
	Pension plans																		Post- employment															Pension plans																		employment
	UK									US and other									benefits						Total									UK									US and other									benefits						Total
	2009			2008			2007			2009			2008			2007			2009		2008		2007		2009			2008			2007			2010			2009			2008			2010			2009			2008			2010		2009		2008		2010			2009			2008
	($ million)																																	($ million)

Current service costs		7			9			10			1			1			—			—		—		—		8			10			10			6			7			9			1			1			1			—		—		—		7			8			10
Interest cost on benefit obligation		22			30			30			10			10			10			1		1		1		33			41			41			25			22			30			11			10			10			1		1		1		37			33			41
Expected return on plan assets		(21	)		(32	)		(34	)		(8	)		(11	)		(9	)		—		—		—		(29	)		(43	)		(43	)		(25	)		(21	)		(32	)		(10	)		(8	)		(11	)		—		—		—		(35	)		(29	)		(43	)

Operating profit before exceptional items		8			7			6			3			—			1			1		1		1		12			8			8			6			8			7			2			3			—			1		1		1		9			12			8
Exceptional items		11			—			—			—			—			—			—		—		—		11			—			—			—			11			—			—			—			—			—		—		—		—			11			—

																																			6			19			7			2			3			—			1		1		1		9			23			8
		19			7			6			3			—			1			1		1		1		23			8			8

On January 23, 2009, approval was given for the payment of enhanced pension transfers to those deferred members of the InterContinental Hotels UK Pension Plan who had accepted an offer to receive the enhancement either as a cash lump sum or as an additional transfer value to an alternative pension provider. The payments, comprising lump sum amounts of £5.9 million and additional contributions of £4.3 million, were made by the Group ~~on January 23,~~in the first quarter of 2009. The transfer values subsequently paid by the plan were £45 million and the corresponding IAS19 liability extinguished was £38 million. The settlement loss arising of £7 million (being the $11 million exceptional item above), together with the lump sum payment and costs of arrangement, ~~has been~~was charged to the Consolidated income statement as an exceptional item in 2009 (see Note 5).

The amounts recognized in the Consolidated statement of comprehensive income are:


																																																					Post-
	Pension plans																		Post-employment																Pension plans																		employment
	UK									US and other									benefits							Total									UK									US and other									benefits								Total
	2009			2008			2007			2009			2008			2007			2009			2008		2007		2009			2008			2007			2010			2009			2008			2010			2009			2008			2010			2009			2008		2010			2009			2008
	($ million)																																		($ million)

Actual return on plan assets		7			(25	)		28			22			(27	)		9			—			—		—		29			(52	)		37			46			7			(25	)		13			22			(27	)		—			—			—		59			29			(52	)
Less: expected return on plan assets		(21	)		(32	)		(34	)		(8	)		(11	)		(9	)		—			—		—		(29	)		(43	)		(43	)		(25	)		(21	)		(32	)		(10	)		(8	)		(11	)		—			—			—		(35	)		(29	)		(43	)

		(14	)		(57	)		(6	)		14			(38	)		—			—			—		—		—			(95	)		(6	)		21			(14	)		(57	)		3			14			(38	)		—			—			—		24			—			(95	)
Other actuarial (losses)/gains		(44	)		55			31			(13	)		3			—			(1	)		1		—		(58	)		59			31			(49	)		(44	)		55			(13	)		(13	)		3			(7	)		(1	)		1		(69	)		(58	)		59

Total actuarial (losses)/gains		(58	)		(2	)		25			1			(35	)		—			(1	)		1		—		(58	)		(36	)		25			(28	)		(58	)		(2	)		(10	)		1			(35	)		(7	)		(1	)		1		(45	)		(58	)		(36	)
Movement in asset restriction*		21			(14	)		(17	)		—			—			—			—			—		—		21			(14	)		(17	)
Change in asset restriction and liability in respect of funding commitments*																																				(48	)		21			(14	)		—			—			—			—			—			—		(48	)		21			(14	)

		(37	)		(16	)		8			1			(35	)		—			(1	)		1		—		(37	)		(50	)		8			(76	)		(37	)		(16	)		(10	)		1			(35	)		(7	)		(1	)		1		(93	)		(37	)		(50	)


*	Relates to tax that would be deducted at source in respect of a refund of the surplus taking into account amounts payable under funding commitments.

F-31

The assets and liabilities of the schemes and the amounts recognized in the Consolidated statement of financial position are:


													Post-
	Pension plans												employment
	UK						US and other						benefits						Total
	2010			2009			2010			2009			2010			2009			2010			2009
	($ million)

Retirement benefit assets
Fair value of plan assets		—			426			16			16			—			—			16			442
Present value of benefit obligations		—			(414	)		(11	)		(12	)		—			—			(11	)		(426	)

Surplus in schemes		—			12			5			4			—			—			5			16
Asset restriction*		—			(4	)		—			—			—			—			—			(4	)

Total retirement benefit assets		—			8			5			4			—			—			5			12

Retirement benefit obligations
Fair value of plan assets		475			—			114			110			—			—			589			110
Present value of benefit obligations		(512	)		(47	)		(198	)		(185	)		(27	)		(20	)		(737	)		(252	)

Deficit in schemes		(37	)		(47	)		(84	)		(75	)		(27	)		(20	)		(148	)		(142	)
Asset restriction and liability in respect of funding commitments*		(52	)		—			—			—			—			—			(52	)		—

Total retirement benefit obligations		(89	)		(47	)		(84	)		(75	)		(27	)		(20	)		(200	)		(142	)

Total fair value of plan assets		475			426			130			126			—			—			605			552

Total present value of benefit obligations		(512	)		(461	)		(209	)		(197	)		(27	)		(20	)		(748	)		(678	)


*		Relates to tax that would be deducted at source in respect of a refund of the ~~surplus.~~

~~F-28~~

~~The assets and liabilities of the schemes and the amounts recognized in the Consolidated statement of financial position are:~~

Post-

Pension plans employment

UK US and other benefits Total
2009 2008 2009 2008 2009 2008 2009 2008
($ million)

Schemes in surplus

Fair value of plan assets 426 437 16 16 — — 442 453
Present value of benefit obligations (414 ) (377 ) (12 ) (13 ) — — (426 ) (390 )

Surplus in schemes 12 60 4 3 — — 16 63
Asset restriction* (4 ) (23 ) — — — — (4 ) (23 )

Retirement benefit assets 8 37 4 3 — — 12 40

Schemes in deficit

Fair value of plan assets — — 110 96 — — 110 96
Present value of benefit obligations (47 ) (34 ) (185 ) (172 ) (20 ) (19 ) (252 ) (225 )

Retirement benefit obligations (47 ) (34 ) (75 ) (76 ) (20 ) (19 ) (142 ) (129 )

Total fair value of plan assets 426 437 126 112 — — 552 549

Total present value of benefit obligations (461 ) (411 ) (197 ) (185 ) (20 ) (19 ) (678 ) (615 )


*		~~Relates to tax that would be deducted at source in respect of a refund of the surplus.~~surplus taking into account amounts payable under funding commitments.

The “US and other” surplus of $4$5 million ~~(2008 $3~~(2009 $4 million) relates to a defined benefit pension scheme in Hong Kong. Included within the “US and other” deficit is $1$2 million ~~(2008~~(2009 $1 million) relating to a defined benefit pension plan in the Netherlands.

Assumptions

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


	Pension plans												Post-employment							Pension plans												Post-employment
	UK						US						benefits							UK						US						benefits
	2009		2008		2007		2009		2008		2007		2009		2008			2007		2010		2009		2008		2010		2009		2008		2010		2009		2008
	(%)																			(%)

Wages and salaries increases		5.1		4.5		4.9		—		—		—		4.0		4.0			4.0		5.0		5.1		4.5		—		—		—		4.0		4.0		4.0
Pensions increases		3.6		3.0		3.4		—		—		—		—		—			—		3.5		3.6		3.0		—		—		—		—		—		—
Discount rate		5.7		5.6		5.5		5.7		6.2		5.8		5.7		6.2			5.8		5.3		5.7		5.6		5.2		5.7		6.2		5.2		5.7		6.2
Inflation rate		3.6		3.0		3.4		—		—		—		—		—			—		3.5		3.6		3.0		—		—		—		—		—		—
Healthcare cost trend rate assumed for next year														9.0		9.5			10.0														—		9.0		9.5
-Pre 65 (ultimate rate reached in 2021)																																	10.0		—		—
-Post 65 (ultimate rate reached in 2023)																																	14.0		—		—
Ultimate rate that the cost trend rate trends to														5.0		5.0			5.0														5.0		5.0		5.0
																	��

Mortality is the most significant demographic assumption. ~~In respect of~~The current assumptions for the UK plans are based on the ~~specific~~S1NA tables with long cohort projections and a one percent per annum underpin to future mortality ~~rates used are in line with the PA92 medium cohort tables,~~improvements with age rated down by ~~one year, implying the following life expectancies at retirement.~~1.75 years for pensioners and 1.5 years for non-pensioners. In the ~~US,~~United States, the current assumptions are based on the RP-2000 IRS PPA@ 2011 Non-Annuitant/Annuitant healthy tables, for males and females.

F-32

In both territories, the assumptions have been revised during the year to reflect increased life expectancy ~~is determined by reference to the RP-2000 healthy tables.~~at retirement age as follows:


	Pension plans												Pension plans
	UK						US						UK						US
	2009		2008		2007		2009		2008		2007		2010		2009		2008		2010		2009		2008
	(Years)												(Years)

Current pensioners at 65 — male⁽ⁱ⁾		23		23		23		18		18		18		24		23		23		19		18		18
Current pensioners at 65 — female⁽ⁱ⁾		26		26		26		21		20		20		27		26		26		21		21		20
Future pensioners at 65 — male⁽ⁱⁱ⁾		24		24		24		18		18		18		26		24		24		21		18		18
Future pensioners at 65 — female⁽ⁱⁱ⁾		27		27		27		21		20		20		29		27		27		22		21		20


(i)		Relates to assumptions based on longevity (in years) following retirement at the end of the reporting period.

(ii)		Relates to assumptions based on longevity (in years) relating to an employee retiring in ~~2029.~~2030.

~~F-29~~

The assumptions allow for expected increases in longevity.

Sensitivities

The value of ~~scheme~~plan assets is sensitive to market conditions, particularly equity values. Changes in assumptions used for determining retirement benefit costs and obligations may have a material impact on the income statement and the consolidated statement of financial position. The main assumptions are the discount rate, the rate of inflation and the assumed mortality rate. The following table provides an estimate of the potential impact of each of these variables on the principal pension plans.


	UK						US					UK						US
	Higher/			Increase/			Higher/		Increase/			Higher/			Increase/			Higher/		Increase/
	(lower)			(decrease)			(lower)		(decrease)			(lower)			(decrease)			(lower)		(decrease)
	pension cost			in liabilities			pension cost		in liabilities			pension cost			in liabilities			pension cost		in liabilities
	($ million)											($ million)

Discount rate — 0.25% decrease		0.6			23.3			—		5.2			0.6			25.8			—		5.9
Discount rate — 0.25% increase		(0.5	)		(22.2	)		—		(5.0	)		(0.6	)		(25.8	)		—		(5.6	)
Inflation rate — 0.25% increase		1.6			20.7			—		—			1.6			24.8			—		—
Inflation rate — 0.25% decrease		(1.3	)		(19.8	)		—		—			(1.6	)		(24.8	)		—		—
Mortality rate — one year increase		0.8			9.2			—		6.6			0.8			9.9			—		7.6

~~In 2018, the healthcare cost trend rate reaches the assumed ultimate rate.~~ A one percentage point increase/(decrease) in assumed healthcare costs trend rate would increase/(decrease) the accumulated post-employment benefit obligations as of December 31, ~~2009,~~2010, by approximately $2.5 million (2009 $1.6 million, ~~(2008~~2008 $1.7 million, 2007 $1.9 million) and would increase/(decrease) the total of the service and interest cost components of net post-employment healthcare cost for the period then ended by approximately $0.1 million (2008 $0.1 million, 2007 $0.1 million).

Post-

Pension plans employment

UK US and other benefits Total
2009 2008 2009 2008 2009 2008 2009 2008
($ million)

Movement in benefit obligation

Benefit obligation at beginning of year 411 597 185 184 19 20 615 801
Current service cost 7 9 1 1 — — 8 10
Members’ contributions 1 1 — — — — 1 1
Interest expense 22 30 10 10 1 1 33 41
Benefits paid (12 ) (12 ) (13 ) (12 ) (1 ) (1 ) (26 ) (25 )
Enhanced pension transfer (59 ) — — — — — (59 ) —
Reclassification* — — — 5 — — — 5
Actuarial loss/(gain) arising in the year 44 (55 ) 13 (3 ) 1 (1 ) 58 (59 )
Exchange adjustments 47 (159 ) 1 — — — 48 (159 )

Benefit obligation at end of year 461 411 197 185 20 19 678 615

Comprising:
Funded plans 414 377 151 141 — — 565 518
Unfunded plans 47 34 46 44 20 19 113 97

461 411 197 185 20 19 678 615


*		~~Relates to the recognition of the gross assets and obligations of the Netherlands pension scheme.~~

~~F-30~~F-33

Post-

Pension plans employment

UK US and other benefits Total
2009 2008 2009 2008 2009 2008 2009 2008
($ million)

Movement in plan assets

Fair value of plan assets at beginning of year 437 611 112 144 — — 549 755
Company contributions 16 30 4 3 1 1 21 34
Members’ contributions 1 1 — — — — 1 1
Benefits paid (12 ) (12 ) (13 ) (12 ) (1 ) (1 ) (26 ) (25 )
Enhanced pension transfer (70 ) — — — — — (70 ) —
Reclassification* — — — 4 — — — 4
Expected return on plan assets 21 32 8 11 — — 29 43
Actuarial (loss)/gain arising in the year (14 ) (57 ) 14 (38 ) — — — (95 )
Exchange adjustments 47 (168 ) 1 — — — 48 (168 )

Fair value of plan assets at end of year 426 437 126 112 — — 552 549


													Post-
	Pension plans												employment
	UK						US and other						benefits						Total
Movement in benefit obligation	2010			2009			2010			2009			2010			2009			2010			2009
	($ million)

Benefit obligation at January 1,		461			411			197			185			20			19			678			615
Current service cost		6			7			1			1			—			—			7			8
Members’ contributions		1			1			—			—			—			—			1			1
Interest expense		25			22			11			10			1			1			37			33
Benefits paid		(12	)		(12	)		(13	)		(13	)		(1	)		(1	)		(26	)		(26	)
Enhanced pension transfer		—			(59	)		—			—			—			—			—			(59	)
Actuarial loss/(gain) arising in the year		49			44			13			13			7			1			69			58
Exchange adjustments		(18	)		47			—			1			—			—			(18	)		48

Benefit obligation at December 31,		512			461			209			197			27			20			748			678

Comprising:
Funded plans		457			414			161			151			—			—			618			565
Unfunded plans		55			47			48			46			27			20			130			113

		512			461			209			197			27			20			748			678


													Post-
	Pension plans												employment
	UK						US and other						benefits						Total
Movement in plan assets	2010			2009			2010			2009			2010			2009			2010			2009
	($ million)

Fair value of plan assets at January 1,		426			437			126			112			—			—			552			549
Company contributions		31			16			4			4			1			1			36			21
Members’ contributions		1			1			—			—			—			—			1			1
Benefits paid		(12	)		(12	)		(13	)		(13	)		(1	)		(1	)		(26	)		(26	)
Enhanced pension transfer		—			(70	)		—			—			—			—			—			(70	)
Expected return on plan assets		25			21			10			8			—			—			35			29
Actuarial (loss)/gain arising in the year		21			(14	)		3			14			—			—			24			—
Exchange adjustments		(17	)		47			—			1			—			—			(17	)		48

Fair value of plan assets at December 31,		475			426			130			126			—			—			605			552

Funding commitments


*		~~Relates to the recognition of the gross assets and obligations of the Netherlands pension scheme.~~

The most recent actuarial valuation of the InterContinental Hotels UK Pension Plan was carried out as at March 31, ~~2006~~2009 and showed a deficit of ~~£81~~£129 million on a funding basis. Under the recovery plan agreed with the trustees, ~~at that time,~~ the Group aims to eliminate this deficit by March ~~2014~~2017 through additional Company contributions of up to £100 million and projected investment returns. ~~Of the~~The agreed additional contributions comprise three annual payments of ~~£40~~£10 million; £10 million ~~three~~was paid in August 2010 and two further payments of £10 million ~~were~~are due on or before July 31, 2011 and 2012, together with further payments related to the disposal of hotels (7.5% of net sales proceeds) and growth in the Group’s EBITDA above specified targets. If required in 2017, atop-up payment will be made ~~in prior~~to bring the total additional contributions up to £100 million. The Plan is formally valued every three years and future valuations could lead to changes in the ~~final commitment of £10 million is being met through the funding of the enhanced pension transfer arrangements detailed above. The next actuarial valuation due as at~~amounts payable beyond March ~~31, 2009 is currently in progress.~~2012.

Company contributions are expected to be ~~$13~~$41 million in ~~2010.~~2011, including known UK additional contributions of £14 million with further amounts payable if there are any hotel disposals.

F-34

The combined assets of the principal plans and expected rate of return are:


	2009				2008				2007				2010				2009				2008
	Long-term				Long-term				Long-term				Long-term				Long-term				Long-term
	rate of				rate of				rate of				rate of				rate of				rate of
	return				return				return				return				return				return
	expected		Value		expected		Value		expected		Value		expected		Value		expected		Value		expected		Value
	(%)		($ million)		(%)		($ million)		(%)		($ million)		(%)		($ million)		(%)		($ million)		(%)		($ million)

UK pension plans
Liability matching investment funds		4.8		196		3.9		192		—		—		4.5		185		4.8		196		3.9		192
Equities		9.2		77		7.9		87		7.9		219		8.9		105		9.2		77		7.9		87
Bonds		4.8		64		3.9		140		4.8		360		4.5		95		4.8		64		3.9		114
Hedge funds														8.9		61		9.2		17		7.9		26
Cash		4.8		55		3.9		4		—		—		4.5		10		4.8		55		3.9		4
Other		9.2		34		7.9		14		7.9		32		8.9		19		9.2		17		7.9		14

Total market value of assets				426				437				611				475				426				437

US pension plans
Equities		9.5		63		9.5		55		9.5		77		8.9		65		9.5		63		9.5		55
Fixed income		5.5		42		5.5		37		5.5		52		5.5		44		5.5		42		5.5		37

Total market value of assets				105				92				129				109				105				92

The expected ~~rate~~overall rates of return on assets, ~~has~~being 5.9% (2009 6.2%, 2008 5.5%) for the UK plans and 7.5% (2009 8.0%, 2008 8.0%) for the US plans, have been determined following advice from the plans’ independent actuaries and isare based on the expected return on each asset class together with consideration of the long-term asset strategy.

~~F-31~~

History of experience gains and losses


UK pension plans																2010			2009			2008			2007			2006
																($ million)
	2009			2008			2007			2006			2005
	($ million)

UK pension plans
Fair value of plan assets		426			437			611			527			431			475			426			437			611			527
Present value of benefit obligations		(461	)		(411	)		(597	)		(585	)		(473	)		(512	)		(461	)		(411	)		(597	)		(585	)

(Deficit)/surplus in the plans		(35	)		26			14			(58	)		(42	)		(37	)		(35	)		26			14			(58	)

Experience adjustments arising on plan liabilities		(44	)		55			31			(22	)		(122	)		(49	)		(44	)		55			31			(22	)

Experience adjustments arising on plan assets		(14	)		(57	)		(6	)		13			86			21			(14	)		(57	)		(6	)		13


US and other pension plans																2010			2009			2008			2007			2006
																($ million)
	2009			2008			2007			2006			2005
	($ million)

US and other pension plans
Fair value of plan assets		126			112			144			111			106			130			126			112			144			111
Present value of benefit obligations		(197	)		(185	)		(184	)		(175	)		(176	)		(209	)		(197	)		(185	)		(184	)		(175	)

Deficit in the plans		(71	)		(73	)		(40	)		(64	)		(70	)		(79	)		(71	)		(73	)		(40	)		(64	)

Experience adjustments arising on plan liabilities		(13	)		3			—			—			(5	)		(13	)		(13	)		3			—			—

Experience adjustments arising on plan assets		14			(38	)		—			4			(2	)		(3	)		14			(38	)		—			4


US post-employment benefits																2010			2009			2008			2007			2006
																($ million)
	2009			2008			2007			2006			2005
Present value of benefit obligations																	(27	)		(20	)		(19	)		(20	)		(19	)
	($ million)

US post-employment benefits
Present value of benefit obligations		(20	)		(19	)		(20	)		(19	)		(20	)
Experience adjustments arising on plan liabilities		(1	)		1			—			1			1			(7	)		(1	)		1			—			1

F-35

The cumulative amount of net actuarial losses recognized since January 1, 2004 in the Consolidated statement of comprehensive income is $253 million (2009 $208 million, ~~(2008~~2008 $150 ~~million, 2007 $114~~ million). The Group is unable to determine how much of the pension scheme deficit recognized on transition to IFRS of $298 million and taken directly to total equity is attributable to actuarial gains and losses since inception of the schemes. Therefore, the Group is unable to determine the amount of actuarial gains and losses that would have been recognized in the Consolidated statement of comprehensive income before January 1, 2004.

Unaudited information on Directors’ emoluments

Policy on remuneration of Executive Directors and senior executives

Remuneration policy and structure

IHG’s overall remuneration is intended to:


	•	attract and retain high-quality executives in an environment where compensation ~~levels are~~is based on global market practice;

	•	drive aligned focus of the senior executive team and reward the achievement of ~~business targets and key~~ strategic objectives;

	•	align rewards of executives with returns to shareholders;

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

	•	facilitate global assignments and relocation.

