theoard,enior b s management and their responsibilities · from cadbury schweppes plc where he was...

Businessreview 37

In this section we present our Board and senior management team, our governance processes and procedures, and our compliance with the codes and regulations to which we are committed. We also present details of Directors’ remuneration in 2010, and the structure of senior executives’ pay for 2011.

HotelIndigoLondon-TowerHill,UK

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S BusinessreviewandTheBoard,seniormanagementandtheirresponsibilities 37

TheBoard,seniormanagementandtheirresponsibilities

38 TheBoardofDirectors

39 OthermembersoftheExecutiveCommittee

40 Directors’report

42 Corporategovernance

47 AuditCommitteereport

48 Remunerationreport 48 Shareholder letter 49 Introduction 49 The Remuneration Committee 50 Remuneration policy and structure 51 Base salary and benefits 51 Annual Bonus Plan 52 Long Term Incentive Plan 53 Performance graph 54 Total compensation 54 Shareholding policy 55 Policy regarding pensions 55 Non-Executive Directors’ pay 55 Service contracts 56 Audited information on Directors’ emoluments

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38 IHGAnnualReportandFinancialStatements2010

David WebsterNon-ExecutiveChairman*ChairmanoftheNominationCommitteeAppointedDeputyChairmanandSeniorIndependentDirectorofInterContinentalHotelsGroupontheseparationofSixContinentsPLCinApril2003.AppointedNon-ExecutiveChairmanon1January2004.AlsoNon-ExecutiveChairmanofMakinsonCowellLimited,acapitalmarketsadvisoryfirm,aNon-ExecutiveDirectorofAmadeusITHoldingSA,atransactionprocessingandtechnologysolutionscompanyforthetravelandtourismindustry,amemberoftheAppealsCommitteeofthePanelonTakeoversandMergersandaDirectorofTempleBarInvestmentTrustPLC.FormerlyChairmanofSafewayplcandaNon-ExecutiveDirectorofReedElsevierPLC.Age66.

Andrew CosslettChiefExecutive†

AppointedChiefExecutiveinFebruary2005,joiningtheGroupfromCadburySchweppesplcwherehewasmostrecentlyPresident,Europe,MiddleEast&Africa.DuringhiscareeratCadburySchweppesheheldavarietyofseniorregionalmanagementandmarketingrolesintheUKandAsiaPacific.Alsohasover11years’experienceinbrandmarketingwithUnilever.AmemberoftheExecutiveCommitteeoftheWorldTravel&TourismCouncilandamemberofthePresident’sCommitteeoftheCBI.Age55.

Richard SolomonsChiefFinancialOfficerandHeadofCommercialDevelopment†

Qualifiedasacharteredaccountantin1985,followedbysevenyearsininvestmentbanking,basedinLondonandNewYork.JoinedtheGroupin1992andheldavarietyofseniorfinanceandoperationalroles.AppointedFinanceDirectoroftheHotelsbusinessinOctober2002inanticipationoftheseparationofSixContinentsPLCinApril2003.Responsibleforcorporateandregionalfinance,Groupfinancialcontrol,strategy,investorrelations,tax,treasury,commercialdevelopmentandprocurement.Age49.

James AbrahamsonPresident,TheAmericas†

AppointedaDirectorinAugust2010.Hasover32years’experienceinhoteloperations,branding,developmentandfranchiserelations.JoinedtheGroupasanExecutiveCommitteememberwithresponsibilityfortheAmericasregioninJanuary2009fromGlobalHyattCorporation,whereheservedasHeadofDevelopment,TheAmericas.PreviouslySeniorVicePresident,HiltonHotelsCorporationfor12years.ResponsibleforthebusinessdevelopmentandperformanceofallthehotelbrandsandpropertiesintheAmericasregion.Age55.

Kirk KinsellPresident,EMEA†

AppointedaDirectorinAugust2010,retaininghisresponsibilityfortheEMEAregion,whichhehadheldasanExecutiveCommitteemembersinceSeptember2007.Hasover28years’experienceinthehospitalityindustry,includingseniorfranchisepositionswithHolidayInnCorporationandITTSheraton,priortojoiningtheGroupin2002asSeniorVicePresident,ChiefDevelopmentOfficerfortheAmericasregion.ResponsibleforthebusinessdevelopmentandperformanceofallthehotelbrandsandpropertiesintheEMEAregion.Age56.

David KapplerSeniorIndependentNon-ExecutiveDirector#

ChairmanoftheAuditCommitteeAppointedaDirectorandSeniorIndependentDirectorinJune2004.ANon-ExecutiveDirectorofShireplc.AqualifiedaccountantandformerlyChiefFinancialOfficerofCadburySchweppesplcandNon-ExecutiveChairmanofPremierFoodsplc.AlsoservedasaNon-ExecutiveDirectorofCamelotGroupplcandHMVGroupplc.AmemberoftheTrilanticEuropeAdvisoryCouncil.Age63.

Graham AllanNon-ExecutiveDirector•

AppointedaDirectorinJanuary2010.BecameChiefExecutiveOfficerofYum!RestaurantsInternational(YRI),asubsidiaryofYum!Brands,Inc.,in2010afterservingasPresidentsince2003.PreviouslyExecutiveVicePresidentandChiefOperatingOfficerofYRIandManagingDirectorofYRIinEurope.Hasover19years’experienceinbrandmanagement,marketing,franchisingandretaildevelopment.Age55.

Ralph KuglerNon-ExecutiveDirector°ChairmanoftheRemunerationCommitteeAppointedaDirectorinApril2003.AlsoChairmanofByotrolplc,ahygienetechnologycompany,aNon-ExecutiveDirectorofDiscoveryGroupHoldingsLtd,aPRservicescompany,BoardAdviseratMars,Incorporated,theglobalconsumerbusiness,aNon-ExecutiveDirectorofSpotlessHoldingSas,aconsumerproductsbusiness,andSeniorAdviserto3iplc.PreviouslyDirectorontheboardsofUnileverPLCandUnileverN.V.untilMay2008,withhislastroleasGlobalPresident,UnileverHomeandPersonalCare.Age54.

Jennifer LaingNon-ExecutiveDirector•

ChairmanoftheCorporateResponsibilityCommitteeAppointedaDirectorinAugust2005.WasAssociateDean,ExternalRelationsatLondonBusinessSchool,until2007.AFellowoftheMarketingSocietyandoftheInstituteofPractitionersinAdvertising,hasover30years’experienceinadvertisingincluding16yearswithSaatchi&Saatchi.AlsoaNon-ExecutiveDirectorofHudsonHighlandGroup,Inc.,aUShumanresourcescompany.Age63.

Jonathan LinenNon-ExecutiveDirector‡

AppointedaDirectorinDecember2005.WasformerlyViceChairmanoftheAmericanExpressCompany,havingheldarangeofseniorpositionsthroughouthiscareerofover35yearswithAmericanExpress.ANon-ExecutiveDirectorofYum!Brands,Inc.andModernBank,N.A.,aUSprivatebankingcompany.AlsoservesonanumberofUSCouncilsandadvisoryboards.Age67.

Ying YehNon-ExecutiveDirector‡

AppointedaDirectorinDecember2007.VicePresidentandChairman,GreaterChinaRegion,NalcoCompany,awatertreatmentandprocessimprovementcompany.PreviouslyChairmanandPresident,NorthAsiaRegion,President,BusinessDevelopment,AsiaPacificRegionandVicePresident,EastmanKodakCompany.AlsoaNon-ExecutiveDirectorofABVolvo.Was,for15years,adiplomatwiththeUSForeignServiceinHongKongandBeijinguntil1997.Age62.

TheBoardofDirectors

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N TheBoardofDirectorsandOthermembersoftheExecutiveCommittee 39

Tom ConophyExecutiveVicePresidentandChiefInformationOfficer†§

Hasover30years’experienceintheITindustry,includingmanagementanddevelopmentofnewtechnologysolutionswithinthetravelandhospitalitybusiness.JoinedtheGroupinFebruary2006fromStarwoodHotels&ResortsInternationalwhereheheldthepositionofExecutiveVicePresident&ChiefTechnologyOfficer.Responsibleforglobaltechnology,includingITsystemsandinformationmanagementthroughouttheGroup.Age50.

Tracy RobbinsExecutiveVicePresident,HumanResources&GroupOperationsSupport†§

Hasover25years’experienceinlineandHRrolesinserviceindustries.JoinedtheGroupinDecember2005fromCompassGroupPLC,aworldleadingfoodservicecompany,whereshewasGroupHumanResourcesLeadership&DevelopmentDirector.PreviouslyGroupHRDirectorforForteHotelsGroup.Hasglobalresponsibilityfortalentmanagement,leadershipdevelopment,rewardstrategy,organisationalcapabilityandoperationssupport.Age47.

Tom SeddonExecutiveVicePresidentandChiefMarketingOfficer†§

Hasover18years’experienceinsalesandmarketinginthehospitalityindustry,includingwithIHG’spredecessorparentcompaniesfrom1994to2004.RejoinedtheGroupinNovember2007,fromrestaurantbusinessSUBWAY®wherehewasresponsibleforworldwidesalesandmarketingactivities.Hasresponsibilityforworldwidebrandmanagement,reservations,e-commerce,globalsales,relationshipanddistributionmarketing,andloyaltyprogrammes.Age42.

George TurnerExecutiveVicePresident,GeneralCounselandCompanySecretary†§

Solicitor,qualifiedtoprivatepracticein1995.After12yearswithImperialChemicalIndustriesPLC,wherehewasmostrecentlyDeputyCompanySecretary,hejoinedtheGroupinSeptember2008.AppointedExecutiveVicePresident,GeneralCounselandCompanySecretaryinJanuary2009.Responsibleforcorporategovernance,riskmanagement,insurance,dataprivacy,internalaudit,companysecretariat,legalandcorporateresponsibility&publicaffairs.Age40.

TheBoardofDirectorsandmembersoftheExecutiveCommitteetogethercomprisetheIHGSeniorLeadershipTeam.

WhiletheDirectorshavecertainspecificlegalandregulatorydutiesandresponsibilities,theyworkwithandrelyonthedetailedknowledgeandexperienceoftheExecutiveCommitteememberstosecuretheeffectiverunningofthebusinessinsupportofIHG’scorepurposetocreateGreatHotelsGuestsLove,anditsVisiontobecomeoneoftheworld’sgreatcompanies.

* ANon-ExecutiveDirectorandamemberoftheNominationCommittee

† AmemberoftheExecutiveCommittee# AnindependentNon-ExecutiveDirectorandamember

oftheAudit,RemunerationandNominationCommittees• AnindependentNon-ExecutiveDirectorandamember

oftheAudit,NominationandCorporateResponsibilityCommittees

° AnindependentNon-ExecutiveDirectorandamemberoftheAudit,Remuneration,NominationandCorporateResponsibilityCommittees

‡ AnindependentNon-ExecutiveDirectorandamemberoftheRemunerationandNominationCommittees

§ NotamainBoardDirector

OthermembersoftheExecutiveCommittee


Share repurchasesNoshareswerepurchasedorcancelledundertheauthoritygrantedbyshareholdersattheAnnualGeneralMeetingheldon28May2010.ThesharebuybackauthorityremainsinforceuntiltheAnnualGeneralMeetingin2011,andaresolutiontorenewtheauthoritywillbeputtoshareholdersatthatMeeting.

Substantial shareholdings Asat14February2011,theCompanyhadbeennotified,inaccordancewiththeDisclosureandTransparencyRulesoftheUKFinancialServicesAuthority,ofthefollowingsignificantholdingsofvotingrightsinitsordinaryshares:

CedarRockCapitalLimited 5.07% DirectinterestBlackRock,Inc. 5.02% IndirectinterestCapitalResearchandManagementCompany 5.02% IndirectinterestLegal&GeneralGroupplc3.96% Directinterest

Directors DetailsofDirectorswhoservedontheBoardduringtheyearareshownonpage38.DetailsofthebeneficialshareinterestsofDirectorswhowereontheBoardattheyearendareshownbelow.NochangestotheseinterestsoccurredbetweentheyearendandthedateofthisReport.

31December2010 InterContinentalHotelsGroupPLC ordinaryshares1

ExecutiveDirectorsJamesAbrahamson 52,203AndrewCosslett 496,133KirkKinsell 63,1362

RichardSolomons 171,522Non-ExecutiveDirectorsGrahamAllan 2,000DavidKappler 1,400RalphKugler 1,169JenniferLaing 3,998JonathanLinen 7,3433

DavidWebster 34,905YingYeh –

1 TheseshareholdingsareallbeneficialinterestsandincludesharesheldbyDirectors’spousesandotherconnectedpersons.NoneoftheDirectorshasabeneficialinterestinthesharesofanysubsidiary.TheseshareholdingsdonotincludeExecutiveDirectors’entitlementstoshareawardsundertheCompany’sshareplans,whicharesetoutseparatelyintheRemunerationReportonpages58to60.

