Annual Report • Mar 7, 2022
Annual Report
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I t sha pes our c ul t ur e , br ing s ou r br ands t o l i f e an d r epr esen ts a com mi t men t t o ma k e a di er ence t o ou r peopl e, g uest s an d com mu ni t ies, a nd pr o t ect t he w or ld ar ou nd us . List enin g a nd en ga ging with o ur st ak eholders, t oget her we w or k t o w ar ds common goals th a t hel p ensu r e we c r ea t e shar ed value f or all. F ron t co ver middle image: Ho lid ay Inn E xpre ss ® & Suite s Qu ee nstown , New Ze ala nd Hote l Ind igo ® Ade lai de Ma rkets, Au stral ia Strategic Rep ort 2 20 21 in r eview 4 Ch air ’s state me nt 6 Chief Executiv e Oicer’s re view 8 In du st ry over vi ew 10 Ou r bu sin es s mo de l 14 T ren ds s ha pin g our i nd ust ry 16 Ou r str ateg y 32 T as k Forc e on cl ima te- re late d i nan ci al di sc lo sur es ( TCFD) 36 How I HG do e s bu sin es s 40 Our r isk ma nagement 48 Viability sta tement 50 Key per form an ce i ndi cato rs (K PIs) 54 Performance 54 Chief Financ ial Oice r’s review 55 G roup 63 Americas 66 Euro pe, M iddl e Ea st, A sia & Af ric a (EM EA A) 69 Gre ater C hin a 72 Ce ntral 73 Key p er form anc e me asu res (in clu ding N on - GA AP) Gove rn an ce 80 Cha ir’s over view 82 Our Bo ard o f Dir ec tors 86 Ou r Exec uti ve Co mmi tte e 88 G overna nc e str uct ure 89 Bo ard a ctiv itie s 89 M atte rs di sc uss ed i n 202 1 an d Se ctio n 172 St atem ent 92 Our sh areh ol der s and inve sto rs 93 Director appointments and induction 94 Bo ard d evelo pme nt an d ee ctive ne ss eva luat ion 95 Au dit C om mit tee Re po rt 10 0 Res po ns ibl e Bu si ne ss C om mit tee Re po rt 102 Nomination Committ ee Report 104 Directors’ Remunerati on Report 126 Stateme nt of complian ce Group Financial Stat ements 130 Statement of Direc tors’ Respon sibilities 131 In dep en de nt Au dito r’s UK Rep or t 138 Independent A udit or’ s US R eport 142 Group Financial Statements 149 Accounti ng policies 157 New accounting standards 15 8 Note s to t he G rou p Fin anc ial S tat em ent s Parent Company Financial Statements 208 Parent Company Financial Statements 208 Parent Company stat ement of inancial position 20 9 Pare nt C omp any st ate me nt of c han ge s in e qui ty 210 Note s to th e Par ent C om pa ny Fina nc ial S tate me nt s Addition al Information 218 Oth er in anc ial i nfo rmat ion 226 Directors’ Report 231 Group inf ormation 243 Shareholder informat ion 250 Exhibits 251 Forward-looking sta tements 252 Form 20 F cro ss -r efer en ce gu id e 255 Glossar y 257 U sef ul inf orm atio n The S trate gic R ep or t on pa ge s 2 to 7 7 was a pprove d by the B oa rd on 2 1 Febr uar y 20 2 2. Nic ol ett e Hen frey , Co mp any Se cret ar y Ou r pr e senc e IHG ® Hot els & R esorts is a g loba l hospi ta li ty compan y , wit h 17 ho t el brands and one of t he indus t ry ’ s lar gest l o y al ty pr ogr ammes . W e hav e nearl y 6,000 open hot els in m or e th an 100 cou nt ries and a f ur t her 1 ,800 hot els in our de velopment pi peline . See p age s 17 an d 18 Ou r f ocus W e focu s on o erin g gues ts g r eat cho ice , r ew ar ds and e xperi ences, whil e cont inuou sly de v eloping and inv esting in our pe op le, o perations, sustaina bility , t echnolog y and desi gn , in or der t o dri ve dema nd, perf orm ance a nd r etu rn f or our hot el owner s. See p age s 19 to 3 5 Ou r busi ness model W e mainl y fr anch ise an d mana ge ho t els, wh ich al lo ws us t o foc us on in cr easing f ee r e v enues a nd f e e mar gins, w it h limi t ed r equi r ement s f or capit al. L ed b y our s tr a t egic pr ior it ies, we g r ow ou r busi ness b y ensuri ng our bra nds meet consumer demand and gener at e str ong re tu rns f or hot el owners. See p age s 10 to 13 Our k ey stak eholde rs Shareholders and in vest ors Hot el ow ners Hotel guests Our people Com munity Suppliers See p age s 20 to 28 , 39, 9 2, 10 1, 107, 108, 11 2 to 114 for inf orma tion a bou t how we have e nga ge d with o ur st akeh old ers d urin g 202 1. 1 IHG | Annua l Repo rt a nd Form 20 F 202 1 Contents Tho ug h t he pa ndem ic a ga in t est ed our i ndus t ry , ou r r esil ien t bus iness m odel an d people ’ s desi r e f or tr a vel ha ve shone st r ongly . Alongside a f ocus on o eri ng gr ea t gues t ex p er iences and e xpert ow ner suppor t, we ar e bui lding a st r onger , mor e ag il e comp an y , i n v est ing i n ou r br ands , sus tai na ble opera tions and business, and looking t o fut ur e gr owth wi th coni dence. Financial performance G l o b a l Re v PA R +4 6 .0 % 2020: (52.5)% Ne t syste m siz e grow th - 0. 6 % 2020: +0.3% Signings ( rooms) 6 8 , 8 70 2020: 56, 146 T ot al gross revenue in IH G’s Sys tem a $ 1 9. 4 bn 2020: $13.5bn T ot al revenue $ 2 , 9 07 m 2020: $2,394m Rev e nue f rom reportable segments a $ 1, 3 9 0 m 2020: $992m Ope rating proit/(los s) $ 4 94 m 2020: $(153)m Ope rating proit from reportable segments a $ 53 4 m 2020: $219m Basic EPS b 14 5 . 4 � 2020: (142.9) a U se of N on - GA AP m ea sure s: in a dd itio n to pe r form an ce me as ure s dire ct ly ob se rv abl e in th e Gro up Fi nan ci al St atem en ts (I FRS m ea su res), ot her in anc ial m ea su res (de sc rib ed a s No n- GA A P) are pre se nte d tha t are u se d inte rna lly by m an age me nt as key m ea sur es to a ss es s pe rf orm anc e. N on - GA AP me as ure s are e ithe r no t de in ed und er I FR S or are a dju ste d IF RS igu res . Fur the r exp lan atio n in re lati on to t hes e me as ure s ca n be fo und o n pa ge s 73 to 7 7 an d rec on cili ati ons to I FR S i gure s, w her e they h ave be en a dju ste d, ar e on pa ge s 21 8 to 2 23. b Adjusted EPS a 147.0¢ (+370 %); 202 0: 3 1. 3¢ Regional growth ( number of rooms) Ameri cas EMEA A Gre ate r Chi na Openings 1 5 ,7 3 9 2020: 16,7 46 Openings 1 0 ,1 6 2 2020: 11,288 Openings 1 8 ,0 5 7 2020: 11,358 Signings 1 7, 6 4 7 2020: 14,039 Signings 2 0 , 3 76 2020: 13,903 Signings 3 0 , 8 47 2020: 28,204 See p age 6 3 See p age 6 6 Se e pa ge 6 9 2 021 i n r e v ie w Bui ldi ng a st r onger busi ness Shar e holders and in v est ors O ur re sil ient b us ine s s mo del a nd foc us on ow ne rs, c oup le d with inc rea si ng trave l dem an d, le d to imp roved tr adi ng in 2 021 . We have focu se d on ope rating efi ciently and s ustain ably , whil e inves ting i n futu re grow th . • Gl oba l RevPAR recovere d to 70% of 201 9 level s • 5.0 % gross sy stem grow th; ne t (0.6%) after highe r removal s in par t du e to Holi day Inn and C rowne Pla za revi ew • Sig nings up 2 3% yea r - o n-year w ith devel opme nt acti vit y improvin g • Delivered $ 75m sustaina ble costs sa vings, while i nvesting fo r future grow th • Fee m argin of 4 9.6% , rec overed to 4 .5% pts below 2019 • N et ca sh from op erati ng acti vitie s of $6 36 m, adju sted f ree c ash low a of $5 71m (2020: $29m) • Leverage rati o subs tanti ally red uce d, with n et debt : adju sted EB IT DA at 3.0x (20 20: 7 .7x) • Fin al divi den d of 85 .9 ¢ prop ose d for 20 21 S ee inf orma tion a bou t our s hare ho lde rs an d inves tor s on pa ge 9 2 and o ur KP Is o n pag es 50 to 5 3. Our guests W e are fo cu se d on en su ring the services, technology and expe rie nce s we provi de m eet ev olv ing e xpectations, increase consumer pre fere nc e and l oyalty, and drive b ook ing s. • De livered targeted stay campaigns, loyalty promot ions a nd progr amme i mpro vements • Imp roveme nt in Gue st S atisfa ction I ndex (GSI), ac hievin g sco res of 10 0 or b et ter for ea ch bra nd and o utpe rfo rming p ee rs • C ontinu ed execu tion of I HG Way of Cl ean and I HG C lea n Promis e in our h otels • Enh anc ed M eet wi th Co ni den ce oe r to su pport increasing business demand • AI te chno log y introduc ed to an swer an d route cu stome r call s, rais ing s atisfa ction scores and a verage daily rat es on bookings • Ro om inventor y as se ssm ent s comp lete d in 5,3 00 h otels in s uppo rt o f attrib ute pric ing and a m ore tail ored b oo king exp erie nce • Up date s to gues t room an d pub lic sp ace des igns to e nhan ce st ay experi enc e S ee inf orma tion a bou t our g ues ts o n pag es 1 9 to 2 2 and gu es t love K PI on p ag e 52. Strate gic Re po rt 2 IHG | Annua l Repo rt a nd Form 20 F 202 1 Our p eople A s our i ndu st ry re cover s an d dail y life evolve s from t he p and em ic, we have foc us ed o n how we ca n ef fec tively s up por t ou r pe opl e and provi de th e right r es ourc es a nd wo rking envir onm ent to ke ep ever yon e fee ling en gag ed a nd at t hei r be st . • Ove rall em ployee e ngag eme nt at 8 5%, pla cing I HG a s a Kinc entric G lob al Best Emplo yer • Inclusion Index la unched to t rack di versity , equ ity & in clus ion (D E&I) p rogres s • C orpo rate emp loyees c omp lete d 10,00 0 hours of conscious inclusion t raining • Evolved h ealth, s afet y and we llbe ing guid ance a t hotel an d corp orate leve ls • Sup po rte d emp loyees w ith shif t to hybrid wor king thro ugh guid anc e, o ice enh ance me nts and fe ed back fo rums • Recharge da ys f or corpora te empl oy ees • Resume d employee annual salary increa se and bonus • Emp loyee Re sourc e Group s (ERG s) expan de d to help fos ter our d ivers e and inclusive culture • Increased focus on colleague dev elopment and rete ntion, an d tal ent at tractio n S ee inf orma tion a bou t our p eo ple o n pa ge s 23 to 26 , and o ur emp loye e eng ag eme nt KP I on p age 5 3. Ho t el o wner s O ur own ers c ho os e to work wit h IHG b as ed o n the t rus t they have in ou r bra nd s and o ur tr ack rec ord i n del iverin g retu rns . We conti nue to en han ce o ur of fer a cro ss t he ho tel lifec ycle, alongside ex ploring new gro wth opportunities and collabora ting w ith the industry and gov e rnments to support a str ong re cove ry fo r the s ec tor . • C ontinu ed review a nd evoluti on of bra nd standards to improv e operational e iciency • E xpa nde d hotel p rocure ment s oluti ons to com bat sup ply ch ain ch allen ges a nd risin g cos ts; la unch ed ne w hiring too ls and su ppo rt to re cruit a nd retai n tale nt • Increased commercial support thr ough promot ions, t ools and r ev enue management, alongside i ncreased mark eti ng as pa rt of master brand a pproach • Lower ing of bui ld co sts to en hanc e owne r returns o n investm ent • C ompl eted revi ew of Ho liday Inn a nd Crown e Plaz a es tate to protec t qual ity and b rand p erce ption • Co llaboration with gov ernments and indu str y to supp or t rec over y • E xpanded p ort folio with launch of Luxur y & Life st yle b rand V ignet te Co llec tion; s ix hotel s alread y se cured Se e info rmati on ab out o ur ho tel own er s on p age s 17 to 2 1, and o ur ne t room s sup ply, sig ning s, gro ss reve nue a nd e nterp ris e co ntrib utio n KPI s on p ag es 50 a nd 51. Plan et A s the wo rld b ec ome s in cre as ingl y aware of t he th rea t of cli mate ch ang e, it ’s critica l th at we ope rate responsibly and sustainably . We are w orking to clear plans and targets alongside our owne rs to e ns ure we gr ow in a way that min imis e s our im pa ct on t he worl d arou nd us. • Jo ine d UN ’s Race to Zero an d upgr ade d our s cien ce -b ase d ta rget (SBT ) to he lp limit glob al warmin g to 1.5° C • B ega n glob al rollo ut of autom ated c apture of hotel u tilit y data • B athroom b ulk am enitie s sol ution s sec ured for all brands and mark ets, reducing plastic usage • D evelop ed H otel En ergy Re ducti on Op por tuniti es (H ERO) tool to he lp hotel s targ et ene rgy , c arb on and wate r redu ction s • Continued collabora tion w ith W ater .org, Allian ce for Wate r Stewards hip and Water Resilie nce Co alition • C ontinu ed ma pping r isks an d opp or tunitie s in line w ith guid ance o f T a sk Force o n Climate-relat ed Financial Disclosures S ee p age s 29, 32 to 3 5, 2 2 9 and 2 30 for o ur pla net , TCFD a nd gre en hou se g as em is sio ns dis clo sure s, a nd ou r car bon fo otp rint K PI on p age 5 3. Our c ommunities and supplie rs W e’ re pro ud to b e a par t of thousands of communities an d are co mm itte d to en su ring we op erate a nd c oll abo rate in ways t hat positiv ely impact ot hers, includi ng w orking with s up plie rs t hat s har e our val ue s. • D uring Gi ving for G oo d month , more than 4 0,00 0 coll eag ues d edic ated ove r 260,0 00 ho urs to ma king a p ositi ve die renc e to more than 3 50,0 00 p eop le • Sup po rte d chari ties gl obal ly providin g aid to thos e in ne ed foll owing na tural dis as ters • L aunc hed n ew vir tual l earni ng plat form IH G Skill s Aca demy to provid e pe opl e with free a cce ss to s kills an d trainin g • Refreshed ou r responsibl e procu rement criteri a for pros pe ctive su pplie rs to sup por t our supply chain integrity S ee p age s 27, 28 and 39 fo r info rmati on about our communities and suppliers, and our I HG ® Ac ad emy K PI on p age 5 3. Inte rcon tine nta l Mal dive s Ma amu nag au Re sor t Inte rcon tine nta l Mal dive s Ma amu nag au Re sor t – Ma nta Trust an d Oc ea n Co nse r vatio n Prog ram – Ma nta Trust an d Oc ea n Co nse r vatio n Prog ram Inte rC onti nen tal ® Ma ldiv es M aam una gau Re so rt – Manta T rus t and Ocean Conser vation Pr ogramme 3 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 202 1 in review pro it yet to fully re cover to pre - pand emic 201 9 level s. A key factor in th is improve d pe rfor manc e has b ee n a hei ghtene d com mitme nt to supp or t our own ers , listen to their n ee ds, an d work ha nd in han d acro ss team s to resp ond wi th agilit y and ex per tis e to chall eng es ran ging from re stric tions impa cting d ema nd, to the ne ed to evo lve brand standa rds and meet staing and supply cha in pr essures as demand r etur ns. Wheth er op erati onal o r com merci al, the se acti ons c an stren gthe n both sh or t and lon g-term p er form anc e, and as we b uild owne r relatio nshi ps and l ook to a cce ler ate net ro oms grow th, we c ontinue to inve st in strate gic pri oritie s that will s trength en asp ec ts of ou r entire oe r . T hes e incl ude redu cing c ost s to build, o pen a nd op erate hotel s acros s our b rand s, del ivering l oyalty and di gital en hancements t hat im pro ve t he guest experienc e and drive per formance, and inves ting in th e quali ty , depth a nd brea dth of ou r por t folio, suc h as the l aunc h of the V ignet te™ Col lec tion bra nd in Aug ust. Acc ele rated by the p and emic, re cog nisin g that ou r stakeholders increasingly measure pro it, grow th an d suc ces s in rel ation to how com pani es op erate re spo nsib ly acro ss the environmental, social and governance (ESG) age nda, th e com mitme nts se t out in ou r Jou rney to T o morrow p lan cre ate a roadm ap for po sitive c hang e over the nex t de ca de. Duri ng the yea r , imp or tant p rogre ss was m ade on seve ral front s, incl uding i nvestme nts in new train ing and p rogra mme s that sup por t a diver se and i nclu sive cultu re, thoug htful guid ance a round a s hif t to hybrid work ing, clo se co llab oratio n with ch aritie s resp ondi ng to natural di sa sters , and th e formulati on of a strate gy to mee t an upg rade d sci enc e -ba se d carb on re ducti on ta rget acro ss o ur hote l es tate . C hair ’ s st at e m e nt H aving e nte red 2 021 o n the b ac k of th e toug he st ti me th e ho spi tali ty ind us tr y has eve r know n, th is year ha s be en on e of ho pe, r ec overy, new challenges and opportunity . IHG’ s global sc ale m ea ns we have exp erie nc ed a nd le arne d from t he evolv ing n ature o f the pan de mic o n a dai ly ba sis , ma rket by mark et, and wi th clarity and le xibility we have st ayed focu se d on t he st rate gic bu sin es s ne ed s re quir ed to d elive r long-term success for all stakeholders. Ce ntral to this i s having a m eanin gful, relevant p urpo se an d a well -roun ded a nd ee ctive str ategy , and thi s year refre she d vers ions o f both have b een e mbe dd ed into the bu sine ss , promoti ng greate r priori tisat ion and understanding arou nd what i s coll ecti vely req uired to su cc ee d in a co mpeti tive marketpl ace . Our p urpo se of T rue H osp itali ty for G oo d rec ogni ses th e impo rt anc e of us ing our bus ine ss to not o nly ca re for thos e we interac t with, b ut als o to make a pos itive die renc e to our co mmuniti es an d the world aro und us . Our s trategy, still ver y much c entre d on ac hieving i ndus try- le ading net ro oms grow th, pl ace s a sh arpe r focu s on our b rand s and dig ital inve stme nts, our gu est a nd owne r oer, and ens uring we grow in the rig ht way for our pe opl e, com munitie s and p lan et. T aking a ll we have lea rnt as a co mpa ny from the pan dem ic, our b ehavio urs su ppo rt th e ways of workin g we be lieve are vit al to suc ces sfu l ope ration s, repu tation a nd cultu re. Inves ting fo r th e lon g term The se e lem ents – o ur purp ose, s trategy and b ehavi ours – are b eing a ppli ed to an asset-light, fee- base d, largely franchised business model t hat has pro ven its resil ience during th e pan demi c and all owed for a relatively str ong inanci al performanc e in 202 1, alb eit wi th RevPAR and op erating Final dividend 8 5.9 ¢ Fin al di vid en d pro po se d for 2 02 1 (2020: no dividend was paid) Retu rn of fun d s $ 13 .6 bn Sinc e Ma rch 200 3, the G roup h as returne d $13 .6 billi on of fun ds to sha rehol der s by way of ordinar y an d spec ial dividends, capital returns and shar e r epurchase progra mmes. Since 201 4: • $ 500 m illion s pe cial div ide nd pai d 29 Januar y 2019 • $ 40 0 millio n spe cial d ivide nd p aid 2 2 May 20 17 • $1 .5 bi llion s pec ial div iden d pai d 23 May 20 16 • $ 500 m illion s hare bu yba ck com plete d in 20 14 • $7 50 millio n sp ecia l divid end p aid 14 Ju ly 20 14 Sta yi ng f o cus e d on lo n g - t er m succes s Strate gic Re po rt 4 IHG | Annua l Repo rt a nd Form 20 F 202 1 With t he str ong inancial im pro vements deli vered in 2 02 1, incl uding p roit abil ity rebo undin g and a su bst antial re duc tion in net d ebt, th e Bo ard is prop os ing a i nal divid end o f 85. 9¢ in re sp ect o f 202 1, an amount equivalent to the wit hdrawn inal payme nt in res pe ct of 20 19. No inte rim divid end wa s pai d in resp ec t of 202 1. Goi ng for ward, divi den d payme nts will be re le ctive of I HG ’s prior app roach to sustainably gro w t he ord inary divi dend whils t targ eting a leve l of levera ge that maintains an investment grad e credit rating, and e nsurin g care ful co nsid eratio n of our resp on sibiliti es to all s takeho lde rs. T he Bo ard will al so co ntinue to ac tively a ss es s the opp or tunit y for any surp lus c apit al to be additionally returned through special divid end s or sh are buy back s. A i nal per specti ve The I HG I w ill dep ar t on 31 Au gust 2 02 2 is muc h cha nge d from the o ne I join ed in Jan uar y 201 3 – not le ast h aving grown fro m 4,6 00 to alm ost 6,0 00 h otels , and from nine to 17 bra nds . Havin g ir st gon e on a cruc ial jo urney to es tabl ish ou r bran ds in more at trac tive markets , the pa st alm ost ive ye ars un der Keith B arr ’s leade rsh ip have se en the c omp any transfo rm and re ady for a new ch apter of g rowth . IH G has inves ted in its e ntire enterp rise, in clud ing the qu alit y of the estat e and breadt h of i ts brand portfolio, and a s an organ isati on it ha s be com e more sop histi cate d and cu stome r - centri c, with a com mitme nt to ESG now woven i nto the fabric of t he business. The val ues o f integrit y and t ransp aren cy that I have ad voc ated at B oard leve l run de ep throu gh the bu sine ss a nd its lea der ship, as i llustrate d by the c are and thou ght with whi ch the se pa st t wo years h ave been handl ed for IHG’ s di eren t stak eholders. Keith has a lso s et the ton e from the to p on the im por t ance o f divers it y , e quit y and incl usio n, and p rogres s co ntinue s to be ma de agai nst th e chan ges re quire d to be a truly suc ce ssf ul com pany in this re gard, wi th IH G rec ogni sed fo r a seventh ye ar runni ng as a ‘B es t Plac e to Work for LGBTQ + Equali ty ’ , with a 10 0% ra ting in the C orp orate Equ alit y Ind ex, an d bein g Highl y Com men de d in the C omp any of the Y ear c atego r y at the Europe an D ivers ity Awards . While t he pan dem ic may her ald so me struc tural ch ang e for our in dustr y , suc h as tech nolo gy rep laci ng ce rt ain el eme nts of bus ine ss travel, th ere will b e opp or tunitie s too, incl uding f acilit ating a gl obal s hif t to lexible w orking. What r emains unchanged thou gh, are the in dustr y ’s long -term fund ame ntal grow th drive rs, su ch as a growing p opul ation, ri sing we alth in e mergin g markets a nd inc reas ing co nversio ns from unbra nde d player s. Th e streng th of IH G’s business model, strat e gic inv estments, pipeline , leadership and passionat e t eams gives m e great c on ide nce i n a strong fu ture. It ha s be en a pri vile ge to be a p art o f IH G’s stor y for alm ost a d ec ade an d I would l ike to oer my si nce re resp ect a nd gratitu de to all thos e in our h otels, o ic es a nd res er vation ce ntres who h ave bee n a par t of it . I would als o like to thank our ow ner s for cho osi ng IH G and for th eir c ontinu ed lo ng-te rm con id enc e in our b rand s and bu sine ss . Patr ick Cescau Chair Role o f the B oa rd T o n avigate an in dust ry re cover y , re act to evolvin g trend s and at the s am e time pu sh to streng then I HG o n so ma ny fronts ha s requi red gre at ded icatio n from our l ea ders hip and te ams. T he rol e of the B oard ha s be en to support and constr uctiv ely chal lenge the E xecuti ve Com mit tee aroun d how we prio ritise, m ana ge ris k, grow an d gen erate future valu e. Th e ESG ag end a and tec hno logy lands cape, inclu ding investments in our enterp rise a nd man agin g cybe rse curit y ris ks, were als o regu larly c ons idere d in the ye ar , alon gsid e liste ning to em ployee s entim ent via e ngag eme nt se ssi ons an d fee dbac k. Par t of my role a s Chair h as b een to enc oura ge Bo ard devel opm ent an d overs ee ch ange s that b uild an d add n ew expe rti se an d insig hts in rec ogni tion of the evolv ing natu re of our bu sine ss a nd sta kehold er exp ect ation s. T o this e nd, succe ssion planning was also of signiic ant focu s in 202 1, with b oth Ann e Bus quet a nd Dal e Morr ison re tiring af ter tre men dous ser vi ce, an d Rich ard And