The Remuneration Committee believes that it is important to reward management, including the Executive Directors, for targets achieved, provided those targets are stretching and aligned with shareholders’ interests.

~~F-32~~

IHG’s remuneration structure for senior executives places a strong emphasis on performance-related reward. The individual elements are designed to provide the appropriate balance between fixed remuneration and variable ~~‘risk’~~‘‘risk” reward, linked to both the performance of the Group and the achievements of the individual. Approximately two-thirds of variable reward is delivered in the form of shares, to enhance alignment with shareholders.

In reaching its decisions, the Remuneration Committee takes into account a number of factors, including the relationship between remuneration and risk, strategic direction and affordability. Performance-related measures are chosen ~~carefully~~ to ensure a strong link between reward and underlying financial ~~performance,~~ and ~~emphasis is placed on achievement~~operational performance.

Summarized below are the individual elements of ~~key~~remuneration provided to Executive Directors and other Executive Committee members, including the purpose of each element. For variable incentive plans, the plan measures and link to Group strategic ~~priorities.~~objectives are also included.

F-36


Element	Maximum value	Purpose	Measures and link to strategic objectives

Base Salary (cash)	n/a	• Recognizes the market value of the role and the individual’s skill, performance and experience	n/a
Annual Bonus (one-half cash and one-half deferred shares)	200% of base salary⁽¹⁾	• Drives and rewards annual performance of individuals and teams against both financial and non-financial metrics • Aligns individual employee objectives with those of the Group • Aligns short-term annual performance with long-term returns to shareholders	Group earnings before interest and tax (“EBIT”) Provides focus on earnings growth, driven by core operating inputs, namely rooms growth, RevPAR, royalty fees and profit margins Individual Overall Performance Rating (“OPR”) Provides focus on key performance objectives (“KPOs”) and leadership competencies relative to the individual role. KPOs are linked to strategic priorities, notably:
			Financial Returns — deliver budget and growth targets (EBIT, system size, margin, overheads) Our People — employee engagement survey results Guest Experience — deliver brand performance targets (guest satisfaction, market share) Responsible Business — continue hotel roll-out and adoption of Green Engage sustainability management system
Long Term Incentive Plan (shares)	205% of base salary⁽²⁾	• Drives and rewards delivery of sustained long-term performance on measures that are aligned with the interests of shareholders	Total shareholder return (“TSR”) growth relative to Dow Jones World Hotels index Aligned with our Vision to become one of the world’s great companies by creating Great Hotels Guests Love Net Rooms growth relative to major competitors⁽³⁾Aligned with “Where we compete”, supporting our business model, segment and market strategies to grow system size Like-for-like revenue per available room (“RevPAR”) growth relative to major competitors⁽³⁾Aligned with ‘‘How we win’’, reflecting the power of our brands, scale and experience, and engaged workforce
Pension and benefits (varied)	n/a	• Provides a competitive level of benefits, including short-term protection and long-term savings opportunities	n/a


(1)		Combined Annual Bonus award (cash and shares) was subject to a temporary maximum cap of 175% of base salary in 2010.

(2)		Until 2009, maximum awards were normally granted at 270% of salary.

(3)		As outlined onpage F-40, from 2011, earnings per share (“EPS”) is replaced by net Rooms growth and RevPAR growth in the LTIP.

F-37

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

The Remuneration Committee also reviews the balance of fixed and variable remuneration provided to the wider management population, to ensure these are appropriate given relativities to the Executive Directors and to market practice.

The Company recognizes that its Executive Directors may be invited to become Non-Executive Directors of other companies and that such duties can broaden experience and knowledge, and benefit the Company. Executive Directors are, therefore, permitted to accept one non-executive appointment (in addition to any positions where the Director is appointed as the Group’s representative), subject to Board approval, as long as this is not, in the reasonable opinion of the Board, likely to lead to a conflict of interest. Executive Directors are generally authorized to retain the fees received. Current Executive Directors hold no Non-Executive Directorships of other companies.

~~Summarized below are the individual elements of remuneration provided to Executive Directors and other Executive Committee members and the purpose of each element.~~


~~Element~~	~~Maximum value~~	~~Purpose and alignment with strategy~~

~~Base Salary (cash)~~	~~n/a~~	~~To recognize market value of role and the individual’s skill, performance and experience~~
~~Annual Bonus (cash)~~	~~100% of base salary~~⁽¹⁾	~~To drive and reward annual performance of individuals and teams on both financial and non-financial metrics, and to align employee objectives with those of the Group~~
~~Deferred Annual Bonus (shares)~~	~~100% of base salary~~⁽¹⁾	~~To align short-term and long-term reward with returns to shareholders~~
~~Long Term Incentive Plan (shares)~~	~~205% of base salary~~⁽²⁾	~~To drive and reward delivery of sustained long-term earnings per share (“EPS”) and total shareholder return (“TSR”) performance, aligned with the interests of shareholders~~
~~Pension and benefits (varied)~~	~~n/a~~	~~To provide a competitive level of benefits, providing short-term protection and long-term savings opportunities~~


~~(1)~~		~~Combined Annual Bonus award (cash and shares) is subject to a maximum cap of 175% of base salary in 2010.~~

~~(2)~~		~~Until 2009, maximum awards were normally granted at 270% of salary. In 2009 and 2010, maximum awards were reduced to 205% of base salary.~~

The Remuneration Committee also reviews the balance of fixed and variable remuneration provided to the wider management population, to ensure these ratios are appropriate, given the relativities to the Executive Directors and to market practice.

Base salary and benefits

The salary for each Executive Director is reviewed annually and is based on both individual performance and on relevant competitive market data. ~~Internal relativities and salary levels in the wider employment market are also~~

~~F-33~~

~~taken into account.~~ Base salary is the only element of remuneration which is pensionable. In addition, benefits are provided to Executive Directors in accordance with local market practice.

In assessing levels of pay and benefits, IHG analyzes those offered by different groups of comparator companies. These groups are chosen having regard to participants’:


	•	size — market capitalization, turnover, profits and the number of people employed;

	•	diversity and complexity of business;

	•	geographical spread of business; and

	•	relevance to the hotel industry.

~~In reaching its decisions, the~~Internal relativities and Group-wide remuneration approaches are also taken into account. The Remuneration Committee ~~also considers the remuneration~~reviews average base salary levels and ~~approaches provided to~~average salary increase percentages for the ~~wider~~broader IHG workforce.

Executive Directors’ annual base salaries are shown in the table below:


	~~2010 salary~~2011 Salary			~~2009 salary~~2010 Salary

Andrew Cosslett		£~~826,000~~850,780			£~~802,000~~826,000
James Abrahamson		£477,117	*		£469,348
Kirk Kinsell		£477,117	*		£462,875
Richard Solomons		£~~523,000~~540,000			£~~510,000~~523,000


*		Messrs Abrahamson and Kinsell are paid in US dollars. James Abrahamson’s annual base salary for 2010 was $725,000 and for 2011 is $737,000. Kirk Kinsell’s annual base salary for 2010 was $715,000 and for 2011 is $737,000. The sterling values in the table above have been calculated using an exchange rate of $1= £0.65.

Annual Bonus Plan (“ABP”)

Structure and outcomes in ~~2009~~2010

Awards under the ABP require the achievement of challenging performance goals before ~~target~~ bonus is payable.

~~The maximum bonus an Executive Director or Executive Committee member can receive in any one year is 200% of salary.~~ Achievement of target performance results in a bonus of 115% of salary. Half of any bonus earned is compulsorily deferred in the form of shares for three years. No matching shares are awarded by the Company.

~~For 2009, awards~~Awards under the ABP ~~were~~are linked to individual performance ~~(30% of total award)~~ and earnings before interest and tax (“EBIT”) (70% of total award). In order to increase focus on cost savings and margins, net annual rooms additions was removed as an ABP performance measure for 2009 as outlined in last year’s~~Form 20-F.~~EBIT. Individual performance ~~was~~is measured by the achievement of specific ~~key performance objectives (“KPO”) that are~~KPOs linked directly to the Group’s ~~strategic priorities, and an assessment of performance against leadership competencies and behaviors.~~

~~The individual performance measures comprise several factors linked to~~ strategic objectives, a selection of which is set out in the table ~~below:~~on page F-37, and an assessment against leadership competencies and behaviors.

F-38


~~Individual performance measures~~		~~Example KPOs~~

~~Financial returns~~		~~• Total gross revenue and system contribution revenue~~
~~Our people~~		~~• Annual employee engagement scores~~
~~Guest experience~~		~~• Relaunch of Holiday Inn~~
		~~• Global RevPAR growth and RevPAR growth ahead of market~~
~~Responsible business~~		~~• Tracking of reduced water, waste and energy consumption~~

Each year, specific quantitative targets ~~against individual performance measures~~ are set for each Executive Director and Executive Committee member, as relevant to their role. Performance ~~against these measures~~ is reviewed at the end of each year to determine an OPR. The OPR determines 30% of the bonus ~~outcomes.~~outcome.

EBIT performance determines 70% of the bonus outcome. In ~~2009,~~2010, under the financial measure (EBIT), threshold payout was 90% of target performance, with maximum payout at ~~110%~~120% or more of target. Payout for individual performance would be reduced by half if EBIT performance was below threshold. In addition, no annual bonus would be payable on any measure if EBIT performance was lower than 85% of target.

~~F-34~~

~~Outcomes in 2009~~The maximum result for each measure is double its target value. However the combined payout result of the two measures was capped at 175% of base salary.

The ~~following table shows the performance~~2010 EBIT result was 159%, resulting in ~~2009 against KPOs.~~a maximum combined payout for all Directors, as shown below:

Payout as % of salary
Measure

Key performance indicator
Target Max⁽²⁾ Actual

Financial (70%) EBIT 80.5 161 Zero
Individual (30%) OPR⁽¹⁾ - Andrew Cosslett 34.5 69 Zero
Individual (30%) OPR⁽¹⁾ - Richard Solomons 34.5 69 Zero


		Payout as % of salary
Measure	Key performance indicator	Target		Max

Financial	EBIT (70%)		80.5		161
Individual	OPR (30%)		34.5		69
Total for 2010			115		175	*


Actual 2010 result as % of salary

Andrew Cosslett									175
James Abrahamson									175
Kirk Kinsell									175
Richard Solomons									175


~~(1)~~		~~Overall Performance Rating for individual performance.~~

~~(2)~~*		Combined EBIT and OPR payout subject to a maximum of ~~200%~~175% of base salary.

Structure in ~~2010~~2011

The Annual Bonus structure remains largely unchanged in ~~2010~~2011 with awards under the ABP continuing to require the achievement of challenging ~~performance~~EBIT goals before target bonus is payable.

~~However, reflecting the increased focus on cost control and the continued challenging market conditions,~~For 2011, the maximum bonus opportunity for the Executive Directors will ~~be capped~~revert to 200% of salary. Under the financial measure, the EBIT threshold for payout remains at ~~175%~~90% of ~~salary (previously 200%) for 2010 only. In addition, the stretch EBIT~~ target ~~for~~performance. However, maximum ~~bonus payment~~payout will ~~be increased~~revert to ~~120%~~110% or more of ~~budget for 2010, from 110% in previous years.~~target.

As with previous years, the achievement of target performance will result in a bonus of 115% of salary. Half of any bonus earned will be deferred in the form of shares for three years. Payout for individual performance will be reduced by half if EBIT performance is below threshold, and no annual bonus will be payable on any measure if EBIT performance is lower than 85% of target.

Long Term Incentive Plan (“LTIP”)

The LTIP allows Executive Directors and eligible management employees to receive share awards, subject to the achievement of performance conditions set by the Remuneration Committee, ~~normally~~ measured over a three-year period. Awards are made annually and, other than in exceptional circumstances, will not exceed three times annual salary for Executive Directors.

Structure for ~~2009/2011~~2010/2012 cycle

~~Prior to 2009,~~For the 2010/2012 cycle awards ~~to Executive Directors were normally made at the level of 270% of salary. In light of the cost-constrained environment in which IHG currently operates, awards for 2009~~ were made at 205% of base salary.

The performance conditions for the cycle are:


	•	IHG’s TSR relative to the Dow Jones World Hotels index ~~(two-thirds of the award)~~(50% weighting); and

	•	growth in adjusted EPS over the period ~~(one-third of the award)~~(50% weighting).

F-39

Awards under the LTIP lapse if performance conditions are not met — there is no re-testing.

Performance conditions for all outstanding awards are shown in the table on page ~~F-36.~~F-41.

Structure for ~~2010/2012~~2011/2013 cycle

For the 2011/2013 cycle, maximum award levels will remain at 205% of base salary. The ~~LTIP structure remains relatively consistent for the 2010/2012 cycle,~~Remuneration Committee believes relative TSR is well aligned with the ~~reduced award level for 2009 maintained. Performance conditions~~goal of achieving enduring top quartile returns and so TSR will ~~remain~~continue to retain a 50% weighting in the LTIP.

Furthermore, the Remuneration Committee concluded that the LTIP can be better aligned with IHG’s strategy by replacing EPS with two equally weighted relative growth measures, as follows:


	•	25% of the maximum award will be based on cumulative annual growth of net Rooms; and

	•	25% of the maximum award will be based on cumulative annuallike-for-like RevPAR growth.

Growth in both Rooms and RevPAR will be measured on a relative basis against a comparator group of the major globally-branded competitors: Accor, Choice, Hilton, Hyatt, Marriott, Starwood and Wyndham.

Threshold vesting will occur if IHG’s TSR ~~relative~~growth is equal to the Dow Jones World Hotels index. Maximum vesting will occur if IHG’s TSR growth exceeds the index ~~and growth in adjusted EPS over the period. However, these two measures will be equally weighted for this cycle.~~by 8% or more.

~~F-35~~

In setting the TSR performance ~~targets,~~target, the Remuneration Committee has taken into account a range of factors, including IHG’s strategic plans, ~~analysts’ expectations for IHG’s performance and for the industry as a whole, the~~ historical performance of the industry and FTSE 100 market practice.

For both Rooms growth and RevPAR measures, threshold vesting will occur if IHG performance at least equals the average of the comparator group. Maximum vesting for either measure will only occur if IHG is ranked first in the comparator group. Vesting for points between threshold and maximum will be calculated on a straight-line basis.

The ~~targets selected are shown~~vesting range and weighting for each measure is set out in the table below.


			~~Required TSR~~
	~~Percentage of award~~		~~relative to Dow Jones~~
~~Performance~~	~~vesting~~	~~Required EPS growth~~	~~World Hotels index~~
~~Threshold~~	~~20%~~	~~5% per annum~~	~~Match index~~
~~Maximum~~	~~100%~~	~~15% per annum~~	~~Index + 8% per annum~~


Performance	Threshold	Maximum	Weighting

% of award vesting	20%	100%
TSR relative to Dow Jones World Hotels index	Match index	Index + 8% per annum	50%
Net Rooms growth relative to comparator group	Average	1^st position	25%
RevPAR growth relative to comparator group	Average	1^st position	25%

~~EPS~~After testing the performance ~~henceforth~~conditions set on grant, the Remuneration Committee will review the vesting outcomes of the Rooms and RevPAR measures against an assessment of earnings and quality of the financial performance of the Company over the period. The Remuneration Committee may reduce the number of shares which vest if they determine such an adjustment is appropriate. IHG’s performance and vesting outcomes will be ~~measured on a constant tax rate across~~fully disclosed and explained in the ~~cycle due to the impact that short-term fluctuations in tax rates have on vesting outcomes. Optimization of tax rates remains a key area of focus for~~ relevant ~~management.~~Remuneration Report.

F-40

Outcomes in ~~2009~~2010 and progress on all current LTIP cycles

The specific vesting ~~arrangements~~performance conditions and position as at December 31, 2010 for all conditional LTIP awards made between ~~2007~~2008 and ~~2009~~2010 are set out in the following table:


					Outcome/															Outcome/
	Threshold	Maximum	Threshold⁽¹⁾	Maximum⁽¹⁾	current	Threshold	Maximum	Threshold(1)			Maximum(1)						Maximum			current
Performance measure	performance	performance	vesting	vesting	position	performance	performance	vesting			vesting			Weighting			award			position
2007/2009 LTIP cycle

2008/2010 cycle
TSR	5^th place in relative comparator group	1^st place in relative comparator group	20%	100%	4^th place in relative comparator group	Growth equal to the index	Growth exceeds the index by 8% or more		20	%		100	%		50	%		135	%	Growth outperformance of 8.0%
EPS	Growth of 10% per annum	Growth of 20% per annum or more	20%	100%	Growth of 15.2% per annum	Growth of 6% per annum	Growth of 16% per annum or more		20	%		100	%		50	%		135	%	Growth of 9.6% per annum
Total Vesting					46% of maximum award															73.8% of maximum award
2008/2010 LTIP cycle⁽²⁾
2009/2011 cycle⁽²⁾
TSR	Growth equal to the index	Growth exceeds the index by 8% or more	20%	100%	Growth outperformance of 12.4%	Growth equal to the index	Growth exceeds the index by 8% or more		20	%		100	%		66.7	%		102.5	%	Growth outperformance of 6.1%
EPS	Growth of 6% per annum	Growth of 16% per annum or more	20%	100%	Growth of 16.4% per annum	Growth of 0% per annum	Growth of 10% per annum or more		0	%		100	%		33.3	%		102.5	%	Growth of -1.0% per annum
2009/2011 LTIP cycle⁽³⁾
2010/2012 cycle⁽³⁾
TSR	Growth equal to the index	Growth exceeds the index by 8% or more	20%	100%	Growth outperformance of 17.2%	Growth equal to the index	Growth exceeds the index by 8% or more		20	%		100	%		50	%		102.5	%	Growth outperformance of -5.4%
EPS	Growth of 0% per annum	Growth of 10% per annum or more	0%	100%	Growth of -1.4% per annum	Growth of 5% per annum	Growth of 15% per annum or more		20	%		100	%		50	%		102.5	%	Growth of 26% per annum


(1)		Vesting between threshold and maximum occurs on a straight-line basis.

(2)		Two years of cycle completed.

(3)		One year of cycle completed.

~~F-36~~

Shareholding policy

Share ownership

The Remuneration Committee believes that share ownership by Executive Directors and senior executives strengthens the link between the individual’s personal interests and those of the shareholders. Executive Directors are expected to hold twice their base salary in shares, or three times in the case of the Chief Executive. Executives are expected to hold all shares earned (net of any share sales required to meet personal tax liabilities) until their shareholding requirement is achieved.

Executive share options

~~Since~~From 2006, executive share options have not formed part of the Company’s remuneration structure. Details of prior share option grants are given ~~in the table~~ on page ~~F-42.~~F-48.

Share capital

No awards or grants over shares were made during ~~2009~~2010 that would be dilutive of the Company’s ordinary share capital. Current policy is to settle the majority of awards or grants under the Company’s share plans with shares purchased in the market. A number of options granted up to 2005 are yet to be exercised and will be settled with the issue of new shares.

F-41

The following table shows the guideline and actual shareholdings of the Executive Directors.


	Guideline		Actual shareholding		Guideline		Actual shareholding
	shareholding		at Dec 31, 2009		shareholding		at Dec 31, 2010
Executive	as % of salary		as % of salary⁽¹⁾
					as % of salary		as % of salary⁽¹⁾

Andrew Cosslett		300		468		300		747
James Abrahamson⁽²⁾						200		138
Kirk Kinsell⁽²⁾						200		170
Richard Solomons		200		565		200		408


(1)		Based on share price of ~~893~~1,243 pence per share as at December 31, ~~2009.~~2010.

(2)		Shareholding requirement took effect upon appointment to the Board on August 1, 2010.

Policy regarding pensions

Andrew Cosslett, Richard Solomons and other senior UK-based ~~employees~~executives participate on the same basis in the executive section of the registered defined benefit InterContinental Hotels UK Pension Plan and, if appropriate, the InterContinental ExecutiveTop-Up ~~Scheme.~~Scheme (“ICETUS”). The latter is an unfunded arrangement, but with appropriate security provided via a fixed charge on a hotel asset. As an alternative to these unfunded arrangements, a cash allowance may be taken. Following recent changes to UK pensions legislation, the pension provision is under review. This Plan is now closed to new entrants.

~~Senior~~James Abrahamson, Kirk Kinsell and other senior US-based executives participate in US retirement ~~benefits~~benefit plans. Executives outside the UKUnited Kingdom and USUnited States participate in the InterContinental Hotels Group International Savings and Retirement Plan or other local plans.

~~F-37~~

Non-Executive Directors’ pay policy and structure

Non-Executive Directors are paid a fee which is approved by the Board, ~~having taken~~taking into account ~~of the~~ fees paid in other companies of a similar complexity. ~~Higher~~These fees also reflect the time commitment and responsibilities of the roles. Accordingly, higher fees are payable to the Senior Independent Director who chairs the Audit Committee and to the ~~Chairman~~Chairmen of the Remuneration ~~Committee,~~and Corporate Responsibility Committees, reflecting the additional responsibilities of these roles. In February 2009, a Corporate Responsibility Committee was established. Jennifer Laing was appointed Chairman of this Committee on March 1, 2009. Her fee was consequently increased pro rata by £10,000 per annum in recognition of these additional duties.

~~In light of the challenging external environment and consistent with the Executive salary freeze in 2009, the scheduled review of~~ Non-Executive Directors’ ~~fees was postponed by an additional year. Thus, Non-Executive Directors’ fees were~~fee levels are reviewed inannually. In the final quarter of ~~2009 and~~2010 an increase of 2% for the Chairman and 5%3% for the Non-Executive Directors was agreed by the Board to be effective from January 1, ~~2010. Non-Executive Directors’ fees were last increased~~2011. This increase is broadly in ~~2007.~~

~~Non-Executive Directors’ fee levels have been typically reviewed every two years. In view of prevailing market practice, this has been moved to an annual review in 2010.~~line with anticipated salary increases for executive and senior management employees across the wider organization.

The following table sets out the change in annual fee rates from ~~2009~~2010 to ~~2010~~2011 for the Non-Executive Directors.