2 62,499ordinarysharesand637AmericanDepositaryReceipts.

3 HeldintheformofAmericanDepositaryReceipts.

TheDirectorspresenttheirreportforthefinancialyearended31December2010.

CertaininformationrequiredfordisclosureinthisreportisprovidedinotherappropriatesectionsoftheAnnualReportandFinancialStatements2010.TheseincludetheBusinessReview,theCorporateGovernanceandRemunerationReportsandtheGroupfinancialstatements,andtheseare,accordingly,incorporatedintothisreportbyreference.

Activities of the GroupTheprincipalactivitiesoftheGroupareinhotelsandresorts,withfranchising,management,ownershipandleaseholdinterestsinover4,400establishments,withmorethan640,000guestroomsin100countriesandterritoriesaroundtheworld.

Business reviewThisDirectors’ReportshouldbereadinconjunctionwiththeChairman’sstatementandtheChiefExecutive’sreviewonpages3to5,andtheBusinessReviewonpages8to36.Takentogether,theseprovideafairreviewoftheGroup’sstrategyandbusiness,significantdevelopmentsduringtheyearandadescriptionoftheprincipalrisksanduncertaintiesitfaces.Thedevelopmentandperformanceofthebusinessduringandattheendoftheyeararedescribed,togetherwithmaintrends,factorsandlikelydevelopments,keyperformanceindicators,environmentalandemployeematters,andsocialandcommunityissues.

Results and dividendsTheoperatingprofitbeforeexceptionalitemswas$444m:theGroup’sincomestatementissetoutonpage64oftheGroupfinancialstatements.Aninterimdividendof8.0ppershare(12.8centsperADR)waspaidon1October2010.TheDirectorsarerecommendingafinaldividendof22.0ppershare(35.2centsperADR)tobepaidon3June2011toshareholdersontheRegisterofMembersatthecloseofbusinesson25March2011.Totaldividendsrelatingtotheyearareexpectedtoamountto$101m.

Share capital Duringtheyear,2,496,584newshareswereissuedunderemployeeshareplans.TheCompany’sissuedsharecapitalat31December2010consistedof289,472,651ordinarysharesof1329⁄47peach.Therearenospecialcontrolrightsorrestrictionsontransferattachingtotheseordinaryshares.

IHGoperatesanEmployeeShareOptionTrust(ESOT)forthebenefitofemployeesandformeremployees.TheESOTpurchasessharesinthemarketandreleasesthemtocurrentandformeremployeesinsatisfactionofshareawards.Duringtheyear,theESOTreleased1,492,859sharesandat31December2010itheld1,900,036sharesintheCompany.TheESOTadoptsaprudentapproachtopurchasingshares,usingfundsprovidedbytheGroup,basedonexpectationsoffuturerequirements.

Noawardsorgrantsoversharesweremadeduring2010thatwouldbedilutiveoftheCompany’sordinarysharecapital.CurrentpolicyistosettlethemajorityofawardsorgrantsundertheCompany’sshareplanswithsharespurchasedinthemarket.Anumberofoptionsgrantedupto2005areyettobeexercisedandwillbesettledwiththeissueofnewshares.

TheCompanyhasnotutilisedtheauthoritygivenbyshareholdersatanyofitsAnnualGeneralMeetingstoallotsharesforcashwithoutfirstofferingsuchsharestoexistingshareholders.

Directors’report

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N Directors’report 41

Policy on payment of suppliers InterContinentalHotelsGroupPLCisaholdingcompanyandhasnotradecreditors.Groupcompaniesapplystandardpaymenttermswhichareconsideredreasonable,transparentandconsistentwithprevailingcommercialpractices.Theseareagreedwithsuppliersandpaymentsarecontingentongoodsorservicesbeingsuppliedtotherequiredstandard.

Auditors TheDirectorswhoheldofficeasatthedateofapprovalofthisreportconfirmthattheyhavetakenstepstomakethemselvesawareofrelevantauditinformation.NoneoftheDirectorsisawareofanyrelevantauditinformationwhichhasnotbeendisclosedtotheauditors.

Ernst&YoungLLPhaveexpressedtheirwillingnesstocontinueinofficeasauditorsoftheCompanyandtheirreappointmentwillbeputtomembersattheAnnualGeneralMeeting.

Annual General Meeting TheNoticeconveningtheAnnualGeneralMeetingtobeheldat11.00amonFriday,27May2011iscontainedinacircularsenttoshareholdersatthesametimeasthisReport.

Going concern AnoverviewofthebusinessactivitiesofIHG,includingareviewofthekeybusinessrisksthattheGroupfacesisgivenintheBusinessReviewonpages8to36.InformationontheGroup’streasurymanagementpoliciescanbefoundinnote21totheGroupfinancialstatementsonpages91to95.TheGrouprefinanceditsdebtinMay2008andissueda£250mseven-yearbondinDecember2009whichwasusedtoretiremostofthe$500mbankfacilitythatexpiredinNovember2010.Attheendof2010,theGroupwastradingcomfortablywithinitsbankingcovenantsanddebtfacilities.

TheGroup’sfee-basedmodelandwidegeographicspreadmeansthatitiswellplacedtomanagethroughuncertaintimesandourforecastsandsensitivityprojections,basedonarangeofreasonablypossiblechangesintradingperformance,showthattheGroupshouldbeabletooperatewithinthelevelofitscurrentfacilities.

Aftermakingenquiries,theDirectorshaveareasonableexpectationthattheCompanyandtheGrouphaveadequateresourcestocontinueinoperationalexistencefortheforeseeablefutureand,accordingly,theycontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatements.

ByorderoftheBoard

GeorgeTurnerCompanySecretaryInterContinentalHotelsGroupPLCRegisteredinEngland,Number:5134420

14February2011

SubjecttotheCompany’sArticlesofAssociation,anyrelevantlegislationandtoanydirectionsgivenbyspecialresolution,thebusinessismanagedbytheBoardwhichmayexerciseallthepowersoftheCompany.Theseincludethepowertoallotandtopurchaseshares.TheArticlesofAssociationmayonlybeamendedbyspecialresolutionoftheshareholders.

Duringtheyear,IHGhasmaintainedcoverforitsDirectorsandofficers,andthoseofitssubsidiarycompanies,underadirectors’andofficers’liabilityinsurancepolicy,aspermittedbytheCompaniesAct2006.

TheGrouphasprovidedtoallofitsDirectors,indemnitiesinrespectofcostsofdefendingclaimsagainstthemandthird-partyliabilities.Theseareallqualifyingthird-partyindemnityprovisionsforthepurposesoftheCompaniesAct2006andareallcurrentlyinforce.

TherewerenoindemnityprovisionsrelatingtotheUKpensionplan,forthebenefitoftheDirectorsoftheCompany,inplaceduringtheperiod.

EmployeesIHGdirectlyemployedanaverageof7,858peopleworldwideduring2010,whosecostsarebornebytheGroup.WhenthewholeIHGestateistakenintoaccount(includingstaffworkinginthefranchisedandmanagedhotels)approximately335,000peopleareemployedgloballyacrossIHG’sbrands.

FurtherinformationregardingtheGroup’semploymentpolicies,includingitsobligationsunderequalopportunitieslegislation,itscommitmenttoemployeecommunicationsanditsapproachtowardsstaffdevelopment,canbefoundonpages24to27oftheBusinessReview.

Charitable donationsDuringtheyear,theGroupdonated$649,760(2009$813,900)insupportofcommunityinitiativesandcharitablecauses.Inaddition,IHGemployeesandguestsmadecontributionsduring2010toavarietyofcausesthroughIHGfacilitatedchannels.Takingallthesecontributionsintoaccount,totaldonationsin2010areestimatedat$1,650,000(2009$1,675,000).

Political donationsTheGroupmadenopoliticaldonationsduringtheyearandproposestomaintainitspolicyofnotmakingsuchpayments.

Financial risk managementTheGroup’sfinancialriskmanagementobjectivesandpolicies,includingitsuseoffinancialinstruments,aresetoutonpage23oftheBusinessReviewandinnotes21to23totheGroupfinancialstatementsonpages91to97.

AnumberofIHG’sfinancingarrangementsareterminableuponachangeofcontroloftheCompany.


Inaddition,theAuditCommitteereviews:

• regularreportsfrommanagement,GlobalInternalAuditandtheexternalauditorontheeffectivenessofsystemsforinternalcontrol,financialreportingandriskmanagement;

• thetimelinessandeffectivenessofcorrectiveactiontakenbymanagement;and

• materialfinancialandnon-financialrisks.

TheBoardhasconductedareviewoftheeffectivenessofthesystemofriskmanagementandinternalcontrolduringtheyearended31December2010.Thiscoveredallmaterialcontrols,includingfinancial,operationalandcompliancecontrols,andriskmanagementsystems,andtookintoaccountanymaterialdevelopmentssincetheyearend.

Thereviewwascarriedoutthroughthemonitoringprocesssetoutabove,whichaccordswiththeTurnbullGuidance.Thesystemofriskmanagementandinternalcontrolisdesignedtomanage,ratherthaneliminate,theriskoffailuretoachievebusinessobjectivesanditmustberecognisedthatitcanonlyprovidereasonableandnotabsoluteassuranceagainstmaterialmisstatementorloss.Whilstareasforimprovementhavebeenidentifiedandactionsinitiatedasaresultoftheaboveprocess,nosignificantshortcomingshavebeenidentifiedfromtheannualassessment.

AsIHG’ssharesarealsolistedontheNewYorkStockExchange(NYSE),theCompanyissubjecttotherulesoftheNYSE,USsecuritieslawsandtherulesoftheSecuritiesandExchangeCommission(SEC).TocomplywithourUSobligations,arisingfromtheSarbanes-OxleyAct2002,thekeyfinancialcontrolsacrossallourbusinessunitshavebeenidentifiedandevaluated.ThishasenabledappropriaterepresentationsregardingtheeffectivenessofinternalfinancialcontrolstobemadeintheCompany’sAnnualReportonForm20-F.

Withregardtoinsuranceagainstrisk,whilsttheinsurancemarkethasagainsoftenedinsomeareas,certainrisksremaindifficulttoinsurebothastobreadthandcostofcoverage.Insomecasesexternalinsuranceisnotavailableatallornotataneconomicprice.TheGroupregularlyreviewsboththetypeandamountofexternalinsurancethatitbuys,bearinginmindtheavailabilityofsuchcover,itspriceandthelikelihoodandmagnitudeoftherisksinvolved.Ourapproachtoriskmanagement,keyriskmitigatingactivitiesandtheprincipalriskfactorsthatcouldaffecttheGrouparesetoutintheBusinessReviewonpages31to36.

InMay2010theFinancialReportingCouncilissuedarevisedUKCorporateGovernanceCode(thenewUKCode),buildingonthecontentsofthefamiliarCombinedCodeonCorporateGovernance(theCombinedCode).ThenewUKCodeappliestofinancialyearsbeginningonorafter29June2010.

IHGtakesitscorporategovernanceresponsibilitiesveryseriouslyandaimstoimplementandupholdrobustandresponsiblebusinessprocessesandpoliciesthroughouttheGroup.TheBoardhasthereforealreadyfullyreviewedtheoverallobjectivesandcontentsofthenewUKCode,anticipatesimplementinganumberofimprovedpracticesarisingfromitsrecommendationsandwillreportontheGroup’scompliancewiththenewUKCodeaspartofits2011CorporateGovernancestatement.

InthissectionoftheAnnualReport,wecontinueformallytoreportourcomplianceagainsttheprovisionsoftheCombinedCode,applicableforour2010financialyear.However,wealsoaimtodescribeIHG’sevolvingapproachtowardsgovernance,control,riskmanagementandcompliance,recognisingthechangesexpectedahead.

Combined Code complianceTheBoardconsidersthattheCompanyhascompliedwithalltheprovisionsoftheCombinedCode,availableatwww.frc.org.uk,throughouttheyearended31December2010.

Control environment TheBoardisresponsiblefortheGroup’ssystemofinternalcontrolandriskmanagementandforreviewingitseffectiveness.Inordertodischargethatresponsibility,theBoardhasestablishedtheproceduresnecessarytoapplytheCombinedCode,includingclearoperatingprocedures,linesofresponsibilityanddelegatedauthorities.