ers on unfor tuna tely resig ning af ter thre e mont hs due to p ers onal reas ons . We were del ighted to wel com e Dan iela B aron e Soa res as N on -E xec utive Dire ctor an d Grah am Alla n was app ointe d as Se nior I nde pen dent N on - Exe cutive Dire ctor from 1 J anua ry 2 02 2. In my ninth year a s Ch air , s ucc es sion p lanni ng for my own role wa s als o carri ed out , with a thorou gh and i ndep en dent re cruitm ent proc es s lea ding to the a ppo intment o f Deanna Oppenheimer as Chair Designa te from 1 Ju ne 202 2 , be comi ng No n- E xecutive Cha ir from 1 Se ptemb er 20 2 2 upon my retirem ent. I lo ok for ward to work ing with Deanna on a comprehensiv e hando ver and I would li ke to take the opp or tunit y to wish h er the b est in w hat I am su re will be a ve ry succe ssful tenure. Patri ck C es cau C hair 5 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Chair ’ s stateme nt C hief E xec ut iv e O ice r ’ s r eview E m e rg i n g a s a st r ong er IH G remai ns tough fo r our hote ls, b ut travel is co nsi stently retu rning qui ckly a s restri ction s lif t. O ur appro ach h as be en to stay fo cus ed on o rganis ing op eratio ns an d investm ents a round wh at mat ters m ost to gue sts an d owne rs, an d ens uring I HG c an grow at pac e, in the ri ght way . For co llea gue s, we have improve d proc es ses and intro duc ed ne w tools to b oth attr act an d retain t ale nt in what i s a com petiti ve jobs market, a nd we’ve plac ed a g reater e mpha sis on me ntal h ealth a nd wellb ein g. Co rpor ate and re ser vatio n team s have be en sup por ted with sh ift s to hybrid work ing, inte ractive se ssi ons have b rought em ployee s clo ser to our str ategy , and ho tel team s have rec eived trainin g and sup po rt n ee ded to a dapt to evolvin g ope ration s and b rand st and ards. For gue sts , we have use d AI tec hnol ogy in our re ser vatio n centre s to improve cus tome r ser vice, enhance d our awar d-winning Meet with C on ide nce p rogram me, and o ere d loyalt y mem ber s point ex pir y exten sio ns and n ew promoti ons . We saw Reward Ni ght bookings largel y recov er t o pre-pandemic level s during th e year an d welc ome d anoth er nine mi llion m emb ers to IH G ® Rewards . Working c los ely wi th the IH G Ow ners As soc iation a nd op erator s, we have strive d to anticip ate owne rs’ ne ed s, care fully focusing on c osts, and d elivering training and a ction p lans to a ddres s pe rfo rman ce opp or tunitie s and g ues t fee dbac k. Staing and s upply cha in chal lenges ha ve be en me t with new re cruitm ent so lutio ns and in crea sed p rocu remen t option s that have del ivered key pro duct s at lower c ost , des pite in latio nar y pre ssu res. C omm ercia lly , we have incre as ed ma rketing and intro duc ed new too ls to ide ntif y and c apture de man d, and we c ontinu ed our wo rk with tra de bo dies a nd govern ment s to advoc ate for indu str y supp or t in rec ogn ition of th e vita l economic role hospitality pla ys g lobally . I n the p as t year, the res ili enc e of ou r bu sin es s mo de l and e nd urin g imp or tan ce of trave l and h os pit alit y for mi llio ns globally has shone through str ongly . Crucially , while demonstrating our abili ty to ef fec tively m an age t he im pa ct of an evolvin g pa nde mic , we have not waver ed in our fo cu s to bu ild a n even str ong er IH G, by grow ing our brands, enhancing our guest an d owne r offe r , sup po rti ng ou r pe opl e and communities, a nd prot ecting our planet. While 2 02 1 glob al RevPAR was at 70% of pre -p ande mic 20 19 leve ls and o pe rating pro it ha s yet to fully rec over , b oth imp roved signi ic antly du ring the ye ar as vac cin ations increased, restr ictions lifted and guests travelled again. Enco uragingly , in Q4, alm ost half o f our hote ls were b ack to pre -p and emic RevPAR levels, a nd our G ue st Sati sfac tion Ind ex contin ued to im prove during 20 2 1, outp er formin g comp etitor s as we worked thou ghtfu lly to evolve the s tay expe rien ce and manage dem and. As owne rs lo ok to future g rowth wi th us, devel opme nt acti vit y was als o well ah ead of 202 0, with som e fant astic o pe nings an d signings , alongside contin ued inv estment in the qu alit y of our exi sting e sta te. Grow ing s en se of re cover y Loo king b ack to the h eight of th e pan demi c in 202 0, with many hote ls clo se d and oc cupa ncy at his toric lows , reac hing this much -im proved p oint ha s require d suc h hard work and collabora tion a mong our teams, owne rs and p ar tner s. We’ve met ch allen ges in thoughtful and innovat ive wa ys, quickly sei zed o ppo rtun ities to grow an d improve, and wh ile we kn ow our ind ustr y is no t yet bac k to norm al, we take co ni den ce from a growing s ens e of rec over y . We do still have m arkets whe re restri ction s are crea ting cha llen ges , and the p and emic’s impact on labour a nd supply chains K ey highlights in 2021 29 1 Hotels opened (285 in 2020) 4 37 Hotels signed (360 in 2020 ) 47 % Of f ull -year s ign ing s wer e for ou r Hol iday I nn B ran d Famil y 42 % Of o ur pi pe lin e now r ep res en ted by up sc ale a nd lu xur y br and s Strate gic Re po rt 6 IHG | Annua l Repo rt a nd Form 20 F 202 1 Keith B arr Ch ief E xecuti ve O ice r the pro gres s agai nst ou r strateg ic prio rities in 202 1 an d the imp act thi s will have on h ow we ope rate and g row with owne rs as th e industry st rengt hens. Key highlight s inclu de the H olid ay Inn and Crown e Plaz a qual ity revi ew , whic h has driven s igni ic ant owne r investm ent in 83 p rope rti es and th e removal o f 151 hotel s. With exce llent f uture grow th pros pe cts, this work i s not ju st critic al to prote cting th e pe rfor manc e and re put ation of th ese b rand s, but al so to our a bilit y to redu ce our f uture group avera ge remova ls rate and h elp achi eve our amb ition of in dus try- lea ding net roo ms gro w th. The importance of our establi shed brands was re le cted in o ur Ho liday Inn ® Bran d Family repre se nting alm ost h alf of all s igning s in 202 1, whi le the ad ditio n of new bra nds across more segments increases our attra ctive nes s to owne rs and o pen s up fur the r grow th opp or tunitie s. W ithin Es se ntials , avid® h otels i s now our s ec ond l arges t contr ibutor to sys tem size a nd outp er formi ng pe ers in g ues t sati sfac tion, an d voco™ hotel s has a lread y expan ded to 2 5 countri es with in Premiu m. In Luxu ry & L ifest yl e, progre ss incl ude d Six Se ns es® n ow having grown its o pen an d pip elin e est ate by more tha n half s inc e acqu isitio n in 20 19, and ou r new Vign et te Coll ecti on bra nd alrea dy at six signings and a irst openin g since launch in Augu st. As we us e our I HG ® Hote ls & Res or ts masterbr and t o show case the breadth of our p or tfol io, we contin ue to enh ance th e enterpr ise that supports it. This includes developi ng our next -generation mobile app, an d prepa ring tho usa nds of h otels to allow gu est s to choo se s pec i ic room charact eristi cs and add stay en hancements whe n boo king w ith us, an d in par allel e nab le our own ers to ge ne rate maxim um value from the ir hotel ’s unique fe atures . T ra nsfor mation al work al so too k pla ce in loyalt y ahe ad of a rel aunc h in 202 2 tha t will oe r mem ber s more rewardi ng tier s and p oints value, p rovide ric her b ene i ts and exc eption al choi ce, an d attra ct mo re next- gen eratio n travelle rs. I n the i rst yea r of our 20 30 Journey to T omorrow responsible business pla n, key progres s incl ude d upgr ading o ur sci enc e- ba sed t arget to h elp limi t glob al warming to 1 .5°C , launc hing ou r vir tual I HG Skills A cademy pla tform, cor porate employ ees com pleti ng more th an 10,00 0 hou rs of cons cious inclu sion training, and suppo rting cha rities re spo ndin g to natural di sas ters . Thank y ou I would li ke to thank the B oard for th eir guid ance, a nd ahe ad of h is retirem ent as Cha ir , re cog nise th e invaluab le co ntributi on Patric k Ce sca u has m ade in h is nine ye ars with I HG. H e is a hug ely res pe cted igure and o n a per son al note I am gra teful for hi s cou nse l and su ppo rt . Thou gh he wil l be mis se d, we loo k for ward to welc oming Deann a Oppenhe imer . On b ehal f of the E xecu tive Co mmit tee, I would a lso like to than k our own ers for their p ar tner ship a nd co mmitme nt, an d our inspiring co lleague s for bringing our brands and p urpo se of T rue H osp itali ty for G oo d to life, and m akin g IH G a strong er bu sine ss . T o s ee I HG a gain na med a K inc entric G lob al Be st Emp loyer in 20 21 wa s a proud m ome nt and it h as me ant a lot to re conn ec t with col lea gues i n per son th is year , as well a s our own ers, k nowin g that tog ether we l ook to the future w ith con id enc e. Ke it h B ar r Chie f Exe cutive O i cer Streng thened perf orma nce Our a ction s, alo ngsi de our b usin es s bei ng princ ipall y dom estic fo cus ed in key mar kets suc h as the U S, le d to improved tra ding through out 20 21 . On top of g oo d es senti al business demand, domesti c leisur e bookings at time s hit 20 19 oc cup ancy an d rate levels in seve ral markets , with sig ns of mo re dis cretion ar y bus ines s travel, grou p boo king s and inte rnatio nal trip s be ginning to retu rn. Op eratin g pro it of $4 94 m improve d from a los s of $1 53 m in 202 0. Our ab ilit y to cap ture dem and throu gh our s trong bra nds, enterp rise a nd sc ale, c oupl ed wi th caref ul co st co ntrol, le d to ope rating pro it from repo rt abl e se gment s more th an doub ling to $5 34 m versu s 202 0, with sus tain able savings successfully achie ved al ongside conti nue d investm ent to supp or t grow th. Stron g cas h gen eratio n led to a re duc tion in net d ebt of al most $ 6 50m ye ar - on-ye ar . While a h ighe r - than -avera ge rem ovals rate, linked in p ar t to our H oliday In n® and Crown e Plaz a® H otel & Res or ts qu alit y review, me ant our ne t system s ize de cline d slig htly , the op enin g of 29 1 hotel s, inc luding o ur 3,00 0t h for Ho liday Inn E xp res s® , repre sente d 5.0% gro ss grow th an d unde rline s the lon g-term c on id enc e owner s have in IH G and o ur bran ds. We als o add ed 4 37 hote ls to our pi peli ne, with th e almo st 24,00 0 roo ms sign ed in Q 4 much c los er to the leve ls se en in 20 19. In total, o ur glo bal pip eli ne of alm ost 1,80 0 hote ls rep rese nts mo re than 3 0% of our cu rrent syste m size, wit h more tha n 40 % under construct ion. Focu s on g rowt h Our fo cus in re ce nt years h as be en to improve the q ualit y of our ex istin g hotels fo r guests and the r etur ns our brands generat e for owne rs, an d in par allel i ncrea se th e sca le of tho se bra nds, th e brea dth of our p or t folio, and th e value of o ur tech nolo gy an d loyalty oer. In spite of a p ande mic, I am p roud of 7 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Chie f Exe cutive O i cer ’s review 0 2,500 5, 000 7, 5 0 0 10,0 00 12,500 15, 000 1 7, 5 0 0 2000 2001 2002 2003 2004 2005 2006 20 07 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0 5 10 15 20 25 30 Low an d lower mi ddl e inc ome Forecast Up pe r midd le inc om e Forecast 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022E 2024 E 0,00 0 2, 000, 000 4, 000, 000 6, 000, 000 8, 000, 000 10,0 00,0 0 0 12, 000,000 14 ,000 ,000 2005 2006 20 07 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024 E 2025E T he $360 bill ion hot el industry has compelling structural growth driv ers, underpinned b y factors including consumers’ inherent desire to travel , pop ul ation g row th, a nd an expa ndi ng mi ddl e cla ss i n em erg ing mark ets wit h in creasing disposable inc om es . Whil e th e pan de mic s upp re ss ed de man d duri ng 20 20 a nd 20 21, d em and ha s retur ned r api dly in d ome st ic ma rkets as g overnm ent re st ricti ons h ave lif ted a nd vacc ina tion r ates i nc rea se d. Thi s de ma nd ha s pre do mina ntly b ee n in m arkets n ot expo se d to cro s s-b ord er t rips a nd across essential business tra vel, though discretionary corpora te tr av el and grou p event s have be gun to r eturn . Cos t remains a signii cant barrier to building a sc ale p ositio n in the in dust ry , wheth er that ’s due to the invest ment re quired to buil d and ma intain h otels, e st ablis h a stron g loyalt y progra mme o r to market bran ds in a com petiti ve marketpl ace. A s suc h, the indu str y remai ns frag mente d, with 5 4% of room s a iliate d with a glo bal or regional ch ain. Branded hot el penet rati on has st eadily incre ase d as a l ong -term tren d and is expe cted to c ontinu e to grow as co nsum ers loo k to truste d bran ds to me et thei r evolvin g expe cta tions , par ticul arly wh en it c ome s to state - of-the -a rt te chno log y and th e skill s, sc ale an d reso urce s to provide mo re sustainable stays. Owners aili ated w ith a bran d tend to ge nera te highe r returns . For the in dustr y as a w hol e, it is not yet c lea r what im pac t there wi ll be on d ema nd from struc tural ch ang es brou ght ab out by the pandemic, such as technology r eplacing ele ment s of bu sine ss travel . However , this may be o se t by a greater u se of hote ls to facilitate a global shif t to increasingly lexible workin g arrang eme nts . In add ition, th ere is sc ope fo r ‘blei sure’ de man d, where lexib le workin g create s pote ntial for le isure d ema nd to be co mbin ed wit h busi nes s st ays. It is li kely that l uctu ating C ovid-19 restri ction s will c ontinue to c reate a volati le dem and e nvironme nt in the s hor t term. However, we anticipate the at trac tive ind ustr y fund ame ntals to b e fully re store d in the lon ger term . For examp le, STR fo reca st that US in dustr y Rev P AR will return to 20 19 leve ls by the en d of 202 3. Indu str y ov e r view W e oper at e in a n i ndu st r y wi th h ig h gr owt h pot ent ial , underpi nne d b y st r ong long-t erm fundamen tal s t ha t r ema ined r esil ien t du r in g t he pa ndem ic . The hot el indust ry has attractiv e t ail winds… Di spo s abl e pe rso nal i nc ome i n the U S from 2 00 0 to 20 20 (in bi llion US dollars ) A growi ng mi ddl e cla ss i n em erg ing m arkets w ith a de si re to trave l Wealth s hare in em ergin g eco nomi es (%) Res ilie nc e in ro om nig ht st ays, wit h fur the r grow th exp ec ted Glo bal h otel roo m night st ays So urce : Cre di t Sui ss e Source : Sta tista Source: O xford E conomics Strate gic Re po rt 8 IH G | Annua l Repo rt a nd Form 20 F 202 1 70% 0% -7 5 % 2020 2021 1992 1990 1994 1996 1998 2000 2004 2006 2010 2012 2016 2018 2002 2008 2014 Lux ur y and uppe r ups cal e Upscale Total Mid sc ale Economy 66% 55% 35% 55% Branded share of glo bal room supply Branded share of glo bal ac tive pip eli ne 77% 54% 1.4x Branded hot el business models The re are two p rincip al bu sine ss m ode ls: • A fee - bas ed, a ss et-light mo del: – F ranc hise d: owne d and o pe rated by par tie s distin ct from th e bran d, who pay fee s to the hote l com pany for us e of its brand. – Man age d: ope rated by a p ar ty di stinc t from the h otel owne r . T he own er pays man age ment fe es an d, if the ho tel use s a third -pa rt y bran d nam e, fee s to that third -pa rt y , to o. • An own er-op erate d, ass et-he avy m ode l: – Owne d: op erate d and b rande d by the own er who b en e its from al l the inc om e. – Lea sed: s imila r to owned, exc ept the own er-op erator do es n ot have outrig ht owner ship of th e hotel b ut lea se s it from the u ltimate own er . As set-he avy m ode ls ge ner ate returns on th e real e sta te and ce ntralis e con trol over ope ration s. As set-li ght mod els t ypi call y enab le s faste r growth a nd ge nerate hi gher returns . This m ode l tend s to pres ent lowe r risk to l uctu ations i n the ec ono my . and a tr ack r ecord of g ro w th Ind us tr y RevP AR ha s se en a l ong -term t rac k rec ord o f grow th; the m os t rec ent r ec overy h as b ee n driven by d ome st ic le isu re de ma nd US In dus try Rev P AR grow th, mon thly year-on -year Global industry Re vP AR ($) RevPAR moveme nts are illu strative of lo dging d eman d 2018 8 0.8 2017 78.9 2016 76. 2 2019 8 0.6 2020 3 7. 0 2021 5 3 .7 So urce : ST R Gl oba l roo ms s upp ly (m r o o m s) Supply g rowth relects the attract iveness of the ho tel indu str y 2018 19.0 2017 18.5 2016 1 8 .1 2019 19. 5 2020 1 9.7 2021 2 0.1 So urce : ST R with signiic ant barriers to entr y … The to p ive h otel g roup s a have inc rea se d th eir m arket s hare Sha re of top ive b rand ed hote l group s as % of gl obal ro oms s uppl y 2018 23 .4% 2017 2 2. 5% 2016 21. 9% 2019 23.9 % 2020 23.9 % 2021 24.3% Consumers val ue lo yalty membership whi ch re qui res a l arg e sc ale e nterp ris e to d el iver 57 % Of c on su me rs sp en d mo re on b ran ds to wh ich t hey ar e loyal Source : Acce ntur e 84 % Of l oyalt y pro gra mm e me mb er s have ma de a redempti on fr om the programme So urce : Bo nd, i n pa rtn er shi p wit h Vis a Wit h sha re exp ecte d to fu rth er exp an d Bran de d share of g lob al indu str y supply a nd shar e of g lobal i ndustry active p ipe line a Includes IHG, Marriott Int ernational , Inc., Hilton World wide Holdings Inc., Wy ndh am H otel s & Re sor t s Inc ., Acc or S . A. So urce : ST R So urce : ST R So urce : ST R 9 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Industr y ov er view F ranchised 71% 28% 1% Manage d Own ed , leas ed and ma nag ed lease Americas 57% 25% 18% EME AA Gre ater Ch ina Luxur y & L ife st yle 13% 15% 63% 9% Premium Essential s Suites F ranchised 58% 42% Manage d 36% 34% 30% Americas EME AA Gre ater Ch ina Luxur y & L ife st yle 19% 17% 54% 10% Premium Essential s Suites T he gr owt h of ou r bus in es s rel ies on t wo fund am ent al grow th driv ers: re venue per av ailable r oom (RevP AR) an d inc rea si ng th e num be r of roo ms a cro ss o ur es tate . RevPAR indic ate s the va lue g ue sts a sc ribe t o a given h otel , bra nd or m arket a nd gr ows whe n th ey stay m ore of ten o r pay hig he r rate s. Room supply r elects ho w attr activ e the hote l ind us tr y is as a n inves tme nt fro m an ow ner’ s perspective. T o dr ive growt h, we have a por t folio of 17 bran ds acro ss mo re than 10 0 c ountrie s in the Su ites, E ss ential s, Prem ium and Luxur y & Life st yle c atego ries . Supp or ted by a lea ding l oyalty pro gramm e and p ower ful tech nolo gy , our bra nds me et cl ear g ues t ne eds a nd ge nerate s trong return s for our owne rs, whi ch in turn at trac ts fur the r hotel investm ent an d grows our e state . IH G is an a sse t-light bus ine ss an d our focu s is on growi ng fee reven ues a nd fee margin s, whic h we can d o with limi ted cap ital re quire ment s. Thi s ena ble s us to grow and inves t in our b usin es s while gen eratin g high return s on investe d ca pita l and s trong ca sh low. We gene rally fra nchi se or m anag e hotel s, with the decision largely driven by market maturit y , owner p refere nce an d, in ce rt ain ca ses , the pa rtic ular b rand. H otels i n the Es senti als c atego ry te nd to be fra nchi se d, while L uxur y & Lifes ty le hotel s are predominantly manage d. Our br oad geographi c spread and weightin g towards es se ntial bu sine ss a nd dom esti c leis ure travel ha s driven re silie nce relati ve to the wide r indu str y during th e pan demi c. We are weighte d towards non- urban markets which are less reliant on intern ation al inb ound trave l and le ss expo se d to large grou p mee tings an d events . A com binati on of the se fa ctors , alon g with our e nterpri se c apab ilit y , ha s allowe d IH G to outpe r form the wi der indu str y in RevPAR growth . Our a ss et-light bu sine ss m ode l me ans we do n ot emp loy coll eag ues in fran chis e hotels , nor d o we control their da y-to- day operati ons, policies or pro ce dures . That b eing s aid, I HG and o ur franc hise h otels are c ommi tte d to deli vering a c ons istent b rand experi ence, conduct ing busi ness responsibly and sustai nably so that we deli ver our p urpo se of p roviding T ru e Ho spit alit y for G ood . Ho lid ay Inn E xpre ss ® & Suite s Jo hor B ah ru, Ma lays ia T otal dev e lopment pipeline 2 70, 9 6 0 r ooms T ot al sys tem si ze 8 8 0, 3 2 7 roo ms Composition of r ooms Composition of r ooms Ou r busi ness model W e pr edominan t ly fr anchise our br ands and manage hot els on beha l f o f t hi r d-pa r ty hot el ow ners a nd ha v e a w ei gh ti ng t o mor e r esi l ien t domes t ic no n-ur ban ma r k et s. Strate gic Re po rt 10 IHG | Annua l Repo rt a nd Form 20 F 202 1 F ranchi sed hot els We rece ive a ixe d perc enta ge of ro oms revenue w hen a gu es t stays at on e of our h otels . This i s our fee reve nue. Own ed , lea se d an d man ag ed l eas e hote ls For hotel s which we ow n or le ase, we re co rd the entire reven ue and p roit o f the hotel in o ur i nanc ial st ateme nts. O ur own ed, le as ed an d mana ge d lea se hote ls have redu ce d from over 18 0 hotel s 20 year s ago, to 19 hote ls at 31 D ec emb er 20 21 . Managed hot els Fr om ou r mana ge d hotels , we gen erate revenue th rough a ixed p erce ntag e of the tota l hotel reven ue and a p ropo rtio n of hot el proit. H ow we g en er ate reven ue S ys t e m Fu n d IH G man age s a Syste m Fund for the be ne it of hote ls withi n the IH G syste m and th eir third -pa rt y owne rs, w ho pay contr ibutio ns into it. T his inc lude s a marketing a nd res er vation a ss es sme nt and a loyal ty as se ss ment . The S ystem Fund al so be ne it s from proc ee ds from th e sal e of IH G ® Rewards points unde r third-par ty c o- branding arr angements. Give n the sign ii cant s cal e of the Syste m Fund, IH G can m ake subs tantia l investm ents in m arketing b rands , creati ng a le ading l oyalty p rogramm e and p ower ful tec hnol ogy , incl uding re venue managemen t s ystem s, t hereb y streng thenin g the IH G enterp rise. Thir d- par ty h otel ow ne rs pay: IHG re venue f rom r eportable segments ª 202 1: $1, 39 0 milli on Revenu e attrib uta ble to IH G co mpri ses: • Fee b usin es s revenue fro m repo rt able s egm ent s: – F ranchise f ees – Managemen t fees – Ce ntral revenue ( prin cipa lly tech nolo gy fe e inco me) • All reven ue from own ed, l eas ed an d man age d lea se ho tels. See page 72 for more in format ion. Fee s to I HG in re latio n to the lice nsi ng of our b rand s and, if applicable, hotel managem ent serv ices. Assessments and contr ibut ions which are co llec ted by I HG for sp eci ic u se with in the Sys tem Fund. Sys tem Fund reve nue s 202 1: $9 28 milli on The S ystem Fund is n ot man age d to a pro it or lo ss for I HG over the lo nge r term, bu t for the b ene it o f hotel s in the IH G system , and co mpri ses : • As se ss ment s and co ntribu tions p aid by hote ls • Reven ue rec ogni se d on co nsump tion of I HG Rewa rds loya lt y p oin ts See page 56 for mor e in format ion. IH G fee re venu e System Fu nd Hote l own er F ranchised RevP AR X Rooms X Royal ty r ate Managed Fixe d % of tot al hot el rev enue a s a ma nagement fee a nd t ypi cal ly a sh are of hot el gro ss o per ating proit a fter deduction of mana gement f ees Guests Hote l a Exc lud es S yst em Fun d and h otel c os t rei mbu rs eme nt s. 11 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Our business model Our b usi ness model co nti nu e d Our a ss et-light bu sine ss m ode l is highly c as h gen erative thro ugh the cycl e and e nabl es us to inve st in our b rand s and s trength en our e nterpri se. We have a dis ciplin ed ap proa ch to cap ital allo catio n, whic h ens ures that th e business is ap propria tely in vested in, whilst maintainin g an eicie nt and conse rvative balance sheet . Beyon d this, we l ook to return s urplu s ca sh to sha rehol der s through o rdinar y and speci al dividends and share buyb acks , with our o bje ctive to maint ain an invest ment-g rade c redit rati ng. On e of the me asu res we us e to monito r this is n et debt : adju sted EB IT DA and we aim for a ratio of 2. 