		~~Fees at~~		~~Fees at~~
	~~Role~~	~~Jan 1, 2010~~		~~Dec 31, 2009~~

~~David Webster~~	~~Chairman~~		~~£398,000~~	~~£390,000~~
~~David Kappler~~	~~Senior Independent Director & Chairman of Audit Committee~~		~~£99,750~~	~~£95,000~~
~~Ralph Kugler~~	~~Chairman of Remuneration Committee~~		~~£84,000~~	~~£80,000~~
~~Jennifer Laing~~	~~Chairman of Corporate Responsibility Committee (from March 1, 2009)~~		~~£73,500~~	~~£70,000~~
~~Others~~	~~Non-Executive Directors~~		~~£63,000~~	~~£60,000~~


		Fees at		Fees at
	Role	Jan 1, 2011		Jan 1, 2010

David Webster	Chairman	£	406,000	£	398,000
David Kappler	Senior Independent Director & Chairman of Audit Committee	£	103,000	£	99,750
Ralph Kugler	Chairman of Remuneration Committee	£	86,500	£	84,000
Jennifer Laing	Chairman of Corporate Responsibility Committee	£	76,000	£	73,500
Others	Non-Executive Director	£	65,000	£	63,000

F-42

Service contracts

Policy

The Remuneration Committee’s policy is for Executive Directors to have rolling contracts with a notice period of 12 months. ~~Andrew~~Messrs. Cosslett, Abrahamson, Kinsell and ~~Richard~~ Solomons have service agreements with a notice period of 12 months. All new appointments are intended to have12-month notice periods. However, on occasion, to complete an external recruitment successfully, a longer initial notice period reducing to 12 months may be used, in accordance with the Combined Code.

No provisions for compensation for termination following change of control, nor for liquidated damages of any kind, are included in the current Directors’ contracts. In the event of any early termination of an Executive Director’s contract, the policy is to seek to minimize any liability.

Non-Executive Directors have letters of appointment. David Webster’s appointment as Non-Executive Chairman, effective from January 1, 2004, is subject to six months’ notice. The dates of appointment of the other Non-Executive Directors are set out on page ~~55.~~ 54.

All Directors’ appointments and subsequent reappointments are subject to election and re-election by shareholders.

~~F-38~~

Biographies of each of the Directors and their main responsibilities can be found on ~~page 56.~~pages 54-56.

The Company announced on March 16, 2011 that Andrew Cosslett will step down as Chief Executive on June 30, 2011 and will be succeeded by Richard Solomons. A Director since 2003 and currently Chief Financial Officer and Head of Commercial Development, Richard Solomons will start in his new position as Chief Executive on July 1, 2011.

Directors’ contracts


	Contract
	effective date		Notice period

Andrew Cosslett		~~02.03.05~~February 3, 2005		3 months
James Abrahamson		August 1, 2010		12 months
Kirk Kinsell		August 1, 2010		12 months
Richard Solomons		~~04.15.03~~April 15, 2003		12 months

~~Both of the Executive Directors~~Messrs Cosslett and Solomons signed a letter of appointment, effective from completion of the June 2005 capital reorganization of the Group, incorporating the same terms as their original service agreements.

Richard Solomons signed a contract on March 16, 2011 relating to his employment as Chief Executive, effective from July 1, 2011.

F-43

Audited information on Directors’ emoluments

Directors’ remuneration in ~~2009~~2010

The following table sets out the remuneration paid or payable to the Directors in respect of the year to December 31, ~~2009:~~2010.


	Base salaries												Total emoluments				Base salaries												Total emoluments
	and fees				Performance payments⁽¹⁾				Benefits⁽²⁾				excluding pensions				and fees				Performance payments⁽¹⁾				Benefits⁽²⁾				excluding pensions
	2009		2008		2009		2008		2009		2008		2009		2008		2010		2009		2010		2009		2010		2009		2010		2009
	(£ thousand)																(£ thousand)

Executive Directors
Andrew Cosslett⁽³⁾		802		787		—		495		25		25		827		1,307		820		802		723		—		28		25		1,571		827
Stevan Porter⁽⁴⁾		—		503		—		593		—		5		—		1,101
Richard Solomons⁽³⁾		512		561		—		401		19		18		531		980
James Abrahamson⁽³⁾																		196		—		178		—		6		—		380		—
Kirk Kinsell⁽³⁾																		193		—		169		—		74		—		436		—
Richard Solomons																		520		512		458		—		18		19		996		531
Non-Executive Directors
David Webster		390		390		—		—		—		2		390		392		398		390		—		—		—		—		398		390
Graham Allan⁽⁴⁾																		63		—		—		—		—		—		63		—
David Kappler		95		95		—		—		—		—		95		95		100		95		—		—		—		—		100		95
Ralph Kugler⁽⁵⁾		80		72		—		—		—		—		80		72
Jennifer Laing⁽⁶⁾		68		60		—		—		—		—		68		60
Robert C Larson⁽⁷⁾		—		60		—		—		—		—		—		60
Ralph Kugler																		84		80		—		—		—		—		84		80
Jennifer Laing⁽⁵⁾																		74		68		—		—		—		—		74		68
Jonathan Linen		60		60		—		—		—		—		60		60		63		60		—		—		—		—		63		60
Sir David Prosser⁽⁸⁾		—		33		—		—		—		—		—		33
Ying Yeh		60		60		—		—		—		—		60		60		63		60		—		—		—		—		63		60
Former Directors⁽⁹⁾⁽⁶⁾		—		—		—		—		1		1		1		1		—		—		—		—		1		1		1		1

Total		2,067		2,681		—		1,489		45		51		2,112		4,221		2,574		2,067		1,528		—		127		45		4,229		2,112


(1)		Performance payments comprise cash payments in respect of participation in the ABP but exclude bonus payments in deferred shares, details of which are set out in the ABP table on page ~~F-40.~~F-46. For James Abrahamson and Kirk Kinsell, this also includes a cash payment in lieu of dividends relating to share awards as outlined on page F-46.

(2)		Benefits incorporate all tax assessable benefits arising from the individual’s employment. ~~For Messrs Cosslett and Solomons, this relates in the main~~This includes, but is not limited to, benefits such as the provision of a fully expensed company car, ~~and~~ private healthcare, ~~cover.~~financial counseling and other benefits as applicable to the individual’s work location. This includes the cost of expatriate benefits related to Kirk Kinsell’s international assignment.

(3)		~~2008~~Messrs. Abrahamson and Kinsell were appointed as Directors on August 1, 2010. Base salaries, ~~for Andrew Cosslett~~performance payments and ~~Richard Solomons reflect a~~benefits have been pro-rated from their date of appointment. James Abrahamson’s pro-rated base salary ~~increase effective April 1, 2008. They did not receive~~is $302,083 and Kirk Kinsell’s pro-rated base salary is $297,917. Sterling values have been calculated using an ~~increase in 2009. Richard Solomons also received a pro rata salary supplement~~exchange rate of ~~£10,000 per month from July 1, 2008 to January 7, 2009 reflecting his additional duties as interim President of the Americas region.~~$1= £0.65.

(4)		~~Stevan Porter passed away~~Graham Allan was appointed as a Director on ~~August 7, 2008.~~January 1, 2010.

(5)		~~Ralph Kugler’s fee was increased, pro rata, from June 1, 2008 when he became Chairman of the Remuneration Committee.~~

~~(6)~~		Jennifer Laing’s fee was increased, pro rata, from March 1, 2009 when she became Chairman of the Corporate Responsibility Committee.

~~(7)~~		~~Robert Larson retired as a Director on December 31, 2008.~~

~~(8)~~		~~Sir David Prosser retired as a Director and Chairman of the Remuneration Committee on May 31, 2008.~~

~~(9)~~(6)		Sir Ian Prosser retired as a Director on December 31, 2003. However, he had an ongoing healthcare benefit of ~~£1,150~~£1,179 during the year.

~~F-39~~F-44

Directors’ pension benefits

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

The executive section of the IC Plan is a funded, registered, final salary, occupational pension scheme. The main features applicable to the Executive Directors are: ~~a normal pension age of 60; pension accrual of~~1/30th of final pensionable salary for each year of pensionable service; life assurance cover of four times pensionable salary; pensions payable in the event of ill health; and spouses’, partners’ and dependants’ pensions on death.


	•	a normal pension age of 60;

	•	pension accrual of 1/30th of final pensionable salary for each year of pensionable service;

	•	life assurance cover of four times pensionable salary;

	•	pensions payable in the event of ill health; and

	•	spouses’, partners’ and dependants’ pensions on death.

When benefits would otherwise exceed a member’s lifetime allowance under the post-April 2006 pensions regime, these benefits are limited in the IC Plan, but the balance is provided instead by ICETUS.

James Abrahamson has retirement benefits provided via the Six Continents Hotels, Inc. Deferred Compensation Plan (“DCP”). Kirk Kinsell has retirement benefits provided via the 401(k) Retirement Plan for employees of Six Continents Hotels, Inc. (“401(k)”) and the DCP. The 401(k) is a tax qualified plan providing benefits on a defined contribution basis, with the member and the relevant company both contributing. The DCP is a non-tax qualified plan, providing benefits on a defined contribution basis, with the member and the relevant company both contributing.

The following table sets out the pension benefits of the Executive ~~Directors.~~Directors in the final salary plans.


									Increase in																Increase in
									transfer value		Absolute				Accrued										transfer value		Absolute
			Directors’		Transfer value of				over the year,		increase in		Increase		pension at				Directors’		Transfer value of				over the year,		increase in		Increase		Accrued
			contributions		accrued benefits				less Directors’		accrued		in accrued		Dec 31,				contributions		accrued benefits				less Directors’		accrued		in accrued		pension at
	Age at		in the year⁽¹⁾		Jan 1, 2009		Dec 31, 2009		contributions		pension⁽²⁾		pension⁽³⁾		2009⁽⁴⁾		Age at		in the year⁽¹⁾		Jan 1, 2010		Dec 31, 2010		contributions		pension⁽²⁾		pension⁽³⁾		Dec 31, 2010⁽⁴⁾
Directors	Dec 31, 2009		(£)		(£)		(£)		(£)		(£ pa)		(£ pa)		(£ pa)		Dec 31, 2010		(£)		(£)		(£)		(£)		(£ pa)		(£ pa)		(£ pa)

Andrew Cosslett		54		39,400		2,028,600		2,574,100		506,100		28,600		28,600		131,200		55		40,100		2,574,100		3,438,100		823,900		30,300		23,600		161,500
Richard Solomons		48		25,100		3,430,800		3,934,700		478,800		20,400		20,400		217,700		49		25,500		3,934,700		4,708,400		748,200		21,500		10,400		239,200


(1)		Contributions paid in the year by the Directors under the terms of the plans. Contributions were 5% of full pensionable salary.

(2)		The absolute increase in accrued pension during the year.

(3)		The increase in accrued pension during the year, excluding any increase for inflation.

(4)		Accrued pension is that which would be paid annually on retirement at 60, based on service to December 31, ~~2009.~~2010.

Contributions made by and in respect of James Abrahamson and Kirk Kinsell in the defined contributions plans are*:


	Age at		Directors’		Directors’		Company		Company
	December 31,		contributions to		contributions to		contribution to		contribution to
	2010		DCP in the year		401(k) in the year		DCP in the year		401(k) in the year
			(£)		(£)		(£)		(£)

James Abrahamson		55		3,900		—		18,000		—
Kirk Kinsell		55		3,800		3,500		22,300		—


*	Messrs. Abrahamson and Kinsell were appointed as Directors on August 1, 2010. Pension contributions have been pro-rated from their date of appointment. Sterling values have been calculated using an exchange rate of $1 = £0.65.

F-45

Annual Bonus Plan deferred share awards

~~Messrs Cosslett and Solomons~~All Directors participated in the ABP during the year ended December 31, ~~2009. However, no annual bonus is payable for this period.~~2010. No matching shares are provided on awards. Directors’ pre-tax share interests during the year were as follows:


													ABP shares												Value																								Value
													vested												based on																								based on
													during												share																								share
	Financial year					ABP awards					Market		the year				Market				ABP				price of		Financial year								Market						Market				ABP				price of
	on which					during					price		Jan 1, 2009				price				awards				893 pence		on which								price		ABP shares				price				awards				1,243 pence
	performance		ABP awards			the year					per share		to				per share		Value		held at		Planned		at Dec 31,		performance		ABP awards		ABP awards				per share		vested				per share		Value		held at		Planned		at Dec 31,
	is based for		held at			Jan 1, 2009			Award		at award		Dec 31,		Vesting		at vesting		at vesting		Dec 31,		vesting		2009		is based for		held at		during		Award		at award		during		Vesting		at vesting		at vesting		Dec 31,		vesting		2010
Directors	award		Jan 1, 2009			to Dec 31, 2009			date		(pence)		2009		date		(pence)		(£)		2009		date		(£)		award*		Jan 1, 2010		the year		date		(pence)		the year		date		(pence)		(£)		2010		date		(£)

Andrew Cosslett		2005		28,878	⁽¹⁾					3.8.06		853.67		28,878		3.9.09		443.93		128,198								2006		55,870				2.26.07		1,235		55,870		2.26.10		914.66		511,021
		2006		55,870	⁽²⁾					2.26.07		1235										55,870		2.26.10		498,919		2007		71,287				2.25.08		819.67										71,287		2.25.11		886,097
		2007		71,287	⁽³⁾					2.25.08		819.67										71,287		2.25.11		636,593		2008		104,652				2.23.09		472.67										104,652		2.23.12		1,300,824
		2008					104,652	⁽⁴⁾		2.23.09		472.67										104,652		2.23.12		934,542		2009		—		—														—				—

Total				156,035			104,652															231,809				2,070,054				231,809																175,939				2,186,921

James Abrahamson																												2009		—		—														—				—

Total																														—																—				—

Kirk Kinsell																												2006		13,610				2.26.07		1,235		13,610		2.26.10		914.66		124,485
																												2007		19,731				2.25.08		819.67										19,731		2.25.11		245,256
																												2008		41,427				2.23.09		472.67										41,427		2.23.12		514,938
																												2009		—		—														—				—

Total																														74,768																61,158				760,194

Richard Solomons		2005		18,459	⁽¹⁾					3.8.06		853.67		18,459		3.9.09		443.93		81,945								2006		35,757				2.26.07		1,235		35,757		2.26.10		914.66		327,055
		2006		35,757	⁽²⁾					2.26.07		1235										35,757		2.26.10		319,310		2007		45,634				2.25.08		819.67										45,634		2.25.11		567,231
		2007		45,634	⁽³⁾					2.25.08		819.67										45,634		2.25.11		407,512		2008		66,549				2.23.09		472.67										66,549		2.23.12		827,204
		2008					66,549	⁽⁴⁾		2.23.09		472.67										66,549		2.23.12		594,283		2009		—		—														—				—

Total				99,850			66,549															147,940				1,321,105				147,940																112,183				1,394,435


~~(1)~~*		~~This award was based on EPS, EBIT and individual performance measures. Total shares held include matching shares.~~

~~(2)~~		~~This~~For financial year 2006, the award was based on EPS and EBIT ~~measures. Total~~measures and total shares held include matching shares.

~~(3)~~		~~This~~ For financial year 2007, the award was based on Group EBIT and net annual rooms additions ~~measures. Total~~measures and total shares held include matching shares.

~~(4)~~		~~This~~ For financial year 2008, the award was based on Group EBIT, net annual rooms additions and individual performance measures. The bonus target was 57.5% of base salary. Both Executive Directors were awarded 20.52% for Group EBIT performance, 10.97% for net annual rooms additions and 30.19% for individual performance, resulting in a total deferred shares bonus of 61.68% of base salary. No matching shares were awarded. For financial year 2009, no bonus was paid.

Special share award

James Abrahamson received a special share award which vests over three years as part of his recruitment terms in 2009. Vesting each year is subject to continued service. The details are set out below:

Value

based on

share

Market

price of

price

Shares

price

Awards

1,243 pence

Awards

per share

vested

per share

Value

held at

Planned

at Dec 31,

held at

Award

at award

during

Vesting

at vesting

Dec 31,

vesting

2010

Director

Jan 1, 2010

date

(pence)

the year

date

(pence)

(£)

2010

date

(£)

James Abrahamson

45,000

2.23.09

454.25

45,000

2.17.10

900.07

405,032

45,000

2.23.09

454.25

45,000

2.16.11

559,350

45,000

2.23.09

454.25

45,000

2.15.12

559,350

135,000

90,000

1,118,700

~~F-40~~F-46

Long Term Incentive Plan awards

The awards made in respect of cycles ending on December 31, ~~2008,~~ 2009, 2010, 2011 and ~~2011~~2012 and the maximum pre-tax number of ordinary shares due if performance targets are achieved in full are set out in the table below. In respect of the cycle ending December 31, ~~2008, 86.7%~~2009, 46% of the award vested on February ~~18, 2009.~~17, 2010. In respect of the cycle ending on December 31, ~~2009,~~2010, the Company ~~finished~~outperformed the Dow Jones World Hotels index in ~~fourth place in the~~ TSR ~~group~~by 8 percentage points and achieved ~~15.2%~~9.6% per annum adjusted EPS growth. Accordingly, ~~46%~~73.8% of the award vested on February ~~17, 2010.~~16, 2011.


																							Maximum																							Maximum
						Maximum																	value																							value
						LTIP shares						LTIP shares											based on																							based on
	End of year					awarded						vested											share		End of year																					share
	to which					during				Market		during			Market						Maximum		price of		to which				Maximum				Market					Market						Maximum		price of
	performance			Maximum		the year				price		the year			price				Actual/		LTIP awards		893 pence		performance		Maximum		LTIP shares				price		LTIP shares			price						LTIP awards		1,243 pence
	is based			LTIP awards		Jan 1, 2009				per share		Jan 1, 2009 to			per share		Value		planned		held at		at Dec 31,		is based		LTIP awards		awarded				per share		vested			per share		Value				held at		at Dec 31,
	for award			held at		to Dec 31,		Award		at award		Dec 31,			at vesting		at vesting		vesting		Dec 31,		2009		for award		held at		during		Award		at award		during			at vesting		at vesting		Vesting		Dec 31,		2010
Directors	(Dec 31,)			Jan 1, 2009		2009		date		(pence)		2009			(pence)		(£)		date		2009		(£)		(Dec 31,)⁽¹⁾		Jan 1, 2010		the year		date		(pence)		the year			(pence)		(£)		date		2010		(£)

Andrew Cosslett		2008			200,740				4.3.06		941.5		174,041	⁽¹⁾		481.25		837,572		2.18.09						2009		159,506				4.2.07		1,256		73,372	⁽²⁾		901.5		661,449		2.17.10
		2009	⁽²⁾		159,506				4.2.07		1256									2.17.10		159,506		1,424,389		2010		253,559				5.19.08		854									2.16.11		253,559		3,151,738
		2010	⁽²⁾		253,559				5.19.08		854									2.16.11		253,559		2,264,282		2011		272,201				4.3.09		604									2.15.12		272,201		3,383,458
		2011	⁽²⁾				272,201		4.3.09		604									2.15.12		272,201		2,430,755		2012				160,807		4.8.10		1,053									2.13.13		160,807		1,998,831

Total					613,805		272,201															685,266		6,119,426				685,266		160,807															686,567		8,534,027

James Abrahamson																										2009		82,486				2.23.09		457		37,943	⁽²⁾		901.5		342,056		2.17.10
																										2010		164,973				2.23.09		457									2.16.11		164,973		2,050,614
																										2011		138,730				4.3.09		604									2.15.12		138,730		1,724,414
																										2012				79,008		4.8.10		1,053									2.13.13		79,008		982,069

Total																												386,189		79,008															382,711		4,757,097

Kirk Kinsell																										2009		30,156				4.2.07		1,256		13,871	⁽²⁾		901.5		125,047		2.17.10
																										2009		16,987				11.12.07		961.5		7,814	⁽²⁾		901.5		70,443		2.17.10
																										2010		84,397				5.19.08		854									2.16.11		84,397		1,049,055
																										2011		132,256				4.3.09		604									2.15.12		132,256		1,643,942
																										2012				75,411		4.8.10		1,053									2.13.13		75,411		937,359

Total																												263,796		75,411															292,064		3,630,356

Richard Solomons		2008			128,470				4.3.06		941.5		111,383	⁽¹⁾		481.25		536,031		2.18.09						2009		102,109				4.2.07		1,256		46,970	⁽²⁾		901.5		423,435		2.17.10
		2009	⁽²⁾		102,109				4.2.07		1256									2.17.10		102,109		911,833		2010		161,241				5.19.08		854									2.16.11		161,241		2,004,226
		2010	⁽²⁾		161,241				5.19.08		854									2.16.11		161,241		1,439,882		2011		173,096				4.3.09		604									2.15.12		173,096		2,151,583
		2011	⁽²⁾				173,096		4.3.09		604									2.15.12		173,096		1,545,747		2012				101,818		4.8.10		1,053									2.13.13		101,818		1,265,598

Total					391,820		173,096															436,446		3,897,462				436,446		101,818															436,155		5,421,407


(1)		All details of performance conditions in relation to the awards made in respect of cycles ending on December 31, 2010, 2011 and 2012 are provided on page F-41.

(2)		This award was based on performance to December 31, ~~2008 where the performance measure related to~~2009. Performance was measured against both the Company’s TSR ~~against~~relative to a group of eight other comparator companies and the cumulative annual growth rate (“CAGR”) ~~of rooms~~ in adjusted EPS over the ~~IHG system relative to a group of eight other comparator companies.~~performance period. The number of shares released was ~~graded,~~determined, according to a)(a) where the Company finished in the TSR comparator group, with 50% of the award being released for first ~~or second~~ position and 10% of the award being released for median position; and ~~b) relative CAGR of rooms,~~(b) the cumulative annual growth in adjusted EPS, with 50% of the award being released for ~~3.9% (upper quartile) CAGR~~growth of 20% per annum or more and 10% of the award being released for ~~3.3% (median) CAGR.~~growth of 10% per annum. The Company finished in ~~third place~~fourth position in the TSR group and achieved ~~a relative CAGR of 4.9%.~~15.2% per annum adjusted EPS growth. Accordingly, ~~86.7%~~46% of the award vested on February ~~18, 2009.~~

~~(2)~~		~~All details of performance conditions in relation to these awards are provided on page F-35 and F-36.~~17, 2010.