TheBoard,theExecutiveCommitteeandtheRegionalOperatingCommitteeshaveestablishedprocesses,aspartofthenormalgoodmanagementofthebusiness,tomonitor:

• strategicplanachievement,throughacomprehensiveseriesofGroupandregionalstrategicreviews;

• financialperformance,withinacomprehensivefinancialplanningandaccountingframework;

• capitalinvestmentperformance,withdetailedappraisalandauthorisationprocesses;and

• riskmanagement(throughanongoingprocess,whichhasbeeninplaceuptothedateoftheaccounts).ThisprovidesassurancethroughreportsfromtheHeadofRiskManagement,theHeadofGlobalInternalAudit,and,asappropriate,frommanagement,thatthesignificantrisksfacedbytheGrouparebeingidentified,evaluatedandappropriatelymanaged,havingregardtothebalanceofrisk,costandopportunity.

Corporategovernance

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DirectorsoftheCompanyduring2010were:

Dateoforiginal Position appointment1

DavidWebster Non-ExecutiveChairman 15.4.03AndrewCosslett ChiefExecutive 3.2.05JamesAbrahamson President,TheAmericas 1.8.10KirkKinsell President,Europe, MiddleEastandAfrica 1.8.10RichardSolomons ChiefFinancialOfficer andHeadofCommercial Development 10.2.03DavidKappler Non-ExecutiveDirectorand SeniorIndependentDirector 21.6.04GrahamAllan Non-ExecutiveDirector 1.1.10RalphKugler Non-ExecutiveDirector 15.4.03JenniferLaing Non-ExecutiveDirector 25.8.05JonathanLinen Non-ExecutiveDirector 1.12.05YingYeh Non-ExecutiveDirector 1.12.07

1 ThecapitalreorganisationoftheGroup,effectiveon27June2005,entailedtheinsertionofanewparentcompanyoftheGroup.AllDirectorsservingatthattimesignednewlettersofappointmenteffectivefromthatdate.ThedatesshownaboverepresenttheoriginaldatesofappointmentofeachoftheDirectorstotheGroup’sparentcompany.

CurrentDirectors’biographicaldetailsaresetoutonpage38ofthisAnnualReport.Theseincludetheirmainexternalcommitments.

Onappointment,Non-ExecutiveDirectorsparticipateininductionprogrammesdesignedtomeettheirindividualneedsandtointroducethemto,andfamiliarisethemwith,theprincipalactivitiesoftheGroupandwithcentralandregionalmanagement.ComprehensiveinductionprogrammesarealsoputinplaceforanyExecutiveDirectorwhomayjointheGroupandtailoredinductionisprovidedfornewlyappointedExecutiveDirectorsfromwithintheGroup,focusingontheirresponsibilitiesasBoardDirectors.SuchprogrammeswereimplementedforJamesAbrahamsonandKirkKinsellontheirappointmentsinAugust2010.Theseinductionprogrammesaccordwithbestpracticeguidelines.

TheupdatingofallDirectors’skillsandknowledgeandunderstandingoftheGroup’soperationsisaprogressiveexercise.ThisisaccomplishedatBoardandstrategymeetings,throughbusinesspresentationsandvisitstohotelsandotherpremisesintheregions,andthroughcontactwithemployees.Goingforward,itisintendedthattheChairmanwillregularlyreviewandagreetraininganddevelopmentneedswitheachDirector.

EightregularBoardmeetingsarescheduledeachyear,includingatwo-daymeetingwhichconsiderstheGroup’sstrategy.Furthermeetingsareheldasneeded.AllDirectorsarebriefedbymeansofcomprehensivepapersinadvanceofandbypresentationsatthesemeetings.

During2010,eightBoardmeetingswereheld.ThesewereattendedbyallDirectors.ShouldanyDirectorbeunabletoattendameeting,heorshewouldbeprovidedwithallthepapersandinformationrelevanttothatmeetingandbeabletodiscussmattersarisingwiththeChairmanandtheChiefExecutive.

Board and Committee structure Tosupporttheprinciplesofgoodcorporategovernance,theBoardandCommitteestructureoperatesassetoutbelow.

The Board TheBoard’scurrentcompositionoftheNon-ExecutiveChairman,fourExecutiveandsixNon-ExecutiveDirectorsmeetstherequirementoftheCombinedCodeforatleasthalftheBoard,excludingtheChairman,tobeindependentNon-ExecutiveDirectors.IntheBoard’sview,allofthecurrentNon-ExecutiveDirectorsareindependent.TheChairmanwasindependentonhisoriginalappointmenttotheBoard.Collectively,theBoardhasanappropriatebalanceofskills,experience,independenceandknowledgetoenableittodischargeitsdutiesandresponsibilitieseffectively.TherolesoftheChairmanandoftheChiefExecutiveareseparateandhavebeendefinedinwritingandapprovedbytheBoard.

TheBoardisresponsibletotheshareholdersforthestrategicdirection,development,performanceandcontroloftheGroup.Itthereforeapprovesstrategicplansandcapitalandrevenuebudgets.ItreviewssignificantinvestmentproposalsandtheperformanceofpastinvestmentsandmaintainsanoverviewandcontroloftheGroup’soperatingandfinancialperformance.ItmonitorstheGroup’soverallsystemofinternalcontrols,riskmanagement,governanceandcomplianceandconsidersregulatorychangesanddevelopmentsinadvance,toensurethatIHGiswell-positionedtomaintaintheGroup’strustedreputationintheseareas.TheBoardalsoensuresthatthenecessaryfinancialandhumanresourcesareinplacefortheGrouptomeetitsobjectives.

TheBoardhasresponsibilityfortheplannedandprogressiverefreshingoftheBoardanditsCommittees.Itestablishesandregularlyreviewsitspolicyinbothoftheseareas.ItistheNominationCommittee’sresponsibilitytoevaluateformallytherequiredskills,knowledgeandexperienceoftheBoard,inastructuredway.

ThescheduleofmatterswhicharereservedfortheBoard’sattentionanddecisionmaybefoundontheCompany’swebsiteatwww.ihgplc.com/investorsundercorporategovernance/mainboardandexecutivecommittee.


Corporategovernancecontinued

Chairman DavidWebsterwasNon-ExecutiveChairmanthroughouttheyear.HeisalsoNon-ExecutiveChairmanofMakinsonCowellLimited,amemberoftheAppealsCommitteeofthePanelonTakeoversandMergers,andaDirectorofTempleBarInvestmentTrustPLC.InMay2010hewasappointedaNon-ExecutiveDirectorofAmadeusITHoldingSA.

TheChairmanhasresponsibilityforensuringtheefficientoperationoftheBoardanditsCommittees,foroverseeingcorporategovernancemattersandensuringtheyareaddressed,forrepresentingtheGroupexternallyandcommunicatingparticularlywithshareholders.WorkingcloselywiththeChiefExecutiveandtheCompanySecretary,healsoensuresthatDirectorsreceiveafull,formalandtailoredinductiontotheGroupanditsbusinessandthatallDirectorsarefullyinformedofrelevantmatters.TheChairmanalsomeetswiththeNon-ExecutiveDirectors,withoutExecutiveDirectorspresent.

Chief Executive AndrewCosslettwasChiefExecutivethroughouttheyear.HehasresponsibilitytorecommendtotheBoardandtoimplementtheGroup’sstrategicobjectives.HeisresponsiblefortheexecutivemanagementoftheGroup.HeisamemberoftheExecutiveCommitteeoftheWorldTravel&TourismCouncilandamemberofthePresident’sCommitteeoftheCBI.Neitherofthesepositionsisremunerated.

Senior Independent Director DavidKapplerwasSeniorIndependentDirectorthroughouttheyear.HisresponsibilitiesincludebeingavailabletoliaisewithshareholderswhohaveissuestoraiseandleadingtheperformanceevaluationoftheChairman.

Non-Executive Directors AteamofexperiencedindependentNon-ExecutiveDirectorsrepresentsastrongsourceofadviceandjudgement.TherearecurrentlysixsuchDirectors,inadditiontotheNon-ExecutiveChairman,eachofwhomhassignificantexternalcommercialexperience.TheNon-ExecutiveDirectors,includingtheChairman,meetduringtheyeartoconsidertheGroup’sbusinessandmanagement.

Non-ExecutiveDirectorshavetheopportunityofcontinuingprofessionaldevelopmentduringtheyearandofgainingfurtherinsightintotheGroup’sbusiness.Inaddition,thetrainingrequirementsoftheNon-ExecutiveDirectorsarekeptunderreview.

Company Secretary AllDirectorshaveaccesstotheadviceandservicesoftheCompanySecretary.HisresponsibilitiesincludeensuringgoodinformationflowstotheBoardanditsCommitteesandbetweenseniormanagementandtheNon-ExecutiveDirectors.HefacilitatestheinductionofDirectors,theregularupdatingandrefreshingoftheirskillsandknowledgeandheassiststheminfulfillingtheirdutiesandresponsibilities.ThroughtheChairman,heisresponsibleforadvisingtheBoardoncorporategovernanceandgenerallyforkeepingtheBoarduptodateonalllegal,regulatoryandotherdevelopments.TheCompanySecretaryactsassecretarytoeachofthemainBoardCommittees.TheappointmentandremovaloftheCompanySecretaryisamatterreservedfortheBoard.

TheCompany’sArticlesofAssociationallowtheDirectorstoauthoriseconflictsandpotentialconflictsofinterest,whereappropriate.TheBoardhasconflictsofinterestasastandingagendaitemateachmeetingandduring2010askedeachoftheDirectorstoidentifyanyconflictsorpotentialconflictsbyreturningaquestionnairetotheCompanySecretary.TheBoardconsideredalltheresponsestothequestionnaireandapprovedpotentialconflictsasitdeemedappropriate.

PerformanceevaluationsoftheBoard,itsmainCommitteesandtheDirectorswereundertakenfor2010.Anindependentexternalfacilitatorassistsintheperformanceevaluationinalternateyears.ThisfacilitatorhasnootherconnectionwithIHG.The2010evaluationwasconductedinternallybytheCompanySecretary.

The2010Boardevaluations,includingthoseoftheCommittees,theChairmanandallDirectors,involvedcompletionofcomprehensivequestionnairesandtheChairmanhavingdiscussionswitheachDirectorindividually.

TheBoardquestionnairecovereditsroleandorganisation,agenda,informationflow,monitoringofGroupperformance,leadershipandcultureandfocusonprioritytasks,includingstrategyandcorporategovernance.

TheBoardreceivedfeedbackthroughapresentationatameetingofthefullBoard,andthefindingswerediscussed.ItwasconcludedthattheBoardwasoperatingeffectivelyandareaswheremoreemphasiscouldbeconsideredwereidentified.

TheworkandeffectivenessduringtheyearoftheAudit,Remuneration,NominationandCorporateResponsibilityCommitteesandtheirrespectiveChairmenwerealsoevaluated.ThesereviewsconcludedthateachCommitteewasoperatinginaneffectivemanner.

WithregardtotheperformanceofindividualDirectors,attentionwasfocusedonlevelsofskill,experience,attendanceandcontribution,abilitytolistenandtoaddresskeyissues.Aspartoftheevaluationprocess,theChairmanheldmeetingswitheachDirectoranditwasconcludedthattheycontinuetomakeaneffectivecontributiontotheworkoftheBoard.AllDirectorsarewellpreparedandinformedconcerningitemstobeconsideredbytheBoard,haveagoodunderstandingoftheGroup’sbusinessandretainastrongcommitmenttotheirroles.

Duringtheyear,theNon-ExecutiveDirectorsmettogetherwithouttheChairmanpresent,underthechairmanshipoftheSeniorIndependentDirector,toappraisetheChairman’sperformance.AlltheNon-ExecutiveDirectors,includingtheChairman,mettoappraisetheChiefExecutive’sperformance.

InaccordancewiththerecommendationsofthenewUKCodeitistheChairman’sintentiontoreportnextyearhowtheprinciplesrelatingtotheroleandeffectivenessoftheBoardhaveappliedduring2011.

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Committees EachCommitteeoftheBoardhaswrittentermsofreferencewhichareapprovedbytheBoardandwhicharesubjecttorevieweveryyear.

AuditCommittee

TheAuditCommitteeischairedbyDavidKapplerwhohassignificantrecentandrelevantfinancialexperienceandistheCommittee’sfinancialexpert.During2010theotherCommitteememberswereGrahamAllan,RalphKuglerandJenniferLaing.TheCommitteeisscheduledtomeetatleastfourtimesayear.TheCommitteemetfivetimesin2010.TheAuditCommittee’sroleisdescribedonpage47.