5 3.0x. Liquidity through the r ecovery As o ccu pan cie s have re cove red, t he stren gth of our c as h gen eration b ec ame evide nt with ad juste d free c as h low a gen eratio n of $5 71m in 2 02 1. Discipl ined appr oach t o capital al locati on and manag ing l iqui dity Rec overing d eman d during 2 02 1 and s trong co st co ntrol resu lted in rap id de levera ging. As su ch, our n et deb t: adju sted E BIT DA ratio was 3.0 x at 31 De ce mbe r 202 1 ( 7 .7x as at 31 D ec emb er 202 0). Duri ng the yea r , we rep aid £6 0 0m of com merci al pap er i ssu ed un der th e UK Gove rnm ent ’s Cov id C orp or ate Fin an cing Facilit y (CC FF). Foll owing th e iss uanc e and re payme nt of bon ds in 20 20, our n ext bon d maturi ty is £ 173m i n Novemb er 20 2 2, with no f urth er b ond m aturitie s until Oc tobe r 2024. A s at 31 D ec emb er 202 1, IH G had avail able l iquidi ty of $ 2.7bn. Our $ 1.3 5b n syndic ated a nd bil ateral revolvin g credi t facili ties (RC F) h ave coven ant rela xation s in pla ce for 20 2 2 (see pa ge 59). O ur coven ant levera ge was 3.0x at 3 1 De cem ber 2 02 1 (202 0: 8.7x). Loo king for ward, o ur app roach to c apit al allo catio n remai ns unc hang ed. A s the bus ine ss rec overs , our prio ritie s for the us es of c as h are con sis tent: en sure the busi ness is appr opriat ely inv ested in to drive grow th; targ et sus tain abl e grow th in the ordi nar y divi dend; a nd return surp lus fu nds to sh areho lde rs, while at th e sa me time c ons ide ring our sta ted aim of a l everag e ratio of 2. 53 .0x, and o ur obje ctive of m ainta ining an investm ent-gr ade cre dit ratin g. Bon d maturity pro ile ($ m) 2022 2023 2024 202 5 20 26 202 7 20 28 233 0 565 408 473 570 537 Our a ss et-light bu sine ss m ode l requi res a limite d incre ase i n IH G’s own ope rating expe nditure to su ppo rt o ur revenue grow th, which d elive rs op eratin g pro it and fe e margin g rowth . The b ene i t of ope ration al e ici enci es, along with brands and markets becoming more m ature, has s upp or ted fee m argin expan sion o n averag e by over 100 bp s a year b etwe en 20 0 920 19. a U se of N on - GA AP m ea sure s: I n add itio n to p er form an ce m eas ure s dir ect ly ob se rv abl e in th e Gro up Fi nan ci al St ate me nts (I FR S me asu res), a ddi tio nal in anc ial m ea sur es (des cri be d as N on - GA AP) are p re sen ted t hat a re us ed in tern all y by ma nag em ent a s key me as ures t o as se ss p er for man ce . No n- GA AP m ea sur es ar e eith er n ot de i ne d und er IF RS or a re ad jus ted I FR S ig ure s. Fur th er ex pla nat ion i n rela tio n to the se m ea sur es c an be f oun d on p age 7 3 to 7 7 and r ec onc ili atio ns to I FR S ig ure s, wh ere t hey h ave be en adj us ted, a re on p ag es 2 18 to 2 23 . For franc his ed hote ls, the low throu gh of revenue to o perati ng pro it is hi gher th an it is at ma nage d hote ls, give n our wel l-inve sted sc ale pl atfo rm whe re limited re sou rces are requi red to sup por t the a dditio n of an incre ment al hote l. This i s mos t evide nt in our Am eric as re gion, wh ere fee m argins a re the high es t, re lec ting our s cal e and aro und 90 % of our h otels o per ating und er our franchised model. Acros s our m anag ed h otels, th e low through o f revenue to pro it c an be l ower , given hi gher o per ating exp enditu re on ope ration s team s supp or ting th e hotel net work. How w e dri ve oper at ing pr oit Fee ma rg in a by re gi on Ameri cas F Y 2018 74 . 8 % F Y 2019 7 7. 7 % F Y 202 0 70 .7 % F Y 202 1 82. 2% EMEA A F Y 2018 62.3% F Y 2019 58.6% F Y 202 0 - 1 7. 9 % F Y 20 21 21 .5% Gre ate r Chi na F Y 2018 4 6 .7 % F Y 2019 5 4 .1 % F Y 202 0 4 5. 5% F Y 202 1 4 7. 3 % T otal IHG F Y 2018 53.3% F Y 2019 5 4 .1 % F Y 202 0 3 4 .1 % F Y 202 1 49.6 % a Fee m argi n exclu de s own ed, l ea se d an d man ag ed l eas e ho tel s, si gni ic an t liqu id ated d am age s an d the re su lts o f the G rou p’s cap tive in su ran ce c omp any an d is s tate d at A ER . Our ow ned, l eas ed a nd man age d le ase h otels ten d to have signi ic antly lowe r margin s than o ur fee b usin es s. Thi s is be cau se we no t only re cord th e entire revenu e of the h otel, but a lso th e entire co st ba se, wh ich inc lude s st a and m ainten ance o f the hote l. Strate gic Re po rt 12 IHG | Annua l Repo rt a nd Form 20 F 202 1 Consisten t uses of cash Our p rioriti es for th e use s of ca sh are con sis tent with p revious ye ars an d comprise th ree pil lars: 1 Inves t in th e bu sin es s to dr ive growth We look to s trategic ally drive grow th, whil e maintaining strict c ontrol on inves tment s and ou r day- to - d ay c ap it al exp end iture s. 2 T arget sustainable gro wth in th e ord ina ry di vide nd IH G has a d ivide nd p olicy whe re we would lo ok to grow the ordi nar y divi dend each year , while balancing all our s takeh olde r intere sts and e nsurin g our lo ng- term success. 3 Retur n surplus funds to shareholders The G roup ha s a strong tr ack rec ord of returnin g surplu s ca sh to shareholders. Since 2003, including the ordinar y divid end, th e Grou p has re turned $13.6bn. Sha rehold er returns (20 0319) ( $bn ) Sou rce of return s 7. 8 13.6 5.8 As set dispo sals Operational ca sh flow s To t a l Capit al expend iture Spe nd in curred by I HG c an be s umma rise d as foll ows: Ty p e Wh at is i t? Recent e xamples Mainte nanc e capita l expenditure an d key m on ey Mai ntenan ce c apit al expe nditure i s devoted to the mai ntenan ce of ou r system s and cor porate o ic es, a long w ith our own ed, lea se d and m anag ed le as e hotels . Key money is exp en diture us ed to ac ce ss strate gic opp or tuniti es, p arti cula rly in high -q ualit y and s oug ht-afte r loc ation s, when returns are inancially and/or strategically attractive. E xampl es of m aintena nce s pen d incl ude mainte nanc e of our o ic es, s uch a s reform attin g in light of th e pand emic . Acros s our own ed, l eas ed an d man age d lea se ho tels we inves t in refurb ishm ent of pub lic sp ace s and g ues t room s. E xampl es of key mon ey inclu de inves tme nts to s ec ure rep res ent ation for our b rand s in prim e loc ation s. Recycl ab le inves tme nts t o drive th e grow th of o ur b rand s an d our ex pan sio n in pri orit y ma rkets Recycla ble inves tme nts are ca pita l use d to acq uire real e st ate or investm ent throu gh joint venture s or eq uity c api tal. T his exp enditu re is strate gic to he lp buil d bran d pres enc e. We would lo ok to dive st the se inves tment s at an app ropri ate time and re invest th e proc ee ds ac ross th ebus ine ss. Examples of r e cy clable i nv estments in prio r years i nclu de our E VE N® H otels bran d, whe re we use d our c apit al to devel op three h otel pro per tie s in the U S to showc ase th e bran d. The se h otels have now be en s old a nd op erate und er a franch ise agreement. System F und capital in vestments f or strategic i nv estment to dr ive growth at hote l leve l The d evelop ment o f tool s and syste ms that hotel s use to dri ve per form anc e. This i s cha rged b ack to the S ystem Fund over the life of th e as set. We continu e to develo p our cl oud -b ase d Gue st Re se rvatio n Sys tem (GRS) and IH G Co nce rto™. Othe r exampl es in clud e redeve lop ment of th e IH G mob ile app ahe ad of la unch in 2 02 2. Dividen d policy The B oard c ons isten tly reviews th e Group’s appro ach to c apit al allo cati on and s eek s to mainta in an e icie nt bal anc e she et an d investm ent-gra de cre dit rating . IH G has a n excelle nt track re cord o f returnin g funds to s hareh old ers thro ugh ordinary and spe cial dividends, and share buyb acks . The o rdinar y div ide nd pai d to sha rehol der s incre ase d at an 11% CAGR bet wee n 20 04 an d 2019. Whe n reviewin g divid end re com men dation s, the Di rector s take into ac coun t the lon g-te rm con se que nce s. Th e Bo ard loo ks to ensu re that any rec omm end ation do es n ot harm th e sus tain able s ucc es s of the C omp any and tha t there a re su icie nt distri buta ble re ser ves to pay any rec omme nde d divi den d. The B oard as ses se s the G roup’s ability to p ay a divide nd be aring in mi nd its re sp onsi bilitie s to its sta kehold ers a nd its o bje ctive of ma intain ing an invest ment-g rade c redit rati ng. The B oard i s therefo re prop osin g a in al divid end o f 85. 9¢ in re sp ect o f 202 1, an amount equivalent to the wit hdrawn inal payme nt in res pe ct of 20 19. S ee p age s 92 , 107 , 113 and 1 14 for info rmati on ab out h ow we have e ng age d with s hare ho lde rs an d inves tor s durin g 20 21. 13 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Our business model T r ends shaping our ind ust r y 1 La bo ur and sup p ly c h a i n p re s s u re s Gover nment-m andate d hote l clos ures in 2 020 s aw many pe opl e in hos pit alit y switch c aree rs, an d as de man d returns, va can cies a re at rec ord high s in som e markets , with the Worl d T ravel & Tourism Co uncil p redic ting em ploym ent in the s ec tor will ris e 18% in 2 02 2 to 324 millio n availabl e jobs . The i ndus try m ust wo rk togeth er with governm ents to a ddres s the se st a sh or tag es, i nclu ding throu gh facil itatin g greater l abo ur mob ilit y acros s bo rders , shif ting to rem ote workin g, upskil ling t he wor kforce, promot ing educat ion and app rentice ship s, an d creatin g fair , s afe role s. As ma rkets pivot towards g rowth, s uppl y chain s have als o be en disr upted. W ith the l ack of avail able p roduc ts la rgely d ue to inpu t sho rt age s, bu sine ss es wi th comp lex sup ply ch ains a re ind ing thing s par ticu larly c halle nging . For hotel s, this h as le d to shor t age s in key area s, from lin en for gu est s tays to timb er for c ons tructi on proje ct s. The pandemi c has acceler at ed a nu mber o f pre- existing tr en ds within the ho t el indust ry , includ ing digitalisation and cust ome r c entri cit y , alo n g with greater demand f or sust ai nable br anded e xper iences. I n t he nea r t erm , ne w fa ct ors h av e also emer ge d, incl uding managing labo ur and supply shortages. D urin g the p an dem ic, th e nat ure of h otel stay s changed signiicantly . As guests retu rne d to travel fo llowi ng th e lif ting o f res tric tio ns an d reo pe nin g of hote ls , the re wa s a signiicant f ocus on cleanliness, with the industry collaborati ng with leading e xperts in this ield. The vo latil e nat ure of in fec tion r ates a lso s aw guests welcome le xible cancellat ion policies an d the ex ten sio n of loyalt y pro gra mme s tatu s. As vac cine s have rolle d out a nd res trictio ns ea se d or lif ted, w hat ’s bec ome cl ear i s that the p and emic was a ‘deman d supp ress ion’ event fo r the indu str y , with travel s ubse que ntly bo uncin g bac k signi ic antly. This has b ee n quic kest in do mes tic lei sure, whil st es se ntial bu sine ss d ema nd ha s proven rel atively re silie nt, pa rtic ularly i n exten de d stay ch ains a nd in the e co nomy and mi dsc ale cate gorie s. D isc retiona ry b usin es s travel, group bo okin gs and in ternatio nal trip s have als o shown encouraging si gns of r ecovery . T e chn olo gy and di gitali satio n co ntinue to pl ay a k ey role ac ross t he entire gu est j ourney. This inc lude s digit al bo okin g, greate r levels o f per son alis ation an d the abi lity to c hoo se roo m attri butes , and se r vice deli ver y during a g ues t stay . Our r esponse • Op timisi ng op erating m ode ls at hote ls to imp rove eic iency and cre ate savin gs to he lp os et high er st a co sts • Worki ng with rec ruitm ent age nci es to provid e traine d st a on de man d when re quire d • Provid ed n ew hiring re sourc es, d ee pen ed rel ation ship s with job p latfo rms, an d incre as ed awaren es s of vac anci es throu gh social media • In Au stralia , our myFlex in itiative ha s given h otel co lle ague s the l exibili ty to work a cros s any of our hote ls in the c ountr y ’s man age d est ate, sup por ting b oth st a ing level s and work - life balance • Us ing our I HG ® Ac ade my t o prep are young p eo ple for a c aree r in hos pit alit y , su ppo rte d by a new vir tua l lear ning pl atfo rm • Enh ancin g our gl obal p rocure ment o er , with our te ams in ding m ore ways to leverag e cen tral purch asin g and s eek co st-e ecti ve soluti ons fo r owner s. D uring 20 21, I HG proc ureme nt deli vered a gre ater th an 10% c ost re duc tion on $1 .3 bn of sp end a cros s IH G’s hotel an d corp orate s upply chains sp anning 15 countries S ee p age s 19 to 28 , and 3 9 for m ore info rma tion . Strate gic Re po rt 14 IHG | Annua l Repo rt a nd Form 20 F 202 1 3 2 Sustain abi li t y considera tions De mand f or br anded ho t el e x per i ences Gue st s are paying c los er at tention to a c omp any’s comm itment to loo k af ter the worl d aroun d us. A gl obal s tudy c ommi ssi one d by IH G indic ated th at more th an 80 % of co nsum ers n oted th e impo rt anc e of cho osi ng a hotel b rand th at op erates re sp onsi bly , with gue sts willin g to spe nd on avera ge 31% m ore on ac com mod ation th at mee ts this ne ed . Bus ine ss cu stom ers are al so in creas ingly re que sting inform ation ab out su st ainab le ac comm od ation an d mee ting opti ons to help m ake progre ss ag ains t their ow n targe ts. With s takeho lde rs now exp ec ting bu sine ss es to op erate an d grow resp on sibly, a rapidly growin g numb er of org anis ation s are maki ng exte rnal c ommitm ents to dri ve environm enta l and s ocia l chan ge, incl uding j oining th e UN ’s Race to Zero by up gradin g their c arb on emissio ns targets. Gue st s are incre asin gly se ek ing the re ass uranc e of a high - quali ty , safe b rande d st ay as the in dustr y re covers f rom the pa nde mic. At the sa me time, i nde pen dent h otels are re co gnisi ng the ad vanta ges of be ing at tac hed to a b rande d syste m, incl uding l ower dis tributi on co sts, m arketing at s cal e and a powe r ful loyalt y oer th at ca n drive repe at gue st s tays. While m any inde pe nde nt hotel s remain ed cl ose d durin g the pandemic and experien ced numerous ixed co sts, many branded prop er ties we re more ab le to me et dem and fro m quara ntine st ays, key workers and a gl oba l sal es net work a dept a t capturi ng the return of travel. As s uch, ow ner s are incre asin gly lo okin g at conver sion s to join a bra nde d system w ith limite d cha nge s to their pro per tie s, par ticu larly in th e ups cal e and luxu ry s egm ents . Our r esponse • L aunc hing an au tomate d utilit y data c oll ecti on tool a cros s all our h otels gl oba lly to inform ste ps to op erate su stai nabl y • D evelop ing our H otel En ergy Re duc tion Op po rtun ities (H ERO) tool, w hich will b e key to helpin g our hote ls ta rget en ergy an d carbon reduc tions • C ommit ting to a 1. 5°C s cien ce -b as ed ta rget (SBT ), whi ch put s IH G on a traje ctor y to ach ieve net ze ro by 2050. I n addi tion, we have join ed Ra ce to Zero – the U N - end orse d c ampai gn to rally le ade rsh ip and su ppo rt fro m citie s, bu sine ss es an d investor s for a gre ene r , mo re resili ent, n et zero c arbo n future • On t rack to eli minate si ngle -u se min iature bath room am eniti es from our h otels d uring 20 2 2 • Est ablishing an Envir onmental Sus tainability Co mmittee with the I HG Ow ner s Ass oci ation, w hich will c olla bor ate with IH G on en ergy re ducti on in hote l ope ration s • Par tne ring wi th supp lier s to help e nsure th ey share th e sam e resp on sible b usi nes s co mmitme nts as we d o • Worki ng with a la rge numb er of g overnme nt and in dustr y sta kehold ers to h elp provi de sup por t for o ur owne rs throu gh pol icie s and in centive s, su ch as gre en inan cing S ee p age s 29 to 3 5 and 2 2 9 to 23 0 for mo re info rmati on. Our r esponse • C ontinu ed to stren gthe n our ente rpris e with en hanc em ents to our revenu e deli ver y system s, tech nolo gy o er and ope ration al exp er tise • Enri che d our loyalt y oe r with dy namic p ricing fo r Reward nights , with fur the r enh anc eme nts in 20 22 ex pe cted to str engthen member en gagement • Eng aging w ith owne rs of in dep end ent hote ls on p otential conversion s while maintaining brand st andards • Su cce ss ful la unch of up sc ale c onvers ion bra nd voc o, which has fewe r bran d requi reme nts, bu t all the ha llmarks o f a high- quality and safe guest experienc e • L aunc h of Vign ette C oll ecti on, whic h allows ow ner s of high -q ualit y ups ca le and lu xur y hotels to m ainta in the dis tinct ide ntity o f their p rope rti es whil e enjoyin g the be ne it s of a bran ded sy stem • Gi ving gu est s as suran ce throu ghout th eir s tays with ou r IH G® C le an Promi se, wh ere high s tand ards of hygien e have be en deve lop ed with C level and C linic, Ec olab a nd Dive rsey S ee p age s 17 to 2 2 for mo re info rmat ion . Six S en se s Zighy B ay , Oma n Six S en se s Zighy B ay , Oma n Six S en se s Zighy B ay , Oma n 15 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 T rends shapi ng our industry O ur am biti on to d elive r hig h- qu alit y , industry-leading net rooms grow th i n the c omi ng yea rs is und erp inn ed by st rate gic inve stm ent i n our bra nd s, pe op le, sys tem s and s ca le to dri ve grow th a cro ss o ur p ort foli o in hi gh-val ue ma rkets an d se gme nts . Over th e lon g term, with di scip line d ex ecution , th is appr oach supports sustai ned grow th in ca sh l ows and p roit s, whic h can be rei nvested i n our bu sine ss an d returne d to share hol der s. In the s hor ter te rm, with volatili ty rem ainin g a factor a s market s resp ond to a nd rec over from the p and emic, we conti nue to foc us on reb uildin g revenue and p roit b ack to pr ior leve ls, whil e still investin g in grow th. Our fo ur strate gic prio rities h ave bee n des igne d to put th e expan ded b rand p or tfo lio we have built i n rece nt year s at the he ar t of our bu sin ess , and ou r owner s and gu est s at the he ar t of our thi nking . They rec ogn ise th e cruc ial rol e of a sop histi cate d, well- investe d digit al app roach , and en sure we me et ou r growing re spo nsib ilit y to care for a nd invest in our p eop le, an d to make a pos itive die renc e to our co mmuniti es an d plan et. Combined, t he pro jects and program mes that su ppo rt th es e four pill ars ea ch yea r are de signe d to improve p er forma nce an d stimul ate grow th by helpi ng us cre ate com petiti ve advant age, b uild ric her gu est and o wner rela tionsh ips, opera te su stainably and re spo nsib ly , a nd enh anc e a culture th at bring s the b est o ut of our te ams . Our p lans a nd the ir executio n are sh ape d by what we have le arnt thro ugho ut the pan demi c, as well a s the curre nt ec ono mic and s oci al environm ent, a nd ind ustr y tren ds and ch alle nge s as ma rkets rec over . Our s ucc es s and rep utati on are de pe nde nt on our c omm itment to o ur purp ose o f T ru e Ho spit alit y for G ood, u nde rpinn ed by our work pla ce cul ture and c ommitm ent to ope rating in a re sp ons ible an d ethic al man ner. T o geth er , th es e ele ment s ens ure we buil d trust w ith all our s takeh old ers an d work within a c ulture of res pe ct, re spo nsib ilit y and inclusivity , alongside clear engagement with our str ategy an d the ways in whi ch we aim to create a st ronge r busi nes s for ever yon e. S ee ho w the B oard c on sid ere d strat egi c and op erati on al mat ter s on p age s 9 0 to 91. S ee ho w IH G doe s bu sin es s on p age s 36 to 3 9. Ou r st r a t egy BEHA V IOU RS M ove fa st Solut ions f ocused Think return Buil d o ne te a m PRIORITIES Build lo ved and tr usted br ands C u s to m e r ce ntri c i n all w e do Create digital a dva nt a g e C a re fo r our peop le, c om mu niti e s andp lanet OUR A MBITION To d e l i v e r indu s tr y-l e adin g n e t ro o m s g row t h O U R S T R AT E G Y Use our s cale a nd e xperti se t o cr eat e the e x cepti ona l gues t e xper iences and o wner r etu rn s needed t o gr ow our br ands i n the i ndust ry’ s most v alua ble mark ets and se gme nts. D elivered through a cu ltur e th at r etai ns and a ttr ac ts t he best peopl e and embr ac es oppor t uni ties t o positi v ely impac t the w orld ar ound us. OUR PUR POSE T rue H o s p ita lit y f or Good Strate gic Re po rt 16 IHG | Annua l Repo rt a nd Form 20 F 202 1 2011 2021 Lux ur y & Lif e style Premium E s s enti al s S ui te s C ent ral to o ur su cc es s is t he love an d trus t our g ue sts a nd own er s fee l for ou r bra nd s. We foc us o n inves ting i n a por tf olio t hat of fe rs gu es ts excep tion al qu alit y an d expe rie nce s, a nd one t hat r epr es