~~F-41~~F-47

Share options

Between 2003 and 2005, grants of options were made under the IHG Executive Share Option Plan. No executive share options have been granted since ~~2005. In 2003, a grant of options was made under the IHG all-employee Sharesave Plan.~~then.


																	Ordinary shares under option
	Ordinary shares under option												Weighted												Weighted
								Share					average												average
	Options held			Lapsed		Exercised		price on		Options			option		Option		Options held			Lapsed	Exercised	Options			option		Option
	at Jan 1,			during		during		date of		held at			price		price		at Jan 1,			during	during	held at			price		price
Directors	2009			the year		the year		exercise (pence)		Dec 31, 2009			(pence)		(pence)		2010			the year	the year	Dec 31, 2010			(pence)		(pence)

Andrew Cosslett		157,300	⁽¹⁾				157,300		901.89							619.83
Kirk Kinsell																		77,110	⁽¹⁾				77,110	⁽¹⁾				494.17
																		32,040	⁽²⁾				32,040	⁽²⁾				619.83

Total		157,300			—		157,300				—			—				109,150					109,150			531.06



Richard Solomons		230,320	⁽²⁾								230,320	⁽²⁾				494.17		230,320	⁽¹⁾				230,320	⁽¹⁾				494.17
		100,550	⁽¹⁾								100,550	⁽¹⁾				619.83		100,550	⁽²⁾				100,550	⁽²⁾				619.83
		3,769	⁽³⁾				3,769		466.75							420.50

Total		334,639			—		3,769				330,870			532.36				330,870					330,870			532.36


(1)		~~Executive share options granted in 2005 became exercisable in April 2008 up to April 2015.~~

~~(2)~~		Executive share options granted in 2004 became exercisable in April 2007 up to April 2014.

~~(3)~~(2)		~~Sharesave~~Executive share options granted in ~~2003. These were~~2005 became exercisable ~~between March and August 2009.~~in April 2008 up to April 2015.

Option prices during the year ranged from ~~420.50~~494.17 pence to 619.83 pence per IHG share. The closing market value share price on December 31, ~~2009~~2010 was ~~893.00~~1,243 pence and the range during the year was ~~446.00~~887 pence to ~~903.50~~1,266 pence per share.

~~The~~No Director exercised options during the year; therefore there is no disclosable gain ~~made~~ by Directors in aggregate ~~on the exercise of options during~~for the year ~~was £437,732 (2008 £nil)~~ended December 31, 2010 (2009 £437,732).


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


	Year ended December 31,						Year ended December 31,
	2009		2008		2007		2010		2009		2008
	($ million)						($ million)

Group audit fees		1.8		1.7		2.8		1.9		1.8		1.7
Audit fees in respect of subsidiaries		2.1		1.5		2.6		1.6		2.1		1.5
Tax fees		1.7		1.0		0.8		2.1		1.7		1.0
Interim review fees		0.3		0.4		0.4		0.3		0.3		0.4
Other services pursuant to legislation		0.3		0.1		0.2		0.3		0.3		0.1
Other		1.5		2.8		2.4		1.7		1.5		2.8

		7.7		7.5		9.2		7.9		7.7		7.5

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

~~F-42~~F-48


Note 5 —	Exceptional items


	Year ended December 31,									Year ended December 31,
	2009			2008			2007			2010			2009			2008
	($ million)									($ million)

Continuing operations
Exceptional operating items:
Exceptional operating items
Cost of sales:
Onerous management contracts⁽ⁱ⁾		(91	)		—			—			—			(91	)		—

Administrative expenses:
Holiday Inn brand relaunch⁽ⁱⁱ⁾		(19	)		(35	)		—			(9	)		(19	)		(35	)
Reorganization and related costs⁽ⁱⁱⁱ⁾		(43	)		(24	)		(14	)		(4	)		(43	)		(24	)
Enhanced pension transfer^(iv)		(21	)		—			—
Litigation provision^(iv)											(22	)		—			—
Enhanced pension transfer^(v)											—			(21	)		—

		(83	)		(59	)		(14	)		(35	)		(83	)		(59	)

Other operating income and expenses:
Gain on sale of associate investments		—			13			22			—			—			13
Gain on sale of other financial assets		—			14			36
Loss on disposal of hotels (Note 11)^*		(2	)		(2	)		—
Reorganization and related costs⁽ⁱⁱⁱ⁾		—			—			12
Gain on sale of other financial assets^(vi)											8			—			14
Gain/(loss) on disposal of hotels (Note 11)^*											27			(2	)		(2	)

		(2	)		25			70			35			(2	)		25

Depreciation and amortization:
Reorganization and related costs⁽ⁱⁱⁱ⁾		—			(2	)		(2	)		—			—			(2	)

Impairment:
Property, plant and equipment (Note 10)		(28	)		(12	)		6			(6	)		(28	)		(12	)
Assets held for sale (Note 11)		(45	)		—			—			—			(45	)		—
Goodwill (Note 12)		(78	)		(63	)		—			—			(78	)		(63	)
Intangible assets (Note 13)		(32	)		(21	)		—			—			(32	)		(21	)
Other financial assets (Note 15)		(14	)		—			—			(1	)		(14	)		—

		(197	)		(96	)		6			(7	)		(197	)		(96	)

		(373	)		(132	)		60			(7	)		(373	)		(132	)

Tax:
Tax
Tax on exceptional operating items		112			17			—			1			112			17
Exceptional tax credit^(v)		175			25			60
Exceptional tax credit^(vii)											—			175			25

		287			42			60			(6	)		287			42

Discontinued operations
Gain on disposal of assets (Note 11):
Discontinued operations^(viii)
Gain on disposal of assets (Note 11)
Gain on disposal of hotels**		2			—			40			—			2			—
Tax credit/(charge)		4			5			(8	)
Tax credit											2			4			5

		6			5			32			2			6			5

		(80	)		(85	)		152			(4	)		(80	)		(85	)


*	Relates to hotels classified as continuing operations.

**	Relates to hotels classified as discontinued operations.

The above items are treated as exceptional by reason of their size or nature.

F-49


(i)	An onerous contract provision of $65 million ~~has been~~was recognized at December 31, 2009 for the future net unavoidable costs under the performance guarantee related to certain management contracts with one US hotel owner. In addition to the provision, a deposit of $26 million ~~has been~~was written off as it is no longer considered recoverable under the terms of the same management contracts.

(ii)	Relates to costs incurred in support of the worldwide relaunch of the Holiday Inn brand family that was announced on October 24, 2007.

(iii)	Primarily relates to the closure of certain corporate offices together with severance costs arising from a review of the Group’s cost base.

(iv)	~~Relates~~Estimate of the amount potentially payable in respect of a prior year claim following an unfavorable court judgment on February 23, 2011. Any final amount will not be known until the court process is complete.

(v)	Related to the payment of enhanced pension transfers to those deferred members of the InterContinental Hotels UK Pension Plan who had accepted an offer to receive the enhancement either as a cash lump sum or as an additional transfer value to an alternative pension plan provider. The exceptional item ~~comprises~~in 2009 comprised the lump sum payments ($9 million), the IAS 19 settlement loss arising on the pension transfers ($11 million) and the costs of the arrangement ($1 million). The payments and transfers were made in January 2009.

~~(v)~~(vi)	Relates to the gain on sale of an investment in the EMEA region, in both 2010 and 2008.

(vii)	Represents the release of provisions of $7 million (2009 $175 million, 2008 $25 million) which are exceptional by reason of their size or nature relating to tax matters which ~~have~~had been settled or in respect of which the relevant statutory limitation period has expired, ~~(see Note 7).~~together with, in 2010, a $7 million charge relating to an internal reorganization. This charge comprises the recognition of deferred tax assets of $24 million for capital losses and other deductible amounts, offset by tax charges of $31 million.

(viii)	In 2010, relates to tax refunded relating to the sale of a hotel in a prior year. In 2009 and 2008, related to tax arising on disposals together with the release of provisions no longer required in respect of hotels disposed of in prior years.

~~F-43~~


Note 6 —	Finance costs


	Year ended December 31,						Year ended December 31,
	2009		2008		2007		2010		2009		2008
	($ million)						($ million)

Financial income
Interest income		2		11		15		2		2		11
Fair value gains		1		1		3		—		1		1

		3		12		18		2		3		12

Financial expenses
Interest expense		39		95		90		46		39		95
Finance charge payable under finance leases		18		18		18		18		18		18

		57		113		108		64		57		113

Interest income and expense relate to financial assets and liabilities held at amortized cost, calculated using the effective interest rate method.

Included within interest expense is $2 million ~~(2008~~(2009 $2 million, 2008 $12 ~~million, 2007 $21~~ million) payable to the Priority Club Rewards loyalty program relating to interest on the accumulated balance of cash received in advance of the redemption of points awarded.

~~F-44~~F-50


Note 7 —	Tax


	Year ended December 31,									Year ended December 31,
	2009			2008			2007			2010			2009			2008
	($ million)									($ million)

Income tax
UK corporation tax at 28% (2008 28.5%, 2007 30.0%):
UK corporation tax at 28% (2009 28%, 2008 28.5%):
Current period		26			13			45			21			26			13
Benefit of tax reliefs on which no deferred tax previously recognized		—			—			(1	)
Adjustments in respect of prior periods		(33	)		(28	)		(33	)		(29	)		(33	)		(28	)

		(7	)		(15	)		11			(8	)		(7	)		(15	)

Foreign tax⁽ⁱ⁾:
Current period		79			130			200			122			79			130
Benefit of tax reliefs on which no deferred tax previously recognized		(6	)		(6	)		(15	)		(13	)		(6	)		(6	)
Adjustments in respect of prior periods⁽ⁱⁱ⁾		(246	)		(63	)		(100	)		(23	)		(246	)		(63	)

		(173	)		61			85			86			(173	)		61

Total current tax		(180	)		46			96			78			(180	)		46

Deferred tax:
Origination and reversal of temporary differences		(73	)		26			(67	)		47			(73	)		26
Changes in tax rates		1			(1	)		(4	)		(2	)		1			(1	)
Adjustments to estimated recoverable deferred tax assets		1			(4	)		5			(36	)		1			(4	)
Adjustments in respect of prior periods		(25	)		(13	)		8			8			(25	)		(13	)

Total deferred tax		(96	)		8			(58	)		17			(96	)		8

Total income tax (credit)/charge		(276	)		54			38
Total income tax charge/(credit) for the year											95			(276	)		54

Further analyzed as tax relating to:
Profit before exceptional items		15			101			90			98			15			101
Exceptional items (Note 5):
Exceptional operating items		(112	)		(17	)		—			(1	)		(112	)		(17	)
Exceptional tax credit⁽ⁱⁱⁱ⁾		(175	)		(25	)		(60	)		—			(175	)		(25	)
Gain on disposal of assets		(4	)		(5	)		8			(2	)		(4	)		(5	)

		(276	)		54			38			95			(276	)		54

The total tax (credit)/charge can be further analyzed as relating to:
The total tax charge/(credit) can be further analyzed as relating to:
Continuing operations		(272	)		59			29			97			(272	)		59
Profit on discontinued operations		—			—			1
Gain on disposal of assets		(4	)		(5	)		8
Discontinued operations — gain on disposal of assets											(2	)		(4	)		(5	)

		(276	)		54			38			95			(276	)		54


(i)		Represents corporate income taxes on profit taxable in foreign jurisdictions, a significant proportion of which relates to the Group’s US subsidiaries.

(ii)		~~In 2009, includes~~Includes $7 million (2009 $165 million, 2008 $nil) of exceptional releases included at (iii) below together with other releases relating to tax matters which have been settled or in respect of which the relevant statutory limitation period has expired.

(iii)		Represents the release of provisions of $7 million (2009 $175 million, 2008 $25 million) which are exceptional by reason of their size or nature relating to tax matters which have been settled or in respect of which the relevant statutory limitation period has ~~expired.~~expired, together with, in 2010, a $7 million charge relating to an internal reorganization. This charge comprises the recognition of deferred tax assets of $24 million for capital losses and other deductible amounts, offset by tax charges of $31 million.

~~F-45~~F-51

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


										Before																		Before
										exceptional																		exceptional
	Total⁽ⁱ⁾									items⁽ⁱⁱ⁾									Total⁽ⁱ⁾									items⁽ⁱⁱ⁾
	Year ended December 31,																		Year ended December 31,
	2009			2008			2007			2009			2008			2007			2010			2009			2008			2010			2009			2008
	(%)																		(%)

UK corporation tax at standard rate		28.0			28.5			30.0			28.0			28.5			30.0			28.0			28.0			28.5			28.0			28.0			28.5
Non-deductible expenditure and non-taxable income		(36.5	)		8.7			5.6			7.4			6.1			6.9			4.1			(36.5	)		8.7			4.2			7.4			6.1
Net effect of different rates of tax in overseas businesses		(43.0	)		10.1			1.8			8.7			7.1			2.2			9.4			(43.0	)		10.1			9.3			8.7			7.1
Effect of changes in tax rates		(0.3	)		(0.2	)		(1.0	)		0.1			(0.1	)		(1.2	)		(0.5	)		(0.3	)		(0.2	)		(0.7	)		0.1			(0.1	)
Benefit of tax reliefs on which no deferred tax previously recognized		7.2			(1.7	)		(3.3	)		(1.5	)		(1.2	)		(4.1	)		(3.7	)		7.2			(1.7	)		(3.6	)		(1.5	)		(1.2	)
Effect of adjustments to estimated recoverable deferred tax assets		5.9			(1.1	)		1.3			(1.2	)		(0.8	)		1.6			(9.7	)		5.9			(1.1	)		(2.3	)		(1.2	)		(0.8	)
Adjustment to tax charge in respect of prior periods		185.5			(23.5	)		(11.0	)		(37.6	)		(16.6	)		(13.8	)		(11.8	)		185.5			(23.5	)		(9.1	)		(37.6	)		(16.6	)
Other		(3.8	)		(0.8	)		0.4			0.8			(0.6	)		0.7			—			(3.8	)		(0.8	)		—			0.8			(0.6	)
Exceptional items and gain on disposal of assets		298.3			(2.9	)		(16.3	)		—			—			—			9.4			298.3			(2.9	)		—			—			—

		441.3			17.1			7.5			4.7			22.4			22.3			25.2			441.3			17.1			25.8			4.7			22.4


(i)		Calculated in relation to total ~~losses/profits~~profits/losses including exceptional items.

(ii)		Calculated in relation to profits excluding exceptional items.

Tax paid

Total net tax paid during the year of $68 million (2009 $2 million, ~~(2008~~2008 $2 ~~million, 2007 $138~~ million) comprises $64 million paid (2009 $1 million paid, ~~(2008~~2008 $1 million ~~received, 2007 $74 million paid)~~received) in respect of operating activities and $4 million paid (2009 $1 million, ~~paid (2008~~2008 $3 ~~million paid, 2007 $64~~ million) in respect of investing activities.

Tax paid is lower than the current period income tax charge primarily due to the receipt of refunds in respect of prior years together with provisions for tax for which no payment of tax has currently been made.

Tax risks, policies and governance

It is the Group’s objective to comply fully with its worldwide corporate income tax filing, payment and reporting obligations, whilst managing its tax affairs within acceptable risk parameters on a basis consistent with the Group’s overall business conduct principles in order to minimize its worldwide liabilities in the best interests of its shareholders. The Group adopts a policy of open co-operation with tax authorities, with full disclosure of relevant issues.

The Group’s tax objectives and policies, and any changes thereto, are reviewed and approved by the Audit Committee. Regular tax reports are made to the Chief Financial Officer in addition to an annual presentation to the Audit Committee covering the Group’s tax position, strategy and major risks. Tax is also encompassed within the Group’s formal risk management procedures and any material tax disputes, litigation or tax planning activities are subject to internal risk review and management approval procedures.

~~F-46~~F-52


Note 8 —	Dividends paid and proposed


		Year ended December 31,												Year ended December 31,
		2009		2008		2007		2009		2008		2007		2010		2009		2008		2010		2009		2008
		(cents per share)						($ million)						(cents per share)						($ million)

Paid during the year:
Final (declared in previous year)			29.2		29.2		25.9		83		86		92
Final (declared for previous year)															29.2		29.2		29.2		84		83		86
Interim			12.2		12.2		11.5		35		32		35		12.8		12.2		12.2		37		35		32
Special interim			—		—		400.0		—		—		1,397

			41.4		41.4		437.4		118		118		1,524
															42.0		41.4		41.4		121		118		118

Proposed (not recognized as a liability at December 31):	Proposed (not recognized as a liability at December 31):
Final			29.2		29.2		29.2		84		83		86		35.2		29.2		29.2		101		84		83

The final dividend of ~~18.7~~22.0 pence ~~(29.2~~(35.2 cents converted at the closing exchange rate on February ~~12, 2010)~~11, 2011) is proposed for approval at the Annual General Meeting on May ~~28, 2010~~27, 2011 and is payable on the shares in issue at March ~~26, 2010.~~25, 2011.


Note 9 —	Earnings per ordinary share

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

Diluted earnings per ordinary share is calculated by adjusting basic earnings per ordinary share to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding during the year.

Adjusted earnings per ordinary share is disclosed in order to show performance undistorted by exceptional items, to give a more meaningful comparison of the Group’s performance.


	Year ended December 31,												Year ended December 31,
	2009				2008				2007				2010				2009				2008
	Continuing				Continuing				Continuing				Continuing				Continuing				Continuing
	operations		Total		operations		Total		operations		Total		operations		Total		operations		Total		operations		Total

Basic earnings per ordinary share
Profit available for equity holders ($ million)		207		213		257		262		429		463		278		280		207		213		257		262
Basic weighted average number of ordinary shares (millions)		285		285		287		287		320		320		288		288		285		285		287		287
Basic earnings per ordinary share (cents)		72.6		74.7		89.5		91.3		134.1		144.7		96.5		97.2		72.6		74.7		89.5		91.3

Diluted earnings per ordinary share
Profit available for equity holders ($ million)		207		213		257		262		429		463		278		280		207		213		257		262
Diluted weighted average number of ordinary shares (millions)		295		295		296		296		329		329		296		296		295		295		296		296
Diluted earnings per ordinary share (cents)		70.2		72.2		86.8		88.5		130.4		140.7		93.9		94.6		70.2		72.2		86.8		88.5


	2009		2008		2007		2010		2009		2008
	(millions)						(millions)

Diluted weighted average of ordinary shares is calculated as:
Basic weighted average number of ordinary shares		285		287		320		288		285		287
Dilutive potential ordinary shares — employee share options		10		9		9		8		10		9

		295		296		329		296		295		296

~~F-47~~F-53


	Year ended December 31,																		Year ended December 31,
	2009						2008						2007						2010						2009						2008
	Continuing						Continuing						Continuing						Continuing						Continuing						Continuing
	operations			Total			operations			Total			operations			Total			operations			Total			operations			Total			operations			Total

Adjusted earnings per ordinary share
Profit available for equity holders ($ million)		207			213			257			262			429			463			278			280			207			213			257			262
Adjusting items (Note 5):
Exceptional operating items ($ million)		373			373			132			132			(60	)		(60	)		7			7			373			373			132			132
Tax on exceptional operating items ($ million)		(112	)		(112	)		(17	)		(17	)		—			—			(1	)		(1	)		(112	)		(112	)		(17	)		(17	)
Exceptional tax credit ($ million)		(175	)		(175	)		(25	)		(25	)		(60	)		(60	)		—			—			(175	)		(175	)		(25	)		(25	)
Gain on disposal of assets, net of tax ($ million)		—			(6	)		—			(5	)		—			(32	)		—			(2	)		—			(6	)		—			(5	)

Adjusted earnings ($ million)		293			293			347			347			309			311			284			284			293			293			347			347
Basic weighted average number of ordinary shares (millions)		285			285			287			287			320			320			288			288			285			285			287			287
Adjusted earnings per ordinary share (cents)		102.8			102.8			120.9			120.9			96.6			97.2			98.6			98.6			102.8			102.8			120.9			120.9

Adjusted earnings ($ million)		293			293			347			347			309			311			284			284			293			293			347			347
Diluted weighted average number of ordinary shares (millions)		295			295			296			296			329			329			296			296			295			295			296			296
Adjusted diluted earnings per ordinary share (cents)		99.3			99.3			117.2			117.2			93.9			94.5			95.9			95.9			99.3			99.3			117.2			117.2

~~F-48~~


Note 10 —	Property, plant and equipment

Land
Fixtures,

and
fittings and

buildings equipment Total
($ million)

Year ended December 31, 2008

Cost:
At January 1, 2008 1,606 955 2,561
Additions 6 85 91
Net transfers to non-current assets classified as held for sale (119 ) (60 ) (179 )
Disposals (15 ) (24 ) (39 )
Exchange and other adjustments (112 ) (56 ) (168 )

At December 31, 2008 1,366 900 2,266

Depreciation and impairment:
At January 1, 2008 (129 ) (498 ) (627 )
Provided (11 ) (61 ) (72 )
Net transfers to non-current assets classified as held for sale 37 37 74
Impairment charge⁽ⁱ⁾
(12 ) — (12 )
On disposals 15 25 40
Exchange and other adjustments — 15 15

At December 31, 2008 (100 ) (482 ) (582 )

Year ended December 31, 2009

Cost:
At January 1, 2009 1,366 900 2,266
Additions 22 35 57
Net transfers from non-current assets classified as held for sale 176 104 280
Reclassification 14 (14 ) —
Disposals — (3 ) (3 )
Exchange and other adjustments 44 24 68

At December 31, 2009 1,622 1,046 2,668

Depreciation and impairment:
At January 1, 2009 (100 ) (482 ) (582 )
Provided (11 ) (60 ) (71 )
Net transfers from non-current assets classified as held for sale (44 ) (45 ) (89 )
Impairment charge⁽ⁱⁱ⁾
(28 ) — (28 )
Valuation adjustments arising on reclassification from held for sale (Note 11) (28 ) (17 ) (45 )
On disposals — 2 2
Exchange and other adjustments (1 ) (18 ) (19 )

At December 31, 2009 (212 ) (620 ) (832 )

Net book value at December 31, 2009
1,410 426 1,836

Net book value at December 31, 2008 1,266 418 1,684

Net book value at January 1, 2008 1,477 457 1,934


	Land			Fixtures,
	and			fittings and
	buildings			equipment			Total
	($ million)

Year ended December 31, 2009
Cost:
At January 1, 2009		1,366			900			2,266
Additions		22			35			57
Net transfers from non-current assets classified as held for sale		176			104			280
Reclassification		14			(14	)		—
Disposals		—			(3	)		(3	)
Exchange and other adjustments		44			24			68

At December 31, 2009		1,622			1,046			2,668

Depreciation and impairment:
At January 1, 2009		(100	)		(482	)		(582	)
Provided		(11	)		(60	)		(71	)
Net transfers from non-current assets classified as held for sale		(44	)		(45	)		(89	)
Impairment charge (see below)		(28	)		—			(28	)
Valuation adjustments arising on reclassification from held for sale (Note 11)		(28	)		(17	)		(45	)
Disposals		—			2			2
Exchange and other adjustments		(1	)		(18	)		(19	)

At December 31, 2009		(212	)		(620	)		(832	)

~~F-49~~F-54


	Land			Fixtures,
	and			fittings and
	buildings			equipment			Total
	($ million)

Year ended December 31, 2010
Cost:
At January 1, 2010		1,622			1,046			2,668
Additions		24			35			59
Net transfers to non-current assets classified as held for sale		(57	)		(55	)		(112	)
Disposals		(11	)		(20	)		(31	)
Exchange and other adjustments		(30	)		(9	)		(39	)

At December 31, 2010		1,548			997			2,545

Depreciation and impairment:
At January 1, 2010		(212	)		(620	)		(832	)
Provided		(11	)		(64	)		(75	)
Net transfers to non-current assets classified as held for sale		1			29			30
Impairment charge (see below)		—			(6	)		(6	)
Disposals		8			18			26
Exchange and other adjustments		1			1			2

At December 31, 2010		(213	)		(642	)		(855	)

Net book value at December 31, 2010		1,335			355			1,690

Net book value at December 31, 2009		1,410			426			1,836

Net book value at January 1, 2009		1,266			418			1,684

The impairment ~~charges have arisen~~charge in 2010 arose in respect of one hotel in the Americas following a re-assessment of its recoverable amount, based on value in use. Estimated future cash flows were discounted at a pre-tax rate of 11.8%. The charge is included within impairment on the face of the Consolidated income statement.