RemunerationCommittee

TheRemunerationCommittee,chairedbyRalphKugler,alsocomprisesthefollowingNon-ExecutiveDirectors:DavidKappler,JonathanLinenandYingYeh.Itmeetsatleastfourtimesayear.TheCommitteemetfivetimesduring2010.TheRemunerationCommittee’sroleisdescribedonpage49.

NominationCommittee

TheNominationCommitteecomprisestheChairmanoftheBoardandalltheNon-ExecutiveDirectors.ItischairedbytheChairmanoftheBoardexceptwhenmattersrelatingtothispositionaretobediscussed,inwhichcaseitischairedbyanindependentNon-ExecutiveDirector.Itmeetsatleasttwiceayearandadditionalmeetingsareheldasnecessary.TheCommitteemeteighttimesduring2010.

TheCommitteeleadstheprocessforBoardappointmentsandnominatescandidatesforapprovalbytheBoard.Thebalanceofskills,experience,independenceandknowledgeofBoardmembersisevaluatedinordertodefinetherequirementsforaparticularappointment.TheCommitteegenerallyengagesexternalconsultantstoadviseoncandidatesforBoardappointmentsandappointmentsaremadeonmerit,againstobjectivecriteria,includingabilitytocommittime,andwithdueregardforthebenefitsofdiversity,includinggender.TheCommitteealsohasresponsibilityforsuccessionplanningandassistsinidentifyinganddevelopingtheroleoftheSeniorIndependentDirector.

During2010theCommitteediscussedsuccessionplanningforboththeExecutiveCommitteeandtheBoard,consideredandrecommendednewExecutiveDirectorappointments,whichhavenowbeenimplemented,andconsideredtheappointmentofanadditionalNon-ExecutiveDirector.

CorporateResponsibilityCommittee

TheCorporateResponsibilityCommittee,chairedbyJenniferLaing,wasestablishedinFebruary2009.TheotherCommitteememberduring2010wasRalphKugler.GrahamAllanjoinedtheCommitteeinJanuary2011.MeetingsareregularlyattendedbyothermembersoftheBoardandExecutiveCommittee.TheCommitteeisscheduledtomeetatleasttwiceayearandmetthreetimesin2010.TheCorporateResponsibilityCommittee’sroleisdescribedonpage28.

AsummaryofeachDirector’sattendanceattheBoardanditsprincipalCommitteemeetingsduring2010isprovidedinthetablebelow:

Corporate Audit Remuneration Nomination Responsibility Board Committee Committee Committee CommitteeDavidWebster Chairman 8 n/a n/a 8 n/aAndrewCosslett ExecutiveDirector 8 n/a n/a n/a n/aJamesAbrahamson ExecutiveDirector 4* n/a n/a n/a n/aKirkKinsell ExecutiveDirector 4* n/a n/a n/a n/aRichardSolomons ExecutiveDirector 8 n/a n/a n/a n/aGrahamAllan Non-ExecutiveDirector 8 5 n/a 8 n/aDavidKappler Non-ExecutiveDirector 8 5 5 8 n/aRalphKugler Non-ExecutiveDirector 8 5 5 7† 2†

JenniferLaing Non-ExecutiveDirector 8 5 n/a 8 3JonathanLinen Non-ExecutiveDirector 8 n/a 4‡ 8 n/aYingYeh Non-ExecutiveDirector 8 n/a 5 8 n/aTotalmeetingsheld 8 5 5 8 3

* AppointedaDirectoron1August2010:attendedallBoardmeetingsfromthisdateonwards.

† Unabletoattendonemeetingduetooverseastravelcommitment.

‡ Unabletoattendonemeetingduetofamilybereavement.

ExecutiveCommittee

TheExecutiveCommitteeischairedbytheChiefExecutive.ItconsistsoftheExecutiveDirectorsandthemostseniorexecutivesfromtheGroupandusuallymeetsmonthly.ItsroleistoconsiderandmanagearangeofimportantstrategicandbusinessissuesfacingtheGroup.Itisresponsibleformonitoringtheperformanceofthebusiness.ItisauthorisedtoapprovecapitalandrevenueinvestmentwithinlevelsagreedbytheBoard.ItreviewsandrecommendstotheBoardthemostsignificantinvestmentproposals.


Corporategovernancecontinued

Shareholder relations TheGroupreportsformallytoshareholderstwiceayearwhenitshalf-yearandfull-yearresultsareannounced.TheChiefExecutiveandtheChiefFinancialOfficergivepresentationsontheseresultstoinstitutionalinvestors,analystsandthemedia.Telephonedial-infacilitiesandliveaudiowebcastsenableaccesstothesepresentationsforallshareholders.Inaddition,therearetelephoneconferencesafterthereleaseofthefirstandthirdquarterresults.Thedatausedinthesepresentationsandconferencesmaybefoundatwww.ihgplc.com/investorsunderfinanciallibrary.

IHGalsohasaprogrammeofmeetingsthroughouttheyearwithitsmajorinstitutionalshareholders,whichprovidesanopportunitytodiscuss,usingpubliclyavailableinformation,theprogressofthebusiness,itsperformance,plansandobjectives.TheChairman,theSeniorIndependentDirectorandotherNon-ExecutiveDirectorsareavailabletomeetwithmajorshareholderstounderstandtheirissuesandconcernsandtodiscussgovernanceandstrategy.Facilitated,structuredmeetingsareencouragedandanynewDirectorisavailableformeetingswithmajorshareholdersasamatterofcourse.

AformalexternalreviewofshareholderopinionispresentedtotheBoardonanannualbasisandboththeExecutiveCommitteeandtheBoardreceiveregularupdatesonshareholderrelationsactivities.

Additionally,theAnnualGeneralMeeting(AGM)providesausefulinterfacewithprivateshareholders,manyofwhomarealsocustomers.IHGfacilitatesbothpostalandelectronicvotingandallresolutionsarevotedonbywayofapoll.Thisensuresthatallvotesarecountedonthebasisofonevoteforeveryshareheld.AttheAGMitselfshareholdersreceivepresentationsontheCompany’sperformanceandmayaskquestionsoftheBoard,includingtheChairmanandChairmenofthemainBoardCommittees.AllvotescastinrespectofeachresolutionattheAGMarepublishedontheCompany’swebsiteimmediatelyaftertheMeeting.AcomprehensiverangeofinformationabouttheGroupismaintainedandavailabletoshareholdersthroughtheCompany’swebsite.

InformationonsharecapitalandsubstantialshareholdingsintheCompanyissetoutonpage40oftheDirectors’Report.

Further information ThetermsofreferenceofalloftheCommitteesoftheBoardwerereviewedduringtheyearagainstthelatestbestpracticeguidance.AnumberofamendmentsweremadetoupdatetheAudit,RemunerationandNominationCommittees’termsofreference,whichareavailableontheCompany’swebsitewww.ihgplc.com/investorsundercorporategovernance/committeesorfromtheCompanySecretary’sofficeonrequest.

TheArticlesofAssociationoftheCompanyareavailableontheCompany’swebsitewww.ihgplc.com/investorsundercorporategovernance.

AsrequiredbytheSEC,astatementoutliningthedifferencesbetweentheCompany’scorporategovernancepracticesandthosefollowedbyUScompaniesmaybefoundontheCompany’swebsiteatwww.ihgplc.com/investorsundercorporategovernance/NYSEdifferences.

GeorgeTurnerCompanySecretary14February2011

DisclosureCommittee

TheDisclosureCommittee,chairedbytheGroup’sFinancialController,andcomprisingtheCompanySecretaryandotherseniorexecutives,reportstotheChiefExecutive,theChiefFinancialOfficerandtotheAuditCommittee.ItsdutiesincludeensuringthatinformationrequiredtobedisclosedinreportspursuanttoUKandUSaccounting,statutoryorlistingrequirements,fairlyrepresentstheGroup’spositioninallmaterialrespects.

GeneralPurposesCommittee

TheGeneralPurposesCommitteecomprisesanyoneExecutiveCommitteemembertogetherwithaseniorofficerfromanagreedandrestrictedlistofseniorexecutives.ItisalwayschairedbyanExecutiveCommitteemember.Itattendstobusinessofaroutinenatureandtotheadministrationofmatters,theprinciplesofwhichhavebeenagreedpreviouslybytheBoardoranappropriateCommittee.

Appointment, removal and re-election of DirectorsTherulesgoverningtheappointmentandremovalofDirectorsaresetoutintheCompany’sArticlesofAssociation.NewDirectorsaresubjecttoelectionbyshareholdersatthenextAnnualGeneralMeetingfollowingappointment,andtheofficeofaDirectorshallbevacatedinthecircumstancesdefinedinArticle85oftheArticlesofAssociation,egprohibitionbylaw,bankruptcy,absencewithoutleave.

TheCompany’sArticlesofAssociationprovidethatthoseDirectorswhohavenotbeensubjecttoelectionbyshareholderswithinthelastthreeyears,mustretireandstandforre-electionatthenextAnnualGeneralMeeting.

ThenewUKCoderecommendsthatallDirectorsofFTSE350companiessubmitthemselvesforelectionorre-election(asappropriate)byshareholderseveryyear.AlthoughIHGisnotobligedtofollowthisrecommendationuntilitsAnnualGeneralMeetingin2012,theBoardhasdecidedtosubmittheappointmentofallitsDirectorsforshareholderapprovalin2011.Therefore,allDirectorswillretireandofferthemselvesforelectionorre-electionatthenextAnnualGeneralMeeting.

TheNoticeofAnnualGeneralMeeting,senttoshareholdersatthesametimeasthisReport,providesfurtherinformationabouttheDirectorsstandingforelectionandre-election.InformationonExecutiveDirectors’servicecontractsissetoutonpage55.TheNon-ExecutiveChairmanandthesixindependentNon-ExecutiveDirectorshavelettersofappointment.AllDirectors’servicecontractsandlettersofappointmentareavailableforinspectionbyshareholdersinaccordancewithrelevantlegislation.

Independent advice ThereisanagreedprocedurebywhichmembersoftheBoardmaytakeindependentprofessionaladviceinthefurtheranceoftheirdutiesandtheyhaveaccesstotheadviceandservicesoftheCompanySecretary,theCompany’sexternallegaladvisersandtheexternalauditors.

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TheAuditCommitteesupportstheBoardinmeetingitsresponsibilitiesinrelationtotheintegrityoftheGroup’sfinancialstatementsandassociatedannouncements,theadequacyofinternalcontrolandriskmanagementsystemsandtheappointmentandworkoftheinternalandexternalauditors.TheroleoftheAuditCommitteeissummarisedbelowandinfullinitstermsofreference,acopyofwhichisavailableontheCompany’swebsitewww.ihgplc.com/investorsundercorporategovernance/committeesoronrequest.

TheCommittee’scomposition,andtheattendanceofitsmembersin2010,aresetoutonpage45.

TheCommittee’sChairmanandfinancialexpert,DavidKappler,isaCharteredManagementAccountantanduntilApril2004wasChiefFinancialOfficerofCadburySchweppesplc.HealsochairstheAudit,ComplianceandRiskCommitteeofShireplc.

TheCommittee’sprincipalresponsibilitiesareto:

•reviewtheGroup’spublicstatementsoninternalcontrol,riskmanagementandcorporategovernancecompliancepriortotheirconsiderationbytheBoard;

•reviewtheGroup’sprocessesfordetectingandaddressingfraud,misconductandcontrolweaknessesandtoconsidertheresponsetoanysuchoccurrence,includingoverseeingtheprocessenablingtheanonymoussubmissionofconcerns;

•reviewreportsfrommanagement,internalauditandexternalauditconcerningtheeffectivenessofinternalcontrol,financialreportingandriskmanagementprocesses;

•reviewwithmanagementandtheexternalauditoranyfinancialstatementsrequiredunderUKorUSlegislationbeforesubmissiontotheBoard;

•establish,reviewandmaintaintheroleandeffectivenessoftheinternalauditfunction,includingoverseeingtheappointmentoftheHeadofGlobalInternalAudit;

•assumeresponsibilityfortheappointment,compensation,resignation,dismissalandtheoverseeingoftheexternalauditor,includingreviewoftheexternalaudit,itscostandeffectiveness;

•pre-approvenon-auditworktobecarriedoutbytheexternalauditor,andthefeestobepaidforthatwork,alongwiththemonitoringoftheexternalauditor’sindependence;and

•overseetheGroup’sCodeofEthicsandBusinessConductandassociatedproceduresformonitoringadherence.