ent s a lea din g ch oic e for owne rs , buil t on a c omm itm ent to in du str y out per form anc e, effe ctive h otel life cycle management and strong r eturns. Key to our strateg y is havin g a family of diverse and attractive brands capable of me eting th e nee ds of a ra nge of g ues ts and own ers . In the p ast d ec ade, we h ave trans forme d our p or tfo lio, addin g six new br ands in th e pa st four yea rs alo ne. This includ es signi icantly strengthening our Luxu ry & L ifest yl e oer fo r gues ts an d owne rs, an d our abi lity to t ake advant age of an inc reas ing num ber o f conver sion opp or tunitie s in wh at is a fragm ente d market. A long side th is, we have c ontinue d to invest si gni ica ntly in the qu alit y , d esig n, ser vi ce an d techn olo gy that un derp ins our e xisti ng wel l-est ablished br ands. Supp or ted by I HG Rewa rds, on e of the indu str y’s bigg es t loyalty p rogram mes , we now have a tota l of 17 bran ds – so me of the m world-fa mous and i ndustry-leading, others gaini ng greate r atte ntion, an d newer o nes sta rtin g out wi th exciting grow th prospects ahead. As the in dus try re cover s and deve lop ment activ ity i ncrea se s, we are foc use d on expan ding all o f them at p ace . PRIORIT Y : Bu i ld l o v ed and t r ust ed br a nds 40 %+ Proportion of our global pipeli ne under construction 9 Brands launched or acquir ed in th e pa st d ec ad e 34 % In cre as e in op en h ote ls (2011 2021) 34 % In cre as e in op en r oom s (2011 2021) A decade of pr ogr e ss Gra nd H otel W ien , Aust ria – sig ned a s a Vi gnet te™ C olle cti on ho tel 17 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy Our s t ra t egy c o nti nu e d Bui ld lo ved a nd t ru st ed br a nds co nti nu e d What w e achi ev ed in 2021 We cele brate d the op enin g of 29 1 hotel s during 2 02 1, incl uding o ur 3,00 0 th for Holiday Inn E xp res s an d mo re impre s sive hotel s for our I nterC ontin enta l® H otels & Res or ts bra nd in its 7 5th ann ivers ar y year . A fur ther 4 37 h otels we re adde d to our glob al pip elin e, with alm ost h alf be lon ging to our powe rhou se H olid ay Inn and H olid ay Inn Expres s brands. In orde r to drive future g rowth, we c ontinu e to bala nce inve sting in o ur existi ng es tab lish ed brands to further enhanc e performan ce and p erce ption, a long side a cc ele rating the expan sion o f newer b rand s in key markets. T o un der pin this , we have investe d in our hotel d evelop ment te ams to a cce lerate signi ngs an d put mo re emph asi s on supp or ting fu nctio ns to fac ilitate grow th, such as investment analysis and legal. Critic al work t his year h as inc lude d a review of our H olid ay Inn and C rowne Pl az a est ates, focu se d on qual ity of s er vic e and p rope rt y con ditio n. The se p ower ful bra nds are key to future grow th, whic h relie s on en surin g con sis tency an d quali ty leve ls me et the expe cta tions of o ur owne rs an d gue sts . Re lec ting sig ni icant i nvestme nt by our owne rs, 8 3 hotel s have com mitte d to improvem ent pl ans o r sco pe s of work that will s upp or t improve d per form anc e and rai se gu est s atis factio n sc ores . In ad dition, 1 51 hotel s were remove d from the e state. T hrough th e outc ome s of the review, togethe r with othe r prop er ty improvem ents a nd new o pen ings over th e pas t four yea rs, in th e Ameri ca s two -third s of the H olid ay Inn es tate and th ree - quar ter s of the Crow ne Pla za e state h ave bee n upd ated. E xcelle nt prog ress w ith newe r brand s conti nue d, with avid alre ady th e se con d large st c ontribu tor to system grow th, vo co now glo bally e st abli she d with a pre sen ce in 25 co untrie s, and S ix Sen se s having in crea se d its sys tem size a nd pip elin e by more tha n half s inc e acqu isitio n in 20 19. Followin g its la unch in Au gus t, our Lu xury & L ifes tyl e collection brand, Vignette Collection, has alrea dy se cure d six prop er tie s, with the irs t ope n by the en d of the yea r . T his new b rand pro vides high-quality independent hotels acc es s to the be ne it s of IH G’s enterp rise, while a llowing u s to oer gu es ts more disti nctive an d uniqu e prop er ties th at would other wi se not it with in our exis ting br ands . The re are aroun d 1.5 mil lion in dep end ently run roo ms in the m arket se gme nts we are targ eting, an d we expe ct to at tract m ore than 10 0 hote ls withi n 10 year s. T o in crea se c onsu mer p erce ption an d awarene ss o f our full f amily of b rands a cros s Luxur y & Life st yle, Pre mium, E ss ential s and Suite s, we ado pted a n ew IH G Hotel s & Res or ts masterbr and mar ke ting approach , which dr ove impro ved brand a war eness and pr eference during th e year. Lo yalt y promo tions in key markets a nd travel hub s were al so inc reas ed, unde rpinn ed by travel low dat a. In D ece mbe r , we we re proud to win fo ur awards at the 2 8th World Tra vel Awards, including World’s Leading Bu sines s Hotel Bran d 202 1 an d World’s Lea ding H otel Bra nd 202 1 (Inter C ontine ntal ); World ’ s Lea ding Premiu m Hotel B rand 2 02 1 (voco); and World ’ s Lea ding B udg et Hote l Bran d 202 1 (Hol iday Inn E xp ress). What’ s to come Followin g the co nclu sion o f our Ho liday In n and C rowne Pla za revi ew in 202 1, we exp ect our avera ge group re movals rate to re duce a nd for net sy stem si ze grow th to subs equ ently acc ele rate, re lec ting hun dred s of plan ne d ope ning s and in creas ing deve lop ment activ ity a s market s contin ue to recove r . With a p ipel ine of alm ost 1, 80 0 hotel s, repre senti ng more th an 30 % of our c urrent est ate, and a m ore roun ded p or tfo lio of attra ctive br ands , we are con id ent in o ur abilit y to de liver in dustr y- lea ding ne t system size grow th in th e comi ng year s through the co ntinue d expa nsio n of our e sta blis hed bran ds and s ca ling of ne wer add ition s. Not able o pe nings in 2 02 2 inc lude o ur ir st Atwe ll Suite s™ prope rtie s, K impton® H otels & Res taura nts mak ing it s deb ut in main land Chin a, and a lag ship Re gent ® hote l in Hong Kong. Key factors i n delive ring ou r expe cted grow th include capita lising on more con version opp or tunitie s within th e Luxur y & Life st yle spa ce. Togethe r , th e upsc ale a nd luxur y se gment s now rep rese nt 32 % of our sys tem size an d 42 % of our pip eli ne. 25 % Of o pe nin gs i n 202 1 wer e co nvers io ns voc o Bo nnin gton D uba i, UAE HUALUXE® N anj ing Yangt ze Rive r , Chin a Strate gic Re po rt 18 IH G | Annua l Repo rt a nd Form 20 F 202 1 man age d est ate, sup por ting b oth st a ing level s and work-life b alanc e. We also l aunch ed o ur Jou rney to GM t ale nt acc ele ration p rogra mme to sup por t tho se mak ing the tra nsitio n into Ge nera l Man age r role s, and s trength ene d how we id entif y an d devel op future t alen t as our e sta te expand s. As de man d incre ase s in our h otels, we a re providin g our own ers an d team s with cl ear acti on pla ns, train ing and s upp or t for evolvi ng brand standards and proce dures to meet changing guest e xpectations. Rising costs due to in latio n in som e market s have be en met wi th ope ration al e icie ncy changes and an expa nde d proc ureme nt oer, wit h o ur sc ale an d exper tis e he lping d eliver n ew sol ution s that res ulted in n et year-o n-year savin gs of mo re than 10 % for own ers ac ross the $ 1.3 bn of sp end m ana ged by I HG. Thousands of o wners and operators also join ed our we bin ars durin g the yea r on topic s inc luding v irtu al sa les c alls , evolvin g foo d and beve rage, a nd the I HG ® Way of Cl ean p rogramm e. In l ate 202 1, we collabo rated with the Professional Convention Man age ment A ss ocia tion to oe r hotel team s a new Hy brid Events for H otels & Venues I ntro Ce rti ic ate Co urse, to h elp them succe ssfully par tner with planners to hos t corp orate an d soc ial hybri d events . We have capture d de mand th rough t ailore d marketing c amp aigns a nd prom otion s, supp or ted by re sourc es su ch as P R toolk its and n ew ser vi ces w ithin IH G’s Revenu e Man age ment fo r Hire pro gramm e, which help s hotel s ide ntif y and ac t on revenu e opp or tunitie s usi ng bus ine ss inte lligen ce and d ata. T o e nsure o ur co rporate te ams are th inking like our owne rs, we a lso invite d owne rs and Ge nera l Man age rs (GM s) t o sp eak at re gion al townhal ls and s hare the ir pe rsp ecti ves during 2 02 1. For our guests , as m ore pe opl e return to travel, we are focu se d on en suring th e se rvi ce s, tech nolo gy an d experi enc es we cre ate me et evolvin g expe ctati ons . Cleanline ss and safety stan dards have remaine d very impo rta nt, underpinne d by our IH G Way of Cle an pro gramm e and IH G Cle an Prom ise. T he st ay experi enc e has c ontinu ed to evolve, i nclu ding the rein tr oduction of buet breakfasts a nd social hour s for bra nds in c er tain m arkets, a nd we oer c lea r gue st co mmunic atio n on what to expe ct durin g their h otel st ay at this time . Duri ng 202 1, we introd uce d mo re loyalty oer s for IH G Reward s memb er s, exte nde d the pa use o n point s expirati on and inte grate d sel ec t Six Se nse s res or ts into the p rogram me. W e know t hat to s tay su cc es sfu l we ne ed to p ut ou rse lves i n the s ho es o f our l eis ure g ue sts , bu sin es s cu sto mer s an d owne rs in a ll we do. Th is is h ow we cre ate un rivall ed s er vic e an d tail ore d expe rie nce s in o ur hot els , an d attrac tive in vestme nt oppor tunitie s with str ong re turn s for ou r owne rs . Our re spo nse to th e pan demi c has ill ustrate d more th an ever our d es ire to go the ex tra mile t hrough fast, though tful and eectiv e sol ution s, built o n liste ning to wh at’s ne ede d. Wheth er it ’s food an d bever age, cl ean line ss, hybrid m eetin gs or loyalt y en hanc em ents for g uests, or mor e eicient opera tions, recru itmen t supp or t or pro curem ent sol ution s for our own ers , we’ re working w ith a cus tomer-c entric mi nds et to ens ure IH G and o ur bran ds st and ou t as a prefe rred choi ce in th e market. What w e achi ev ed in 2021 Many of o ur hotel owners repre se nt sm all, individ ual busi nesses and as t he reco very stren gthen s, we’re providing the o per ationa l and c omm ercial s upp or t they ne ed to drive performance, alongsi de seeking opportunit ies to grow fur ther w ith them . On e of the big c halle nge s of the p and emic for our industry is rec ruiting and retaining tal ent to me et returnin g gue st de mand . IH G has p rovide d a numb er of too ls an d sol ution s for hotel s, inc luding n ew hirin g reso urce s, de epe r relati ons hips wi th job plat form s, and t argete d so cial m edia cam paign s. In Au strali a, our myFl ex initiative has g iven hote l coll eag ues th e lexi bilit y to work ac ross a ny of our hotel s in the c ountr y ’ s PRIORIT Y : Cus t omer ce n t r i c i n al l w e do 19 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy Guest engag ement Our a bilit y to oer a ra nge of di erenti ated an d attra ctive bra nds wi th rich st ay expe rienc es, g reat valu e, lexi bilit y and s trong loyalt y rewards are key to attra cting gu est s to IH G bran ded h otels an d drivin g com merci al pe rfo rmanc e and reve nue. What i mpacted them in 2021 Engagement Outc omes • Book ing , can ce llati on an d loyal ty lexi bilit y a s a res ult of l oc al pa nde mic tr avel re stri ctio ns • Covid -19 rel ate d hea lth an d saf ety p rotoc ol s • E volvin g corporate meeting requireme nts ble nd ed wi th hybr id work ing a nd le isu re • Quali ty o f the gu es t stay a nd bo ok ing experienc e, including increase d digitalisation • Locat ion of h otel s and f aci litie s oe red • Prefere nce f or hote ls wi th tru ste d soc iet al and g ree n cre dent ial s • Guest surveys • Nine c ont act c entre s su ppo r ting gu es ts in seve n co untrie s, w ith 2,700 s al es an d se rv ice agents speaking 12 lang uages • Soci al media engagement • Pr ogramme of targeted sta y campaigns, loyal ty p romot ion s and awa ren es s of st ay experi ence impr ov ements • Board and Executive Committee reviews of gu est p rop os ition a nd loya lt y oe r as pa rt of the B oa rd’s co nsi de ratio n of str ateg ic and operat ional matt ers • Consumer surveys focused on a ttitudes to be ing m ore env ironm ent all y and s oci ally co nsc iou s whe n trave lling , and th e pan de mic’s imp ac t on ap peti te to travel • Ext end ed p oint s expi ry fo r loyal ty m emb er s, and incr eased master brand mar ke ting and st ay prom otio ns, l ead ing to up lif t in b rand awaren es s • Contin uati on of I HG Way of C le an pro gra mme and ev olut ion of M e et with C on i den ce pro gram me for c orp ora te clie nts • Enhan ce d cus tome r se rv ic e supp or t, inc ludi ng au tomat ion to s pe ed up r esp on se time a nd di rec tion to th e righ t team • Guest exper ience enhan cements, i ncludin g renov ations , new designs a nd simpler roo m rates • Open ing of 2 9 1 hotel s an d laun ch of o ur 17th brand, Vignette Collection • Cont inued impr ov ement in Guest Satisfact ion Ind ex, w ith sc ore s of 10 0 or b et ter fo r ea ch bra nd an d outp er for ming p ee rs • Laun ch of J ourn ey to T omo rrow 10 -ye ar responsible business plan S ee ou r gue st lo ve KPI o n pa ge 52 an d how th e Bo ard ha d reg ard for g ues ts a s par t of th eir c on sid erat ion of s trate gic a nd op era tion al ma tte rs on p age s 90 to 9 1. Suc h step s have dee pe ned g ues t relati onsh ips, wi th Reward Nig ht book ings large ly rec overing to pre - pan demi c leve ls and p ar ticipa tion rates o f our high er tie red mem ber s excee ding 2 019 l evels. A f ur ther nine mi llion m emb ers al so join ed th e progr amme, w ith reco rd enrol ment s on our we b and m obil e chann els . For co rporate g ues ts, ‘ Welc ome B ac k to Bu sine ss’ c amp aigns we re launc he d, with our S ME p rogramm e, IH G Bu sine ss Ed ge, incre asin g its ac co unts by 4 4% in the yea r . Our M ee t with Co n iden ce pro gramm e for busi ness customers w as also e xpanded to inclu de new ra pid on - site testi ng for large eve nts at ou r US hote ls, whil e a new Point s + Perks oe r makes b oo king s even more rewardin g. In N ovem be r , I HG re ce ive d the Ste lla Award gol d me dal for B es t Hotel Cha in for the exce ption al me eting expe rien ce provid ed thro ugh the p rogram me. Re lec ting our o ngoi ng cus tomer-c entric app roach, o ur Gu est S atisf actio n Ind ex conti nue d to improve, achi eving s core s of 10 0 or be tte r for eac h bran d and outperfor ming peers. T o c ontinu e improvin g gue st sati sfac tion sc ores an d drive revenu e for our own ers , upd ated gu est ro om and p ubli c spa ce des ign pro gramm es are on goin g acros s many of ou r brand s, inc ludin g our Formul a Blu e con cep t at Holi day Inn E xpre ss a nd next -generation designs for Holi day Inn, Can dlewo od Su ites® a nd St aybridg e Suite s®. What’ s to come Our I HG Rewa rds loyalt y prog ramme i s critic al to our b usin es s and ou r future grow th. Our m emb ers dr ive around h alf of all ro om nights g lob ally ea ch year a nd sp end 2 0% more in o ur hotel s than n on- mem ber s. They are al so nin e time s more likel y to bo ok dire ct, whi ch is mo re pro itab le to our own ers . T o d ee pen re lation ship s with new a nd existi ng mem ber s, and d rive more re peat bus ine ss for o ur owne rs, we will tra nsfo rm our loyalt y oe ring in 2 02 2. In J anua ry 2 02 2, we anno unc ed a irst p has e of new tie rs an d bon us- po int earni ng stru cture that w ill allow our me mb ers to ea rn more p oints , more quick ly than eve r befo re. La ter in the ye ar , det ails of th e full pro gramm e will co mme nce, incl uding n ew and e nhan ce d ben e its, m ore expe rien ces a nd more re dem ption o ptions , all powe red by our n ew IH G mob ile ap p, whic h goe s live in 20 22 . As the n ew prog ramme ro lls out , we’ re tak ing ste ps to ea se the p res sure and disr uption o n our bu sy hotel te ams by providing training and resource s, alongsid e care fully ma nagin g co sts for ow ner s. He lping o ur owne rs man age c ost s to build, ope n and o per ate is a top prio rit y , so we conti nue to work c los ely with th em on sol ution s to increa se reven ue alo ngsi de delivering more eicient and sust ainable ope ration s. Key ele ment s to this inc lude a conti nue d focus o n our c entral p rocure ment services and reduci ng ener gy cost s. As we foc us on ac ce lerati ng grow th, we will al so proa ctive ly man age ou r glob al devel opme nt pip elin e and he lp sup por t our owners to ensu re t hey can progr e ss pro jects as qui ckly a s pos sib le. Our s t ra t egy c o nti nu e d Cust omer cen tr ic i n a l l w e do co nti nu e d Strate gic Re po rt 20 IHG | Annua l Repo rt a nd Form 20 F 202 1 Hot el o wner en gagement IH G’s succ es s relie s on ho tel owne rs inves ting in our b rand s. T o remain a ttra ctive, we foc us on th e brea dth of our b rand por t folio an d ee ctive nes s of our l oyalty p rogram me, ente rpris e contri butio n, tech nolo gy , procure ment a nd s ales o erin g. What i mpacted them in 2021 Engagement Outc omes • Abilit y to ca pture a nd dri ve dem an d to the ir hote ls • E volving brand standards • Labour shortages, supply chain and continued budgeting constrain ts caused by the p and emi c • Exp and ed b rand p or t folio w ith la unc h of Vi gne tte C oll ec tion • Direc t me etin gs wit h CEO an d regi ona l CEO s • IHG Owners Association collaboration • Portfolio and individual hotel r eviews coveri ng operat ional, strat egic and industry tr end u pdat es • W ebinars, regular newsletters and bulletins • Hotel li fecyc le an d in anc e tea m sup po rt • Collabora tion with govern ments and industry to sup po rt re cove r y • T ailored mark eting and pr omotions, supported by new d ata - drive n res ourc es a nd se r vic es that h elp h otel s qui ckly i de ntif y an d act o n revenue op por tuniti es • Brand s ta nda rds evol ved o r rem oved to cre ate mo re e ici ent an d ee cti ve op erati on s • Net yea r - on -year p rocu rem ent s aving s of ove r 10 % for own er s acro ss $ 1. 3bn s pe nd ma na ged by IH G • Increased training, guidanc e and recruitment sup po rt fo r hote l tea ms • Ne xt-gen f ormats and r efur bishments being app lie d to hote ls un de r bran ds in clu ding Ho liday I nn E xpr es s, Ho lid ay Inn, C an dlewo od Sui tes an d St aybri dge S uite s • 83 hote ls c ommi tte d to imp rovem ent p lan s as a res ult of th e Ho lid ay Inn an d Crow ne Pl az a revie w, and 151 ho tels ex ited t he e sta te Se e ou r net ro oms s upp ly, signin gs, gro ss re venu e and e nterp ris e co ntrib utio n KP Is on p ag es 50 a nd 51 an d how th e Bo ard ha d reg ard for h otel own ers a s par t of th eir c on sid era tion o f strate gic a nd op er ation al ma tte rs on p ag es 9 0 to 91 . Visit ww w.owne rs.o rg for fu rth er i nform atio n abo ut th e IH G Own er s Ass oc iati on. Hote l owner s cho ose to wo rk with IH G be ca use of th e trust th ey have in our b rand s and o ur track re cord in d elive ring stro ng returns . Why hote l owne rs c hoo se to wo rk with I HG Strength of brands The b rea dth an d de pth of o ur bra nd portfolio delivers str ong owner ROIs Strong lo yalty progr amme and enterpris e contribution 7 4% of revenu es d elive red to hote ls by I HG ’s enterp ris e Digital adv antage Our c lou d- ba se d IH G Co nc er to platform, including a new G uest Reservation Sy stem, provides a str ong in terface for guests and owners Inve stm en t in ho tel li fecyc le management and operat ions We have inve ste d in ex tens ive te chn olo gy , syste ms a nd pro ce ss es to s upp or t performance, increase eiciencies a nd drive re turn s for ou r owne rs Procure ment We use o ur sc al e to redu ce c os ts for owners with procur ement prog ramm es f or h otel goods, services and constructi on Sustainability tools & e xpertise We have deve lo pe d too ls, tra inin g and p rogr amm es to s upp or t hote ls an d provi de b ett er dat a and i nsi ghts to e nab le th em to red uce t hei r ene rgy, waste an d wat er consumpti on Global sales organisat ion We have deve lo pe d a le adin g glo bal s al es en terp ris e to drive h ighe r qu alit y , lowe r co st reve nue to o ur hote ls 21 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy O u r s trate g y c o ntin u e d se amle ssl y sel ect ro om ch arac teristi cs to tail or the ir stays wh en b ook ing with u s, with pric es ad justin g bas ed o n the at tribute s chosen. In parallel , the technology enables owne rs to gen erate ma ximum val ue from their h otel ’ s uniqu e feature s. This wo rk forms a key el eme nt of a multi -year co mmitme nt to trans form the bo okin g and st ay exper ienc e. In 20 21, we made signi icant prog ress in streamlining and c larif yin g the rate optio ns availa ble to custo mer s acros s our b rand s, in favour of a simp ler a nd fas ter bo oki ng proc es s that is c apa ble of a cc ommo dating value- added experien ces. T o fur ther enhance the digital experience for our g ues ts, we are c ontinui ng to move dat a and ap plic ations to th e clou d, and we are usi ng con sum er ana lysis o f thos e se arching fo r stays an d travelling w ith us to create highly personal and targeted guest promotions. Data -driven analysis is also bei ng app lied to gu es t fee dbac k so that i t inform s our de cis ion ma king an d ens ures we’ re focu sed o n area s mos t likely to improve s atisfa ction s co res. T o e nhan ce ou r custo mer s er vic e, arti i cial intellig enc e (AI) voic e -ac tivated p latfo rms are answe ring an d routing c ustom er c alls to the mo st app ropria te supp or t area, wh ich is inc reas ing s atisfa ction s core s and l ead ing to highe r average d aily rate s on bo oki ngs. A digit al co ncie rge chatb ot ha s als o bee n introdu ce d on ihg.c om an d the IH G mob ile app to fur the r as sis t custo mer b ook ings and communication. In light o f the cha llen ges of th e pan dem ic, IH G has a lso tra nsform ed it s tech nolo gy to help a round 70% o f spe cial ists i n our Philip pine s co ntac t centre s work rem otely , and tra nsitio n all op eratio ns at ou r Mexic o Cit y co ntac t centre to rem ote workin g. What’ s to come We’ve design ed a c lear ro adm ap of inv e stments and enha