The impairment charge in 2009 arose as a result of the ~~current~~ economic downturn and a re-assessment of the recoverable amount of certain properties, based on value in ~~use, as follows:~~

~~(i) Recognized at December 31, 2008 in respect~~use. The charge, which is included within impairment on the face of ~~a North American hotel. Estimated future cash flows were discounted at a pre-tax rate of 13.5%.~~

~~(ii) Recognized at June 30, 2009, comprising~~the Consolidated income statement, comprised $20 million in respect of a North American hotel and $8 million relating to a European hotel. Estimated future cash flows were discounted at pre-tax rates of 14.0% and 12.5% respectively.

The ~~charges are included within impairment on the face of the Consolidated income statement.~~

~~The~~ carrying value of ~~land~~property, plant and ~~buildings~~equipment held under finance leases at December 31, ~~2009~~2010 was ~~$187~~$183 million ~~(2008 $192~~(2009 $187 million).

The carrying value of assets in the course of construction was $nil ~~(2008 $41 million)~~(2009 $nil).

No borrowing costs were capitalized during the year ~~(2008 $nil, 2007~~(2009 $nil).

Charges over one hotel totaling $85 million exist as security provided to the Group’s pension plans.


Note 11 —	Assets sold, held for sale and discontinued operations

At
At
December 31,
December 31,
2009 2008
($ million)

Assets and liabilities held for sale

Non-current assets classified as held for sale:
Property, plant and equipment — 210

Liabilities classified as held for sale:
Deferred tax (Note 25) — (4 )

~~At December 31, 2008, five hotels (2007 three)~~There were no assets or liabilities classified as held for ~~sale.~~ sale at either December 31, 2010 or December 31, 2009.

Subsequent to December 31, 2010, four hotels, including the InterContinental Barclay in New York, met the “held for sale” criteria of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations.” Three of the properties are located in North America and one in Australia, and all are expected to be sold within 12 months. The fair value less estimated costs to sell for each property exceeds its net book value.

During the year ended December 31, 2010, two hotels in the Americas were sold including the InterContinental Buckhead, Atlanta on July 1, 2010 for a profit of $27 million.

F-55

During the year ended December 31, 2009, one ~~(2008 one, 2007 three)~~ hotel was ~~sold. The remaining~~sold and four others were reclassified as property, plant and equipment at June 30, 2009 when they no longer met the “held for sale” criteria of IFRS 5 ~~-“Non-current~~“Non-current Assets Held for Sale and Discontinued Operations” as sales ~~are~~were no longer considered highly probable within the next 12 months. On reclassification, valuation adjustments of $45 million were recognized, comprising $14 million of depreciation not charged whilst held for sale and $31 million of further write-downs to recoverable amounts, as required by IFRS 5. Recoverable amounts were assessed by reference to value in use with the expected future cash flows for the North American hotels comprising substantially all of the write-downs discounted at a pre-tax rate of 12.5%. The valuation adjustments are included within impairment on the face of the Consolidated income statement.

The results of two of these reclassified hotels, which, prior to June 30, 2009, were presented as discontinued operations, are now reported as continuing operations and prior period results have been re-presented on a consistent basis. The impact has been to increase revenue from continuing operations for the year by $34 million (2008 $43 million, 2007 $47 million) and to increase operating profit from continuing operations, before exceptional items, for the year by $8m (2008 $14 million, 2007 $14 million).

~~There were no disposals of associates in 2009.~~ During the year ended December 31, 2008, ~~the Group sold two associates (2007 two).~~one hotel was sold.


	Year ended December 31,
	2010			2009			2008
	($ million)

Consideration
Current year disposals:
Cash consideration, net of costs paid		109			20			34
Management contract value		5			—			—

		114			20			34

Net assets of hotels sold:
Property, plant and equipment		(87	)		(22	)		(28	)
Cash and cash equivalents		—			—			(8	)

		(87	)		(22	)		(36	)

Prior year disposals:
Provision release		—			2			—
Tax		2			4			5

Gain on disposal of assets		29			4			3

Analyzed as:
Gain/(loss) on disposal of hotel assets from continuing operations (Note 5)		27			(2	)		(2	)
Gain on disposal of assets from discontinued operations (Note 5)		2			6			5

		29			4			3

Net cash inflow
Current year disposals:
Cash consideration, net of costs paid		109			20			34
Tax		(6	)		—			(1	)
Cash disposed of		—			—			(8	)
Prior year disposals:
Costs paid		(2	)		—			(1	)
Tax		2			—			(2	)

		103			20			22

~~Subsequent~~Discontinued operations

The results of discontinued operations comprise gains arising from prior year hotel disposals of $2 million (2009 $6 million 2008 $5 million) and do not impact on segmental results.


	Year ended December 31,
	2010		2009		2008
	(cents)

Earnings per ordinary share from discontinued operations
Basic		0.7		2.1		1.8
Diluted		0.7		2.0		1.7

Cash flows attributable to ~~the year end, a North American hotel was sold for $5.5~~discontinued operations were $2 million ~~on March 25, 2010.~~(2009 $nil, 2008 $nil).

~~F-50~~F-56

Year ended December 31,
2009 2008 2007
($ million)

Net assets of hotels sold

Property, plant and equipment 22 28 70
Net working capital — — 2
Cash and cash equivalents — 8 —
Non-controlling interest — — (12 )

Group’s share of net assets disposed of 22 36 60

Consideration

Current year disposals:
Cash consideration, net of costs paid 20 34 94
Management contract value — — 6

20 34 100
Net assets disposed of (22 ) (36 ) (60 )
Prior year disposals:
Provision release 2 — —
Tax 4 5 (8 )

Gain on disposal of assets, net of tax 4 3 32

Analyzed as:

Loss on disposal of hotel assets from continuing operations (Note 5) (2 ) (2 ) —
Profit for the year from discontinued operations (Note 5) 6 5 32

4 3 32

Net cash inflow

Current year disposals:
Cash consideration, net of costs paid 20 34 94
Cash disposed of — (8 ) —
Prior year disposals — (1 ) 3

20 25 97

Year ended December 31,
2009 2008 2007
($ million)

Results of discontinued operations

Revenue — — 33
Cost of sales — — (28 )

— — 5
Depreciation and amortization — — (2 )

Operating profit — — 3
Tax — — (1 )

Profit after tax — — 2
Gain on disposal of assets, net of tax (Note 5) 6 5 32

Profit for the year from discontinued operations 6 5 34

~~F-51~~

Year ended December 31,
2009 2008 2007
(cents per ordinary share)

Earnings per ordinary share from discontinued operations

Basic 2.1 1.8 10.6
Diluted 2.0 1.7 10.3

Year ended December 31,
2009 2008 2007
($ million)

Cash flows attributable to discontinued operations

Operating profit before interest, depreciation and amortization — — 5
Investing activities — — (1 )

~~The effect of discontinued operations on segmental results is shown in Note 2.~~


Note 12 —	Goodwill


	Year ended December 31,						Year ended December 31,
	2009			2008			2010			2009
	($ million)						($ million)

Cost
At January 1,		206			221			223			206
Exchange and other adjustments		17			(15	)		10			17

At December 31,		223			206			233			223

Impairment
At January 1,		(63	)		—			(141	)		(63	)
Impairment charge		(78	)		(63	)		—			(78	)

At December 31,		(141	)		(63	)		(141	)		(141	)


Net book value at December 31,		82			143			92			82

Net book value at January 1,		143			221			82			143

Goodwill arising on business combinations that occurred before January 1, 2005 was not restated on adoption of IFRS as permitted by IFRS 1.

Impairment charges are included within impairment on the face of the Consolidated income statement and all cumulative impairment losses relate to the Americas managed cash-generating unit (see below).

Goodwill has been allocated to cash-generating units (“CGUs”) for impairment testing as follows:

Cost Net book value
At December 31,
2009 2008 2009 2008
($ million)

Americas managed operations 141 141 — 78
Asia Pacific:
Asia Pacific managed and franchised operations n/a 65 n/a 65
Asia Australasia managed and franchised operations 82 n/a 82 n/a

223 206 82 143


	Cost				Net book value
	At December 31,
	2010		2009		2010		2009
	($ million)

Asia Australasia franchised and managed operations		92		82		92		82
Americas managed operations		141		141		—		—

		233		223		92		82

~~F-52~~

~~All cumulative impairment losses relate to the Americas managed CGU.~~

The Group tests goodwill for impairment annually, or more frequently if there are any indications that an impairment may have arisen. The recoverable amounts of the CGUs are determined from value in use calculations. These calculations use pre-tax cash flow forecasts derived from the most recent financial budgets and strategic plans approved by management covering a five-year period or, in absence ofup-to-date strategic plans, the financial budget for the next year with an extrapolation of the cash flows for the following four years, using growth rates based on management’s past experience and industry growth forecasts. After the five-year planning period, the terminal value of the future cash flows is calculated based on perpetual growth rates that do not exceed the average long-term growth rates for the relevant markets. Pre-tax discount rates are used to discount the cash flows based on the Group’s weighted average cost of capital adjusted to reflect the risks specific to the business model and territory of the CGU being tested.

Asia Australasia goodwill

At December 31, 2010, the recoverable amount of the CGU has been assessed based on the approved budget for 2011 and strategic plans covering a five-year period, a perpetual growth rate of 3.5% (2009 3.5%) and a discount rate of 14.4% (2009 14.2%).

Impairment was not required at either December 31, 2010 or December 31, 2009 and management believe that the carrying value of the CGU would only exceed their recoverable amounts in the event of highly unlikely changes in the key assumptions.

F-57

Americas goodwill

Americas managed operations ~~which is both the CGU to which the goodwill is allocated and a segment reported by the Group, have~~ incurred significant operating losses during ~~the year. These have arisen~~2009 as a result of the global economic downturn and, in particular, IHG’s funding obligations under certain management contracts with one US hotel owner. As a consequence, goodwill ~~has been~~was tested on a quarterly basis during ~~the year~~2009 using updated five-year projections prepared by management, a perpetual growth rate of 2.7% and a discount rate of 12.5%. Due to the expectation of continuing losses, the recoverable value of the CGU ~~has~~ declined resulting in the impairment of the remaining goodwill ~~balance.~~balance during 2009. Total impairment charges of $78 million ~~have been recognized; $57~~were recognized in 2009 ($57 million at June 30, 2009 and $21 million at September 30, ~~2009.~~

The above impairment charges follow a charge of $63 million that was recognized at December 31, 2008 as a result of the onset of the global economic downturn and a revision to expected fee income. The value in use calculations were based on the cash flows included in the approved budget for 2009 with an extrapolation over the following four years at growth rates increasing from 1% to 4%, a perpetual growth rate of 2.7% and a discount rate of 12.5%2009). ~~Actual performance during 2009 was significantly worse than budgeted and future cash flow expectations continued to deteriorate throughout the course of the year.~~

~~The impairment charges for both years are included within the impairment line on the face of the Consolidated income statement.~~ As the goodwill ~~has now been~~is impaired in full, there is no sensitivity around any assumptions that could lead to a further impairment charge.

~~Asia Pacific goodwill~~

Following an internal reorganization during the year, the regional managed and franchised operations now comprise two separate CGUs, Greater China and Asia Australasia. Goodwill, which was previously tested for impairment at the Asia Pacific regional CGU level, is now allocated to the smaller Asia Australasia CGU.

At December 31, 2009, the recoverable amount of the CGU has been assessed based on the approved budget for 2010 and strategic plans covering a five-year period, a perpetual growth rate of 3.5% (2008 4%) and a discount rate of 14.2% (2008 16%).

Impairment was not required at either year end and management believe that the carrying values of the CGUs would only have exceeded their recoverable amounts in the event of highly unlikely changes in the key assumptions.

~~F-53~~


Note 13 —	Intangible assets


				Management			Other									Management			Other
	Software			contracts			intangibles			Total			Software			contracts			intangibles			Total
	($ million)												($ million)

Year ended December 31, 2008
Cost:
At January 1, 2008		120			249			86			455
Additions		40			—			9			49
Disposals		(2	)		—			—			(2	)
Exchange and other adjustments		—			(29	)		(2	)		(31	)

At December 31, 2008		158			220			93			471

Amortization and impairment:
At January 1, 2008		(63	)		(26	)		(31	)		(120	)
Provided		(20	)		(12	)		(8	)		(40	)
Impairment charge⁽ⁱ⁾		—			(21	)		—			(21	)
Disposals		2			—			—			2
Exchange and other adjustments		—			9			1			10

At December 31, 2008		(81	)		(50	)		(38	)		(169	)

Year ended December 31, 2009
Cost:
At January 1, 2009		158			220			93			471			158			220			93			471
Additions		24			—			9			33			24			—			9			33
Disposals		—			—			(7	)		(7	)		—			—			(7	)		(7	)
Exchange and other adjustments		3			11			3			17			3			11			3			17

At December 31, 2009		185			231			98			514			185			231			98			514

Amortization and impairment:
At January 1, 2009		(81	)		(50	)		(38	)		(169	)		(81	)		(50	)		(38	)		(169	)
Provided		(19	)		(10	)		(9	)		(38	)		(19	)		(10	)		(9	)		(38	)
Impairment charge⁽ⁱⁱ⁾		—			(32	)		—			(32	)
Impairment charge (see below)														—			(32	)		—			(32	)
Disposals		—			—			5			5			—			—			5			5
Exchange and other adjustments		—			(4	)		(2	)		(6	)		—			(4	)		(2	)		(6	)

At December 31, 2009		(100	)		(96	)		(44	)		(240	)		(100	)		(96	)		(44	)		(240	)

Year ended December 31, 2010
Cost:
At January 1, 2010														185			231			98			514
Additions														18			5			11			34
Disposals														(2	)		—			(1	)		(3	)
Exchange and other adjustments														2			(5	)		1			(2	)

At December 31, 2010														203			231			109			543

Amortization and impairment:
At January 1, 2010														(100	)		(96	)		(44	)		(240	)
Provided														(15	)		(10	)		(8	)		(33	)
Disposals														2			—			1			3
Exchange and other adjustments														(7	)		—			—			(7	)

At December 31, 2010														(120	)		(106	)		(51	)		(277	)

Net book value at December 31, 2010														83			125			58			266

Net book value at December 31, 2009		85			135			54			274			85			135			54			274

Net book value at December 31, 2008		77			170			55			302
Net book value at January 1, 2009														77			170			55			302

Net book value at January 1, 2008		57			223			55			335

The impairment ~~charges have arisen~~charge in 2009 arose as a result of the ~~current~~ economic downturn and a revision to ~~expected~~the fee income ~~as follows:~~

~~(i) Recognized at September 30, 2008 in respect of a European management contract. Estimated future cash flows were discounted at a pre-tax rate of 12.5% (previous valuation 10.0%).~~

~~(ii) Recognized at June 30, 2009 in respect of~~expected to be earned under a US management contract. Estimated future cash flows were discounted at a pre-tax rate of 12.5% (previous valuation 12.5%).

The ~~charges are~~charge is included within impairment on the face of the Consolidated income statement.

F-58

The weighted average remaining amortization period for management contracts is 21 years (2009 22 ~~years (2008 23~~ years).

~~F-54~~


Note 14 —	Investment in associates

The Group holds five investments ~~(2008~~(2009 five) accounted for as associates. The following table summarizes the financial information of the associates:


	At			At			At			At
	December 31,			December 31,			December 31,			December 31,
	2009			2008			2010			2009
	($ million)						($ million)

Share of associates’ statement of financial position
Current assets		5			5			5			5
Non-current assets		65			65			62			65
Current liabilities		(9	)		(20	)		(9	)		(9	)
Non-current liabilities		(16	)		(7	)		(15	)		(16	)

Net assets		45			43			43			45

Share of associates’ revenue and profit
Revenue		31			30			26			31
Net loss		(1	)		—			—			(1	)

Related party transactions
Revenue from related parties		4			5			4			4
Amounts owed by related parties		2			2			1			2


Note 15 —	Other financial assets


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Non-current
Equity securitiesavailable-for-sale		66		64		87		66
Other		64		88		48		64

		130		152		135		130

Current
Equity securitiesavailable-for-sale		5		6		—		5
Other		—		4

		5		10

Available-for-sale financial assets, which are included in the Consolidated statement of financial position at fair value, consist of equity investments in listed and unlisted shares. Of the total amount of equity investments at December 31, ~~2009, $2~~2010, $3 million ~~(2008~~(2009 $2 million) were listed securities and ~~$69~~$84 million ~~(2008 $68~~(2009 $69 million) unlisted; ~~$39~~$41 million ~~(2008 $44~~(2009 $39 million) were denominated in US dollars, ~~$14~~$17 million ~~(2008 $13~~(2009 $14 million) in Hong Kong dollars and ~~$18~~$29 million ~~(2008 $13~~(2009 $18 million) in other currencies. Unlisted equity shares are mainly investments in entities that own hotels which the Group manages. The fair value of unlisted equity shares has been estimated using valuation guidelines issued by the British Venture Capital Association and is based on assumptions regarding expected future earnings. Listed equity share valuation is based on observable market prices. Dividend income fromavailable-for-sale equity securities of $8 million (2009 $7 million, ~~(2008~~2008 $11 ~~million, 2007 $16~~ million) is reported as other operating income and expenses in the Consolidated income statement.

Other financial assets consist of trade deposits and restricted ~~cash and deferred consideration on asset disposals.~~cash. These amounts have been designated as “loans and receivables” and are held at amortized cost. Restricted cash of ~~$47~~$42 million ~~(2008 $55~~(2009 $47 million) relates to cash held in bank accounts which is pledged as collateral to insurance companies for risks retained by the Group.

~~F-55~~F-59

The movement in the provision for impairment of other financial assets during the year is as follows:

Year ended
Year ended

December 31,
December 31,

2009 2008
($ million)

At January 1, (11 ) (9 )
Provided:
Operating profit before exceptional items — (2 )
Exceptional items (14 ) —

At December 31, (25 ) (11 )


	Year ended			Year ended
	December 31,			December 31,
	2010			2009
	($ million)

At January 1,		(25	)		(11	)
Provided — exceptional items (Note 5)		(1	)		(14	)

At December 31,		(26	)		(25	)

The ~~amount~~amounts provided as an exceptional ~~item relates~~items relate to anavailable-for-sale ~~investment~~equity investments and ~~arises~~have arisen as a result of a significant and prolonged ~~decline~~declines in ~~its~~their fair value below ~~its~~ cost. In ~~addition,~~2009, a deposit of $26 million ~~has been~~was written off directly to the income statement as an exceptional item (see Note 5) as it is no longer considered recoverable under the terms of the related management contracts which are deemed onerous.

The provision is used to record impairment losses unless the Group is satisfied that no recovery of the amount is possible; at that point the amount considered irrecoverable is either written off directly to the income statement, or, if previously provided, against the financial asset with no impact on the income statement.