TheCommitteedischargesitsresponsibilitiesthroughaseriesofAuditCommitteemeetingsduringtheyear,atwhichdetailedreportsarepresentedforreview.TheCommitteecommissionsreports,eitherfromexternaladvisers,theHeadofGlobalInternalAudit,orGroupmanagement,afterconsiderationofthemajorriskstotheGrouporinresponsetodevelopingissues.TheChiefFinancialOfficerattendsitsmeetings,asdotheexternalauditorandtheHeadofGlobalInternalAudit,bothofwhomhavetheopportunitytomeetprivatelywiththeCommittee,intheabsenceofGroupmanagement,attheconclusionofeachmeeting.

Allproposalsfortheprovisionofnon-auditservicesbytheexternalauditorarepre-approvedbytheAuditCommitteeoritsdelegatedmember,theoverridingconsiderationbeingtoensurethattheprovisionofnon-auditservicesdoesnotimpacttheexternalauditor’sindependenceandobjectivity.

Duringtheyear,theCommittee’sdeliberationsincludedthefollowingmatters:

•quarterly,interimandfull-yearfinancialresults.ThesepublicfinancialstatementsarereviewedbytheCommitteeinadvanceoftheirconsiderationbytheBoard.ThereisadequatetimebetweenthisreviewandtheBoard’sapprovaltocompleteanyactionsorfurtherworkrequestedbytheCommittee;

•thescopeandcostoftheexternalaudit;

•anynon-auditworkcarriedoutbytheGroup’sexternalauditor(andtrendsinthenon-auditfees)inaccordancewiththeCommittee’spolicytoensurethesafeguardingofauditindependenceandobjectivity;

•theexternalauditor’squarterly,interimandfull-yearreports;

•theeffectivenessoftheexternalauditorsandconsiderationoftheirobjectivity,independenceandreappointment;

•thescopeoftheannualGlobalInternalAuditplan,GlobalInternalAudit’sapproachtodeliveringassurance,itsresourcingandtheresultsofitsreviews;

•oversightofthefinancialcontrolself-assessmentprocess;

•theeffectivenessoftheGlobalInternalAuditfunctionanditscompliancewithprofessionalstandards;

•anymajorchangesintheGroup’sinternalcontrolsandcontrolenvironment;

•theco-ordinationoftheinternalandexternalauditfunctions;

•theGroup’sframeworkfortheidentificationandcontrolofmajorrisks,andtheresultsoftheGroup’sriskreviewprocess;

•developmentsincorporategovernanceandaccountingstandardsintheUKandtheUS;

•reportsfromtheHeadofRiskManagementontheactivitiesofthatfunction;

•considerationoftheresultsoftheGroup’stangibleassetimpairmentreviewandgoingconcernreview;

•overseeingtheGroup’sSarbanes-OxleyActcompliancework;

•thedisclosurecontrolsandproceduresoperatedbytheGroup,withreferencetoperiodicreportsfromtheChairmanoftheDisclosureCommittee;

•reviewingtheGroup’sapproachtomanagingtaxrisk,includingrelatedpoliciesandinitiatives;

•considerationoftheGroup’stechnologystrategyandrelatedrisks;

•considerationoftheGroup’streasuryobjectivesandpolicies;

•areviewofchangestotheGroup’spolicyondelegationofauthority;

•areviewofthefundingpositionandgovernanceoftheGroup’smainpensionplan;

•periodicreportsonanysignificantincidentsoffraudoranyallegationsmadeviatheGroup’swhistleblowingproceduresandtheeffectivenessoftheseprocedures;

•anymateriallitigationinvolvingtheGroup;and

•considerationoftheeffectivenessoftheAuditCommitteeandthecontinuingappropriatenessofitstermsofreference.

DavidKapplerChairmanoftheAuditCommittee14February2011

AuditCommitteereport


Remunerationin2011

During2010,theRemunerationCommitteespentasignificantamountoftimeconsideringmorestrategicallyrelevantlong-termperformancemeasures,whichalsodriveshareholdervalue.Basedonthisreviewandconsultationwithkeyinstitutionalshareholders,theCommitteeconcludedthatrelativeTSRremainswellalignedwiththegoalofachievingenduringtopquartilereturns;henceTSRwillcontinuetoaccountfor50%oftheLTIPweighting.

However,theCommitteealsoresolvedthattheLTIPwouldbebetteralignedwithstrategybyreplacingEPSwithtwoequallyweightedmeasures–netRoomsgrowthandlike-for-likeRevPARgrowth,bothrelativetomajorcompetitors.

BothnetRoomsgrowthandRevPARunderpinIHG’sstrategytodriveshareholdervalueandhavehighrelevanceformostemployees.NetRoomsgrowthfocusesonthegoaltoincreasesystemsize.Like-for-likeRevPARgrowthreflectstheimportanceofrevenueshare,guestpreferenceandoverallbrandstrength.

Aftertestingtheperformanceconditionssetongrant,theCommitteewillreviewthevestingoutcomesoftheRoomsandRevPARmeasuresagainstanassessmentofearningsandqualityofthefinancialperformanceoftheCompanyovertheperiod.TheCommitteemayreducethenumberofshareswhichvestiftheydeterminesuchanadjustmentisappropriate.IHG’sperformanceandvestingoutcomeswillbefullydisclosedandexplainedintherelevantRemunerationReport.

TheCommitteeisdeterminedthattheoverallincentivepackageisbasedonanappropriatebalanceofperformancemeasures.Earningsgrowthcontinuestoaccountforasignificantpartofexecutiveincentives,duetothe70%weightingofEBITintheAnnualBonusPlan(increasedfrom50%in2009).

Inaddition,thefollowingchangeshavebeenmadetoexecutiveremunerationarrangementsfor2011:

• themaximumbonusopportunitywillrevertfrom175%to200%ofbasesalary;

• theEBITtargetformaximumbonusachievementwillrevertfrom120%to110%ofbudget;and

• themaximumLTIPawardwillbemaintainedat205%ofbasesalary.

Inconclusion,theCommitteebelievesthatthesechangeswillleadtogreatermanagementfocusonthekeydriversofsuperiorperformance,andthattheyarewellalignedwiththegoalofincreasingshareholdingvalue.

RalphKuglerChairmanoftheRemunerationCommittee14February2011

Dear ShareholderIampleasedtopresenttheDirectors’RemunerationReportfor2010.

Theyearstartedwithsignificantuncertaintyandvolatilityintheeconomicenvironment.Earlyindustryforecastsprojecteddecliningrevenueperavailableroom(RevPAR)for2010,including–4%fortheUSmarket.However,bytheendof2010,theUSmarkethadachieved5.5%growthinRevPAR.Marketconditionsimprovedprogressivelythroughouttheyearasconsumerconfidencestrengthened.

ForIHG,globalRevPARgrew6.2%andratesarenowshowingpositivegrowthinallregions.Otherkeyperformanceindicatorsalsoimproved:

2010Keyperformanceindicatorgrowth(perannum) 2010 2009

Earningsbeforeinterestandtax(EBIT) +22.6% –34%Revenueperavailableroom(RevPAR) +6.2% –14.7%Employeeengagement +3% +1%Three-yeartotalshareholderreturn(TSR)* +8% –8.7%Three-yearadjustedearningspershare(EPS)* +9.6% +15.2%

* Annualised.

Basedontheseresults,annualbonusoutcomesinrespectof2010were175%ofbasesalary.TheRemunerationCommitteebelievesthistobeanappropriatereflectionofastrongrecovery,notingthatresultssignificantlyexceededexpectationatthestartoftheyear.

Remunerationin2010

Noannualbonuspaymentsweremadeinrespectof2009.Robustlinksbetweenperformanceandrewardweremaintainedin2010incentiveplandesigns.TargetsweresetatachallenginglevelinrelationtoIHG’sstrategicgoalsandtoexternalanalystconsensus.Inlightofthehighlevelofcontinuinguncertaintyintheindustry,theCommitteeputinplacethefollowingsafeguardsfor2010executiveremuneration:

AnnualBonusPlan(ABP)

• themaximumbonusopportunitywastemporarilycappedat175%ofbasesalary;

• thetargetformaximumbonusachievementwastemporarilyincreasedfrom110%to120%forEBIT;

• theweightingofEBITremainedat70%toensureacontinuedstrongfocusonearnings;and

• asfirstintroducedin2009,nobonusispayableifEBITperformanceislowerthan85%oftarget.

LongTermIncentivePlan(LTIP)

• maximumawardlevelsweremaintainedat205%ofbasesalary(previously270%);and

• EPSandrelativeTSRperformancemeasureswererestoredto50%weightingeach.

Salarieswereincreasedbyanaverageof2.8%followingnoincreasein2009.

Theaboveactionswerealsoappliedto2010remunerationforallotherExecutiveCommitteemembers.

Remunerationreport

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Throughouttheyear,theCommitteewasassistedinitsworkbyPricewaterhouseCoopersLLP(PwC),asindependentconsultantsappointedbytheCommittee.PwCalsosupportmanagementindevelopingandimplementingremunerationproposals.Inaddition,PwCprovidedadditionalservicestoIHG,includingadviceonemployerandemployeetaxcomplianceprocessesforexpatriateemployeesandontaxwithholdingobligationsinrelationtoemployeeshareplans.ThefollowingadviserswereretainedonbehalfoftheCompanyandprovideinformationtotheCommitteeonrelevantmatters:

• TowersWatsonprovidedadviceonrewardstructuresandlevelsapplicableinthemarketsrelevanttotheGroup.TowersWatsondidnotprovideanyotherservicestotheGroupduring2010;and

• LinklatersLLPandFreshfieldsBruckhausDeringerLLPprovidedadvicetotheCommitteeandalsootherlegalservicestotheGroupthroughout2010.

ThetermsofengagementforPwCandTowersWatsonareavailablefromtheCompanySecretary’sofficeonrequest.

Meeting Agendaitemsdiscussed5August2010 •LongTermIncentivePlanmeasures

review,includingalternativeapproachestostructureandtargets

4November2010 •LongTermIncentivePlanmeasuresreviewfor2011

•UKPensionsProvisionreview

15December2010 •LongTermIncentivePlanmeasuresreview

•ReviewofChairmanandNon-ExecutiveDirectorfees

•Termsofreferenceannualreview

CommitteemeetingsarealsoregularlyattendedbythefollowingindividualswhoprovideadvicetotheCommitteeonremunerationproposals:

DavidWebster(ChairmanoftheBoard)

AndrewCosslett(ChiefExecutive)

TracyRobbins(ExecutiveVicePresident,HumanResources&GroupOperationsSupport)

LoriGaytan(SeniorVicePresident,GlobalCompensation&Benefits)

Noneoftheaboveisinattendancewhenhis/herownremunerationisbeingdiscussed.

TheCommittee’sremitissetoutinitstermsofreferencewhichwereupdatedbytheBoardinDecember2010.TheCommitteeagrees,onbehalfoftheBoard,allaspectsoftheremunerationoftheExecutiveDirectorsandtheExecutiveCommitteemembers,andagreesthestrategy,directionandpolicyfortheremunerationofotherseniorexecutiveswhohaveasignificantinfluenceovertheCompany’sabilitytomeetitsstrategicobjectives.

Meeting Agendaitemsdiscussed11February2010 •2009AnnualBonusPlanand2007/2009

LongTermIncentivePlanresultsandawards

•2010AnnualBonusPlanand2010/2012LongTermIncentivePlandesigns

•ExecutiveCommitteeperformanceandsalaryreview

•2010ExecutiveCommitteeKeyPerformanceObjectives(KPOs)

•2009RemunerationReport

23June2010 •IHGPensionPlanarrangements

•Executiveremunerationtrends,includingareviewofmarketpracticeandlatestdevelopments

•Reviewofcorporategovernancedevelopments

•2010BoardappointmentsofJamesAbrahamsonandKirkKinsell

1. The Remuneration CommitteeTheindependentNon-ExecutiveDirectorswhoservedontheCommitteeduringtheyearwereasfollows: Meetingsattended Dateofappointment Role in2010 toCommitteeRalphKugler Chairman 5outof5 1June2008*DavidKappler Member 5outof5 21June2004JonathanLinen Member 4outof5† 1December2005YingYeh Member 5outof5 1December2007

* RalphKuglerwaspreviouslyamemberoftheRemunerationCommitteefrom2003to2005.

† Unabletoattendonemeetingduetofamilybereavement.