ncements needed over the c oming ye ars to de liver an eo rtl ess ly sm ooth, exce ption al gue st expe rien ce at ever y touc hpo int – pre -s tay , during -s tay and p os t-stay – with th e aim of keepi ng IH G hotel s ir st ch oice fo r gues ts. Havin g com plete d impo rt ant foun datio nal work in 20 21, we w ill laun ch the n ext gen eratio n of our I HG m obile a pp in 20 2 2 to fur ther s trength en our m obil e pres enc e and e nhan ce our l oyalty o er . Usin g data insi ghts an d new de sign s, it will p rovide a rich er expe rien ce an d introdu ce lot s of new feature s, fas t. For gue sts , the app ke eps th e mana gem ent of st ay reque sts a nd feature s in on e plac e, create s a sp ace to rec eive p ers ona l and time ly marketing o ers a nd will e nabl e new be ne its a s par t of a tran sform ed loyalt y oe r . For owne rs, a ric her gu es t use r expe rienc e is expe cted to dr ive revenue thro ugh inc reas ed direc t bo okin gs to our hote ls, hig her l oyalty engagemen t and incr emental spend during stays. In 20 22 , we will als o co mple te room inventor y as ses sm ents o n the rem aining h otels in o ur est ate in sup por t of ro lling ou t attrib ute prici ng on ou r direc t chann els . I n a world w her e we all exp ec t sea ml es s expe rie nce s, o ur di gita l ca pab iliti es fo rm cru cia l as pe cts o f our of fe r for gu es ts an d owners. F or guests, our brand proposition is a s muc h ab out o ur bo oki ng exp erie nc e, mark eting and mobile app f unctionality , as it i s ab out t he hot el de sti nati on an d ou r bra nd h allm arks . For owne rs , our of fe r is as m uch a bo ut ou r abil ity to c rea te revenu e advantages thr ough data and technology , as it i s ab out o ur sc ale a nd exp er tis e. We und ers tan d th is an d are inve stin g in the technology , tools and solutions that ma ke the bi gge st d iff ere nce t o our g ue sts , own ers a nd t eams. Our c loud -b ase d pl atform , IH G Con ce rto, is criti cal to th e work we’r e doin g in this spa ce, s er ving a s the foun dation fo r much of how we’re creating di gital a dvant age by ble nding c ore hote l app licati ons into on e se amle ss, p ower ful p latfo rm cap abl e of enh ancin g the gue st, ow ner a nd co llea gue expe rien ce. It g ives I HG the a bilit y to add regul ar rele as es with n ew func tion alit y at pac e and s cal e, and e nsure s we conti nue to evolve how we en rich th e gues t stay an d me et new exp ect ation s, alo ngsi de driv ing strong er return s for our ow ner s. What w e achi ev ed in 2021 Wor king collabora tiv ely wit h our owners in rec ogniti on of the evo lving tra ding an d ope ration al pre ssu res fac ed du ring the pan demi c, we mad e critic al prog res s on severa l fronts in 2 02 1 to enric h the gue st experience and drive per formance for our hot els. Duri ng the yea r , 5,3 0 0 hotels c omp lete d det aile d room invento ry a ss es sme nts to prep are for at tribute p ricing p owere d by our industry-leadi ng Guest Reservat ion Sy stem (GRS). Co mbin ed with o ther b ook ing l ow improvem ents , this is th e impo rt ant ground work req uired to all ow gue sts to PRIORIT Y : Cr ea t e di gi ta l ad v an tage 5, 3 0 0 Hotels completed r oom in ven tory assessments in 20 21 a he ad of r oll ing o ut at trib ute p ric ing on our direct channels 22 IHG | Annua l Repo rt a nd Form 20 F 202 1 Strate gic Re po rt C aring for our people, communities and planet has always b ee n at the h ea rt of h ow we work , but t he na ture of a n ever- evolvin g social and en vironmental landscape means we con tinu ally ex plo re how we c an ma ke a po siti ve dif fere nc e as we op era te and gro w ou r busi ness. The Board’ s Responsible Business Co mmit tee revie ws IH G’s resp ons ible business objecti ves and stra tegy and advises the B oard on o ur app roach to di versi ty , equ ity & in clus ion (D E&I), ou r impa ct on lo ca l com munitie s, res po nsib le proc ureme nt in our su pply c hain, p rogram mes o n human rights a nd mo dern s laver y , o ur env iron mental impact, and our eng agement with employees. T o g uide ou r actio ns an d drive prog ress , in 202 1 we la unch ed our 2 03 0 Jou rney to T o morrow pl an, a se ries of a mbitio us com mitme nts to cre ate pos itive cha nge for our p eo ple, c ommun ities a nd pla net, align ed to our p urpo se of True Hos pita lity for Go od a nd to the U N Sus tain able Deve lopm ent G oals . We know the a ction s we take aroun d the environ ment , our pe opl e and s ocie ty are clo sel y followe d by our investo rs and oth er sta kehold ers a nd are the refore criti cal to ou r repu tation a nd grow th, and we h ave focus ed our e or ts on th e area s where we fe el we can m ake the greate st imp act . Re lec ting the cha nging wor ld aroun d us, e ach c ommitm ent is de sign ed to en sure IH G grows re spo nsib ly and in ways th at ens ure travel ha s a bea utiful future for eve ryo ne. Se e key mat ter s dis cus se d by th e Bo ard on p age 9 1 an d the Re sp ons ibl e Bu sin es s Co mmi tte e Rep or t on p age s 10 0 an d 101 . Se e our Re sp on sib le Bu sin es s Rep or t at www.ihgplc. com/ responsible-business PRIORIT Y : Ca r e f or ou r people , co mmuni t ie s and plan et Our 1 0 - y ear r e sponsi ble busi nes s pla n Our g oal is to h elp sh ape th e future of re spo nsib le travel tog ethe r with tho se wh o stay , work and par tne r with us . We will sup por t our p eo ple an d make a po sitive di eren ce to lo cal c ommu nities , while p rese r ving ou r plan et ’s beaut y and di versi ty… not just tod ay but lo ng into the futu re. Champion a dive rse cultu re whe re ever yon e can thrive Imp rove the li ves of 30 mi llion pe opl e in our communities aroun d the world Redu ce ou r ene rgy use a nd ca rbon emi ssio ns in lin e with cli mate sci enc e Pionee r the transformation to a minima l waste hospit ality industr y Conserve wa ter and h elp se cure water ac ce ss in thos e area s at greates t risk EM POW ER OU R PEO PLE TO HE LP S HAP E THE F UT UR E OF R ES PO NS IB LE T R A VEL 23 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy Our s t ra t egy c o nti nu e d Car e f or ou r pe opl e , com mu ni t ies and pl ane t c o ntin u e d What w e achi ev ed in 2021 People engagemen t We have a numbe r of forum s availab le for emp loyees to s hare the ir thou ghts, in clud ing emp loyee res ource g roups, a d es ignate d non - exec utive di rec tor for wo rk forc e engagemen t, and our emplo yee en gagement survey , known as Colleague HeartBeat, whic h allows p eop le to expre ss the ir view s on key asp ect s of work ing at IH G. In our 2 02 1 sur vey , ou r overall em ployee eng age ment s tood at 8 5% , whic h saw IH G agai n acc redite d as a Ki nce ntric Gl obal B es t Empl oyer . T he sur vey highl ighted are as tha t we can s trength en fur th er , in clud ing the impo r tanc e of illing jo b vaca ncie s and advo catin g e icient a nd e ective ways of workin g. Actio ns were t aken in b oth thes e area s, incl uding n ew hiring to ols a nd a conti nue d focus o n improvi ng proc es se s, acc ount abilit y an d integrati on amo ng team s. The se are as will re main a p riorit y for 20 2 2. Attracti ng, de veloping and re taining ta lent T o a chieve ou r ambiti ons, we k now we ne ed to attra ct, d evelop a nd retai n a divers e and tal ented wo rkfo rce. Th is relie s on ou r abilit y to develo p an op en and i nclu sive cultu re that prom otes ca reer d evelo pme nt and e qual opp or tunit y , a nd rec ogni ses t he imp or tan ce of wellb ein g in the work plac e. T o a ddres s the c halle nge s in at tractin g tal ent, we h ave develop ed n ew hiring reso urce s and up date d our po licie s to spe e d up the tim e it take s to proce ss a pplic atio ns, work e d wit h jobs pla tforms, schools and NG Os to un ear th fres h tal ent, an d run recru itmen t days and fai rs. O ur Ea rly Care er s and I HG ® Ac ade my program mes al so provi de work exp erie nce, inte rnsh ips an d gradu ate opp or tunitie s to thos e se ekin g a care er in hospitalit y . We are irml y com mitte d to investin g in our emp loyees a nd this ye ar at a co rpor ate level we emb ed ded re gular t ale nt pla nning an d devel opme nt co nversati ons to e nsure we are buil ding a stro ng pip elin e for the fu ture to deli ver our am bition s. Pe opl e man ager s have con tinue d to hold q uar terly ch ec k -ins with the ir team s to disc uss p er form anc e and p ers ona l develo pme nt, sup por te d by an ups killin g of HR p ar tner s through b es poke tal ent ma stercl ass es . The re is als o a strong focu s on reward, with o ur robu st govern anc e app roach ai med a t having fai r and co nsi stent reward and re co gnition p racti ce s acros s our employ ee populati on. In our h otels , actio ns in 20 21 in clud ed enh ance me nts to our le arnin g and devel opme nt prog ramme fo r existin g GM s, the l aunc h of a new J ourney to G M tal ent ac cel eratio n progr amme, a nd the impl eme ntatio n of a new h otel tal ent People Champion a div e rse cultu re whe re ever yone c an t hrive Our 2030 commitments • Ach ieve gen der b alan ce and a d oubl ing of u nder -represent e d gr oups across our lead ership • Cu ltivate a culture o f inclu sion fo r colleagues, owners and suppl iers • Sup po rt all c oll eagu es to pri oritis e their ow n wellb eing an d the we llbei ng of othe rs • Dr ive resp ec t for and a dvanc e human rights Our p eo ple are fu ndam enta l to IH G achiev ing its p urpo se and s trategi c goal s. I HG ’ s bus ine ss mod el me ans th at we do not e mpl oy all col lea gues . We directl y emp loy indiv idual s in our c orp orate o ice s, res er vation c entre s, and managed, owned, leased and managed lea se ho tels. H owever , not all in divid uals in managed, o wned, leased and managed lease hotel s are direc tly emp loyed, an d we do not emp loy any indivi dual s in franc hise d hote ls (nor do we co ntrol the ir day-to -d ay ope ration s, po licie s or pro ce dures). People engagemen t De liver y of our p urpo se to provi de T rue Ho spit alit y for G oo d and the s trategi c priori ties th at drive future s ucc es s relie s on our pe opl e and our a bilit y to maint ain and evo lve an en gage d, dive rse an d incl usive cu lture whe re care ers c an grow. What i mpacted them in 2021 Engagement Outc omes • Attrac tive nes s of wo rkin g in th e hos pit alit y ind ustr y d uring t he pa nde mic • Sta ing l evel s and a bili ty to at tra ct an d retain talent • IHG ’s strate gy an d app roac h to grow th an d fut ure success • IHG ’s appro ach to D E& I • IHG ’s appro ach to hy brid wo rki ng and w ellb ein g • IHG ’s appro ach to c lim ate cha nge a nd wi der envi ronmen tal issues • E mploy ee engagemen t su rvey • CEO and re gio nal l ead er ship c all s with Q & A • V o ice o f the Em ploye e fe edb ack s es si ons • Employ ee communic ations including intranet st ories, newsletters, blogs, videos, podcasts and in teract ive sessions on strategic pri orities • ERGs re pre sen ting et hnic m ino ritie s, ge nd er , LGBTQ +, disa bili ties a nd oth er e mpl oyee s • Quart erly perfor mance, devel opment a nd wellbeing che ck-ins • Collabora tive sessions including hacka thons • Incre ase d fo cus o n rec ruitm ent a nd ta len t deve lop me nt at hote l an d cor por ate leve ls • Cont inuati on of employ ee engagement in co mp any prio riti es an d cul ture • P rogress aga inst and continued priorit isation of D E&I c omm itme nts , inc ludi ng co ns cio us inclusio n training and r efreshe d DE&I policy • Contin ue d and i ncre as ed fo cus o n em ploye e well be ing, in clu din g enh anc ed p aren tal l eave po lici es in s om e market s an d upd ated G lo bal Flexible Working Guidelin es • R einstatement of bonus and ann ual salary inc rea se for o ur c orp orate e mpl oyee s • IHG n ame d a Ki nc entri c Glo ba l Be st Em ploye r , with 85% empl oy ee engagement Se e ou r emp loyee e ng age men t KPI o n pa ge 5 3, how th e Bo ard h ad reg ard fo r pe opl e in the ir bo ard a nd rem une ratio n de cis ion s on p age s 91, 9 2, 107 , 10 8, 112 an d 114, Voic e of the E mpl oyee di sc los ure on p age 1 01, a nd st ate men t on em ploye e en gag eme nt on p ag e 22 7 . Visit www.ihgplc. com/ responsible-business for fur th er info rma tion a bou t our p eo ple c om mitm ent s. Strate gic Re po rt 24 IH G | Annua l Repo rt a nd Form 20 F 202 1 system i n cer ta in markets , which m atche s on -prop er t y tale nt to the mo st rel evant opp or tunitie s acro ss ou r est ate. S ee ou r GM t ale nt ac ce ler atio n prog ramm e on p age 1 9, work pla ce e nviron men t on pa ge 37 and wor kforce r emunerat ion considerat ions on p age s 107 , 10 8, 112 an d 114. Wellbeing In rec ogni tion of a s hif t to hybrid work ing as a resul t of the p ande mic, we have provi ded emp loyees w ith guid anc e and res ource s to help t hem a dopt a b alanc e of rem ote and o ice work ing tha t supp or ts in dividu als an d the de liver y of I HG ’ s key prioriti es. E mployee sur veys have als o be en run to un der stan d expe cta tions a nd he lp inform ou r appro ach. In 20 21, we up date d our G loba l Flexib le Wor king Guideli nes with hybr id w orking princ iple s, refre she d our U K Flexi ble Worki ng Policy and highlighted lexible workin g opp or tunitie s within j obs . We’ve also ta ken step s to ensu re a bes t prac tice a pproa ch to mana ging t alent a nd pe rfo rman ce in a hybrid e nvironme nt. Duri ng the yea r , we provi ded e mploye es with ac ce ss to me ntal h ealth a nd wellb ein g guid eline s and we bina rs, an d contin ued Rec harge d ays and Focu s Fridays, whe re we tr y to avoid st andin g mee tings wh ere pos sible to cre ate som e undis turbe d time for em ployee s. Pare ntal l eave po licie s were als o evaluate d acros s a numb er of l oc ations and si gni ica nt enh ance ment s were ma de to our U K pater nity l eave po licy and U S pare ntal leave p olicy. W e will co ntinue to evalu ate and review ou r poli cies to e nsure th ey supp or t pe opl e to be at the ir be st. For hotel teams, mon thly newsletters with well bein g guid ance we re sha red, an d loc al initi atives we re also e st ablis he d in some markets. Dive rsi ty , eq uit y & inc lus ion (D E&I) As a glo bal c omp any , it ’s impor ta nt to us that our busi ness relects our people, our guests and th e nation alitie s, cul tures, eth nicitie s, sexua l orient ation s, ba ckgrounds a nd be lief s that they re pres ent. T his co mmitm ent is emphasised throughout our global hiring guid eline s and i nitiative s, suc h as our conscious inclusion t rainin g, and is backed up by our G lob al Dive rsit y , Eq uit y , In clus ion and Equ al Op por tuni ties Po licy , which was refre she d in 20 21 an d set s for th our com mitme nt to promoti ng an inc lusi ve envir onment that v alues and considers diver se at tribute s, pe rsp ec tives, c ultures and experience s. Rec ogni sing th at we still have p rogres s to make as a b usin es s, our G lob al DE &I Bo ard and re gion al DE &I co uncil s work toge ther to mon itor progr ess against commit ments, dis cus s eme rging tren ds and fe ed bac k, an d ide ntif y future foc us area s. O ur work in thi s spa ce revolve s aroun d a DE &I frame work spa nning th ree co re areas : streng theni ng a culture of i nclu sion; in crea sing th e divers it y of our l ead ers hip and t ale nt; an d put ting the right de cis ion -ma king p roce ss es arou nd our ac tion s. Str eng the nin g a cul ture of i ncl us ion In 20 21, c orpo rate emp loyee s comp lete d more th an 10,00 0 hou rs of co nsc ious inclusio n training, promoting education and awareness, and sparking impor tant team con versat ions. As pa rt of o ur emp loyee en gag eme nt sur vey , we al so imp lem ented a n inclu sio n index i n 202 1 to track p erce ption s of culture and b ehavi our . The in dex showe d that nine o ut of 10 c orpo rate, res er vation an d man age d hotel e mploye es fee l IH G has a n incl usive cu lture, altho ugh p erce ptions we re les s po sitive am ong s ome e thnic min orit y group s. Thi s is so methin g we reco gnis e and is re lec ted in o ur com mitme nt to inclu sion and a chievin g more dive rse re pres ent ation at all leve ls of our b usin es s. Ce ntral to the c onvers ation aro und D E&I and o ur progre ss ion as a b usin es s are our Em ployee Re sou rce Grou ps (ERG s), whic h contin ue to expan d and now h ave 1,3 00 m emb ers gl oball y . T hes e group s repre sent e thnic min oritie s (BE RG US, EMb race E ME A A), ge nde r (Lean I n) , LGBTQ+ (Out and O pe n, US an d UK ), dis abil ities (DA WN U S and U K), an d Ea rly Care er s (HY PE Gre ater Chi na, US a nd U K) an d have be en ins trume ntal i n driving e mpl oyee eng age ment an d ce leb rating key events, incl uding I nternatio nal Wom en’s Day , Glo bal I nclu sion & Well bein g Week , and Pride. Ou r Diver sit y , Equi ty an d In clu sio n Poli cy IH G is co mmit ted to pro moting a c ulture of inc lusio n whe re ever yone fee ls s afe, resp ec ted an d value d. Our p olic y appli es to anyone wh o is direc tly emp loyed by IH G an d col lea gues w ho work in m ana ged h otels . Be low is a su mmar y of ou r com mitme nts: • Acti vely sup po rt di versi ty an d inclu sio n to ens ure that all o ur emp loyee s are value d and tre ated with d ignit y and re spe ct. • Stri ve contin ually to provi de pe opl e with a workin g environ ment th at is free f rom racism, har assment and discrim ination. • Fost er an env iron ment where our emp loyees c an work to geth er to maint ain an inc lusive wo rking e nvironm ent whe re ever yone’s unique c ontrib ution i s value d. • Ens ure that all d eci sion s ae cting an emp loyee’s employm ent are m ade fai rly and are based on an individual’s ability and per formance. • Provi de all e mployee s with th e opp or tunit y to join our E mploye e Reso urce G roups . • Provid e emp loyees w ith dis abiliti es the appropr iat e support wher e reasonable and p ractic abl e to do so an d in accordanc e with local requirements. • Ens ure our re cruitm ent, d evelop ment a nd reward pra ctice s, an d our ap proac h to workin g arrang eme nts, a re desi gne d to attra ct, d evelop, an d retai n divers e tal ent. • Work to ed uca te our emp loyee s abou t the b ene it s that dive rsit y and i nclu sion bring s to our bu sine ss a nd sup por t inter ventio ns that im prove diver sit y and incl usio n in our pl ace s of work . • Ens ure all em ployee s are aware of thi s pol icy and c omp lete any relevan t training in relati on to diver sit y and in clus ion. • Ens ure our cu stom ers exp erie nce a n incl usive we lco me and s tay provid ed by our em ployee s. IH G’s Glo bal D E&I B oard, ch aired by o ur CEO, and reg iona l DE& I coun cils fe ature repre sent atives f rom acro ss our C om pany who o er a bre adth of exp erie nce f rom die rent cultu res, in dustri es an d organisat ions. The y wor k with stak eholders to ens ure we contin ue to hon our ou r DE& I com mitme nts an d strive for b est p racti ce. It is o ur pol icy to com ply with i nternatio nal, national and local regulator y requirements and, wh ere req uired, a ny airm ative acti on as sti pulate d by loc al laws . We set me asura ble ob jec tives for a chievi ng diver sit y and in clus ion for I HG an d we review our pro gres s aga inst th em ea ch year. Se e our D E& I Poli cy at www.ihgplc. com/ responsible-business 25 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy Inc rea si ng th e diver sit y of ou r leadership talent We continu e to deli ver tal ent initi atives, suc h as our s ucc es sful R ise p rogramm e, whic h is focu se d on inc reas ing the nu mbe r of wome n in G M and op eratio ns rol es. Duri ng 202 1, mo re than 10 0 wom en join ed to take adva ntag e of mento ring se ss ions , care er d evelop ment wo rksho ps, hig h-i mpac t lea rning mo dul es and e mpowe ring conver sati ons de sign ed to fur th er ca reer s. In the A meric as , we launc hed A sc end, a be spo ke program me to devel op Bl ack lea der ship t ale nt and bu ild stron g relatio nsh ips with org anis ation s dedi cate d to supp or ting Bla ck em ployee s, whil e in the U K, we h ave worked wi th Women in H os pita lity a nd Leis ure (W iH TL) to provid e opp or tunitie s for our eth nic mino rity t ale nt on a de dic ated talent programme. An ethnicity disclo sure cam paign wa s als o carri ed ou t in the U K to fur ther un der sta nd our p opu lation a nd help i nform futu re soluti ons an d acti ons to supp or t our eth nic mino rit y empl oyees . IH G proud ly co ntinue s to be rec ogni se d for its eo rt s, with C EO Keith Barr ra nked i rst in th e 202 1 H ERoe s Advoc ates li st, wh ich ce leb rates the top 3 5 executi ves or s enio r lea der s who active ly ca mpaig n for diver sit y , in clus ion an d gen der b alan ce in th e workp lac e. IH G als o rec eived a H ighly C omm en ded award in the C omp any of the Y ear c atego r y at the Europe an D ivers ity Awards , with the e or ts of se veral employ ees being acknowledged across dier ent catego ries. Putting the ri ght decision-making pro ce ss es a rou nd ou r act ion s We unde rst and that a d ivers e and in clus ive environ ment c reates a s ens e of be long ing amo ng emp loyees a nd bui lds tru st in our culture an d value s as a c ompa ny . In 2 02 1, we mad e progre ss o n multip le fronts , inclu ding our work to m ainta in a hea lthy gend er bal ance a s par t of o ur suc ce ssio n pla nning and o ur work with re cruitm ent pa rtn ers to ens ure that ta lent s hor tlis ts are as di vers e as po ss ible . We also work w ith organ isati ons that encourage female senior leader devel opme nt, an d interna lly run in - depth tal ent review s with our C EO and C HRO to creat e r obust plans and pat hw ays arou nd devel oping f uture le ade rs. A new me mbe r was al so ap pointe d to our Glo bal D E&I B oard to re pres ent the voi ce of the N ext G en eration a nd he lp sha pe how we buil d an incl usive cu lture whe re all colleagu es can thrive. In 20 21, we fu rth ered o ur intent to cul tivate inclusion wi thin ou r supply chai n. This w ork include d IHG joinin g leading supp lier diversit y cou ncils to h elp bro ade n our ne twork o f diver se lo cal s uppli ers . In ad dition, a n ew anal ysis to ol was id enti ie d for hotel a nd cor porate s pen d that wil l allow us to cre ate a more info rme d glob al pic ture and id entif y opp or tunitie s to