Note 16 —	Inventories


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Finished goods		2		2		2		2
Consumable stores		2		2		2		2

		4		4		4		4


Note 17 —	Trade and other receivables


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Trade receivables		268		318		292		268
Other receivables		27		49		32		27
Prepayments		40		45		47		40

		335		412		371		335

Trade and other receivables are designated as “loans and receivables” and are held at amortized cost.

Trade receivables are non-interest-bearing and are generally on payment terms of up to 30 days. The fair value of trade and other receivables approximates their carrying value.

~~F-56~~

The maximum exposure to credit risk for trade and other receivables, excluding prepayments, at the end of the reporting period by geographic region is:


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Americas		158		208		163		158
Europe, the Middle East and Africa		90		109		98		90
Asia Pacific		47		50		63		47

		295		367		324		295

F-60

The aging of trade and other receivables, excluding prepayments, at the end of the reporting period is:


	At December 31, 2009							At December 31, 2008							At December 31, 2010							At December 31, 2009
	Gross		Provision			Net		Gross		Provision			Net		Gross		Provision			Net		Gross		Provision			Net
						($ million)									($ million)

Not past due		173		(2	)		171		254		(13	)		241		197		(3	)		194		173		(2	)		171
Past due 1 to 30 days		70		(9	)		61		61		(1	)		60		75		(4	)		71		70		(9	)		61
Past due 31 to 180 days		80		(19	)		61		63		(5	)		58		66		(9	)		57		80		(19	)		61
Past due more than 180 days		57		(55	)		2		99		(91	)		8		44		(42	)		2		57		(55	)		2

		380		(85	)		295		477		(110	)		367		382		(58	)		324		380		(85	)		295

The movement in the provision for impairment of trade and other receivables during the year is as follows:


	At			At			At			At
	December 31,			December 31,			December 31,			December 31,
	2009			2008			2010			2009
	($ million)						($ million)

At January 1,		(110	)		(96	)		(85	)		(110	)
Provided		(34	)		(28	)		(27	)		(34	)
Amounts written back								7			3
Amounts written off		59			14			47			56

At December 31,		(85	)		(110	)		(58	)		(85	)


Note 18 —	Cash and cash equivalents


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Cash at bank and in hand		23		32		38		23
Short-term deposits		17		50		40		17

		40		82		78		40

Short-term deposits are highly liquid investments with an original maturity of three months or less, in various currencies.

~~F-57~~


Note 19 —	Trade and other payables


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Current
Trade payables		99		111		113		99
Other tax and social security payable		29		31		35		29
Other payables		278		322		226		278
Accruals		262		272		348		262
Derivatives		20		10

		688		746		722		668

Non-current
Other payables		408		392		464		408

Trade payables are non-interest-bearing and are normally settled within an average of 45 days.

F-61

Other payables includes ~~$470~~$531 million ~~(2008 $471~~(2009 $470 million) relating to the future redemption liability of the Group’s loyalty program, of which ~~$86~~$92 million ~~(2008 $96~~(2009 $86 million) is classified as current and ~~$384~~$439 million ~~(2008 $375~~(2009 $384 million) as non-current.

Derivatives are held in the Consolidated statement of financial position at fair value. Fair value is estimated using discounted future cash flows taking into consideration interest and exchange rates prevailing on the last day of the reporting period.


Note 20 —	Provisions

At
At

December 31,
December 31,

2009 2008
($ million)

Onerous management contracts 65 —


	Onerous
	management
	contracts			Litigation		Total
	($ million)

At January 1, 2009		—			—		—
Provided: exceptional items (Note 5)		65			—		65

At December 31, 2009		65			—		65
Provided:
Profit before exceptional items		3			—		3
Exceptional items (Note 5)		—			22		22
Utilized		(58	)		—		(58	)

At December 31, 2010		10			22		32


	At		At
	December 31,		December 31,
	2010		2009
	($ million)

Analyzed as:
Current		30		65
Non-current		2		—

		32		65

The onerous management contracts provision relates to the unavoidable net cash outflows that are expected to be incurred under ~~the~~ performance ~~guarantee~~guarantees associated with certain management ~~contracts with one US hotel owner (see Note 5). As~~contracts. The non-current portion of the ~~provision was first recognized in the income statement at December 31, 2009, there are no other movements to disclose. The~~ provision is expected to be utilized ~~within 12 months.~~over the period to 2020.

~~F-58~~

For accounting purposes, provision is made for outstanding litigation when management consider it probable that an outflow of economic benefit may occur even though defense of such claims may still be ongoing through the relevant court processes.


Note 21 —	~~Loans and other borrowings~~

At December 31, 2009 At December 31, 2008
Current Non-current Total Current Non-current Total
($ million)

Secured bank loans 3 5 8 5 2 7
Finance leases 16 188 204 16 186 202
£250 million 6% bonds — 402 402 — — —
Unsecured bank loans 87 421 508 — 1,146 1,146

Total borrowings 106 1,016 1,122 21 1,334 1,355

Denominated in the following currencies:
Sterling — 402 402 — 152 152
US dollars 103 348 451 16 873 889
Euro — 216 216 — 224 224
Other 3 50 53 5 85 90

106 1,016 1,122 21 1,334 1,355

~~Secured bank loans~~

~~These mortgages are secured on the hotel properties to which they relate. The rates of interest and currencies of these loans vary.~~

~~Non-current amounts include $5 million (2008 $nil) repayable by instalments.~~

~~Finance leases~~

~~Finance lease obligations, which relate to the 99-year lease on the InterContinental Boston, are payable as follows:~~

At December 31, 2009 At December 31, 2008
Minimum
Present
Minimum
Present

lease
value of
lease
value of

payments payments payments payments
($ million)

Less than one year 16 16 16 16
Between one and five years 64 48 64 48
More than five years 3,364 140 3,380 138

3,444 204 3,460 202
Less: amount representing finance charges (3,240 ) — (3,258 ) —

204 204 202 202

~~The Group has the option to extend the term of the lease for two additional 20 year terms. Payments under the lease step up at regular intervals over the lease term.~~

~~£250 million 6% bonds~~

The 6% fixed interest sterling bonds were issued on December 9, 2009 and are repayable in full on December 9, 2016. Interest is payable annually on December 9, in each year commencing December 9, 2010 to the maturity date. The bonds are unsecured. Currency swaps were transacted at the same time the bonds were issued in order to swap its proceeds and interest flows into US dollars. Under the terms of the swaps, $415 million was borrowed and £250 million deposited for seven years at a fixed exchange rate of 1.66.

~~F-59~~

~~Unsecured bank loans~~

Unsecured bank loans are borrowings under the Group’s Syndicated Facility and its short-term bilateral loan facilities. Amounts are classified as non-current when the facilities have more than 12 months to expiry. These facilities contain financial covenants and, as at the end of the reporting period, the Group was not in breach of these covenants, nor had any breaches or defaults occurred during the year. In the second quarter of 2008, the Group successfully refinanced $2.1 billion of long-term debt facilities. At December 31, 2009, this syndicated bank facility consists of two tranches; a $1.6 billion five-year revolving credit facility and a $85 million term loan with a~~30-month~~ ~~maturity. In December 2009, the Group repaid $415 million of the term loan with proceeds from the bond issue.~~

~~Facilities provided by banks~~

At December 31, 2009 At December 31, 2008
Utilized Unutilized Total Utilized Unutilized Total
($ million)

Committed 519 1,174 1,693 1,161 946 2,107
Uncommitted 3 22 25 — 25 25

522 1,196 1,718 1,161 971 2,132

At December 31,
2009 2008
($ million)

Unutilized facilities expire:
Within one year 22 25
After two but before five years 1,174 946

1,196 971

~~Utilized facilities are calculated based on actual drawings and may not agree to the carrying value of loans held at amortized cost.~~


~~Note 22 —~~	Financial risk management ~~policies~~

Overview

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

Market risk exposure

The US dollar is the predominant currency of the Group’s revenue and cash flows. Movements in foreign exchange rates can affect the Group’s reported profit, net assets and interest cover. To hedge translation exposure,

F-62

wherever possible, the Group matches the currency of its debt (either directly or via derivatives) to the currency of its net assets, whilst maximizing the amount of US dollars borrowed to reflect the predominant trading currency.

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

~~F-60~~

A general strengthening of the US dollar (specifically a five cent fall in the sterling : US dollar rate) would increase the Group’s profit before tax by an estimated $3.5 million (2009 $1.6 million, ~~(2008~~2008 $4.0 ~~million, 2007 $2.9~~ million) and ~~increase~~decrease net assets by an estimated $5.6 million (2009 $4.1 million, ~~(2008 decrease of~~2008 $1.1 ~~million, 2007 increase of $6.1~~ million). Similarly, a five cent fall in the ~~euro:~~euro : US dollar rate would reduce the Group’s profit before tax by an estimated $1.4 million (2009 $0.7 million, ~~(2008~~2008 $2.0 ~~million, 2007 $1.6~~ million) and decrease net assets by an estimated $8.2 million (2009 $4.5 million, ~~(2008~~2008 $4.3 ~~million, 2007 $5.9~~ million).

Interest rate exposure is managed within parameters that stipulate that fixed rate borrowings should normally account for no less than 25% and no more than 75% of net borrowings for each major currency. This is usually achieved through the use of interest rate ~~swaps~~swaps. Due to relatively low interest rates and ~~options and forward~~the level of the Group’s debt, 100% of borrowings were fixed rate ~~agreements.~~debt or had been swapped into fixed rate borrowings at December 31, 2010.

Based on the year-end net debt position and given the underlying maturity profile of investments, borrowings and hedging instruments at that date, a one percentage point rise in US dollar interest rates would increase the annual net interest charge by approximately $nil (2009 $0.8 million, ~~(2008~~2008 $4.7 ~~million, 2007 $5.8~~ million). A similar rise in euro and sterling interest rates would increase the annual net interest charge by approximately $nil (2009 $1.1 million, ~~(2008 $1.2 million, 2007~~2008 $1.2 million) and $nil ~~(2008~~(2009 $nil, 2008 $0.9 ~~million, 2007 $3.2~~ million) respectively.

Liquidity risk exposure

The treasury function ensures that the Group has access to sufficient funds to allow the implementation of the strategy set by the Board. At the year end, the Group had access to ~~$1,174~~$1,452 million of undrawn committed facilities. Medium and long-term borrowing requirements are met through the ~~$1,685 million~~$1.6 billion Syndicated Facility of which ~~$85 million expires in November 2010 and $1.6 billion~~ expires in May 2013 and through the £250 million 6% bonds that are repayable on December 9, 2016. Short-term borrowing requirements are met from drawings under bilateral bank facilities.

The Syndicated Facility contains two financial covenants: interest cover and net debt divided by earnings before interest, tax, depreciation and amortization (“EBITDA”). Net debt is calculated as total borrowings less cash and cash equivalents. The Group is in compliance with all of the financial covenants in its loan documents, none of which is expected to present a material restriction on funding in the near future.

At the year end, the Group had ~~surplus~~ cash of ~~$40~~$78 million which is held in short-term deposits and cash funds which allow daily withdrawals of cash. Most of the Group’s ~~surplus~~ funds are held in the United Kingdom or United States and there are no material funds where repatriation is restricted as a result of foreign exchange regulations.

Credit risk exposure

The Group trades only with recognized, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures.

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern. The capital structure consists of net debt, issued share capital and ~~reserves.~~reserves totaling $1,014 million at December 31, 2010 (2009

F-63

$1,241 million). The structure is managed to ~~minimize the Group’s cost of capital,~~maintain an investment grade credit rating, to provide ongoing returns to shareholders and to service debt obligations, whilst maintaining maximum operational flexibility. A key characteristic of IHG’s managed and franchised business model is that it generates more cash than is required for investment in the business, with a high return on capital employed. Surplus cash is either reinvested in the business, used to repay debt or returned to shareholders. The Group maintains a conservative level of ~~debt. The level of~~ debt which is monitored on the basis of a cashflow leverage ratio, ~~which is~~being net debt divided by EBITDA.

~~F-61~~

Hedging

Interest rate risk

The Group hedges its interest rate risk by taking out interest rate swaps to fix the interest flows on between 25% and 75% of its net borrowings in major ~~currencies.~~currencies, although 100% of interest flows were fixed at December 31, 2010. At December 31, ~~2009,~~2010, the Group held interest rate swaps (swapping floating for fixed) with notional principals of ~~$250~~$100 million and €75 million ~~(2008~~(2009 $250 ~~million, £75~~ million and €75 million). The Group ~~did not hold any forward-starting~~designates its interest rate swaps ~~at December 31, 2009 (2008 interest rate swaps with notional principals of $100 million, £75 million and €75 million). The interest rate swaps are designated~~ as cash flow hedges ~~of borrowings under the Syndicated Facility and they are held in the Consolidated statement of financial position at fair value in other financial assets and other payables.~~

Changes in the fair value of cash flow hedges are recognized in the unrealized gains and losses reserve to the extent that the hedges are effective. When the hedged item is recognized, the cumulative gains and losses on the hedging instrument are recycled to the income statement. No ineffectiveness was recognized during the current or prior year.(see Note 23 for further details).

Foreign currency risk

Hedge of net investment in foreign operations

The Group designates its foreign currency bank borrowings and currency derivatives as net investment hedges of foreign operations. The designated risk is the spot foreign exchange risk for loans and ~~short-dated~~short dated derivatives and the forward risk for the seven-year currency swaps. The interest on these financial instruments is taken through financial income or expense except for the seven-year currency swaps where interest is taken to the currency translation reserve. ~~The derivatives are held in the Consolidated statement of financial position at fair value in other financial assets and other payables.~~

Hedge effectiveness is measured at calendar quarter ends. Variations in fair value due to changes in the underlying exchange rates are taken to the currency translation reserve until an operation is sold, at which point the cumulative currency gains and losses are recycled against the gain or loss on sale. No ineffectiveness was recognized on net investment hedges during the current or prior year.

At December 31 ~~2009,~~2010, the Group held currency swaps with a principal of $415 million ~~(2008 $nil)~~(2009 $415 million) and ~~a fair value~~short dated foreign exchange swaps with principals of ~~$13~~€75 million ~~liability (2008 $nil)~~(2009 nil) and HK$70 million (2009 nil). See Note 23 for further details. The maximum amount of foreign exchange derivatives held during the year as net investment hedges and measured at calendar quarter ends ~~had~~were currency swaps with a principal of $415 million ~~(2008 $70~~(2009 $415 million) and ~~a fair value~~short dated foreign exchange swaps with principals of ~~$13~~HK$280 million ~~liability (2008 $4 million liability).~~and €75 million.

Hedge effectiveness is measured at calendar quarter ends. No ineffectiveness arose in respect of either the Group’s cash flow or net investment hedges during the current or prior year.

~~F-62~~F-64


~~Note 23 —~~	~~Financial instruments~~

Liquidity risk

The following are the undiscounted contractual cash flows of financial liabilities, including interest payments:


				Between 1			Between 2									Less than			Between 1 and			Between 2 and			More than
	Less than			and			and			More than						1 year			2 years			5 years			5 years			Total
At December 31, 2009	1 year			2 years			5 years			5 years			Total
	($ million)															($ million)

At December 31, 2010
Non-derivative financial liabilities:
Secured bank loans		3			1			5			—			9			1			5			—			—			6
£250m 6% bonds		24			24			73			453			574			23			23			70			411			527
Finance lease obligations		16			16			48			3,364			3,444			16			16			48			3,348			3,428
Unsecured bank loans		512			—			—			—			512			201			—			—			—			201
Trade and other payables		668			102			120			302			1,192			722			118			137			336			1,313
Provisions		65			—			—			—			65			30			—			2			—			32
Derivative financial liabilities:
Interest rate swaps		7			4			1			—			12			4			1			—			—			5
Currency swaps-outflows		26			26			77			467			596
Currency swaps-inflows		(24	)		(24	)		(73	)		(453	)		(574	)
Forward foreign exchange contracts																	2			—			—			—			2
Currency swaps - outflows																	26			26			77			441			570
Currency swaps - inflows																	(23	)		(23	)		(70	)		(411	)		(527	)



	Less than			Between 1 and			Between 2 and			More than
At December 31, 2008	1 year			2 years			5 years			5 years			Total
	($ million)

Non-derivative financial liabilities:
Secured bank loans		2			8			—			—			10
Finance lease obligations		16			16			48			3,380			3,460
Unsecured bank loans		1,156			—			—			—			1,156
Trade and other payables		737			101			113			277			1,228
Derivative financial liabilities:
Interest rate swaps		6			4			3			—			13


	Less than			Between 1 and			Between 2 and			More than
	1 year			2 years			5 years			5 years			Total
	($ million)

At December 31, 2009
Non-derivative financial liabilities:
Secured bank loans		3			1			5			—			9
£250m 6% bonds		24			24			73			453			574
Finance lease obligations		16			16			48			3,364			3,444
Unsecured bank loans		512			—			—			—			512
Trade and other payables		668			102			120			302			1,192
Provisions		65			—			—			—			65
Derivative financial liabilities:
Interest rate swaps		7			4			1			—			12
Currency swaps - outflows		26			26			77			467			596
Currency swaps - inflows		(24	)		(24	)		(73	)		(453	)		(574	)

Cash flows relating to unsecured bank loans are classified according to the maturity date of the loan drawdown rather than the facility maturity date.

Interest rate swaps are expected to affect profit or loss in the same periods that the cash flows are expected to occur.

F-65

Credit risk

The carrying amount of financial assets represents the maximum exposure to credit risk.


	At		At
	December 31,		December 31,
	2010		2009
	($ million)

Equity securitiesavailable-for-sale		87		71
Loans and receivables:
Cash and cash equivalents		78		40
Other financial assets		48		64
Trade and other receivables, excluding prepayments		324		295

		537		470

Fair values

The table below compares carrying amounts and fair values of the Group’s financial assets and liabilities.

~~F-63~~


	At December 31, 2009						At December 31, 2008						At December 31, 2010						At December 31, 2009
	Carrying						Carrying						Carrying						Carrying
	value			Fair value			value			Fair value			value			Fair value			value			Fair value
	($ million)												($ million)

Financial assets
Equity securitiesavailable-for-sale* (Note 15)		71			71			70			70			87			87			71			71
Loans and receivables:
Cash and cash equivalents (Note 18)		40			40			82			82			78			78			40			40
Other financial assets (Note 15)		64			64			92			92			48			48			64			64
Trade and other receivables, excluding prepayments (Note 17)		295			295			367			367			324			324			295			295

Financial liabilities
£250 million 6% bonds (Note 21)		(402	)		(402	)		—			—
Finance lease obligations (Note 21)		(204	)		(206	)		(202	)		(168	)
Other borrowings (Note 21)		(516	)		(516	)		(1,153	)		(1,153	)
Trade and other payables, excluding derivatives (Note 19)		(1,076	)		(1,076	)		(1,128	)		(1,128	)
Derivatives* (Note 19)		(20	)		(20	)		(10	)		(10	)
£250 million 6% bonds (Note 22)														(385	)		(404	)		(402	)		(402	)
Finance lease obligations (Note 22)														(206	)		(217	)		(204	)		(206	)
Other borrowings (Note 22)														(203	)		(203	)		(516	)		(516	)
Trade and other payables (Note 19)														(1,186	)		(1,186	)		(1,076	)		(1,076	)
Derivatives* (Note 23)														(44	)		(44	)		(20	)		(20	)
Provisions (Note 20)		(65	)		(65	)		—			—			(32	)		(32	)		(65	)		(65	)


*		Financial assets and liabilities which are measured at fair value.

The fair value of cash and cash equivalents approximates book value due to the short maturity of the investments and deposits. Equity securitiesavailable-for-sale and derivatives are held in the Consolidated statement of financial position at fair value as set out in Note ~~15.~~15 and Note 23. The fair value of other financial assets approximates book value based on prevailing market rates. The fair value of borrowings, excluding finance lease obligations and the fixed rate $250 million 6% bonds, approximates book value as interest rates reset to market rates on a frequent basis. The fair value of the £250 million 6% bonds is based on the quoted market price. The fair value of the finance lease ~~obligation~~obligations is calculated by discounting future cash flows at prevailing interest rates. The fair value of trade and other receivables, trade and other payables and ~~current~~ provisions approximates to their carrying value, including the future redemption liability of the Group’s loyalty program.

F-66

Fair value hierarchy

The Group uses the following valuation hierarchy to determine the carrying value of financial instruments that are measured at fair value:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.


	At December 31, 2009										At December 31, 2008										At December 31, 2010										At December 31, 2009
	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
	($ million)																				($ million)

Assets
Equity securitiesavailable-for-sale		2		—			69		71			2		—			68		70			3		—			84		87			2		—			69		71

Liabilities
Derivatives		—		(20	)		—		(20	)		—		(10	)		—		(10	)		—		(44	)		—		(44	)		—		(20	)		—		(20	)

~~F-64~~

There were no transfers between Level 1 and Level 2 fair value measurements during the year and no transfers into and out of Level 3.

The following table reconciles movements in instruments classified as Level 3 during the year:


	At
	~~December 31,~~
	~~2009~~
	~~($ million)~~

~~Balance at January 1, 2009~~		68
~~Valuation gains recognized in other comprehensive income~~		11
Impairment*		~~(10~~	)

~~Balance at December 31, 2009~~		69


	At			At
	December 31,			December 31,
	2010			2009
	($ million)			($ million)

At January 1,		69			68
Additions		4			—
Repaid		(5	)		—
Valuation gains recognized in other comprehensive income		16			11
Impairment*		—			(10	)

At December 31,		84			69


*		The impairment charge recognized in the income statement (see Note 5) also includes $1 million (2009 $4 ~~million~~million) of losses reclassified from equity.

The Level 3 equity securities relate to investments in unlisted shares which are valued by applying an average price-earnings (P/E) ratio for a competitor group to the earnings generated by the investment. A 10% increase in the average P/E ratio would result in a $5$4 million increase in the fair value of the investments (2009 $5 million) and a 10% decrease in the average P/E ratio would result in a $5$4 million decrease in the fair value of the ~~investments.~~investments (2009 $5 million).