TheCommitteemeetsseveraltimesayeartodiscussmattersrelatingtotheoperationoftheremunerationpolicyandemergingmarketpractices.In2010,theCommitteemetfivetimesanddiscussed,amongstothers,thefollowingmatters:

IntroductionThisreportsetsouttheremunerationpolicyfortheCompany’sDirectors,describesitsimplementation,andsetsouttheamountspaidin2010.IthasbeenpreparedbytheRemunerationCommitteeandhasbeenapprovedbytheBoard.ItcomplieswiththeCompaniesAct2006andrelatedregulations.ThisreportwillbeputtoshareholdersforapprovalattheforthcomingAnnualGeneralMeeting.


IHG’sremunerationstructureforseniorexecutivesplacesastrongemphasisonperformance-relatedreward.Theindividualelementsaredesignedtoprovidetheappropriatebalancebetweenfixedremunerationandvariable‘risk’reward,linkedtoboththeperformanceoftheGroupandtheachievementsoftheindividual.Approximatelytwo-thirdsofvariablerewardisdeliveredintheformofshares,toenhancealignmentwithshareholders.

Inreachingitsdecisions,theCommitteetakesintoaccountanumberoffactors,includingtherelationshipbetweenremunerationandrisk,strategicdirectionandaffordability.Performance-relatedmeasuresarechosentoensureastronglinkbetweenrewardandunderlyingfinancialandoperationalperformance.

2. Remuneration policy and structureIHG’soverallremunerationisintendedto:

• attractandretainhigh-qualityexecutivesinanenvironmentwherecompensationisbasedonglobalmarketpractice;

• drivealignedfocusoftheseniorexecutiveteamandrewardtheachievementofstrategicobjectives;

• alignrewardsofexecutiveswithreturnstoshareholders;

• supportequitabletreatmentbetweenmembersofthesameexecutiveteam;and

• facilitateglobalassignmentsandrelocation.

TheCommitteebelievesthatitisimportanttorewardmanagement,includingtheExecutiveDirectors,fortargetsachieved,providedthosetargetsarestretchingandalignedwithshareholders’interests.

SummarisedbelowaretheindividualelementsofremunerationprovidedtoExecutiveDirectorsandotherExecutiveCommitteemembers,includingthepurposeofeachelement.Forvariableincentiveplans,theplanmeasuresandlinktoGroupstrategicobjectivesarealsoincluded:

ElementMaximumvalue Purpose Measuresandlinktostrategicobjectives

BaseSalary(cash)

n/a •Recognisesthemarketvalueoftheroleandtheindividual’sskill,performanceandexperience

n/a

AnnualBonus(one-halfcashandone-halfdeferredshares)

200%ofbasesalary1

•Drivesandrewardsannualperformanceofindividualsandteamsagainstbothfinancialandnon-financialmetrics

•AlignsindividualemployeeobjectiveswiththoseoftheGroup

•Alignsshort-termannualperformancewithlong-termreturnstoshareholders

GroupEBIT

Providesfocusonearningsgrowth,drivenbycoreoperatinginputs,namelyroomsgrowth,RevPAR,royaltyfeesandprofitmargins

IndividualOverallPerformanceRating(OPR)

ProvidesfocusonKPOsandleadershipcompetenciesrelativetotheindividualrole.KPOsarelinkedtostrategicpriorities,notably:

Financialreturns–deliverbudgetandgrowthtargets(EBIT,systemsize,margin,overheads)

Ourpeople–employeeengagementsurveyresults

Guestexperience–deliverbrandperformancetargets(guestsatisfaction,marketshare)

Responsiblebusiness–continuehotelroll-outandadoptionofGreenEngagesustainabilitymanagementsystem

LongTermIncentivePlan(shares)

205%ofbasesalary2

•Drivesandrewardsdeliveryofsustainedlong-termperformanceonmeasuresthatarealignedwiththeinterestsofshareholders

TSRgrowthrelativetoDowJonesWorldHotelsindex

AlignedwithourVisiontobecomeoneoftheworld’sgreatcompaniesbycreatingGreatHotelsGuestsLove

NetRoomsgrowthrelativetomajorcompetitors3

Alignedwith‘Wherewecompete’,supportingourbusinessmodel,segmentandmarketstrategiestogrowsystemsize

Like-for-likeRevPARgrowthrelativetomajorcompetitors3

Alignedwith‘Howwewin’,reflectingthepowerofourbrands,scaleandexperience,andengagedworkforce

Pensionandbenefits(varied)

n/a •Providesacompetitivelevelofbenefits,includingshort-termprotectionandlong-termsavingsopportunities

n/a

1 CombinedAnnualBonusaward(cashandshares)wassubjecttoatemporarymaximumcapof175%ofbasesalaryin2010.

2 Until2009,maximumawardswerenormallygrantedat270%ofsalary.

3 Asoutlinedonpage48,from2011,EPSisreplacedbynetRoomsgrowthandRevPARgrowthintheLTIP.

Remunerationreportcontinued

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ExecutiveDirectors’annualbasesalariesareshowninthetablebelow:

2011 2010Director £ £AndrewCosslett 850,780 826,000JamesAbrahamson 477,117* 469,348KirkKinsell 477,117* 462,875RichardSolomons 540,000 523,000

* MessrsAbrahamsonandKinsellarepaidinUSdollars.JamesAbrahamson’sannualbasesalaryfor2010was$725,000andfor2011is$737,000.KirkKinsell’sannualbasesalaryfor2010was$715,000andfor2011is$737,000.Thesterlingvaluesinthetableabovehavebeencalculatedusinganexchangerateof$1=£0.65.

4. Annual Bonus Plan Structureandoutcomesin2010

AwardsundertheABPrequiretheachievementofchallengingperformancegoalsbeforebonusispayable.Achievementoftargetperformanceresultsinabonusof115%ofsalary.Halfofanybonusearnediscompulsorilydeferredintheformofsharesforthreeyears.NomatchingsharesareawardedbytheCompany.

AwardsundertheABParelinkedtoindividualperformanceandEBIT.IndividualperformanceismeasuredbytheachievementofspecificKPOslinkeddirectlytotheGroup’sstrategicobjectives,aselectionofwhichissetoutinthetableonpage50,andanassessmentagainstleadershipcompetenciesandbehaviours.

Eachyear,specificquantitativetargetsaresetforeachExecutiveDirectorandExecutiveCommitteemember,asrelevanttotheirrole.PerformanceisreviewedattheendofeachyeartodetermineanOPR.TheOPRdetermines30%ofthebonusoutcome.

EBITperformancedetermines70%ofthebonusoutcome.In2010,underthefinancialmeasure(EBIT),thresholdpayoutwas90%oftargetperformance,withmaximumpayoutat120%ormoreoftarget.PayoutforindividualperformancewouldbereducedbyhalfifEBITperformancewasbelowthreshold.Inaddition,noannualbonuswouldbepayableonanymeasureifEBITperformancewaslowerthan85%oftarget.

Themaximumresultforeachmeasureisdoubleitstargetvalue.However,thecombinedpayoutresultofthetwomeasureswascappedat175%ofbasesalary.

The2010EBITresultwas159%,resultinginamaximumcombinedpayoutforallDirectors,asshownbelow:

Measure Keyperformanceindicator Payoutas%ofsalary Target MaxFinancial EBIT(70%) 80.5 161Individual OPR(30%) 34.5 69Total 115 175*Actual2010resultas%ofsalaryAndrewCosslett 175JamesAbrahamson 175KirkKinsell 175RichardSolomons 175

* CombinedEBITandOPRpayoutsubjecttoamaximumof175%ofbasesalary.

ThenormalpolicyforallExecutiveDirectorsandExecutiveCommitteemembersisthattheirtargetperformance-relatedincentiveswillequatetoapproximately70%oftotalannualremuneration(excludingpensionsandbenefits).

ThefollowingtableshowsthesplitoffixedandvariablecompensationfortheExecutiveDirectors,assumingtargetperformanceisachieved(whereapplicable):

Short-term Long-termDirector Fixedpay variablepay variablepayAndrewCosslett 30% 35% 35%JamesAbrahamson 30% 35% 35%KirkKinsell 30% 35% 35%RichardSolomons 30% 35% 35%

TheCommitteealsoreviewsthebalanceoffixedandvariableremunerationprovidedtothewidermanagementpopulationtoensuretheseareappropriate,givenrelativitiestotheExecutiveDirectorsandtomarketpractice.

TheCompanyrecognisesthatitsExecutiveDirectorsmaybeinvitedtobecomeNon-ExecutiveDirectorsofothercompaniesandthatsuchdutiescanbroadenexperienceandknowledge,andbenefittheCompany.ExecutiveDirectorsare,therefore,permittedtoacceptonenon-executiveappointment(inadditiontoanypositionswheretheDirectorisappointedastheGroup’srepresentative),subjecttoBoardapproval,aslongasthisisnot,inthereasonableopinionoftheBoard,likelytoleadtoaconflictofinterest.ExecutiveDirectorsaregenerallyauthorisedtoretainthefeesreceived.CurrentExecutiveDirectorsholdnoNon-ExecutiveDirectorshipsofothercompanies.

3. Base salary and benefitsThesalaryforeachExecutiveDirectorisreviewedannuallyandisbasedonbothindividualperformanceandrelevantcompetitivemarketdata.Basesalaryistheonlyelementofremunerationwhichispensionable.Inaddition,benefitsareprovidedtoExecutiveDirectorsinaccordancewithlocalmarketpractice.

Inassessinglevelsofpayandbenefits,IHGanalysesthoseofferedbydifferentgroupsofcomparatorcompanies.Thesegroupsarechosenhavingregardtoparticipants’:

• size–marketcapitalisation,turnover,profitsandthenumberofpeopleemployed;

• diversityandcomplexityofbusiness;

• geographicalspreadofbusiness;and

• relevancetothehotelindustry.

InternalrelativitiesandGroup-wideremunerationapproachesarealsotakenintoaccount.TheCommitteereviewsaveragebasesalarylevelsandaveragesalaryincreasepercentagesforthebroaderIHGworkforce.



• 25%ofthemaximumawardwillbebasedoncumulativeannualgrowthofnetRooms;and

• 25%ofthemaximumawardwillbebasedoncumulativeannuallike-for-likeRevPARgrowth.

GrowthinbothRoomsandRevPARwillbemeasuredonarelativebasisagainstacomparatorgroupofthemajorglobally-brandedcompetitors:Accor,Choice,Hilton,Hyatt,Marriott,StarwoodandWyndham.Asummaryoftheoperationofthe2011/2013LTIPcycleisshownbelow.

ThresholdvestingwilloccurifIHG’sTSRgrowthisequaltotheDowJonesWorldHotelsindex.MaximumvestingwilloccurifIHG’sTSRgrowthexceedstheindexby8%ormore.

InsettingtheTSRperformancetarget,theCommitteehastakenintoaccountarangeoffactors,includingIHG’sstrategicplans,historicalperformanceoftheindustryandFTSE100marketpractice.

ForbothRoomsgrowthandRevPARmeasures,thresholdvestingwilloccurifIHGperformanceatleastequalstheaverageofthecomparatorgroup.MaximumvestingforeithermeasurewillonlyoccurifIHGisrankedfirstinthecomparatorgroup.Vestingforpointsbetweenthresholdandmaximumwillbecalculatedonastraight-linebasis.

Thevestingrangeandweightingforeachmeasureissetoutinthetablebelow:

Performance Threshold Maximum Weighting%ofawardvesting 20% 100%TSRrelativeto Match Index+ 50%DowJonesWorld index 8%paHotelsindexNetRoomsgrowthrelativeto Average 1stposition 25%comparatorgroupRevPARgrowthrelativeto Average 1stposition 25%comparatorgroup

Aftertestingtheperformanceconditionssetongrant,theCommitteewillreviewthevestingoutcomesoftheRoomsandRevPARmeasuresagainstanassessmentofearningsandqualityofthefinancialperformanceoftheCompanyovertheperiod.TheCommitteemayreducethenumberofshareswhichvestiftheydeterminesuchanadjustmentisappropriate.IHG’sperformanceandvestingoutcomeswillbefullydisclosedandexplainedintherelevantRemunerationReport.

Performancemeasures

Structure

LTIP2011/2013

25% RevPAR

25% Rooms

100%Shares

50%TSR

Structurein2011

Theannualbonusstructureremainslargelyunchangedin2011withawardsundertheABPcontinuingtorequiretheachievementofchallengingEBITgoalsbeforetargetbonusispayable.

Asummaryoftheoperationofthe2011ABPisshownbelow.

For2011,themaximumbonusopportunityfortheExecutiveDirectorswillrevertto200%ofsalary.Underthefinancialmeasure,theEBITthresholdforpayoutremainsat90%oftargetperformance.However,maximumpayoutwillrevertto110%ormoreoftarget.