incre ase wo rk with sm all and di verse b usi nes se s. In s uppo rt o f this, we have st arte d the pro ce ss of d etail ing and c ommun icatin g our su pplie r diver sit y progr amme to he lp de mon strate our com mitme nt to the pe opl e and c ommun ities that we imp act . As at 3 1 De ce mb er 2 02 1 Male Female To t a l Directors 7 5 12 Executive Co mmittee 7 3 10 Executive Co mmittee direct re port s 33 22 55 Senior managers (including subsidiar y directors) 81 29 110 All emplo yees (w hose costs wer e bo rne by th e Gro up or th e Sys tem Fund ) 4 ,679 6,482 11 ,1 6 1 Hum an rig hts a nd m ode rn sl aver y An integ ral par t of o ur glob al co mmitm ent to resp ons ible b usin es s is res pe cting hu man rights i n acc ordan ce with i nternatio nally recognis ed standards. We unde rst and the i mpo rt anc e of huma n rights i n relatio n to our co llea gue s, gue sts and c ommun ities a nd we en coura ge tho se with wh om we do bu sine ss – i nclu ding our su pplie rs, own ers a nd fran chis ee s – to prevent, m itigate an d addre ss a dvers e impa cts o n huma n rights, in clud ing mo dern slaver y . We see k to advan ce hum an right s through o ur bu sine ss a ctiviti es and by workin g togeth er wit h other s to identif y chal leng es an d ee ctive so lutio ns. Key focus are as in 20 21 i nclu ded: th e devel opme nt and p ilot of min imum requi reme nts rela ting to migrant wo rker risks i n our ho tels, incl uding r esponsible recruitment and onb oarding, sta living acc omm odati on and wo rker voice ; and a conti nue d risk a sse ss ment o f our sup ply chai n, alon g with ana lysis o f our ap proac h to due dilig enc e of sup plie rs. Fin dings fro m our 20 19/20 Om an market-leve l lab our as se ss ment c ontinu e to be ad dres se d and ap plie d to other c ountri es in the I ME A regio n, and we h ave star ted a s imilar as ses sm ent in the U K . More b roadl y , we have collaborat ed with the Sustai nable Hospitality Allian ce (SH A) and I nternatio nal O rgani satio n for Migrati on (IO M) on p ro je ct s fo cu s ed on ethical recruitme nt in our industry. S ee ou r Co de of C on duc t dis clo sur e on pa ge s 37 to 38 , Res po nsi ble B us ine ss a nd N omin atio n Co mmi tte e Rep or ts o n pag es 1 00 to 1 03 an d st atem ent o n dis abil it y on pa ge 2 27. Se e our M od ern S laver y S tate me nt at www.ihgplc.com/ modernslavery We do not req uire emp loyee s to repor t ethnicity and are dependent on self -disclosure. W e encourage employ ees to consider disclosur e, whic h will provid e strong er rep or ting in the fu ture. IH G is a me mbe r of the U nited N ation s Glo bal C omp act (U N GC) and i s com mit ted to align ment of I HG ’s ope ration s, cultu re and stra tegie s with the U NG C ’ s 10 unive rsa lly ac cepte d princ iple s in rel ation to hum an rights , environ ment an d anti- c orruptio n. Our s t ra t egy c o nti nu e d Car e f or ou r pe opl e , com mu ni t ies and pl ane t c o ntin u e d Strate gic Re po rt 26 IHG | Annua l Repo rt a nd Form 20 F 202 1 C o m mu n iti e s Imp rove the l ives of 3 0 mill ion people in our communities aro und t he worl d Our 2030 commitments • Drive econ omic and social change through s kill s training a nd inn ovation • Sup po rt o ur com munitie s whe n natura l disasters strik e • C ollab orate to aid th os e facin g food pov er ty We rely on th e comm unitie s in whic h we ope rate and a re proud to us e our gl obal sc ale, tim e, skill s and re sourc es to en sure that ou r growth c ontrib utes p ositi vely to thos e around u s. As we work toward s our ta rgets , it’s impo r tant we un der stan d the imp act o f our inv estments, which ma kes integrit y of d ata key to our appro ach. T his yea r , we joi ned Bu sine ss for S oci etal I mpa ct (B 4S I) – the glob al st anda rd in man aging c orp orate com munit y investm ent – s o that we c an me asure ou r input , outp ut and im pac t of our proj ects. What w e achi ev ed in 2021 Skills training and innovation We’ re p as sion ate abo ut our in dustr y an d ins piring in divid uals to exp lore ju st how rewarding a c aree r in ho spit alit y can b e. Sinc e 20 04, o ur IH G Aca demy pro gramm e has b ee n help ing youn g peo ple a round th e world g ain valua ble e mploym ent an d life skil ls throug h work expe rien ce, inte rnshi ps and ap prenti ces hips a long side s ome o f the world ’s best h otelie rs. In the p ast e ight year s, work ing with lo ca l education pr oviders and commun ity organisat ions, mor e tha n 80, 000 people have be en train ed an d mento red throu gh the I HG Ac ade my , oe ring tho se from all ba ckground s a rich varie ty of fre e progr amme s to help th em ga in a job in hos pit alit y or othe r indu strie s, as pa rt o f our pro mise to p rovide T rue H osp itali ty for Go od o n a glob al sc ale. T o f urth er it s reach , we evolved th e IH G Aca demy in 20 21 w ith the la unch of th e IH G Skill s Aca demy – a b est-in - clas s onli ne lea rning p latfo rm that provi des a s pac e for IHG and lik e -minded collaborat ors t o oer free o nline e duc ation, c our ses a nd opportunities f or t housands more people loo king to b uild the ir co ni den ce and g et emp loyme nt-ready. This work ha s be en unde r taken in c olla borati on with c haritie s and oth er IH G sup plie rs and l aunc hed i n Oc tobe r with more th an 50 0 initia l piec es of Engli sh co ntent availa ble. We continu e to advan ce othe r ski lls- buil ding progr amme s, too, inc ludin g workin g with glob al NG O Jun ior Ach ieveme nt Worldwi de to give young p eop le a he ads tar t in th e world of wo rk, a nd in 20 21 we h oste d our Glo bal I nnovation C hall eng e to help high-school students learn v aluable ski lls. We have also s et up the O pe n Sourc e Curriculum with the Sustainabl e Hospit ality Allian ce, wh ich will p rovide fre e onlin e teac hing to he lp par tici pant s to ind j obs in hos pit alit y or othe r indu strie s. In Gre ater C hina, we form ed a s trategic partne rship with W uxi Special Educ ation Scho ol to provide training, in ternships an d emp loyme nt for mute an d deaf c hildre n, with a num ber o f hotels i n diere nt citie s now ta king p ar t. We also we lco me d 149 Future Lead er As pire par tic ipant s into our Future Lead ers p rogramm e. Givi ng for G oo d mo nth Duri ng Se ptemb er 202 1, mo re than 4 0,000 colleagues supported communi ty projects as pa rt of o ur annu al Giv ing for G oo d month, mak ing a po sitive di eren ce to mo re than 350,000 people. Over 2 60,00 0 volunte erin g hour s were col lec tively de dic ated to su ppo rtin g com munitie s, c ause s and c hariti es, wi th col lea gue ac tivitie s rangi ng from ho sting free p op -up g roce ry s tores in th e US an d cha rity wal ks in the U K, to p lanting tre es in Sau di Arab ia. Supporting our communities whe n nat ural d is aste rs s trike We continu e to work with a ra nge of s kille d humanitarian aid organisations to support critic al reli ef eo rt s and he lp our c ommu nitie s in time s of ne ed, wh ethe r that involve s dea ling with th e imp act of th e pand emic or the e ec ts of na tural dis aste rs. In 20 21, we s uppo rte d relie f eor ts a round the glo be thro ugh do nation s to chari ties incl uding th e Intern ationa l Fede ration of Red C ros s and Re d Cres ce nt Soc ietie s followi ng the loo ds in Wes tern Europ e, while als o supp or ting it s resp ons e to the pa nde mic in co untries s uch a s Indi a and Br azil. 27 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy We donate d to the Bri tish Re d Cros s, wh o supp or ted th e UK va ccin ation pro gramm e, and wor ked with CAR E Intern ation al following typh oons in the Philippin es. IH G has wo rked with th e Ameri can Re d Cros s (ARC) o n disa ster re lief for a l ong tim e, and we c ontinu ed sup po rtin g its in credib le work in 20 21, i nclu ding he lping th e many US c ommun ities a ecte d by wild ire s, torna dos an d Hurri can e Ida, a long w ith the rese ttl eme nt of Afghan re fuge es . As well a s many of ou r hotels p roviding fo od, toil etrie s and qu arantin e facili ties, I HG wa s amo ng one of t he i rst c ompa nies to jo in the T ent Par tne rship – a p le dge to he lp Afghan refug ee s rese ttle i n the US by provi ding trainin g, job op por tuni ties an d guid ance fo r our ho tels to sup por t e or ts to hire the m. We ass ist ou r coll eag ues u sing th e IH G Colleague Disaster Relief Assistance Fund. Duri ng 202 1, we sup por te d corp orate emp loyees , hotel te ams an d their f amilie s impa cted by hu rrica nes a nd seve re weathe r in the U S, and oth ers d eali ng with a wors enin g situatio n in Ind ia as a re sult of the p ande mic. Co lla bor ate to aid t ho se fa cin g food p over ty We have supp or ted foo d ban k and foo d provisi on cha rities i n 44 c ountri es. Our d onatio ns have he lpe d the se provi ders acc es s the fun ds, tra ining an d reso urce s requi red to oe r bas ic provis ions to s ocie ty ’s most vul nerable. We are workin g with orga nisa tions s uch as N o Kid H ungr y in the U S and th e T ru ss ell T ru st in th e UK , whil e supp or ting the Europe an Fed eratio n of Food B anks (F EBA) and T he Gl obal Fo odB ank ing Ne twor k (GFN). We also wo rk clos ely w ith organ isati ons in die rent par t s of the worl d to diver t foo d from our h otels to th ose in n ee d. Communities engagement The c ommu nitie s we are a par t of bo th supp or t and b ene i t from our re spo nsib le bu sine ss a pproa ch and th e co mmitme nts we have mad e to achieve a b et ter and m ore sus tain abl e future for ever yon e through o ur Jo urney to T omorrow p rogram me. What i mpacted them in 2021 Engagement Outc omes • Natura l dis aste rs , suc h as t yph oo ns in th e Phil ipp ine s, l oo ds in We ster n Europ e an d torn ado s in th e US • Soci eta l and e co nom ic imp act o f the pandemic, includi ng unemplo yment and foo d pover t y • Mode rn sl aver y an d huma n right s is su es • Acce ss to b usi nes s sk ill s devel op men t and local emplo yment • Climat e cha nge an d oth er wi der envi ronmen tal chal lenges • Cont inued close collaboration with int ernationa l and local chari ties a nd NG Os , suc h as C are Inte rna tion al and B riti sh Re d Cro ss • Ind ustry collaborat ion on human r ights a nd lab our c on diti ons i n spe ci ic m arket s • Givin g for G oo d mont h prog ramm e of act iviti es a nd em ploye e volu ntee ring d ays • Collabora tion with local education providers and community organisations, as p ar t of our fo cu s on o erin g ski lls b uild ing and training oppor tunities • Supp or t for re lief e or ts a roun d the gl ob e and fo r our c oll ea gue s and t hei r famil ies through our Colleague Disaster Relief Assistance Fu nd • Supp or t for fo od b ank an d foo d provi sio n cha ritie s in 4 4 c ountr ies • Human r ight s ass es sm ent s in IM E A an d UK • Laun ch of n ew vir tua l le arnin g pl atfo rm IHG Skills A cademy • Set up Op en S ourc e Cu rric ulum w ith SH A • Over 26 0,00 0 ho urs o f emp loyee vo lunte er ing de dic ated to s upp or tin g com mun itie s S ee o ur IH G Ac ade my KPI o n pa ge 5 3, an d Res po nsib le B usi ne ss C omm it tee Re po rt o n pag es 1 00 a nd 10 1. Visit www.ihgplc. com/ responsible-business for f ur ther i nform atio n on o ur co mmun it y com mitm ent s. voc o Kirk ton Pa rk Hu nter Valley, Australi a – from it s sol ar farm t hat p owers l ight s, eg gs th at co me from t he Kirk ton P ark ch icken s, h oney be e farm th at po llin ates cro ps an d provid es f resh h on ey , a nd rec ycle d water th at fee ds th e lus h veg etab le ga rden s, th ey are on tra ck to creat ing an e nviron me ntall y frie ndl y hotel . Kid s als o love tak ing th e foo d- scra p buc kets to the p ig pe n, wh ich i s one w ay the hote l limi ts was te. 35 0 , 000 + People supported b y colleagues participating in IH G’s ann ual G ivi ng fo r Go od m ont h in Se pte mb er 8 0 , 000 + Peo pl e have b ee n tra ine d an d me nto red t hro ug h our IHG Academy p rogramme since 201 3 Our s t ra t egy c o nti nu e d Car e f or ou r pe opl e , com mu ni t ies and pl ane t c o ntin u e d Strate gic Re po rt 28 IH G | Annua l Repo rt a nd Form 20 F 202 1 Se e Waste fo r more d et ail on [ p a ge 3 0] Plan et With h otels in m ore than 1 00 c ountrie s and ambi tious grow th pl ans fo r our bra nds, it i s impo r tant to us th at we ope rate sus tain ably and h elp pre ser ve ou r plan et for all gen eratio ns to travel an d explo re. So tha t we contin ue to create m ore sustainable guest sta ys and support our hotel s to reduc e ca rbon e mis sion s, man age waste , and conserve and pr eserve nat ural reso urce s, we are work ing with o ur hotel owners, suppliers, indust ry and go vernmen ts. Remaining mindful of the ch allenge s owners fac e in the curre nt tradin g environm ent, we als o set up a G lob al Environm ent al Sus tain abilit y C ommit tee w ith the I HG Ow ner s As soc iation in 2 02 1 to help u s develo p achiev able milestones a nd reach our shared goa ls over the n ext d ec ade. Se e ou r TCFD, Re sp ons ibl e Bu sine s s Co mmi tte e Rep or t an d gree nho us e gas emi ss ion s dis clo sure s on p age s 32 to 3 5, 10 0, 101 a nd 2 29 to 2 30. Se e our Re sp on sib le Bu sin es s Rep or t at www.ihgplc. com/ responsible-business Energy Red uc e our e ne rgy u se an d ca rbon e mi ss ion s in lin e with climat e science Our 2030 commitments • Imp lem ent a 20 30 1. 5°C s cien ce -b as ed target that delivers – 46 % abs olute re ducti on in CO 2 from our fra nchised, managed, ow ned, lea se d and m anag ed le as e hotels • T arget 10 0 % new buil d hotel s to ope rate at ver y low/zero carb on emi ssio ns by 20 30 • M aximis e/optimise th e role of r enewable energy With th e hotel s ecto r acc ountin g for aroun d 1% of glo bal c arbo n emis sio ns, we kn ow it ’s impo r tant tha t we play our p ar t in protec ting our pl anet fo r the futu re. In 202 1, we jo ined the U N’s Rac e to Zero and up grad ed our carb on e mis sion s targe t to align with th e mos t ambi tious g oals o f the Pari s Agree ment to keep gl obal wa rming wi thin 1. 5°C. As we own le ss th an 1% of ou r hotels , ever y thing we do to m ake a long -term cha nge mu st be a chieve d in coll abo ration with our ow ner s, par tne rs an d coll eag ues . Car bon re ducti on is a p riorit y we have be en work ing cl ose ly on, in cludi ng set ting a sci enc e- ba sed t arget (S BT ) in 202 0 that was initi ally alig ned w ith limitin g glob al warming to b elow 2 ° C, and f urth er stren gthen ed thi s year to alig n with 1. 5°C. What w e achi ev ed in 2021 T o m eet o ur new up grad ed S BT , wo rk was unde r taken thi s year to en sure ever y IH G hotel h as its ow n ene rgy redu ctio n target fo r 202 2, a nd as a b usin es s we are focu se d on three b road are as: a ction p lans a nd traini ng to develo p cle arly de i ned p athways that improve the e nerg y e icie ncy of our exi sting hotel e st ate; help ing owne rs s ource re newabl e ene rgy; and deve lopin g our str ategy to en sure our ne w-b uild hote ls op erate at ver y low o r zero c arbo n in the future . In 20 21, key step s incl ude d introdu cing a new sys tem to allow hote ls to have the ir ene rgy dat a autom atical ly captu red for track ing, whi ch in turn all ows for mo re targ eted ac tion s and rec omm end ation s to redu ce en ergy c ons umption . We have also switch ed ou r UK o ic es an d mana ged h otels to a renewab le en ergy t ari an d conti nue to map ren ewabl e ene rgy opp or tunitie s globally , alongside w orking w ith a number of hotel s on on -s ite renewa ble e nergy. Rec ogni sing th e value of c olla bora tion in sp ee ding up p rogres s, we b ec ame the ir st hote l com pany to sign up to th e UK’s Zero Ca rbon For um, whic h alon g with our IHG a t COP 2 6 IH G played a l ead ing role fo r the hos pit alit y indus tr y at the U N’s 26th Co nferen ce of the P ar ties (CO P 26) in Gla sgow i n Novemb er 20 21, w hich focu se d on how gove rnmen ts, bus ine sse s and c ivil so ciet y c an work toget her to ind the u rgent s olutio ns neede d t o tackle clima te change. Our C hief S ust ainab ilit y O ice r and EVP , Global Corporat e Aai rs spoke at a se ries of hi gh- pro ile event s over the co urs e of the t wo- wee k summit , where they discussed the facts t he indu str y ne eds to fa ce up to, the impo r tanc e of co llab oratio n in bring ing me aningf ul chan ge and o utlin ed the innovative s tride s IH G is mak ing to he lp sha pe the f uture of res pon sibl e travel. As tr ustees of the Susta inable Ho spit alit y Allia nce, th ey also h elp ed laun ch the G las gow De cla ration: A Co mmitme nt to a De ca de of Clim ate Actio n in T o urism . Duri ng the for tnight , CEO Keith B arr als o atten de d the Elys ée Pa lac e in Paris fo r a rece ption a nd work ing session with t he F rench P resident, Emma nuel M ac ron, on how we c an ac ce ler ate rec over y a nd m ove toward s a more s ust ainab le travel an d tour is m se cto r . The te am at C rowne Pl aza C op en hag en T ower s in De nm ark is d ed ica ted to runn ing a f ully s usta ina ble h otel. Its fa cad e is li ne d with s ola r pan el s so th at a renewa bl e ene rgy so urce c an he lp p ower th e bu ildi ng an d a state - of-the -ar t gro und water-bas ed sy stem kee ps it c oo l duri ng su mme r an d warm du rin g winter. Autom atic inte llig ent l ight , water , and w aste -s aving m ea sure s are ins tall ed th rough ou t the p rope rt y , whil e a stun nin g atrium ( pic tured ) is i lle d with a ir-puri fy ing p lant s. 29 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy 202 1 to put a ra nge of p roduc t sol ution s in pla ce for all o f our bra nds a cros s all regi ons. Redu cing o ur pla stic u sag e by an esti mated 85 0 tonne s in the Am eric as re gion al one, the se bulk p rodu cts wil l also p rovide ho tels with sig ni icant c os t saving s. We have also e nga ged w ith expe rt s from T ravel W itho ut Pla stic to pro duce a b es poke Singl e Us e Items Toolkit to h elp gui de hote ls on be st p ractic e whe n it co mes to re duci ng, replacing and r ecycli ng common pr oducts. The to olkit p romis es to b e a valuab le edu catio nal re sourc e for our h otel tea ms, whic h will have a po sitive im pac t on our ope ration s and th e environm ent. Food wa ste is a p arti cular ly big pro ble m glob ally , with a st agg ering $ 1 trillio n los t or was ted ever y yea r acros s the p lane t – acc ountin g for rough ly one th ird of the world ’s food. We have sp ent tim e this year devel oping ex isting c oll abor ations a nd formin g new on es with exp er t orga nis ations across our r egions t o tackle the issue. Duri ng 202 1, we co mme nce d the devel opme nt of a glo bal fo od was te training mod ule for al l of our hote l food te ams to enc oura ge the m to mea sure and m ana ge their fo od wa ste, ahe ad of rol lout in 2 02 2. In the U S, we are work ing with G oo dr to deli ver lef tover fo od from o ur hotel s to loc al cha rities , and in Europ e many of o ur hotel s use th e T o o Go od To Go app to oe r peo ple the s ame op por tuni ty. In Aus tralia, o ur suc ce ssf ul work with fo od cha rity O zHa rve st ente red it s third year , as we conti nue d to diver t foo d waste to lo cal com munitie s via a n etwo rk of cha rities , and in the M iddle E as t, we are us ing AI te chno logy mem ber ship of o ther o rganis ation s, incl uding th e World T ravel and Tourism Co uncil, th e Sus tain able H os pita lity A llianc e and th e Amer ican L odgin g & Ho spit alit y As soc iation, s aw us wor k coll ecti vely on ways to dec arb onis e the ind ustr y . Working w ith expe rt s Arup, Gl ee ds an d Schn eid er Ele ctric, we have explo red ste ps to he lp our exi siting hotel s ope rate at net ze ro carb on. Was te Pioneer the tr ansformati on to a mi nimal wast e hosp ital ity industry Our 2030 commitments • Eliminate single -us e items, or move to reus able o r recycl able al ternative s acro ss the g ues t stay • Min imis e food g oing to was te through a ‘prevent, don ate, diver t ’ pla n • C ollab orate to ac hieve circul ar so lution s for maj or hotel c omm odit y item s What w e achi ev ed in 2021 With o nly 9% o f pla stic curre ntly be ing recycle d an d around o ne third of fo od prod uce d be ing was ted acro ss th e glob e, we’ re pas sio nate ab out provi ding our g ues ts with a mo re sust aina ble s tay . We’re working to elimin ate singl e -us e item s in our hote ls, adopt mor e reusable or recy clable alternatives, and establish a three- part pl an to ‘prevent, don ate and dive rt ’ fo od was te. While f ul illing o ur com mitme nt to move all hotel s to bulk-size b athroo m amen ities h as be en ha mpe red by the p ande mic, we ma de impo r tant pro gres s with s everal sup plie rs in so ou r hotels c an tra ck and m eas ure foo d waste, p roviding c hefs w ith real -time inform ation for p lanni ng and p repar ation. We also c olla borate d with th e World Wil dlife Fund, Gre enview an d indu str y pe ers o n the Hote l Waste Me asu reme nt Meth odo logy, whic h is de signe d to provid e a com mon indu str y app roach to c olle cting d ata, an d me asurin g and rep or ting wa ste. We continu e to loo k for ways to exten d the life of prod uct s that le ave our hote ls and o ic es . Our indust ry has tr aditi onally seen product con sumpti on at vario us st age s of the gu es t expe rien ce and s o our lo nge r -term aim i s to achieve c irculari ty , whe re reso urces can b e recycl ed or re use d on a l arge sc ale. This m ight inc lude th e inco rpo ration of recycle d co ntent in the m anuf acturin g of new p roduc ts, o r makin g sure item s are put to go od u se el sewh ere onc e they le ave our ho tels, s uch as d onatin g com puter s or furnitu re to charit y , o r oeri ng surp lus foo d to thos e who ne ed i t. We have com mitte d to coll abo rate and work w ith othe rs to hel p us ac hieve this a s par t of our J ourn ey to T omorrow commitments. Wate r Co ns er ve water a nd he lp se cur e water a cc es s in th os e are as at g reat est ri sk Our 2030 commitments • Imp lem ent too ls to redu ce th e water footpr int of our h otels • Mi tigate water ri sk throu gh sta kehold er collaborat ion t o deliv er wat er stewards hip at ba sin leve l • Collaborate t o ensure adequat e wa ter , san itatio n and hygien e (WASH) con ditio ns for ou r ope rating c ommun ities De mand fo r water