F-67


Note 22 —	Loans and other borrowings


	At December 31, 2010						At December 31, 2009
	Current		Non-current		Total		Current		Non-current		Total
	($ million)

Secured bank loans		1		4		5		3		5		8
Finance leases		16		190		206		16		188		204
£250 million 6% bonds		—		385		385		—		402		402
Unsecured bank loans		1		197		198		87		421		508

Total borrowings		18		776		794		106		1,016		1,122

Denominated in the following currencies:
Sterling		—		385		385		—		402		402
US dollars		16		287		303		103		348		451
Euro		—		100		100		—		216		216
Other		2		4		6		3		50		53

		18		776		794		106		1,016		1,122

~~Credit risk~~Secured bank loans

These mortgages are secured on the hotel properties to which they relate. The rates of interest and currencies of these loans vary.

Non-current amounts include $4 million (2009 $5 million) repayable by installments.

Finance leases

Finance lease obligations, which relate to the99-year lease on the InterContinental Boston, are payable as follows:


	At December 31, 2010					At December 31, 2009
	Minimum			Present		Minimum			Present
	lease			value of		lease			value of
	payments			payments		payments			payments
	($ million)

Less than one year		16			16		16			16
Between one and five years		64			48		64			48
More than five years		3,348			142		3,364			140

		3,428			206		3,444			204
Less: amount representing finance charges		(3,222	)		—		(3,240	)		—

		206			206		204			204

The Group has the option to extend the term of the lease for two additional 20-year terms. Payments under the lease step up at regular intervals over the lease term.

£250 million 6% bonds

The ~~carrying amount~~6% fixed interest sterling bonds were issued on December 9, 2009 and are repayable in full on December 9, 2016. Interest is payable annually on December 9, in each year commencing December 9, 2010 to the maturity date. The bonds were initially priced at 99.465% of ~~financial assets represents~~face value and are unsecured. Currency swaps were transacted at the ~~maximum exposure~~same time the bonds were issued in order to ~~credit risk.~~swap its proceeds and interest flows into US dollars (see Note 23 for further details).

F-68

Unsecured bank loans

At
At
December 31,
December 31,
2009 2008
($ million)

Equity securitiesavailable-for-sale
71 70
Loans and receivables:
Cash and cash equivalents 40 82
Other financial assets 64 92
Trade and other receivables, excluding prepayments 295 367

470 611

Unsecured bank loans are borrowings under the Group’s Syndicated Facility and its short-term bilateral loan facilities. Amounts are classified as non-current when the facilities have more than 12 months to expiry. These facilities contain financial covenants and, as at the end of the reporting period, the Group was not in breach of these covenants, nor had any breaches or defaults occurred during the year. At January 1, 2009 the Group had access to a $0.5 billion term loan with a30-month maturity and a $1.6 billion five-year revolving credit facility. In December 2009, $415 million of the term loan was repaid with proceeds from the bond issue and the remaining $85 million was repaid in September 2010. The $1.6 billion revolving credit facility matures in May 2013.

Facilities provided by banks


	At December 31, 2010						At December 31, 2009
	Utilized		Unutilized		Total		Utilized		Unutilized		Total
	($ million)

Committed		205		1,400		1,605		519		1,174		1,693
Uncommitted		1		52		53		3		22		25

		206		1,452		1,658		522		1,196		1,718


	At December 31,
	2010		2009
	($ million)

Unutilized facilities expire:
Within one year		52		22
After two but before five years		1,400		1,174

		1,452		1,196

Utilized facilities are calculated based on actual drawings and may not agree to the carrying value of loans held at amortized cost.


Note 23 —	Derivative financial instruments


	At December 31,
			2009
	2010		restated*
	($ million)

Currency swaps		38		13
Interest rate swaps		4		7
Forward foreign exchange contracts		2		—
		—		—
		44		20

Analyzed as:
Current liabilities		6		7
Non-current liabilities		38		13

		44		20


*		Restated for a $13 million reclassification from current liabilities to non-current liabilities.

Derivatives are recorded at their fair values, estimated using discounted future cash flows taking into consideration interest and exchange rates prevailing on the last day of the reporting period.

F-69

Currency swaps

At December 31, 2010, the Group held currency swaps with a principal of $415 million (2009 $415 million). These swaps were transacted at the same time as the £250 million 6% bonds were issued in December 2009 in order to swap the bonds’ proceeds and interest flows into US dollars. Under the terms of the swaps, $415 million was borrowed and £250 million deposited for seven years at a fixed exchange rate of 1.66. The fair value of the currency swap comprises two components; $27 million (2009 $10 million) relating to the repayment of the underlying principal and $11 million (2009 $3 million) relating to interest payments. The element relating to the underlying principal is disclosed as a component of net debt (see Note 24). The currency swaps are designated as net investment hedges.

Interest rate swaps

At December 31, 2010, the Group held interest rate swaps with notional principals of $100 million and €75 million (2009 $250 million and €75 million). These swaps are held to fix the interest payable on borrowings under the Syndicated Facility; at December 31, 2010, $100 million of US dollar borrowings were fixed at 1.99% until May 2012 and €75 million of euro borrowings were fixed at 5.25% until June 2011. The interest rate swaps have been designated as cash flow hedges.

Forward foreign exchange contracts

At December 31, 2010, the Group held short dated foreign exchange swaps with principals of €75 million and HK$70 million (2009 nil). The swaps are used to manage US dollar surplus cash and reduce euro and Hong Kong dollar borrowings whilst maintaining operational flexibility. The foreign exchange swaps have been designated as net investment hedges.


Note 24 —	Net debt


										At
	At			At			At			December 31,
	December 31,			December 31,			December 31,			2009
	2009			2008			2010			restated*
	($ million)						($ million)

Cash and cash equivalents		40			82			78			40
Loans and other borrowings — current		(106	)		(21	)		(18	)		(106	)
Loans and other borrowings — non-current		(1,016	)		(1,334	)		(776	)		(1,016	)
Derivatives hedging debt values (Note 23)								(27	)		(10	)

Net debt		(1,082	)		(1,273	)		(743	)		(1,092	)


*		With effect from January 1, 2010, net debt includes the exchange element of the fair value of currency swaps that fix the value of the Group’s £250 million 6% bonds at $415 million. An equal and opposite exchange adjustment on the retranslation of the £250 million 6% bonds is included in non-current loans and other borrowings. Comparatives have been restated on a consistent basis.

~~F-65~~F-70


										Year ended
	Year ended			Year ended			Year ended			December 31,
	December 31,			December 31,			December 31,			2009
	2009			2008			2010			restated*
	($ million)						($ million)

Movement in net debt
Net (decrease)/increase in cash and cash equivalents		(44	)		25
Net increase/(decrease) in cash and cash equivalents								51			(44	)
Add back cash flows in respect of other components of net debt:
Issue of £250m 6% bonds		(411	)		—			—			(411	)
Decrease in other borrowings		660			316			292			660

Decrease in net debt arising from cash flows		205			341			343			205
Non-cash movements:
Finance lease liability		(2	)		(2	)		(2	)		(2	)
Exchange and other adjustments		(12	)		47			8			(22	)

Decrease in net debt		191			386			349			181
Net debt at beginning of the year		(1,273	)		(1,659	)		(1,092	)		(1,273	)

Net debt at end of the year		(1,082	)		(1,273	)		(743	)		(1,092	)


*		With effect from January 1, 2010, net debt includes the exchange element of the fair value of currency swaps that fix the value of the Group’s £250 million 6% bonds at $415 million. An equal and opposite exchange adjustment on the retranslation of the £250 million 6% bonds is included in non-current loans and other borrowings. Comparatives have been restated on a consistent basis.


Note 25 —	Deferred tax


																Other																					Other
	Property,			Deferred												short-term						Property,			Deferred												short-term
	plant and			gains on						Employee			Intangible			temporary						plant and			gains on						Employee			Intangible			temporary
	equipment			loan notes			Losses			benefits			assets			differences			Total			equipment			loan notes			Losses			benefits			assets			differences			Total
	($ million)																					($ million)

At January 1, 2008		248			175			(190	)		(32	)		42			(89	)		154
Income statement		(7	)		—			13			18			(8	)		(8	)		8
Statement of comprehensive income		—			—			—			(21	)		—			—			(21	)
Statement of changes in equity		—			—			—			—			—			2			2
Exchange and other adjustments		(15	)		(33	)		36			2			(6	)		(6	)		(22	)

At December 31, 2008		226			142			(141	)		(33	)		28			(101	)		121
At January 1, 2009																							226			142			(141	)		(33	)		28			(101	)		121
Income statement		(43	)		—			6			(1	)		1			(59	)		(96	)		(43	)		—			6			(1	)		1			(59	)		(96	)
Statement of comprehensive income		—			—			—			(1	)		—			—			(1	)		—			—			—			(1	)		—			—			(1	)
Statement of changes in equity		—			—			—			—			—			(6	)		(6	)		—			—			—			—			—			(6	)		(6	)
Exchange and other adjustments		6			9			(11	)		—			2			(1	)		5			6			9			(11	)		—			2			(1	)		5

At December 31, 2009		189			151			(146	)		(35	)		31			(167	)		23			189			151			(146	)		(35	)		31			(167	)		23
Income statement																							24			(3	)		(12	)		11			6			(9	)		17
Statement of comprehensive income																							—			—			—			(22	)		—			(2	)		(24	)
Statement of changes in equity																							—			—			—			—			—			(12	)		(12	)
Exchange and other adjustments																							(8	)		(4	)		8			(1	)		(2	)		(1	)		(8	)

At December 31, 2010																							205			144			(150	)		(47	)		35			(191	)		(4	)

At
At
December 31,
December 31,
2009 2008
($ million)

Analyzed as:
Deferred tax receivable (95 ) —
Deferred tax payable 118 117
Liabilities classified as held for sale — 4

23 121


	At			At
	December 31,			December 31,
	2010			2009
	($ million)

Analyzed as:
Deferred tax assets		(88	)		(95	)
Deferred tax liabilities		84			118

		(4	)		23

F-71

Deferred gains on loan notes includes $55 million ~~(2008~~(2009 $55 million) which is expected to fall due for payment in ~~2011.~~2016.

~~F-66~~

The deferred tax asset of ~~$146~~$150 million ~~(2008 $141~~(2009 $146 million) recognized in respect of losses includes ~~$97~~$113 million ~~(2008 $87~~(2009 $97 million) in respect of capital losses available to be utilized against the realization of capital gains which are recognized as a deferred tax liability and ~~$49~~$37 million ~~(2008 $54~~(2009 $49 million) in respect of revenue tax losses. Deferred tax assets of $88 million are recognized in relation to legal entities which suffered a tax loss in the current or preceding period. These assets are recognized based upon future taxable profit forecasts for the entities concerned.

Tax losses with a net tax value of ~~$517~~$411 million ~~(2008 $553~~(2009 $517 million), including capital losses with a value of ~~$196~~$148 million ~~(2008 $160~~(2009 $196 million), have not been recognized. These losses may be carried forward indefinitely with the exception of $16 million which expires after six years (2009 $1 million which expires after 15 years, $1 million which expires after nine years and $14 million which expires after seven ~~years (2008 $1 million which expires after three~~ years). Deferred tax assets with a net tax value of $nil (2009 $9 ~~million (2008 $4~~ million) in respect of share-based payments, ~~$13~~$15 million ~~(2008~~(2009 $13 million) in respect of employee benefits and $7$5 million ~~(2008 $8~~(2009 $7 million) in respect of other items have not been recognized. These losses and other deferred tax assets have not been recognized as the Group does not anticipate being able to offset these against future profits or gains in order to realize any economic benefit in the foreseeable future. However, future benefits may arise depending on future profits arising or on the outcome of EU case law and legislative developments.

At December 31, ~~2009~~2010 the Group has not provided deferred tax in relation to temporary differences associated with post-acquisition undistributed earnings of subsidiaries as the Group is in a position to control the timing of reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. Following the introduction of a UK dividend exemption regime, the tax which would arise upon reversal of the temporary differences is not expected to exceed $20 million.

Other short-term temporary differences relate primarily to provisions and accruals and share-based payments.


Note 26 —	Share-based payments

Annual Bonus Plan

The IHG Annual Bonus Plan enables eligible employees, including Executive Directors, to receive all or part of their bonus in the form of shares together with, in certain cases, a matching award of free shares of up to half the deferred amount. The bonus and any matching shares awarded are released on the third anniversary of the award date. The bonuses in ~~2006 and~~ 2007 were eligible for matching shares, all of which will be released on the third anniversary of the award date. In ~~2006 and~~ 2007, participants could defer up to 100% of the total annual bonus, ~~in which case it is~~with the deferred amount being accounted for as a share-based payment. Under the terms of the 2008, 2009 and ~~2009~~2010 plans, a fixed percentage of the bonus is awarded in the form of shares with no voluntary deferral and no matching shares. The awards in all of the plans are conditional on the participants remaining in the employment of a participating company or leaving for a qualifying reason as per the plan rules. Participation in the Annual Bonus Plan is at the discretion of the Remuneration Committee. The number of shares is calculated by dividing a specific percentage of the participant’s annual performance-related bonus by the middle market quoted prices on the three consecutive dealing days immediately preceding the date of grant. A number of executives participated in the plan during the year ~~and~~however, no conditional rights over shares (2009 1,058,734, ~~(2008 661,657, 2007 675,515) shares~~2008 661,657) were awarded to participants. ~~This~~In 2009 this number ~~includes~~included 228,000 shares awarded as part of recruitment terms or for one-off individual performance-related awards.

Long Term Incentive Plan

The Long Term Incentive Plan allows Executive Directors and eligible employees to receive share awards, subject to the satisfaction of performance conditions, set by the Remuneration Committee, which are normally measured over a three-year period. Awards are normally made annually and, except in exceptional circumstances, will not exceed three times salary for Executive Directors and four times salary in the case of other eligible employees. During the year, conditional rights over 2,602,773 (2009 5,754,548, ~~(2008 5,060,509, 2007 3,538,535)~~2008 5,060,509) shares were

F-72

awarded to employees under the plan. The plan provides for the grant of “nil cost options” to participants as an alternative to conditional share awards.

~~F-67~~

Executive Share Option Plan

For options granted, the option price is not less than the market value of an ordinary share, or the nominal value if higher. The market value is the quoted price on the business day preceding the date of grant, or the average of the middle market quoted prices on the three consecutive dealing days immediately preceding the date of grant. A performance condition has to be met before options can be exercised. The performance condition is set by the Remuneration Committee. The plan was not operated during ~~2009~~2010 and no options were granted in the year under the plan. The latest date that any options may be exercised is April 4, 2015.

Sharesave Plan

The Sharesave Plan is a savings plan whereby employees contract to save a fixed amount each month with a savings institution for three or five years. At the end of the savings term, employees are given the option to purchase shares at a price set before savings began. The Sharesave Plan is available to all UK employees (including Executive Directors) employed by participating Group companies provided that they have been employed for at least one year. The plan provides for the grant of options to subscribe for ordinary shares at the higher of nominal value and not less than 80% of the middle market quotations of the ordinary shares on the three dealing days immediately preceding the invitation date. The plan was not operated during ~~2009~~2010 and no options were granted in the year under the plan. ~~All~~There were no options outstanding at ~~December 31, 2008 were either exercised or lapsed in 2009.~~January 1, 2010.

US Employee Stock Purchase Plan

The US Employee Stock Purchase Plan will allow eligible employees resident in the United States an opportunity to acquire Company American Depositary Shares (“ADS”s) on advantageous terms. The option to purchase ADSs may be offered only to employees of designated subsidiary companies. The option price may not be less than the lesser of either 85% of the fair market value of an ADS on the date of grant or 85% of the fair market value of an ADS on the date of exercise. Options granted under the plan must generally be exercised within 27 months from the date of grant. The plan was not operated during ~~2009~~2010 and at December 31, ~~2009~~2010 no options had been granted under the plan.

Former Six Continents Share Schemes

Under the terms of the separation of Six Continents PLC in 2003, holders of options under the Six Continents Executive Share Option Schemes were given the opportunity to exchange their Six Continents PLC options for equivalent value new options over IHG shares. As a result of this exchange, 23,195,482 shares were put under option at prices ranging from 308.5 pence to 593.3 pence. The exchanged options were immediately exercisable and are not subject to performance conditions. During ~~2009, 380,457 (2008, 159,254, 2007 1,358,791)~~2010, 1,016,572 (2009 380,457) such options were exercised and ~~43,088 shares~~82,076 (2009 43,088) lapsed, ~~(2008 113,024, 2007 nil),~~ leaving a total of ~~2,001,060 (2008 2,424,605, 2007 2,696,883)~~902,412 (2009 2,001,060) such options outstanding at prices ranging from 308.5 pence to 434.2 pence. The latest date that any options may be exercised is October 3, 2012.

F-73

The Group recognized a cost of $32 million (2009 $22 million, ~~(2008~~2008 $47 ~~million, 2007 $60~~ million) in operating profit and $1 million (2009 $2 million, ~~(2008~~2008 $2 ~~million, 2007 $nil)~~million) within exceptional administrative expenses related to equity-settled share-based payment transactions during the year.

The aggregate consideration in respect of ordinary shares issued under option schemes during the year was $19 million (2009 $11 million, ~~(2008~~2008 $2 ~~million, 2007 $32~~ million).

The following table sets forth awards and options granted during ~~2009.~~2010. No awards were granted under the Annual Bonus Plan, Executive Share Option Plan, Sharesave Plan or US Employee Stock Purchase Plan during the year.

Annual Bonus
Long Term

Plan

Incentive Plan

Number of shares awarded in 2009 1,058,734 5,754,548


	Long Term
	Incentive Plan

Number of shares awarded in 2010		2,602,773

~~F-68~~

~~In 2009, 2008 and 2007, the~~The Group ~~used~~uses separate option pricing models and assumptions ~~for each~~depending on the plan. The following tables set forth information about ~~how the fair value of each option grant is calculated:~~options granted in 2010, 2009 and 2008:

Annual
Long Term
2009
Bonus Plan Incentive Plan
Valuation model Binomial Monte Carlo
Simulation and
Binomial

Weighted average share price (pence) 454.0 612.0
Expected dividend yield 4.89 % 5.26 %
Risk-free interest rate 2.11 %
Volatility* 43 %
Term (years) 3.0 3.0

Annual
Long Term
2008
Bonus Plan Incentive Plan
Valuation model Binomial Monte Carlo
Simulation and
Binomial

Weighted average share price (pence) 836.0 865.0
Expected dividend yield 3.33 % 2.76 %
Risk-free interest rate 4.78 %
Volatility* 30 %
Term (years) 3.0 3.0

Annual
Long Term
2007
Bonus Plan Incentive Plan
Valuation model Binomial Monte Carlo
Simulation and
Binomial

Weighted average share price (pence) 1,252.0 1,262.0
Expected dividend yield 2.13 % 2.13 %
Risk-free interest rate 5.40 %
Volatility* 19 %
Term (years) 3.0 3.0


	Long Term
2010	Incentive Plan
Valuation model	Monte Carlo
	Simulation and
	Binomial

Weighted average share price (pence)		1,033.0
Expected dividend yield		3.10	%
Risk-free interest rate		1.83	%
Volatility*		41	%
Term (years)		3.0


	Annual			Long Term
2009	Bonus Plan			Incentive Plan
Valuation model	Binomial			Monte Carlo
				Simulation and
				Binomial

Weighted average share price (pence)		454.0			612.0
Expected dividend yield		4.89	%		5.26	%
Risk-free interest rate					2.11	%
Volatility*					43	%
Term (years)		3.0			3.0


	Annual			Long Term
2008	Bonus Plan			Incentive Plan
Valuation model	Binomial			Monte Carlo
				Simulation and
				Binomial

Weighted average share price (pence)		836.0			865.0
Expected dividend yield		3.33	%		2.76	%
Risk-free interest rate					4.78	%
Volatility*					30	%
Term (years)		3.0			3.0


*		The expected volatility was determined by calculating the historical volatility of the Company’s share price corresponding to the expected life of the share award.

~~F-69~~F-74

Movements in the awards and options outstanding under the schemes are as follows:


	Annual			Long Term			Annual			Long Term
	Bonus Plan			Incentive Plan			Bonus Plan			Incentive Plan
	Number of shares			Number of shares			Number of shares			Number of shares
	(thousands)						(thousands)

Outstanding at January 1, 2007		1,001			11,325
Granted		675			3,539
Vested		(418	)		(1,694	)
Share capital consolidation		(68	)		—
Lapsed or canceled		(86	)		(1,707	)

Outstanding at December 31, 2007		1,104			11,463
Outstanding at January 1, 2008								1,104			11,463
Granted		662			5,061			662			5,061
Vested		(472	)		(2,752	)		(472	)		(2,752	)
Lapsed or canceled		(5	)		(2,619	)		(5	)		(2,619	)

Outstanding at December 31, 2008		1,289			11,153			1,289			11,153
Granted		1,059			5,755			1,059			5,755
Vested		(434	)		(3,124	)		(434	)		(3,124	)
Lapsed or canceled		(60	)		(1,518	)		(60	)		(1,518	)

Outstanding at December 31, 2009		1,854			12,266			1,854			12,266
Granted								—			2,603
Vested								(580	)		(1,500	)
Lapsed or canceled								—			(2,027	)

Outstanding at December 31, 2010								1,274			11,342

Fair value of awards granted during the year (cents)
At December 31, 2010								n/a	*		1,181.9
At December 31, 2009		735.6			414.1			735.6			414.1
At December 31, 2008		1,436.0			870.4			1,436.0			870.4
At December 31, 2007		2,387.4			910.0

Weighted average remaining contract life (years)
At December 31, 2010								0.7			1.0
At December 31, 2009		1.3			1.3			1.3			1.3
At December 31, 2008		1.6			1.2			1.6			1.2
At December 31, 2007		1.5			1.1


*		No awards were granted during the year.