Aswithpreviousyears,theachievementoftargetperformancewillresultinabonusof115%ofsalary.Halfofanybonusearnedwillbedeferredintheformofsharesforthreeyears.PayoutforindividualperformancewillbereducedbyhalfifEBITperformanceisbelowthreshold,andnoannualbonuswillbepayableonanymeasureifEBITperformanceislowerthan85%oftarget.

5. Long Term Incentive PlanTheLTIPallowsExecutiveDirectorsandeligiblemanagementemployeestoreceiveshareawards,subjecttotheachievementofperformanceconditionssetbytheCommittee,measuredoverathree-yearperiod.Awardsaremadeannuallyand,otherthaninexceptionalcircumstances,willnotexceedthreetimesannualsalaryforExecutiveDirectors.

Structurefor2010/2012cycle

Forthe2010/2012cycleawardsweremadeat205%ofbasesalary.

Theperformanceconditionsforthecycleare:

• IHG’sTSRrelativetotheDowJonesWorldHotelsindex(50%weighting);and

• growthinadjustedEPSovertheperiod(50%weighting).

AwardsundertheLTIPlapseifperformanceconditionsarenotmet–thereisnore-testing.Performanceconditionsforalloutstandingawardsareshowninthetableonpage53.

Structurefor2011/2013cycle

Forthe2011/2013cycle,maximumawardlevelswillremainat205%ofbasesalary.Asoutlinedonpage48,theCommitteebelievesrelativeTSRiswellalignedwiththegoalofachievingenduringtopquartilereturnsandsoTSRwillcontinuetoretaina50%weightingintheLTIP.

Furthermore,theCommitteeconcludedthattheLTIPcanbebetteralignedwithIHG’sstrategybyreplacingEPSwithtwoequallyweightedrelativegrowthmeasures,asfollows:

Performancemeasures

Structure

AnnualBonus

for 2011

70%EBIT

50%Cash30%

Individual

50%DeferredShares

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Outcomesin2010andprogressonallcurrentLTIPcycles

Thespecificvestingperformanceconditionsandpositionasat31December2010forallconditionalLTIPawardsmadebetween2008and2010aresetoutinthefollowingtable:

Performancemeasure

Thresholdperformance

Maximumperformance

Threshold1vesting

Maximum1

vesting WeightingMaximumaward

Outcome/currentposition

2008/2010cycle

TSR Growthequaltotheindex

Growthexceedstheindexby8%ormore

20% 100% 50% 135% Growthoutperformanceof8.0%

EPS Growthof6%pa Growthof16%paormore

20% 100% 50% 135% Growthof9.6%pa

Totalvesting 73.8%ofmaximumaward

2009/2011cycle2



20% 100% 66.7% 102.5% Growthoutperformanceof6.1%


0% 100% 33.3% 102.5% Growthof–1.0%pa

2010/2012cycle3



20% 100% 50% 102.5% Growthoutperformanceof–5.4%


20% 100% 50% 102.5% Growthof26%pa

1 Vestingbetweenthresholdandmaximumoccursonastraight-linebasis.

2 Twoyearsofcyclecompleted.

3 Oneyearofcyclecompleted.

6. Performance graphThroughout2010,theCompanywasamemberoftheFTSE100indexand,forremunerationpurposes,usedaTSRcomparatorgroupoftheDowJonesWorldHotelsindex.Accordingly,theCommitteehasdeterminedthatthesearethemostappropriatemarketindicesagainstwhichtotesttheCompany’sperformance.ThegraphbelowshowstheTSRperformanceofIHGfrom31December2005to31December2010,assumingdividendsarereinvested,comparedwiththeTSRperformanceachievedbytheFTSE100indexandtheDowJonesWorldHotelsindex.Overthefive-yearperiod,IHGoutperformedtheFTSE100indexby39.6%andtheDowJonesWorldHotelsindexby18.5%.

TotalShareholderReturn:InterContinentalHotelsGroupPLCvFTSE100andvDowJonesWorldHotelsindex

Source: DatastreamInterContinental Hotels Group PLC – Total Shareholder Return Index

FTSE 100 – Total Shareholder Return Index

Dow Jones World Hotels – Total Shareholder Return Index

31 Dec 201031 Dec 200931 Dec 200831 Dec 200731 Dec 200631 Dec 2005

250

200

150

100

50

0

Remunerationreport 53



7. Total compensationThechartsbelowshowthetotalvalueofExecutiveDirectorremunerationatmaximumandtargetperformancelevelsandshowtheactual2010outcome:

Notes:

• Actualbasesalaryrepresentsactualsalarypaidduringthefinancialyear.MaximumandTargetbasesalaryisannual.

• Actualannualbonusrepresentsthecashamountpayableinrespectoffinancialyear2010.

• Actualdeferredannualbonussharesrepresentthevalueatvestingforsharesreleasedin2010inrespectofthe2006financialyear.

• ActualLongTermIncentivePlanrepresentsthevalueatvestingforthe2007/2009LTIPcycle.

• TargetLongTermIncentivePlanisassumedtobehalfwaybetweenthresholdandmaximum.

2010 2010

Andrew Cosslett

2010

Max

imum

Targ

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Max

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Targ

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Actu

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Targ

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Actu

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Max

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Targ

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Actu

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2010

Richard Solomons

James Abrahamson

Kirk Kinsell

1,000

2,000

3,000

4,000

5,000

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000)

� Base salary � Annual bonus � Deferred annual bonus shares � Long Term Incentive Plan

Sharecapital

Noawardsorgrantsoversharesweremadeduring2010thatwouldbedilutiveoftheCompany’sordinarysharecapital.CurrentpolicyistosettlethemajorityofawardsorgrantsundertheCompany’sshareplanswithsharespurchasedinthemarket.Anumberofoptionsgrantedupto2005areyettobeexercisedandwillbesettledwiththeissueofnewshares.

ThefollowingtableshowstheguidelineandactualshareholdingsoftheExecutiveDirectors.

Actual Guideline shareholding shareholding at31Dec2010Director as%ofsalary as%ofsalary1

AndrewCosslett 300 747JamesAbrahamson2 200 138KirkKinsell2 200 170RichardSolomons 200 408

1 Basedonsharepriceof1243ppershareasat31December2010.

2 ShareholdingrequirementtookeffectuponappointmenttotheBoardon1August2010.

8. Shareholding policyShareownership

TheCommitteebelievesthatshareownershipbyExecutiveDirectorsandseniorexecutivesstrengthensthelinkbetweentheindividual’spersonalinterestsandthoseoftheshareholders.ExecutiveDirectorsareexpectedtoholdtwicetheirbasesalaryinshares,orthreetimesinthecaseoftheChiefExecutive.Executivesareexpectedtoholdallsharesearned(netofanysharesalesrequiredtomeetpersonaltaxliabilities)untiltheirshareholdingrequirementisachieved.

Executiveshareoptions

From2006,executiveshareoptionshavenotformedpartoftheCompany’sremunerationstructure.Detailsofpriorshareoptiongrantsaregivenonpage60.

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9. Policy regarding pensionsAndrewCosslett,RichardSolomonsandotherseniorUK-basedexecutivesparticipateonthesamebasisintheexecutivesectionoftheregistereddefinedbenefitInterContinentalHotelsUKPensionPlanand,ifappropriate,theInterContinentalExecutiveTop-UpScheme(ICETUS).Thelatterisanunfundedarrangement,butwithappropriatesecurityprovidedviaafixedchargeonahotelasset.Asanalternativetotheseunfundedarrangements,acashallowancemaybetaken.FollowingrecentchangestoUKpensionslegislation,thepensionprovisionisunderreview.ThisPlanisnowclosedtonewentrants.

JamesAbrahamson,KirkKinsellandotherseniorUS-basedexecutivesparticipateinUSretirementbenefitplans.ExecutivesoutsidetheUKandUSparticipateintheInterContinentalHotelsGroupInternationalSavingsandRetirementPlanorotherlocalplans.

10. Non-Executive Directors’ pay policy and structureNon-ExecutiveDirectorsarepaidafeewhichisapprovedbytheBoard,takingintoaccountfeespaidinothercompaniesofasimilarcomplexity.Thesefeesalsoreflectthetimecommitmentandresponsibilitiesoftheroles.Accordingly,higherfeesarepayabletotheSeniorIndependentDirectorwhochairstheAuditCommitteeandtotheChairmenoftheRemunerationandCorporateResponsibilityCommittees,reflectingtheadditionalresponsibilitiesoftheseroles.

Non-ExecutiveDirectors’feelevelsarereviewedannually.Inthefinalquarterof2010anincreaseof2%fortheChairmanand3%fortheNon-ExecutiveDirectorswasagreedbytheBoardtobeeffectivefrom1January2011.Thisincreaseisbroadlyinlinewithanticipatedsalaryincreasesforexecutiveandseniormanagementemployeesacrossthewiderorganisation.

Thefollowingtablesetsoutthechangeinannualfeeratesfrom2010to2011fortheNon-ExecutiveDirectors:

Feesat Feesat 1Jan2011 1Jan2010 Role £ £

DavidWebster Chairman 406,000 398,000DavidKappler SeniorIndependentDirector&ChairmanofAuditCommittee 103,000 99,750RalphKugler ChairmanofRemunerationCommittee 86,500 84,000JenniferLaing ChairmanofCorporateResponsibilityCommittee 76,000 73,500Others Non-ExecutiveDirector 65,000 63,000

11. Service contractsPolicy

TheRemunerationCommittee’spolicyisforExecutiveDirectorstohaverollingcontractswithanoticeperiodof12months.MessrsCosslett,Abrahamson,KinsellandSolomonshaveserviceagreementswithanoticeperiodof12months.Allnewappointmentsareintendedtohave12-monthnoticeperiods.However,onoccasion,tocompleteanexternalrecruitmentsuccessfully,alongerinitialnoticeperiodreducingto12monthsmaybeused,inaccordancewiththeCombinedCode.

Noprovisionsforcompensationforterminationfollowingchangeofcontrol,norforliquidateddamagesofanykind,areincludedinthecurrentDirectors’contracts.IntheeventofanyearlyterminationofanExecutiveDirector’scontract,thepolicyistoseektominimiseanyliability.

Non-ExecutiveDirectorshavelettersofappointment.DavidWebster’sappointmentasNon-ExecutiveChairman,effectivefrom1January2004,issubjecttosixmonths’notice.ThedatesofappointmentoftheotherNon-ExecutiveDirectorsaresetoutonpage43.

AllDirectors’appointmentsandsubsequentreappointmentsaresubjecttoelectionandre-electionbyshareholders.

BiographiesofeachoftheDirectorsandtheirmainresponsibilitiescanbefoundonpage38.

Directors’contracts

Contract effectivedate Noticeperiod

AndrewCosslett 3.02.05 12monthsJamesAbrahamson 1.08.10 12monthsKirkKinsell 1.08.10 12monthsRichardSolomons 15.04.03 12months

MessrsCosslettandSolomonssignedaletterofappointment,effectivefromcompletionoftheJune2005capitalreorganisationoftheGroup,incorporatingthesametermsastheiroriginalserviceagreements.




Fromthispointforward,theinformationprovidedhasbeenauditedbyErnst&YoungLLP.

12. Audited information on Directors’ emolumentsDirectors’remunerationin2010

ThefollowingtablesetsouttheremunerationpaidorpayabletotheDirectorsinrespectoftheyearto31December2010:

Totalemoluments Basesalariesandfees Performancepayments1 Benefits2 excludingpensions

2010 2009 2010 2009 2010 2009 2010 2009 £000 £000 £000 £000 £000 £000 £000 £000

ExecutiveDirectors AndrewCosslett 820 802 723 – 28 25 1,571 827JamesAbrahamson3 196 – 178 – 6 – 380 –KirkKinsell3 193 – 169 – 74 – 436 –RichardSolomons 520 512 458 – 18 19 996 531Non-ExecutiveDirectors DavidWebster 398 390 – – – – 398 390GrahamAllan4 63 – – – – – 63 –DavidKappler 100 95 – – – – 100 95RalphKugler 84 80 – – – – 84 80JenniferLaing5 74 68 – – – – 74 68JonathanLinen 63 60 – – – – 63 60YingYeh 63 60 – – – – 63 60FormerDirectors6 – – – – 1 1 1 1Total 2,574 2,067 1,528 – 127 45 4,229 2,112

1 PerformancepaymentscomprisecashpaymentsinrespectofparticipationintheABPbutexcludebonuspaymentsindeferredshares,detailsofwhicharesetoutintheABPtableonpage58.ForMessrsAbrahamsonandKinsell,thisalsoincludesacashpaymentinlieuofdividendsrelatingtoshareawardsasoutlinedonpage58.