of ten exce ed s supp ly in many pa rt s of the worl d, with th e UN pred icting th is de mand to in crea se be twe en 20 30 % by 205 0. It ’s therefore neve r be en more im por ta nt for us to ind ways to redu ce our us ag e and work w ith othe rs towards sus tain able s oluti ons th at create wate r acc es s for all. We are im ple mentin g tool s to reduc e water c ons umption a cros s all our hotel s, payin g par ticul ar atte ntion to tho se in water-sc arce are as. I n our co mmuni ties, we are als o workin g with othe rs to es tab lish ade quate wate r , s anit ation an d hygiene (WA SH) condit ions and help ensu re s upply is ma nage d mo re sust aina bly at a lo cal l evel. Our s t ra t egy c o nti nu e d Car e f or ou r pe opl e , com mu ni t ies and pl ane t c o ntin u e d Strate gic Re po rt 30 IHG | Annua l Repo rt a nd Form 20 F 202 1 Wh a t ’ s t o come What w e achi ev ed in 2021 Ea ch of our h otels h as be en gi ven a water redu ction t arget a long w ith acc es s to sus tain able s oluti ons to imp rove ei cien cie s through t he IH G Gre en Eng age TM system, suc h as low- low ix tures an d it ting s. Own ers are a lso ab le to ac ces s inc reas ingly acc urate dat a on us age in th eir h otels vi a an autom ated d ata entr y too l. Havin g identi i ed the ri sks to water qu alit y and qu antit y in our o pen a nd pip elin e hotel s in 201 9, we unde rto ok six wate r stew ardsh ip pr ojects ar ound t he w orld as pa rt of o ur me mbe rshi p of the Alli ance for Water Stewa rdship (AWS), progre ss ing on the ina l two in Sh enz hen i n China a nd on H ayman Is lan d in Austra lia this ye ar . Applying the A WS Standard to our pr ojects has p rovide d a cle ar pathway to redu ce water us age, w hile all owing us to s hare ide as with oth er gl obal m emb er organ isati ons an d with hote ls acro ss our e state to m aximis e e icie ncy . Co llab oratio n is vit al to mea ningfu l progre ss and a s a memb er of th e Water Res ilien ce Co alitio n, a CEO -l ed c oaliti on of the U N Glo bal C omp act C EO Water Man date, IH G is work ing with oth er org anis ation s to col lec tively a dvanc e water steward ship an d pres er ve the worl d’s fresh wate r . T his ha s inform ed our wo rk to ide ntif y and ma nage risks a round wate r supp ly , wh ile als o redu cing co sts for o ur hotel s as they c los ely mo nitor their u sa ge. In 2 02 1, we also c oll abor ated with Water .org as p art o f a pilot to he lp de liver WASH con dition s for 15,0 00 p eo ple in I ndia, Indonesia and Mexico . People It is im per ative that we en sure the ri ght cap abili ties, to ols an d res ource s are the re to supp or t our p eop le if we are to drive the grow th of ou r busi nes s and b uild an incl usive an d high -p er forman ce cul ture. Key focus are as in 20 2 2 inclu de investm ent in an H R tec hnol ogy pl atfo rm that will i mprove the us er exp erie nce fo r cor porate c olle agu es an d hotel te ams throug h increased aut omation , mobile functionality and se amless se lf-servic e. We will als o contin ue the wo rk done i n 202 1 to stren gthe n our G ene ral Ma nage r pip eline, w ith a par tic ular foc us on Luxur y & Life st yle in s uppo rt o f our grow th asp iration s in that s egm ent. O ur stron g focu s on DE &I will b e maint aine d, including c elebrating key ev ents, building further e ducation with conscious inclus ion training, and esta blishing new programm es with pro mine nt organi satio ns that champion equ ality within wider society. We will als o invest in b uildin g our ta lent attra ctio n cap abiliti es, in crea se our fo cus on ta lent m anag eme nt to build l ea ders for the fu ture, and s tep up a multi -year investm ent in a ne w IH G Univer sit y framew ork desig ned to s upport colleague devel opme nt at die rent leve ls of the busi ness. Mo re broadl y , we will c ontinu e to pla ce a cle ar foc us on em ployee e nga gem ent with our s trateg y and how we c ontinu e to invest in o ur cultu re and ways of work ing. Communities For our c ommun ities , we will co ntinue to work with c hariti es to sup por t tho se in m ost ne ed arou nd the wor ld, and th e rollou t of our I HG S kills Ac ad emy will co ntinue in local languag es across markets globally , with the a dditio n of new l oc al coll abo ration s. Plane t Buil ding a su sta inab le future i s not simp ly a goa l for our in dustr y b ut impe rative for our p lane t, and a s one o f the world ’s lea ding h otel group s, we rec ogni se ou r resp on sibilit y to ta ke decis ive, pra ctic al acti on to redu ce c arbon e mis sio ns in ever y par t of ou r bus ines s. Fr om 20 2 2, tie d to our new s cien ce -b ase d targ et and Ra ce to Zero pl ed ge, we will incre ase t he sup por t we provi de our owne rs in imp roving the e nergy e i cien cy of the ir hotel s, with e ach rec eiv ing an ene rgy targ et tai lored to th eir pro per t y , alon g with ac ce ss to so lution s and col lea gue traini ng to drive en ergy con se rvatio n. Thi s will b e supp or ted by our ne w HERO (H otel En ergy Re duc tion Op por tuniti es) tool, whi ch will an alys e ene rgy co nsum ption an d help h otels ind the me asu res sp eci ic to th eir pro per t y that repr esent the most cost -eective way to reduc e ene rgy us age. More r enewabl e energy contr acts wil l als o be roll ed ou t in die rent market s, and wor k will be gin on a n update to our I HG G reen E ngag e system a nd the devel opme nt of our s trategy to e nsure our ne w-b uild hote ls op erate at ver y low or ze ro carb on in th e future. 31 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Ou r strate gy D e li veri n g o n th e r e commendat ions of T CFD W ith h otel s in th ous an ds of c om mun itie s all over the wo rld, o ur bu si ne ss a nd br and s tou ch th e live s of mil lion s of p eop le ever y day. W e un der sta nd t hat in ou r role a s a ma jor g lob al ho sp ita lity c om pany we h ave an imp or tan t par t to pl ay in ad dre ss ing t he im pac ts of c lim ate ch ang e. Th e suc ce s s of IHG ove r the l ong -term d ep en ds o n the env ironmental and social sustainability o f our operat ions, the r es ilie nc e of our s up ply c hai n and o ur ab ilit y to ma nag e the p ote ntia l imp act o f clim ate c han ge on o ur b usi ne ss m od el and performance. We have upgra ded to a 1. 5°C s cie nce - bas ed t arget (SB T), whi ch put s us on a tra jecto ry to a chieve ne t- zero e mis sion s by 205 0. In add ition, we have join ed the U N ’s Race to Zero – the gl oba l camp aign to rall y lea der ship an d sup por t from b usin es ses , citie s and inves tors for a he althy , res ilient , zero - carb on fu ture. While we h ave an as set-light b usin es s mod el, with th e majo rity of IH G hotel s owne d by a third- par t y , ou r comm itmen ts cover th e ope ration s of all ou r hotels g lob ally , w hethe r fran chis ed, ma nag ed, owne d, le ase d or ma nage d le ase h otels . La st yea r , we ma de a form al com mitme nt to supp or t the rec omme ndati ons of th e TCFD. The fo llowing s umma ry s ets o ut our ali gnme nt, and n otes wh ere in this A nnual R epo rt we h ave made further climat e-related inancial d isclosures consistent with the rec omm end ation s. In th e rest of thi s se ction , fur ther re levant dis clos ures are in dic ated as a pplic abl e. We note that o ur dis clos ures are co nsis tent with th e TCFD’s rec omme ndati ons for 2 02 1 and have outlin ed wh at acti ons we wi ll take to fur ther s trengt hen ou r clim ate- relate d i nanc ial dis clo sures in ‘ Future acti ons’ . TCFD recomme ndation Sum ma ry of o ur a lig nm ent w ith TC FD Gove rn anc e – Se tti ng ou t our g overn anc e arou nd cl imate - rel ated ri sks a nd op po rtu niti es. a. De sc rib e the B oard ’s overs ight of cl imate - rela ted ri sks a nd opp or tunities . The I H G Bo ard ha s co lle ctive re sp on sibi lit y for ove rse ei ng an d ens urin g the m ana gem ent o f clim ate -re late d ris ks and o pp or tuni ties a nd is a dvi se d by the Re sp on sib le Bu sin es s Co mmi tte e on I HG ’s appro ach i n this a rea . Se e more details on page 33. b. Describe ma nagement’ s r ole in asse ssing and managin g climate -rel ated risks and opp or tunities . The E xe cuti ve Co mmit te e is re spo ns ibl e for ma nag ing cl imat e- rel ated r isks a nd op po rt uniti es . The C hie f Fin anc ial O ic er an d Gro up H ead o f Stra tegy (C FO) is th e overal l sp ons or fo r dec arb on isa tion w ithin t he bu sin es s, an d we have form ed a TC FD Ste er ing G roup of S en ior Le ad ers f rom ac ros s di eren t func tio ns of th e bus ine ss w ho h ave led t he work , su ppo r ted by th e TCFD Wo rkin g Gro up, to en sure we a ss es s and m ana ge c lima te- rel ated r isks a nd o ppo r tuniti es, emb ed din g the re sult s of th e clim ate sc en ario a nal ysi s into lo ng- ran ge bu sin es s pl anni ng. S ee m ore de tail s on pa ge 33 . Strategy – Th e ac tual a nd po tenti al imp ac ts of c lima te- rel ated r isks a nd o ppo r tuniti es o n our b usi nes s, s trate gy an d in anc ial p lan ning , whe re mate rial . a. De sc rib e the cl imate - rel ated ri sks and opportunit ies the organisat ion ha s fac ed ove r the s hor t, m ed ium and long-term. Wit h exte rna l expe r tise , we co mpl eted a r isk a nd op po rtu nit y revie w acro ss o ur val ue ch ain an d ide nti ie d the m os t mate rial p ote ntial i mpa cts a ss oc iate d with o ur bu sin es s. S ee o ur cli mate -r elat ed ri sks t abl e on pa ge 3 4 and clim ate -re late d op po rtu niti es t abl e on pa ge 3 5. Our i mpa ct s are ca tego ris ed ove r the fo llow ing ti mes ca le s: (a) shor t: 1 5 yea rs to hig hlig ht imm edi ate ris ks or opp or tun itie s; (b) me diu m: 10 15 yea rs to ali gn to ou r Grou p stra tegi c pla nnin g cycle s; (c) long -ter m: 30 ye ars to a lign to TCFD re qu irem ent s. b. D es cri be th e imp act o f clim ate - rel ated ri sks a nd op po rtu niti es on the organisat ion’ s businesses, strategy , and inancial planning. Cli mate - rela ted s cen ari os are b ein g emb ed de d into ou r lon g- rang e pl anni ng an d future B oa rd stra tegy d is cus sio ns . Work is u nde r way to imp rove dat a and m od elli ng arou nd m ajor r isks i den ti ie d and TC FD i ndi ngs a re now co nsi dere d as p ar t of th e strate gic p la nnin g proc es s. We h ave outl ine d the m ost m ater ial of o ur im pac ts in o ur clim ate -re late d ris ks ta bl e on pa ge 3 4. S ee p age s 29 to 3 1 for de tai ls of th e envi ronm ent al ini tiati ves al read y und er way an d pag es 14 9, 172 a nd 176 for t he co nsi de ratio n of cli mate ri sks i n the ina nci al st atem ent s to sup por t co ncl usi ons o n goin g co nce rn, d efer red t ax as se ts an d go odw ill res pe cti vely. c. D e scr ibe th e res ilie nc e of the organisat ion’ s strat egy , taking into c onsiderati on dier ent climate -rel ated sce narios, inc ludi ng a 2 °C o r lowe r sc en ario. We ana lyse d th e resi lien ce o f IH G’s stra tegy u nde r bot h 2° C an d 4°C c lim ate ch ang e sce na rios . Th e resu lts s howe d that , give n IH G’s as set- light b us ine ss m ode l, tra nsit ion ri sks a re more l ikely to h ave a mate rial i mpa ct on o ur bu sin es s, co mpa red wi th phys ica l ris ks. For mo re det ail o n how we a re mitig atin g our c limat e- rel ated r isks to e ns ure bu sin es s res ilie nce , se e our c lima te- rel ated ris ks ta ble o n pag e 34 a nd se e p age s 29 to 3 1 for de tai ls of ou r envi ronm ent al po lic ies a nd ini tiati ves . Future actions We’ re c ommi tte d to contin ued im proveme nt on cli mate ris k man age ment a s we delive r on the s trategi c intent of the TC FD. In ad dition to s pec i ic clim ate risk miti gation a ctio ns ide nti ied in the foll owing p age s, over the n ext 12 m onths we w ill deli ver the foll owing key actio ns: • C ontinu e the integ ration of c limate co nsi derati ons into o ur Group r isk ma nag eme nt framewo rk. Th is allows u s to con sid er the interac tion s bet wee n clim ate and othe r strate gic ris ks, as wel l as impl eme nting miti gation s through b usin es s- as -us ual pro ce ss es. • C ontinu e to monitor tre nds in p otentia lly mate rial clim ate -rel ated risks a nd op por tuniti es, wi th improved d ata c apture. T his will incl ude fur th er emb ed ding cl imate imp act s into our ris k assessments and long-t erm ina ncial pla ns and Gr oup st rat egy , with deve lopm ent of f urth er me trics w here ne e ded . • We will ta ke steps to ali gn to new rec omm end ations a nd disclosur e requ iremen ts under t he In terna tional Sus tain abil ity St anda rds Bo ard (IS SB), TCFD an d UK G ree n Fina nce S trategy. • Un der ta ke a carb on pric e expo sure as se ss ment o n how cha nge s to carb on pri cing p olicy c ould im pac t our bu sine ss , and to inform the bu sine ss c as es for d ec arbo nisa tion ac tions . • Enh anc e the qua lity o f data c apture o n thos e risks th at have be en id enti ied a s mos t materi al and p rovide fu rth er qua ntii catio n of the p otential i mpac ts. • D evelop a G roup -wi de clim ate trans ition p lan to co ordina te dec arb onis ation i nitiative s and inves tment s tak ing pl ace a cros s our bu sin ess . Thi s plan wi ll align wi th our 1. 5°C S BT com mitme nt. Strate gic Re po rt 32 IHG | Annua l Repo rt a nd Form 20 F 202 1 G overn an c e Bo ard c ons id erati on of c lim ate ris k and o pp or tunit ie s IH G’s appro ach to govern anc e has b ee n abo ut add ress ing our e nvironme ntal an d so ciet al impa cts a s well as o ur i nanc ial pe rfor manc e for ma ny years. O ur govern anc e frame work is he ad ed by the Bo ard, whic h incl ude s coll ecti ve resp ons ibilit y for en surin g the ma nag eme nt of clim ate- relate d risks a nd op por tuniti es . The B oard i s advi se d by the Res pon sibl e Bus ine ss C ommit tee (the Com mit tee) on the G roup’s corpo rate resp on sibilit y str ategy , incl uding o ur app roach to c limate -re lated im pac ts. T he C ommit tee me ets thre e time s a year an d ass es se s the Gro up’s e xpo sure to pote ntial lon g-te rm clim ate- relate d risks a nd op por tuniti es. T his yea r , the C ommit tee e st abli she d TCFD rep or ting p roce dures a nd pro ce sse s for overs ee ing the m onitori ng and m anag eme nt of the c limate cha nge ris ks ide ntii ed thro ugh the s cen ario an alysi s. TCFD i s als o con sid ered by b oth the Aud it and Re mune ration C ommi tte es with in the ir res pe cti ve remit s. Bo ard trainin g on ESG c ons ide ration s is provid ed as n ee de d. In 20 21, our up dates fo cus ed o n our de car boni satio n strate gy , a s well as sp eci ic p rioritie s for TCF D work in 20 22 . TCFD recomme ndation Sum ma ry of o ur a lig nm ent w ith TC FD Risk management – How we i den tif y , as ses s an d man age c lim ate -re late d ris ks. a. De sc rib e the org ani sati on’s pro ce ss es fo r ide ntif yin g and ass ess ing climate -rel ated risks. Our TC FD S tee ring G roup h as l ed a de tai le d sce na rio an alys is of c lima te -rel ate d imp act s acro ss th e IH G val ue ch ain. Ou tcom es o f this ri sk a ss es sme nt pro ce ss we re pre se nted to E xe cuti ve Co mmit te e mem be rs, S eni or Le ad ers hip an d the B oa rd for revi ew an d use d to info rm our c lim ate ch ang e acti on pl ans . Th e mon itori ng an d man age me nt of the c lim ate ris ks ide nti ie d by our i niti al as se ss men t (supp or ted by ex te rnal ex pe rti se) wil l now b e integ rate d into ou r exis ting ris k man age me nt pro ce ss es – in clu ding s ce nar io pl anni ng, cr isi s man age me nt an d anal ysi s of lo nge r -te rm tren ds . For mo re info rmati on on o ur s cen ario a nal ysi s of cli mate - rela ted ri sks, s ee t he Cl imate - rel ated ri sk m ana gem ent a nd stra tegy s ec tio n on pa ge 3 4. b. D es cri be th e orga nis atio n’s processes fo r man agin g climate -rel ated risks. We have hi stori ca lly ta ken a num be r of ste ps to m ana ge cli mate ri sk , inc lud ing ac tiv itie s suc h as e nga ging w ith cus tom ers a nd th e rest o f the in dus tr y on de ma nd for g ree ner t ravel an d ho spi tal ity s er vi ce s. For s evera l year s, we h ave als o ha d car bon re du ctio n ta rget s at bot h a Grou p and h otel l evel, a nd in e arly 2 020 a nno unc ed a S BT to re duc e gre enh ous e ga s emi ssi ons , whi ch we up gra ded a t the e nd of 2 02 1. We con tinu e to col lec t info rmati on to su pp or t the m onito ring o f the se ri sks an d deve lop m itig atio n res pon se s as re quire d. Wit h overs ight f rom ou r Ris k and A ss uran ce an d Co rpo rate Re sp ons ibi lit y team s, ou r as se ss men t of tran siti on ri sks are con tinual ly reviewe d by relev ant tea ms a cros s IH G. O ur phys ica l ris k as se ssm ent w ill b e review ed eve ry t hree ye ar s, or mo re fre que ntly if r equ ired . Se e the C lim ate -re late d ris k man age me nt and s trate gy s ect ion o n pag e 34 . c. Describe ho w processes for ide ntif yi ng, a ss es sing a nd man agi ng cli mate - rela ted ri sks ar e inte grate d into th e orga nis atio n’s over all risk ma nagement. We con sid er c lima te cha nge w ithin t he co ntex t of env ironm ent al an d so cia l meg atre nds a s on e of our p rinc ipa l ris ks. As p ar t of our 2 02 1 revie w of pri nci pal ri sks w ith the B oa rd, we al so de sc rib ed h ow clim ate ch ang e pote ntia lly im pac ts othe r exis tin g prin cip al ris ks an d are em be ddin g cli mate ch ang e res ilie nc e into exi stin g ‘bu sin es s as us ual ’ pro ce ss es . For mo re info rmati on on I H G gover nan ce an d man ag eme nt of p rinc ipal r isk s, se e pa ges 4 0 to 47 . Me tric s an d ta rge ts – Th e met ric s and t arge ts us ed to a ss es s an d man age re leva nt cli mate -re late d ri sks an d opp or tun itie s. a. Di scl os e the m etric s us ed by th e org anis atio n to as se ss c lima te- rel ated ri sks a nd op po rtu niti es in lin e with i ts st rateg y and r isk management process. On e of our s trate gic p rio ritie s is to ‘care fo r our p eo pl e, co mmun itie s and p lan et ’ and to g uid e our a ctio ns an d drive pro gres s, in 2 02 1 we la unc hed J ou rney to Tomorro w, an actio n pla n of co mmi tme nts we’ve m ade to c reat e pos itive c han ge by 20 30. As p ar t of thi s ac tion p lan , we have se t our se lves a n ambi tiou s SB T , a lign ed to 1 .5° C, whi ch is d rivi ng ac tion a cros s the busin es s. M ore d etai l on ou r SBT i s inc lud ed in t he str ateg ic miti gati ons i n our cl imate - rel ated r isks t ab le pa ge 3 4. Ene rgy re duc tion t arg ets a re inc orp orate d into h otel -l evel m etric s, a s well a s at the E xe cuti ve Co mmit te e. ES G crite ria , incl udi ng ann ual e ne rgy red uct ion, fo rm pa rt o f the A nnua l Per for man ce Pl an (A PP) stru ctu re for E xec utive Dire cto rs an d eli gibl e emp loye es . Thi s form s par t of a ra nge o f KPI s an d review o f pe rfo rma nce a gai nst I HG ’s Glo bal Me tric s. We have c onti nue d our wo rk thi s year to d evel op ES G met ric s with a vi ew to in cor por ating i nto our l ong -te rm inc enti ve pla n and c onti nue to d evel op the q ual ity o f our e nviro nme ntal d ata i n orde r to en abl e this . Se e mo re on ou r met rics o n pa ge 3 5. b. D is clo se s cop e 1, s cop e 2, and , if app rop riate, s co pe 3 gre en ho us e g as (G H G) emi ss ion s, an d the re late d ris ks. Our 2 01 920 21 s co pe 1, 2 a nd 3 em is sio ns dat a an d meth od olo gy c an be fo und o n pa ges 2 2 9 and 2 30. We h ave dis clo se d the c ate gori es of s co pe 3 e mis sio ns , whic h are cov ere d by our 1. 5°C a lign ed S BT. c. D e scr ibe th e ta rget s use d by the org anis atio n to man ag e clim ate - rel ated ri sks a nd op po rtu niti es and performance aga inst tar gets. Our e xist ing t arge ts have b ee n app roved by t he Sc ien ce B as ed Target s initi ative (S BTi ) as 1. 5°C a lign ed a nd we are als o aimi ng for o ur ne w-b uil d hote ls to op era te at ver y low o r zero c arb on by 20 30 . Our s co pe 1, 2 an d 3 em iss ion s dat a will p rovid e us wi th an on goi ng und er st andi ng of h ow we are pro gre ss ing o n our de c arbo nis ati on jou rney. Management ownership of clima te-rela ted risk s a nd opport unit ies Op eratio nal ma tter s, routin e bus ines s and i nformati on dis clo sure proc edu res are de leg ated by the B oa rd to Mana gem ent C ommit tee s. Our inte rnal TCF D Ste ering G roup is re spo nsib le for d eliver ing on th e TCFD re comm end ation s and id entif yin g and as se ss ing any pote ntially materi al clim ate impa cts an d during 2 02 1 it met fo ur time s. Th e Chie f Sustainabili ty Oicer is responsible for monit oring progress aga inst our c arbo n redu ction t arget , which i s repo rte d exte rnally o n an annual basis. A TCFD Work ing Gro up has ove rse en an inte grated c limate s cen ario anal ysis for I HG ’s global b usin es s. Th is Grou p, with oversi ght from the Ste erin g Group, will c ontin ue to ope rate throug h 202 2 to drive ado ption of TC FD -re lated a ction p lans a cros s the bu sine ss . The TC FD Working G roup re gularl y repo rt s into the TCFD S tee ring Gro up and als o provide s pe riodi c upd ates on it s key indin gs from th e sce nari o anal ysis an d clim ate- risk i denti ic ation p roce ss . Se e the foll owing se ction fo r more de tail s of our sc en ario ana lysis p roc es s. S ee fu rth er in form atio n abo ut Di rec tor deve lo pme nt on p age 9 4, a nd Audi t, Re sp ons ibl e Bu sin es s and Re mun era tion C om mit tee Re po rt s on p age s 95 to 1 01, a nd 10 4 to 125 . 33 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 De liverin g on the re com men dation s of TCFD D e li ve rin g o n th e r e commendat ions of T C FD c onti nu e d The m ost p otentia lly materi al clim ate- rela ted ris ks and op por tuni ties we id enti ie d through s ce nario a nalys is, as we ll as th e mitigatio ns se t out in o ur acti on pla n, are de scrib ed in th e tab le be low. As we contin ue to gathe r more d ata to en able u s to unde rst and th e impa ct on I HG, we will al so as se ss the a ggre gate impa ct of th ese o n our wi der s takeho lde rs, in cludin g our ho tel owne rs. Clima te-rela ted r isks Su mm ar y of ris k Impact Mitigation and strate gy resilienc e Abi lit y to me et stakeholder expectations around IH G’s role i n the energy transi tion Med ium-te rm (1015 years ) Potentially materia l impact Wit h clim ate ch ang e bei ng th e bigg es t thre at fac ing hum anit y , we all h ave a sig ni ic ant an d imm edi ate role to p lay in c urbi ng glo ba l car bon e mis si ons a nd keep ing te mp eratu re ris e with in 1. 