The above awards do not vest until the performance and service conditions have been met.

~~F-70~~F-75

Sharesave Plan Executive Share Option Plan
Weighted
Weighted
Number of
Range of
average
Number of
Range of
average
shares option prices option price shares option prices option price
(thousands) (pence) (pence) (thousands) (pence) (pence)

Outstanding at January 1, 2007 165 420.5 420.5 14,079 308.5-619.8 482.2
Exercised (101 ) 420.5 420.5 (5,568 ) 308.5-619.8 471.9
Lapsed or canceled (7 ) 420.5 420.5 (317 ) 438.0-619.8 526.8

Outstanding at December 31, 2007 57 420.5 420.5 8,194 308.5-619.8 487.4
Exercised (3 ) 420.5 420.5 (353 ) 434.2-619.8 543.6
Lapsed or canceled (5 ) 420.5 420.5 (206 ) 349.1-593.2 431.3

Outstanding at December 31, 2008 49 420.5 420.5 7,635 308.5-619.8 486.3
Exercised (48 ) 420.5 420.5 (1,518 ) 308.5-619.8 496.2
Lapsed or canceled (1 ) 420.5 420.5 (247 ) 438.0-619.8 509.9

Outstanding at December 31, 2009
— — — 5,870 308.5-619.8 482.8

Options exercisable

At December 31, 2009 — — — 5,870 308.5-619.8 482.8
At December 31, 2008 — — — 7,635 308.5-619.8 486.3
At December 31, 2007 — — — 6,583 308.5-619.8 455.0


	Sharesave Plan							Executive Share Option Plan
						Weighted							Weighted
	Number of			Range of		average		Number of			Range of		average
	shares			option prices		option price		shares			option prices		option price
	(thousands)			(pence)		(pence)		(thousands)			(pence)		(pence)

Outstanding at January 1, 2008		57			420.5		420.5		8,194			308.5-619.8		487.4
Exercised		(3	)		420.5		420.5		(353	)		434.2-619.8		543.6
Lapsed or canceled		(5	)		420.5		420.5		(206	)		349.1-593.2		431.3

Outstanding at December 31, 2008		49			420.5		420.5		7,635			308.5-619.8		486.3
Exercised		(48	)		420.5		420.5		(1,518	)		308.5-619.8		496.2
Lapsed or canceled		(1	)		420.5		420.5		(247	)		438.0-619.8		509.9

Outstanding at December 31, 2009		—			—		—		5,870			308.5-619.8		482.8
Exercised		—			—		—		(2,497	)		349.1-619.8		478.6
Lapsed or canceled		—			—		—		(82	)		349.1		349.1

Outstanding at December 31, 2010		—			—		—		3,291			308.5-619.8		489.3

Options exercisable
At December 31, 2010		—			—		—		3,291			308.5-619.8		489.3

At December 31, 2009		—			—		—		5,870			308.5-619.8		482.8

At December 31, 2008		—			—		—		7,635			308.5-619.8		486.3

Included within the options outstanding under the Executive Share Option Plan are options over 902,412 (2009 2,001,060, ~~(2008 2,424,605, 2007 2,696,883)~~2008 2,424,605) shares that have not been recognized in accordance with IFRS 2 as the options were granted on or before November 7, 2002. These options, relating to former Six Continents share schemes, have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.

The weighted average share price at the date of exercise for share options vested during the year was ~~571.0~~1,063.8 pence. The closing share price on December 31, ~~2009~~2010 was ~~893.0~~1,243.0 pence and the range during the year was ~~446.0~~887.0 pence to ~~903.5~~1,266.0 pence per share.

Summarized information about options outstanding at December 31, ~~2009~~2010 under the share option schemes is as follows:


							Options outstanding and exercisable
									Weighted
	Options outstanding and exercisable								average		Weighted
			Weighted				Number		remaining		average
			average		Weighted		outstanding		contract life		option price
	Number		remaining		average		(thousands)		(years)		(pence)
	outstanding		contract life		option price
Range of exercise prices (pence)	(thousands)		(years)		(pence)

Executive Share Option Plan
308.5 to 349.1		268		0.3		347.3
308.5								12		1.8		308.5
422.8 to 494.2		4,574		3.3		459.9		2,676		2.4		460.7
619.8		1,028		5.3		619.8		603		4.3		619.8

		5,870		3.5		482.8		3,291		2.7		489.3

~~F-71~~F-76


Note 27 —	Operating leases

During the year ended December 31, ~~2009,~~2010, $53 million (2009 $51 million, ~~(2008~~2008 $61 ~~million, 2007 $64~~ million) was recognized as an expense in the Consolidated income statement in respect of operating leases, net of amounts borne by the System ~~Funds.~~Fund.

Total commitments under non-cancelable operating leases are as follows:


	At		At		At		At
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2010		2009
	($ million)				($ million)

Due within one year		51		56		50		51
One to two years		44		50		40		44
Two to three years		38		47		36		38
Three to four years		37		40		31		37
Four to five years		30		33		25		30
More than five years		309		322		323		309

		509		548		505		509

~~Included above are commitments of $8 million (2008 $11 million) which will be borne by the System Funds.~~

The average remaining term of these leases, which generally contain renewal options, is approximately 1921 years ~~(2008 18~~(2009 19 years). No material restrictions or guarantees exist in the Group’s lease obligations.

Included above are commitments of $12 million (2009 $8 million) which will be borne by the System Fund.

Total future minimum rentals expected to be received under non-cancellable sub-leases are $17 million (2009 $20 million).


Note 28 —	Capital and other commitments

At
At
December 31,
December 31,
2009 2008
($ million)

Contracts placed for expenditure on property, plant and equipment and intangible assets not provided for in the Consolidated Financial Statements 9 40


	At		At
	December 31,		December 31,
	2010		2009
	($ million)

Contracts placed for expenditure on property, plant and equipment and intangible assets not provided for in the Consolidated Financial Statements		14		9

On October 24, 2007, the Group announced a worldwide relaunch of its Holiday Inn brand family. In support of this relaunch, IHG will make a non-recurring revenue investment of $60 million which will be charged to the Consolidated income statement as an exceptional item. During the year, $19 million (2008 $35 million) was charged.


Note 29 —	Contingencies

At
At
December 31,
December 31,
2009 2008
($ million)

Contingent liabilities not provided for in the Consolidated Financial Statements 16 12


	At		At
	December 31,		December 31,
	2010		2009
	($ million)

Contingent liabilities not provided for in the Consolidated Financial Statements		1		16

In limited cases, the Group may provide performance guarantees to third-party hotel owners to secure management contracts. The maximum unprovided exposure under such guarantees was ~~$106~~$90 million at December 31, ~~2009 (2008 $249~~2010 (2009 $106 million). ~~Payments under any such guarantees are charged to the income statement as incurred.~~

As of December 31, ~~2009,~~2010, the Group had outstanding letters of credit of $54 million ~~(2008 $42~~(2009 $54 million) mainly relating to self insurance programs.

The Group may guarantee loans made to facilitate third-party ownership of hotels in which the Group has an equity interest and also a management contract. As of December 31, ~~2009, the Group was a guarantor of loans which could amount to a maximum of $54 million (2008 $46~~2010, there were no such guarantees in place (2009 $22 million).

~~F-72~~

From time to time, the Group is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. The Group has also given warranties in respect of the disposal of certain of its former ~~subsidiaries and hotels.~~subsidiaries. It is the view of the Directors that, other than to the extent that liabilities have been provided for in these financial statements, such legal proceedings and warranties are not expected to result in material financial loss to the Group.

F-77


Note 30 —	Related party disclosures

Key management personnel comprises the Board and Executive Committee.


	Year ended December 31,						Year ended December 31,
	2009		2008		2007		2010		2009		2008
	($ million)						($ million)

Total compensation of key management personnel
Short-term employment benefits		9.8		18.4		18.9		13.6		9.8		18.4
Post-employment benefits		0.6		0.7		0.9		0.6		0.6		0.7
Termination benefits		0.8		—		—		—		0.8		—
Equity compensation benefits		9.5		12.8		18.2		9.4		9.5		12.8

		20.7		31.9		38.0		23.6		20.7		31.9

There were no other transactions with key management personnel during the years ended December 31, 2010, 2009 ~~2008~~ or ~~2007.~~2008.


Note 31 —	System ~~Funds~~Fund

The Group operates ~~funds~~a System Fund (the “Fund”) to collect and administer assessments and contributions from hotel owners for specific use in marketing, the Priority Club Rewards loyalty program and the global reservation system. The ~~Funds~~Fund and loyalty program are accounted for in accordance with the accounting policies set out onpage ~~F-18.~~F-21.

The following information is relevant to the operation of the ~~Funds:~~Fund:

Year ended December 31,
2009 2008 2007
($ million)

Assessment fees received from hotels* 1,008 990 930
Key elements of Funds’ expenditure:*
Marketing 165 211 215
Priority Club 210 212 238
Payroll costs 152 155 144
Net surplus/(deficit) for the year 43 10 (34)
Cumulative short-term net surplus 71 28 18
Loyalty program liability 470 471 426
Interest payable to the Funds 2 12 21


	Year ended December 31,
	2010			2009		2008
	($ million)

Income:*
Assessment fees and contributions received from hotels		944			875		914
Proceeds from sale of Priority Club Rewards points		106			133		76
Key elements of expenditure:*
Marketing		170			165		211
Priority Club		250			210		212
Payroll costs		167			152		155
Net (deficit)/surplus for the year*		(51	)		43		10
Interest payable to the Fund		2			2		12


*		Not included in the Consolidated income statement in accordance with the Group’s accounting policies.

The payroll costs above relate to 3,927 (2008 4,019, ~~(2008 3,853, 2007 3,539)~~2008 3,853) employees of the Group whose costs are borne by the ~~Funds.~~Fund.

The following liabilities relating to the Fund are included in the Consolidated statement of financial position:


	Year ended December 31,
	2010		2009		2008
	($ million)

Cumulative short-term net surplus		20		71		28
Loyalty program liability		531		470		471

		551		541		499

The net change in the loyalty program liability and System Fund surplus contributed an inflow of $10 million (2009 $42 million, 2008 $55 million) to the Group’s cash flow from operations.

~~F-73~~F-78

INTERCONTINENTAL HOTELS GROUP PLC

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS


			Additions												Additions
	Balance at		charged to								Balance at		Balance at		charged to							Balance at
	beginning		costs and		Exchange						end of		beginning		costs and		Exchange					end of
	of period		expenses		differences			Deductions			period		of period		expenses		differences		Deductions			period
	($ million)												($ million)

Year ended December 31, 2010
Provisions for bad and doubtful debts														85		27		—		(54	)		58
Year ended December 31, 2009
Provisions for bad and doubtful debts		110		34		—			(59	)		85		110		34		—		(59	)		85
Year ended December 31, 2008
Provisions for bad and doubtful debts		96		28		—			(14	)		110		96		28		—		(14	)		110
Year ended December 31, 2007
Provisions for bad and doubtful debts		85		23		—			(12	)		96
Year ended December 31, 2006
Provisions for bad and doubtful debts		81		29		2			(27	)		85
Year ended December 31, 2005
Provisions for bad and doubtful debts		83		25		(2	)		(25	)		81

S-1

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

INTERCONTINENTAL HOTELS GROUP PLC

(Registrant)


	By:	/s/ Richard Solomons

Name: Richard Solomons


	Title:	Chief Financial Officer

Date: April ~~1, 2010~~11, 2011


(1)		Includes Holiday Inn Club Vacations (6 hotels, 2,892 rooms). within franchised.


(1)		Includes Holiday Inn Club ~~Vacations.~~Vacations (6 hotels, 2,892 rooms in both 2010 and 2009).


	Hotels							Rooms
					Change							Change
Global pipeline at December 31,	2009		2008		over 2008			2009		2008		over 2008

Analyzed by brand
InterContinental		63		71		(8	)		20,173		21,884		(1,711	)
Crowne Plaza		129		133		(4	)		38,555		41,469		(2,914	)
Holiday Inn		338		387		(49	)		59,008		64,261		(5,253	)
Holiday Inn Express		563		719		(156	)		57,756		70,270		(12,514	)
Staybridge Suites		123		166		(43	)		13,360		18,109		(4,749	)
Candlewood Suites		169		242		(73	)		14,851		21,790		(6,939	)
Hotel Indigo		53		56		(3	)		6,660		7,212		(552	)
Other		—		1		(1	)		—		90		(90	)

Total		1,438		1,775		(337	)		210,363		245,085		(34,722	)

Analyzed by ownership type
Franchised		1,158		1,474		(316	)		126,386		156,959		(30,573	)
Managed		280		300		(20	)		83,977		87,941		(3,964	)
Owned and leased		—		1		(1	)		—		185		(185	)

Total		1,438		1,775		(337	)		210,363		245,085		(34,722	)


(a)		Incorporated in Great Britain and registered in England and Wales.

(b)		Incorporated in the United States.

(c)		Incorporated in Hong Kong.

(d)		Incorporated in France.


Net book value as at December 31, 2009	Americas		EMEA		Asia Pacific		Total
Net book value at December 31, 2010									Americas		EMEA		Asia Pacific		Total
	($ million)								($ million)

Land and buildings		533		556		321		1,410		495		523		317		1,335
Fixtures, fittings and equipment		165		167		94		426		119		146		90		355

		698		723		415		1,836		614		669		407		1,690


	•	Implementing sound environmental practices in the design, development and operation of its hotels;

	•	Encouraging the development and integration of sustainable technologies;

	•	~~Endeavouring~~Endeavoring to reduce its use of energy, water and re-use and recycle the resources consumed by its business wherever practical;

	•	Engaging its customers, colleagues, hotel owners, suppliers and contractors in its efforts to protect the environment;

	•	Providing the training and resources required to meet its objectives;

	•	Monitoring, recording and benchmarking its environmental performance on a regular basis;

	•	Making business decisions taking into account these commitments; and

	•	Communicating its policies, practices and ~~program~~programs to all its stakeholders.


	•	Innovation— the Group develops innovative concepts and technologies, and works closely with its partners to find creative solutions to the challenges it faces.

	•	Collaboration— the Group’s stakeholders play a key role in helping it identify and tackle its priorities. Stakeholders include guests and corporate clients, hotel owners and franchise holders, local communities, employees, shareholders, suppliers, academic institutions, non-government organizations, governments and industry-specific institutions.


	•	Environment — reduce energy use in the Group’s owned and managed estate by between 6% and 10% over three years(2010-2012) via the use of Green Engage; and

	•	Communities— generate local economic opportunities, particularly through the ‘‘IHG Academy’’, and provide support through disaster relief.


	•	Green Engage— Green Engage is the Group’s innovative online sustainability management system, which launched in 2009 and, which defines the Group’s vision of a sustainable hotel. Green Engage is designed to help hotels reduce energy costs, with hotels achieving energy savings of up to 25%. The system, which has recently received a LEED (Leadership in Energy and Environmental Design) endorsement, allows hotels to track, measure and report on their energy, water and waste, and recommends actions that will cut energy bills without compromising the guest experience. The Group is the world’s first hotel company to be awarded LEED endorsement for an existing hotel program, further cementing its place as an industry leader in sustainability.

	•	‘‘IHG Academy’’ — The ‘‘IHG Academy’’ is a public/private partnership with education providers and community organizations that helps the Group create local economic opportunities.

	•	The Innovation Hotel— The Group’s online ‘‘innovation hotel’’ takes visitors on a tour of the model hotel of the future, pointing out practical solutions and technology that can make its hotels greener and more efficient.


ITEM 5.	*OPERATING AND FINANCIAL REVIEW AND PROSPECTS*


	•	Property, plant and equipment — ~~$28 million, comprising $20~~$6 million in respect of ~~a North American~~one hotel ~~and $8 million relating to a European hotel;~~

	•	~~Assets held for sale — $45 million, comprising $14 million of depreciation not charged whilst held for sale and $31 million of impairments relating to two North American hotels;~~

	•	~~Goodwill — $78 million relating to~~in the ~~Americas managed operations cash-generating unit;~~

	•	~~Intangible assets — $32 million in respect of a US management contract;~~Americas; and

	•	Other financial assets — ~~$14~~$1 million ~~relating to an investment~~ in ~~an entity that owns a~~respect of two equity investments in North ~~American hotel that the Group manages.~~America.


	•	$91 million charge, comprising an onerous contract provision of $65 million for the future net unavoidable costs under a performance guarantee related to certain management contracts with one US hotel owner, and a deposit of $26 million written off as it is no longer considered recoverable under the terms of the same management contracts;

	•	~~$19 million in relation to the Holiday Inn brand family relaunch;~~

	•	$21 million enhanced pension transfers to deferred members of the InterContinental Hotels UK Pension Plan who accepted an offer to receive the enhancement as either a cash lump sum or an additional transfer value to an alternative pension plan provider;

	•	~~$197 million of non-cash impairment charges reflecting the weaker trading environment in 2009, including $45 million relating to hotels reclassified from held for sale assets;~~

	•	~~$43 million which primarily related to the closure of certain corporate offices together with severance costs arising from a review of the Group’s cost base; and~~

	•	~~$2 million loss on disposal of hotels.~~


	Total amounts		Less than						After		Total amounts		Less than						After
	committed		1 year		1-3 Years		3-5 years		5 years		committed		1 year		1-3 Years		3-5 years		5 years
	($ million)										($ million)

Long-term debt^{(i) (ii)}		934		88		5		426		415
Long-term debt^(i)(ii)												621		1		205		—		415
Interest payable⁽ⁱⁱ⁾		209		38		67		52		52		166		32		56		52		26
Finance lease obligations⁽ⁱⁱⁱ⁾		3,444		16		32		32		3,364		3,428		16		32		32		3,348
Operating lease obligations		509		51		82		67		309		505		50		76		56		323
Agreed pension scheme contributions		13		13		—		—		—
Agreed pension scheme contributions^(iv)												152		41		17		—		94
Capital contracts placed		9		9		—		—		—		14		14		—		—		—

		5,118		215		186		577		4,140		4,886		154		386		140		4,206


(i)		Repayment period classified according to the related facility maturity date.

(ii)		Including the impact of derivatives.

(iii)		Represents the minimum lease payments related to the99-year lease on the InterContinental Boston. Payments under the lease step up at regular intervals over the lease term.

(iv)		Primarily relates to the recovery plan agreed with trustees of the InterContinental Hotels UK Pension Plan (see below).


		Initially		Date of next
		appointed to		reappointment
Name	Title	the Board		by shareholders

Graham Allan⁽¹⁾⁽²⁾	Director		2010		2010
Andrew Cosslett	Director and Chief Executive		2005		2011
David Kappler⁽¹⁾	Director and Senior Independent Director		2004		2011
Ralph Kugler⁽¹⁾⁽³⁾	Director		2003		2010
Jennifer Laing⁽¹⁾	Director		2005		2012
Jonathan Linen⁽¹⁾	Director		2005		2012
Richard Solomons	Director and Chief Financial Officer		2003		2012
David Webster⁽³⁾	Director and Chairman		2003		2010
Ying Yeh⁽¹⁾	Director		2007		2011


(1)		~~Non-executive independent director.~~The new UK Corporate Governance Code recommends that all Directors of FTSE 350 companies submit themselves for election or re-election (as appropriate) by shareholders every year. Although IHG is not obliged to follow this recommendation until its Annual General Meeting in 2012, the Board has decided to submit the appointment of all its Directors for shareholder approval in 2011. Therefore, all Directors will retire and offer themselves for election or re-election at the next Annual General Meeting.

(2)		~~Required, under the Company’s Articles of Association, to stand for election at the 2010 Annual General Meeting.~~

~~(3)~~		~~Required, under the Company’s Articles of Association, to stand for re-election at the 2010 Annual General Meeting.~~Non-executive independent director.


		Initially appointed
Name	Title	to position

~~Jim Abrahamson~~	~~President, The Americas~~		~~2009~~
Tom Conophy	Executive Vice President and Chief		~~2006~~
	Information Officer
~~Kirk Kinsell~~	~~President, EMEA~~		~~2007~~2006
Tracy Robbins	Executive Vice President, ~~Global~~ Human Resources & Group Operations Support		2005
	~~Resources~~
Tom Seddon	Executive Vice President and Chief		~~2007~~
	Marketing Officer		2007
George Turner	Executive Vice President, General		~~2009~~
	Counsel and Company Secretary		2009


	Contract
	effective		Unexpired term/
Directors	date		notice period

Andrew Cosslett		~~2.3.05~~February 3, 2005		3 months
James Abrahamson		August 1, 2010		12 months
Kirk Kinsell		August 1, 2010		12 months
Richard Solomons		~~4.15.03~~April 15, 2003		12 months


	•	review the Group’s public statements on internal control, risk management 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 Global Internal Audit;

	•	assume responsibility for the appointment, compensation, resignation, dismissal and the overseeing 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

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


	Annual Bonus		Long Term
	Plan		Incentive Plan

Number of shares awarded in 2009		1,058,734		5,754,548

Key performance

Current status and

Strategic priorities

indicators (KPIs)

2010 developments

2011 priorities

To accelerate profitable growth of our core business in the largest markets where presence and scale really count and also in key global gateway cities. Seek opportunities to leverage our scale in new business areas.

• Sustained system size growth; and
• deal signings focused in scale markets and key gateway cities.

•   System size maintained at 647,161 rooms;
•   over 90% of deals signed in scale markets and key gateway cities;
•   re-entry into Hawaii with a Holiday Inn Resort;
•   opening our second Hotel Indigo in London, and our first in Asia Pacific, on the Bund in Shanghai;
•   17 signings of Hotel Indigo and Staybridge Suites outside of North America; and
•   259 hotels opened globally.

•   Continue international roll-out of Staybridge Suites and Hotel Indigo;
•   accelerate growth strategies in quality locations in agreed scale markets; and
•   continue to leverage scale and build upon improved strategic position during the economic downturn.