2 Benefitsincorporatealltaxassessablebenefitsarisingfromtheindividual’semployment.Thisincludes,butisnotlimitedto,benefitssuchastheprovisionofafullyexpensedcompanycar,privatehealthcare,financialcounsellingandotherbenefitsasapplicabletotheindividual’sworklocation.ThisincludesthecostofexpatriatebenefitsrelatedtoKirkKinsell’sinternationalassignment.

3 MessrsAbrahamsonandKinsellwereappointedasDirectorson1August2010.Basesalaries,performancepaymentsandbenefitshavebeenpro-ratedfromtheirdateofappointment.JamesAbrahamson’spro-ratedbasesalaryisUS$302,083andKirkKinsell’spro-ratedbasesalaryisUS$297,917.Sterlingvalueshavebeencalculatedusinganexchangerateof$1=£0.65.

4 GrahamAllanwasappointedasaDirectoron1January2010.

5 JenniferLaing’sfeewasincreased,prorata,from1March2009whenshebecameChairmanoftheCorporateResponsibilityCommittee.

6 SirIanProsserretiredasaDirectoron31December2003.However,hehadanongoinghealthcarebenefitof£1,179duringtheyear.

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Directors’pensionbenefits

ThefollowinginformationrelatestothepensionarrangementsprovidedforMessrsCosslettandSolomonsundertheexecutivesectionoftheInterContinentalHotelsUKPensionPlan(theICPlan)andtheunfundedICETUS.

TheexecutivesectionoftheICPlanisafunded,registered,finalsalary,occupationalpensionscheme.ThemainfeaturesapplicabletotheExecutiveDirectorsare:

• anormalpensionageof60;

• pensionaccrualof1/30thoffinalpensionablesalaryforeachyearofpensionableservice;

• lifeassurancecoveroffourtimespensionablesalary;

• pensionspayableintheeventofillhealth;and

• spouses’,partners’anddependants’pensionsondeath.

Whenbenefitswouldotherwiseexceedamember’slifetimeallowanceunderthepost-April2006pensionsregime,thesebenefitsarelimitedintheICPlan,butthebalanceisprovidedinsteadbyICETUS.

JamesAbrahamsonhasretirementbenefitsprovidedviatheSixContinentsHotels,Inc.DeferredCompensationPlan(DCP).KirkKinsellhasretirementbenefitsprovidedviathe401(k)RetirementPlanforemployeesofSixContinentsHotels,Inc.(401(k))andtheDCP.The401(k)isataxqualifiedplanprovidingbenefitsonadefinedcontributionbasis,withthememberandtherelevantcompanybothcontributing.TheDCPisanon-taxqualifiedplan,providingbenefitsonadefinedcontributionbasis,withthememberandtherelevantcompanybothcontributing.

ThefollowingtablesetsoutthepensionbenefitsoftheExecutiveDirectorsinthefinalsalaryplans:

Andrew Richard Cosslett Solomons £ £

Directors’contributionsintheyear1 40,100 25,500Transfervalueofaccruedbenefitsat1January2010 2,574,100 3,934,700Transfervalueofaccruedbenefitsat31December2010 3,438,100 4,708,400Increaseintransfervalueovertheyear,lessDirectors’contributions 823,900 748,200Absoluteincreaseinaccruedpension2(pa) 30,300 21,500Increaseinaccruedpension3(pa) 23,600 10,400Accruedpensionat31December20104(pa) 161,500 239,200Ageat31December2010 55 49

1 ContributionspaidintheyearbytheDirectorsunderthetermsoftheplans.Contributionswere5%offullpensionablesalary.

2 Theabsoluteincreaseinaccruedpensionduringtheyear.

3 Theincreaseinaccruedpensionduringtheyear,excludinganyincreaseforinflation.

4 Accruedpensionisthatwhichwouldbepaidannuallyonretirementat60,basedonserviceto31December2010.

ContributionsmadebyandinrespectofJamesAbrahamsonandKirkKinsellinthedefinedcontributionsplansare*:

James Kirk Abrahamson Kinsell £ £

Directors’contributionstoDCPintheyear 3,900 3,800Directors’contributionsto401(k)intheyear – 3,500CompanycontributiontoDCPintheyear 18,000 22,300Companycontributionto401(k)intheyear – –Ageat31December2010 55 55

* MessrsAbrahamsonandKinsellwereappointedasDirectorson1August2010.Pensioncontributionshavebeenpro-ratedfromtheirdateofappointment.Sterlingvalueshavebeencalculatedusinganexchangerateof$1=£0.65.



AnnualBonusPlandeferredshareawards

AllDirectorsparticipatedintheABPduringtheyearended31December2010.Nomatchingsharesareprovidedonawards.Directors’pre-taxshareinterestsduringtheyearwereasfollows:

Value Financial based yearon ABP onshare which ABP ABP Market shares Market ABP priceof performance awards awards priceper vested priceper Valueat awards Planned 1243pat isbased heldat during Award shareat during Vesting shareat vesting heldat vesting 31Dec2010Directors foraward* 1Jan2010 theyear date award theyear date vesting £ 31Dec2010 date £

AndrewCosslett 2006 55,870 26.2.07 1235p 55,870 26.2.10 914.66p 511,021 2007 71,287 25.2.08 819.67p 71,287 25.2.11 886,097 2008 104,652 23.2.09 472.67p 104,652 23.2.121,300,824 2009 – – – –Total 231,809 175,939 2,186,921JamesAbrahamson 2009 – – – –Total – – –KirkKinsell 2006 13,610 26.2.07 1235p 13,610 26.2.10 914.66p 124,485 2007 19,731 25.2.08 819.67p 19,731 25.2.11 245,256 2008 41,427 23.2.09 472.67p 41,427 23.2.12 514,938 2009 – – – –Total 74,768 61,158 760,194RichardSolomons 2006 35,757 26.2.07 1235p 35,757 26.2.10 914.66p 327,055 2007 45,634 25.2.08 819.67p 45,634 25.2.11 567,231 2008 66,549 23.2.09 472.67p 66,549 23.2.12 827,204 2009 – – – –Total 147,940 112,183 1,394,435

* Forfinancialyear2006,theawardwasbasedonEPSandEBITmeasuresandtotalsharesheldincludematchingshares.Forfinancialyear2007,theawardwasbasedonGroupEBITandnetannualroomsadditionsmeasuresandtotalsharesheldincludematchingshares.Forfinancialyear2008,theawardwasbasedonGroupEBIT,netannualroomsadditionsandindividualperformancemeasures.Nomatchingshareswereawarded.Forfinancialyear2009,nobonuswaspaid.

Specialshareaward

JamesAbrahamsonreceivedaspecialshareawardwhichvestsoverthreeyearsaspartofhisrecruitmenttermsin2009.Vestingeachyearissubjecttocontinuedservice.Thedetailsaresetoutbelow:

Value based onshare Market Shares Market priceof Awards priceper vested priceper Valueat Awards Planned 1243pat heldat Award shareat during Vesting shareat vesting heldat vesting 31Dec2010Director 1Jan2010 date award theyear date vesting £ 31Dec2010 date £

JamesAbrahamson 45,000 23.2.09 454.25p 45,000 17.2.10 900.07p 405,032 45,000 23.2.09 454.25p 45,000 16.2.11 559,350 45,000 23.2.09 454.25p 45,000 15.2.12 559,350Total 135,000 90,000 1,118,700


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LongTermIncentivePlanawards

Theawardsmadeinrespectofcyclesendingon31December2009,2010,2011and2012andthemaximumpre-taxnumberofordinarysharesdueifperformancetargetsareachievedinfullaresetoutinthetablebelow.Inrespectofthecycleending31December2009,46%oftheawardvestedon17February2010.Inrespectofthecycleendingon31December2010,theCompanyoutperformedtheDowJonesWorldHotelsindexinTSRby8percentagepointsandachieved9.6%perannumadjustedEPSgrowth.Accordingly,73.8%oftheawardwillveston16February2011.

Maximum Endofyear Maximum value towhich Maximum LTIP LTIP Maximum basedon performance LTIP shares Market shares Market LTIP shareprice isbased awards awarded priceper vested priceper Valueat awards of1243pat foraward heldat during Award shareat during shareat vesting Vesting heldat 31Dec2010Directors (31Dec)1 1Jan2010 theyear date award theyear vesting £ date 31Dec2010 £

AndrewCosslett 2009 159,506 2.4.07 1256p 73,3722 901.5p 661,449 17.2.10 2010 253,559 19.5.08 854p 16.2.11 253,559 3,151,738 2011 272,201 3.4.09 604p 15.2.12 272,201 3,383,458 2012 160,807 8.4.10 1053p 13.2.13 160,807 1,998,831Total 685,266 160,807 686,5678,534,027JamesAbrahamson 2009 82,486 23.2.09 457p 37,9432 901.5p 342,056 17.2.10 2010 164,973 23.2.09 457p 16.2.11 164,973 2,050,614 2011 138,730 3.4.09 604p 15.2.12 138,730 1,724,414 2012 79,008 8.4.10 1053p 13.2.13 79,008 982,069Total 386,189 79,008 382,711 4,757,097KirkKinsell 2009 30,156 2.4.07 1256p 13,8712 901.5p 125,047 17.2.10 2009 16,987 12.11.07 961.5p 7,8142 901.5p 70,443 17.2.10 2010 84,397 19.5.08 854p 16.2.11 84,397 1,049,055 2011 132,256 3.4.09 604p 15.2.12 132,256 1,643,942 2012 75,411 8.4.10 1053p 13.2.13 75,411 937,359Total 263,796 75,411 292,0643,630,356RichardSolomons 2009 102,109 2.4.07 1256p 46,9702 901.5p 423,435 17.2.10 2010 161,241 19.5.08 854p 16.2.11 161,241 2,004,226 2011 173,096 3.4.09 604p 15.2.12 173,096 2,151,583 2012 101,818 8.4.10 1053p 13.2.13 101,818 1,265,598Total 436,446 101,818 436,155 5,421,407

1 Alldetailsofperformanceconditionsinrelationtotheawardsmadeinrespectofcyclesendingon31December2010,2011and2012areprovidedonpage53.

2 Thisawardwasbasedonperformanceto31December2009.PerformancewasmeasuredagainstboththeCompany’sTSRrelativetoagroupofeightothercomparatorcompaniesandthecumulativeannualgrowthrate(CAGR)inadjustedEPSovertheperformanceperiod.Thenumberofsharesreleasedwasdeterminedaccordingtoa)wheretheCompanyfinishedintheTSRcomparatorgroup,with50%oftheawardbeingreleasedforfirstpositionand10%oftheawardbeingreleasedformedianposition;andb)thecumulativeannualgrowthinadjustedEPS,with50%oftheawardbeingreleasedforgrowthof20%perannumormoreand10%oftheawardbeingreleasedforgrowthof10%perannum.TheCompanyfinishedinfourthpositionintheTSRgroupandachieved15.2%perannumadjustedEPSgrowth.Accordingly,46%oftheawardvestedon17February2010.



Shareoptions

Between2003and2005,grantsofoptionsweremadeundertheIHGExecutiveShareOptionPlan.Noexecutiveshareoptionshavebeengrantedsincethen.

Ordinarysharesunderoption

Options Lapsed Exercised Options Weighted heldat during during heldat averageoption OptionDirectors 1Jan2010 theyear theyear 31Dec2010 price price

KirkKinsell 77,1101 77,1101 494.17p 32,0402 32,0402 619.83pTotal 109,150 109,150 531.06pRichardSolomons 230,3201 230,3201 494.17p 100,5502 100,5502 619.83pTotal 330,870 330,870 532.36p

1 Executiveshareoptionsgrantedin2004becameexercisableinApril2007uptoApril2014.

2 Executiveshareoptionsgrantedin2005becameexercisableinApril2008uptoApril2015.

Optionpricesduringtheyearrangedfrom494.17pto619.83pperIHGshare.Theclosingmarketvaluesharepriceon31December2010was1243pandtherangeduringtheyearwas887pto1266ppershare.

NoDirectorexercisedoptionsduringtheyear;thereforethereisnodisclosablegainbyDirectorsinaggregatefortheyearended31December2010(2009£437,732).

ThisreportwasapprovedbytheBoardon14February2011.

RalphKuglerChairmanoftheRemunerationCommittee


theoard,enior b s management and their responsibilities · from cadbury schweppes plc where he was...

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