5°C ab ove pre-indust rial lev els. Ke y stak eholders – i ncluding guests, in vestors and g overn men ts – are i ncre as ingl y loo kin g for bu sine s ses to n ot on ly se t the rig ht go als , but al so demonstrat e their commitmen t in the act ions the y take to day. We rec ogn ise th at no t del iveri ng on i ncre as ed st akeho ld er exp ec tati ons c oul d res ult in a rep uta tion al ris k for th e Gro up, es pe cia lly in a sc ena rio wh ere o ur pe er s me et or exc ee d our o wn decarbonisation pla ns. Continuo us progr ess against our t arge ts c an cre ate si gni ic ant o pe ratio nal a nd commercial opportunities. We have not q uan ti ied t his im pac t, b ut we are monitor ing it alongside wider reputa tional risks. Be ing a re sp ons ibl e bu sine s s is at th e hea rt o f IH G’s str ateg y and inc lud es a s trong fo cu s on re duci ng th e car bon fo otp rint of o pe ratio ns, as we ll as th os e of our f ranc his ee s. We have up gra de d ou r em is sio ns r edu ct ion t arg et to a lig n to 1. 5°C, an d are p rog re ss ing d ec arb on is atio n pl an s acr os s th e es tate Our t arg et is to re duc e em iss ion s from o ur ma nag ed , owne d, le as ed and m ana ge d le ase h otel s by 46 % by 20 30, fro m a 20 19 ba se line , and to do th e sam e with e mis si ons f rom ou r fran chi se d hotel s, wh ich p uts us on a t raje cto ry to a chie ve net-zero em iss ion s by 20 50. I n 202 2, w e will u pda te our tr ans itio n risk a ss es sm ent to a lign wi th thi s new t arge t. The se a re cha lle ngin g ta rget s give n IH G’s pre dom inan tly fra nch ise d bu sine s s mod el an d amb itio us grow th s trate gie s. We are d evel opi ng a G rou p-w id e cli mate t ran si tio n pla n Thi s will h elp u s ens ure we m eet s ta keho lde r expe ct atio ns aro und t he tran siti on an d del iver o n our ow n amb itio us ta rget s on c arb on re duc tion . Ove r the n ext 12 m onth s, we w ill be d evel opi ng a de tail ed c lim ate tran siti on pl an, in l ine w ith rec ent s upp le men tar y gu ida nce a nno unc ed by the TC FD. Thi s pla n will c oo rdin ate a ran ge of d ec arb onis ati on init iative s on goin g acro ss o ur bu sin es s and f ocu se s on thre e key leve rs: driv ing e nerg y e ici enc y in our ex ist ing e sta te; fac ilit atin g a shi ft to ren ewab le en ergy w he rever p os sib le; an d ta rgeti ng 10 0% o f new- bu ild hote ls to op er ate at ver y lo w or zero c arb on by 2 03 0. S ee ou r pla net s ec tion o n pa ges 2 9 to 31 to l ear n more a bo ut our work on decarbonisation. Reducti on in aviation passenger nu mbers expected to impact hotel demand me diu m to lo ng -ter m (10 30 ye ar s) Potentially materia l impact T oday ’s aviati on trave l, in p ar ticu lar in tern ation al travel , has a s igni i can t car bon fo otp rint. U nd er a 2 °C sc ena rio, avi atio n travel c oul d redu ce s igni i can tly as trave l pat te rns al ign to a low - car bon e co no my . Thi s cou ld p otenti ally re du ce th e abil it y of gue st s to vis it ou r hote ls. Give n our d iver se p or tf olio o f hote ls ca terin g to bot h dom es tic an d inte rnati ona l travel ler s, su ch a sh if t in trave l pat tern s co uld p rovid e bot h down sid es an d up sid es to ou r bus ine ss , if for ex amp le, mo re gue st s opt to tr avel do me stic all y utili sin g gree ne r tran sp or t mod es such as high- spee d trains in China. We are i mpr ovin g dat a co lle cti on to u nde rs ta nd ou r cu sto me rs’ tra vel patt erns The i mpa ct o n travel i s bei ng cl os ely m onito red p os t Cov id -19. T o ena ble u s to ca lcul ate th e pote ntial i mpa ct of t his s hif t in trave l on our d ie rent re gio ns an d bran ds, w e are pl anni ng ch ang es to o ur gue st sur vey to c oll ate fur the r dat a on th e mo de s of tran sp or t us ed. Clima te-rela ted r isk management a nd str at egy We cons ide r clima te chang e within th e contex t of enviro nme ntal and s oci al meg atrend s as on e of our p rincip al ris ks. Du ring 20 21, we unde r took s cen ario an alysi s work to as ses s in mo re det ail IH G’s pote ntial expo sure to bo th physic al and tra nsiti on imp act over th e sho rt , med ium and l ong -term. We s ele cted 2 ° C and 4° C sc ena rios to mod el a high p hysica l impa ct sc ena rio and o ne with gre ater trans ition im pac ts. T his was al igne d with the 2 ° C align ed S BT that we had s et. In 2 02 1, we upgr ade d to a 1.5° C aligne d SB T and the refore intend to ref resh o ur sc enari o analy sis in 20 2 2 to align to this n ewly revise d ta rget. Our a nalys is covere d our fu ll value c hain an d inclu de d acute an d chroni c physic al ris ks, incl uding d roughts o r lo od s, water stre ss , wild ire s and ri sing s ea leve ls, as we ll as tran sitio n risks, s uch a s cha nges i n sta kehold er exp ect ation s, travel pat tern s, clim ate pol icy and re gulatio n. Physic al ris ks were as se ss ed us ing the Intergove rnme ntal Pa nel o n Clim ate Chan ge’s (IPC C’s) 2° C- and 4°C - align ed Rep res entati ve Con centr ation Pathways (RC Ps) 4. 5 and 8 .5 res pe ctivel y . We inte grated I HG ’s busine ss p lan as sum ption s on reg ional g rowth i nto the sc enari o analy sis pro ce ss, to e nsure risk a nd opp or tunit y qua nti icatio ns re le cted I HG ’s growth strate gy . The ri sks were th en as se ss ed us ing de in ed m ateriali ty thre sho lds alon g with revenu e esti mates fro m the bu sine ss p lan ac ross timef rame s. In th e climate - relate d risks t abl e (be low) we outline o ur mitiga tion and s trateg y resili enc e, bas ed o n the sc ena rio anal ysis . We have beg un to quantif y th ese c limate -re lated i mpac ts, b ase d on glob al emi ss ions an d clim ate mod ellin g data, a s well as i nput s from IH G’s busi nes s pla nning an d risk m ana gem ent pro ces se s. In 2 02 2, we will b e advanc ing thi s work by enh ancin g the qua lity o f data cap ture on tho se ris ks that have b een i denti ie d as mo st ma terial and p rovide fur the r quanti ic atio n of the po tential im pac ts. Strate gic Re po rt 34 IHG | Annua l Repo rt a nd Form 20 F 202 1 Su mm ar y of ris k Impact Mitigation and strate gy resilienc e Increased desire for ‘gree n ho tel s’ co uld have a m ater ial i mpa ct on IH G reve nu es Me diu m to lo ng -ter m (10 30 ye ar s) Potentially materia l impact Gre en h otel s will p lay an im po rt ant p ar t of our f uture und er al l sc ena rios . Att itud es an d be lie fs aro und clim ate ch ang e have c hang ed s igni i ca ntly , with 6 0% of 9,0 00 a dult s sur veye d by IH G acro ss t he US , U K, Ge rma ny , G reat er Ch ina, t he UAE a nd Aus tral ia agre ei ng tha t they wan t to be mo re envi ronm ent ally and s oc iall y con sc iou s on th eir trave ls . The c han ge s in the se a tti tude s an d bel ief s have st ar ted to now im pac t co nsu me r beh avio ur , both f or bu sin es s and l eis ure trave l, as g ree n cred ent ials a re fac torin g into cu sto mer s’ bu ying d ec isi ons . We rec ogn ise t hat the se c han ging c on sum er be havi our s oe r both a n opp or tun it y and a ri sk fo r IH G, dep en ding o n how fas t the gr een h otel m arket ex pan ds an d how m uch of thi s new m arket we c aptu re sha re of. Und er a 2 °C sc ena rio, we d o expe ct a s igni ic ant i mpa ct ove r time – eith er a ri sk o r opp or tuni ty d ep end ing o n our ab ilit y to demonst rate our g reen cr edentials. We have deve lo pe d a be sp oke too l to hel p our h otel s ide ntif y an d pri oriti se e nerg y e ici enc y sol utio ns b ase d on key b uildi ng ch ara cter isti cs , inc ludi ng retu rn on inve stm ent i nform atio n and p roc urem ent s upp or t as fe asi ble . Ca lle d the H otel E nerg y Red uct ion O pp or tunit ies Tool (HE RO Tool), i t will h elp e nha nce th e hote l’s env ironm ent al cr ede ntia ls. In th e UK , all o ur ma nag ed l ea se ho tels a re now o n rene wabl e en ergy contracts , and we ha ve started activ ely pr omoti ng r enewable energy so lutio ns to ow ner s in key mar kets . We are i mpr ovin g dat a co lle cti on to u nde rs ta nd c ons um er sentim ent towards greene r trav el Give n the p ote ntial m ater iali ty of t his exp os ure, we a re work ing to leve rag e exis ting c ons ume r se ntim ent d ata in t his are a, su ch a s a so cia l mon itorin g pl atfo rm to gat her d ata f rom gu es ts’ s oci al po st s (soc ial m edi a, revi ew site s) and d evelo pin g a meth od olo gy to g athe r , trac k and m ea sure th e imp ac t of ac tual (rath er th an cl aim ed ) guest behaviour. Lo ss of f ran chi se royalt y fe es fo llow ing natural dis asters Long t erm (1530 y e ars) Potentially minor imp act Un der b oth a 2 ° C and 4° C sc en ario, th e fre que ncy of natu ral di sa ster s is exp ec ted to c ont inue to i ncre as e up to 20 50 a nd beyo nd. The r esu lting b us ine ss in terru ptio n red uce s the amo unt of f ranc his e royalt y fee s we wi ll rec eive f rom the s pe ci ic h otel s impa cte d, how ever thi s do es no t take in to acc ou nt the p otent ial fo r incre as ed d em and from a ny ongo ing re cove r y eo rt s. We are t rac kin g phys ic al cl ima te imp ac ts a cro ss o ur p or tfo lio We have pre viou sly a ss es se d the p hysic al ri sks o f clim ate eve nts on our h otel s, an d we are now u pgr adin g syst ems to tr ack t he phys ic al imp act s of cl imate c han ge ac ros s our p or t foli o and h ow muc h add itio nal bu sine s s is dri ven into o ur hote ls fro m rec over y e or ts . Thi s will a llow us to ad apt to th es e ha zar ds mo re ee cti vely a nd as se ss t he imp ac t on ou r bus ine ss a nd ow ner s. Som e of the p otential ly materi al clim ate- relate d ris ks we have identi i ed co uld al so pre sent o ppo r tunitie s to IHG, wh ich are sh own in the tab le be low. Our co ntinue d progre ss a gains t our d eca rbon isati on ta rgets an d strate gic res pon se pl annin g will stren gthe n our abi lity to reali se the se p otential o ppo rtu nitie s. Clima te-re lated op portu nities Summary of opportuni ty Actions being t aken Supporting hot el own ers t o me et ne w customer demand for sustainable trav e l We have co mm itt ed to d eli ver n ew-b uil d hot el s tha t op era te at ver y low o r ze ro ca rbo n by 203 0 We rec ogn ise o ur cu stom er s are inc rea sin gly exp ec ting h igh s tan dard s of su st aina bili ty in t hei r lei sure a nd trave l purc has es . Our c om mitm ent to d elive r new -b uild h otel s that o pe rate at ve ry l ow or ze ro ca rbo n sig nal s our int ent to fu rth er h elp o ur hote l own ers m ee t pote ntial f uture d em and fo r gree n trave l, and to i mprove o ur co mp etiti ve po sitio n over all. T his wi ll be s upp or ted by enh anc ed e ng age me nt with c usto me rs an d dat a reg ardin g cus tome r de man d to he lp us de live r on c usto mer p rio ritie s for sust ainability an d climate. Supporting ho tel o wners to decarbonise their assets coul d incr ease comm ercial attra ctivenes s We are c ont inu ing to i nves t in ways to s up por t h otel s be co me m ore e ne rgy e i cie nt an d de ca rbo ni se a ss ets Whil e red uci ng em iss ion s ca n req uire inve stm ent , we are leve rag ing o ur Gre en E nga ge sys tem to e nsu re we inves t in en erg y e ici enc y impro veme nts th at have t he gre ates t pote ntia l to red uce c os ts ove r the lo ng -ter m. Thi s will b e su ppo r ted by ou r HE RO too l, fur th er de tail s of wh ich ar e availa ble i n our 20 2 1 Res po nsib le B usi ne ss Re po rt (se e lin k be low). Increased domestic tou ris m drive n by changes in long-haul tra vel patt erns We are i mpr ovin g dat a co lle cti on to u nde rs ta nd ou r cu sto me rs’ p refe ren ce s on s us ta ina bil ity Ch angi ng trave l pat ter ns rep res ent b oth a p otenti al ri sk an d opp or tun ity to o ur bu sin es s. We have a l arge d om est ic cu stom er ba se, an d the re may b e a fur the r po siti ve imp act to t his m arket dri ven by fu ture ch ang es to tr avel pa tte rns, a s so me cu sto mer s move to s hor ter-h aul an d le ss c arb on inte ns ive mo de s of trave l. Ga ther ing fu rt her d ata w ill he lp us u nde rs tan d this t rend f ur the r and e ns ure we c an me et th e nee ds o f any cha ngi ng cu stom er b ase . Metrics and targets Our m etric s and t argets a llow us to mo nitor the d elive ry of o ur strate gy and lo ng- term su cce ss . T o e nsure o ur trans ition i s bas ed o n the be st availab le sci enc e, we have now up grade d our s cie nce - bas ed t arget (SBT ) to align to the m ost a mbitio us ta rget of the P aris Agre eme nt to limit gl obal wa rming to 1. 5°C. T his t arget ha s be en ap proved by SB Ti and c ommit s us to red ucing o ur abs olute c arb on footp rint by 46 % from our f ranch ise d, man age d, owne d, lea se d and m anag ed le as e hotel s by 203 0 (ba se d on our 2 019 c arbo n footp rint). S ee ou r car bo n footp rint K PI on p ag e 53 . A core p ar t of del ivering f urth er em iss ion s reduc tion s again st this targ et will be d ec arbo nisi ng our ho tel op eratio ns acro ss ou r por t folio. T o h elp drive th is, we are al so ta rgeting 1 00 % of new- buil d hotel s to ope rate at ver y low or z ero car bon by 20 30 o nwards. We continu e to track gl obal e nvironm enta l impa cts thro ugh our IH G Gre en Eng age sys tem. All I HG h otels a re require d to use thi s system to tra ck the ir environ ment al imp act, w ith dat a coll ecte d on be nch marki ng inform ation, gre en b uildin g solu tions a nd opp or tunitie s to improve e ici ency a cros s carb on, e nergy, water and wa ste metri cs. D ata fro m this sys tem will c ontinue to un derp in our ES G and cl imate met rics an d will he lp us id entif y op por tuni ties for inves tment a s par t of our w ide r climate tra nsiti on pla n. We will work with o ur intern al audi t team an d extern al sp eci alist s to provide assurance ov er this data. As we fur the r devel op our inan cial im pac t as ses sm ent of cli mate - relate d risks a nd op por tuniti es, thi s will inform t he devel opm ent of any additional metrics and targets around the manageme nt and mitiga tion of ris ks and th e streng theni ng of IH G’s bus ine ss res ilien ce against clim ate-rel ated impacts . Our R es pon sib le B usi nes s Re por t a nd ES G Dat abo ok a re availa ble a t www.ihgplc. com/ responsible-business 35 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 De liverin g on the re com men dation s of TCFD Ho w IHG does bus i ness A num be r of lin ked fa ctor s imp act IHG’ s long-ter m success, including the resil ience of our business model, our p urp os e, an d the e ffe ctive ne ss of our s trate gy. Unde rpin nin g all of t he se is our wo rkpl ac e cul ture, w hic h is drive n by our r epu tati on a s a well -g overne d, tru ste d and ethical company . Key factors th at drive ou r over -arch ing culture an d app roach to b usin es s inclu de our str ucture an d govern anc e, risk ap petite, contr ols and s ystems, workplace en vironment, be haviour s, C ode of C on duct , incl uding o ur value s and re lated p olic ies, a ll of whic h shou ld be re ad in co njunc tion with o ur strate gy , r isk man age ment , KPI s and G overnan ce s ectio ns in this Re por t. Ou r stru ctu re and g overna nc e IH G’s Boa rd has overa ll resp ons ibilit y for ens uring th at the way we work an d our cul ture are align ed wi th our pur pos e and dri ve our strate gy . At e ach m eeti ng, the B oard an d its C ommi tte es review m etric s, rep or ts and sc orec ards, an d rec eive pre sent ation s on key busin es s factor s, inc ludin g in relatio n to culture an d govern anc e. They c halle nge an d supp or t Se nior Le ad ers, p ar ticula rly whe re there i s a nee d to ada pt pol icie s and ini tiatives , ens uring th e contin ued a lignme nt of strate gy and cu lture. The Board delega tes da y-t o- day resp on sibilit y for s etti ng and e mbe ddin g Co mpany cul ture to the CEO wh o, togethe r with the E xec utive C ommit tee, l ead s from the front a nd role m ode ls at titude s and be haviour s to create an o pen a nd ho nes t wor kplace en vir onment, empo weri ng emp loyees to gi ve fee dbac k and fre ely as k que stion s abo ut mat ters th at co nce rn them, suc h as durin g the C EO’ s quar terl y , glo bal all- e mployee c alls . The E xec utive C ommit tee is res pon sibl e for execu ting the G roup’s strate gy , an d keep ing the B oard info rme d of the o perati on of the b usin es s and workp lac e culture. IH G’s hotel deve lop ment an d op eration s are orga nise d on a reg iona l bas is (Ame ric as, EME A A an d Gre ater Chi na) and are sup por ted by glob al func tion s in the key areas o f Mar keting, Co mme rcial & T ech nolo gy , Fin ance, H uman R eso urce s, Co rpor ate Aairs , and B usin es s Repu tatio n and Re spo nsib ilit y . Man age ment o f the regi onal a nd glo bal team s is orga nise d into le ade rship te ams , who are re spo nsib le for exec uting o n IH G’s strate gic prio ritie s in a mann er that a ligns with the G roup’s culture and va lues . De cis ions o n hotel d evelop ment s and c apit al expe nditure g o through th e appro priate de al app roval and exp enditu re comm itte es . Our pu rpose o f pr ov idi ng T rue Hosp it ali t y f or Good is un der pinned b y our comm it men t t o a cu lt ur e o f oper at ing i n a r espons ib le an d et hica l manner . Our cu lt ur e sets t he t one f or how w e do business. Stak eholder engagemen t IH G eng age s with its s takeh old ers at all l evels of th e bus ine ss, fro m the Bo ard, through t he E xecutive C omm itte e, Se nior Le ade rshi p and c orpo rate func tions , to front-line o pera tions . A variet y of me thod s are use d ba sed o n expe rien ce and d evelop ing be st pr actic e, incl uding f ace -to -fa ce me eting s, fee dba ck and pe rfor manc e reviews , empl oyee forum s and trai ning. We adju st ou r enga gem ent meth ods a s require d to ens ure they rem ain ee ctive for b oth our s takeh old ers and I HG. For exam ple, a doptin g glob al CEO vi deo c alls w ith Q& A ha s ensu red emp loyees a re kept informe d and h ave an opp or tunit y to rais e topic s that mat ter to the m. The e ec tivene ss o f our en gage men t metho ds is m eas ured th rough a ran ge of metric s, in cludi ng our K PIs (suc h as sig nings an d pip elin e), per forman ce, ab ility to attra ct and re tain t alent , emp loyee en gage me nt sur vey result s, adh eren ce to the po licie s covere d by our C ode o f Con duc t and AGM re sult s. The v iews and i nteres ts of othe r st akehol der s, suc h as regu lators a nd indu str y bo dies , are als o taken into c onsi derati on. Th ey help p rovide a fra mework a gain st whic h we mea sure our sel ves, prote ct ou r reput ation an d devel op our c omm ercial and social awareness . S ee inf orma tion o n our e nga ge men t with key st akeh old er s, ap proa ch to th e pla net o n pa ges 2 0 to 39, 9 2, 10 1, 107, 108, 11 2114, and S ec tion 17 2 st atem ent on p ag es 9 0 and 9 1. Stak eholder engagemen t Wor kplace env iron ment Co de of Conduct and rela ted policies Our struct ure and gover nance Val u e s Ris k app etite, contr ols and syste ms Approach t o communit y and the planet B eh avio ur s How we do business Strate gic Re po rt 36 IHG | Annua l Repo rt a nd Form 20 F 202 1 The G roup op erate s a Glo bal D ele gatio n of Autho rity P olicy , which s ets o ut i nanc ial com mitme nt and exp end iture app roval contro ls. C ommitm ents over c er tain thres hold s or t ype o f propo sa l require app roval from the G roup’s Capit al Co mmit tee, wh ich rep or ts into the Executive Committee. The G roup’s lega l owner ship s tructure comprises around 390 subsidiaries worldw ide. T hes e entiti es provi de the leg al fram ework req uired to su ppo rt the G roup in mak ing in dividu al co ntract s and c ommitm ents . In form ation o n the B oa rd’s mo nitor ing an d as se ss men t of our c ultu re is inc lud ed o n pa ge 91 . Risk appetit e, contr ols and s ystems Our ri sk app etite an d toler ance i s conti nually rev iewed by th e Boa rd in its purs uit of st rategic a nd bus ine ss ob jec tives . While our strat egy does not consciously expo se any of our a ss ets to sig ni ican tly heig htene d risk , the c hoic es we ma ke aim to bala nce p rioriti es and re so urces to e ither active ly expl oit curre nt advant age s or addre ss c urrent di sad vantag es ver sus a rang e of com petito rs, an d mee t stakeh old er expe cta tions . The B oard c ons ide rs the por t folio of ri sks we fa ce and w hethe r our all oc ation of re sourc es an d pac e of initiati ves to buil d enterp rise c apa bilit y , create s any imba lanc e or exp ose s othe r risk a reas a s the ind ustr y em erge s from the pa nde mic. O ur risk ap peti te is ca sca de d through o ur valu es and b eh aviours , our goa ls and t arget s, our C od e of Co nduc t, De leg ation of Au thorit y and o ther gl obal pol icie s, and i s fur ther re inforce d by frequent leadership commun ications to guide b eh aviours a nd set p riori ties . We are comm itte d to a framewo rk of moni toring an d as suranc e pro ces se s in relati on to our ini tiatives a nd po licie s, reviewin g wheth er they h ave opera ted withi n acc ept abl e risk tol eran ces w here p rioritie s have shif te d, or whe re addi tiona l actio ns were req uired. B oa rd and C ommit tee age nda top ics a llow the B oard to id entif y and di scu ss the n ature and ex tent of princ ipal (and e mergi ng) risks an d how ris k managem ent arrangements have adapted whe re req uire d. S ee O ur ris k man age me nt on p age s 40 to 47 and G over nan ce p age s 89 a nd 9 6 to 97 . Wor kplace envi ronment The pandemic has usher ed in f undamental cha nges to th e workp lac e, inclu ding hyb rid and re mote worki ng. We conti nually revi ew our ways of wor king as n ew pra ctis es eme rge in lin e with lo cal re stric tions a nd workin g culture s. Alth ough e ach re gion has e mbra ce d this di erently , with o ic es at die rent st age s of re -o pe ning, wh at has e merg ed is a n ew ty pe of c onne ctiv ity bet wee n emp loyee s, in par tic ular with t he ado ption of v ide o mee tings, a fo cus o n work-life bal anc e and wel lbein g, and a l es s forma l appro ach. A s an examp le, the D enh am he ad o ice in th e UK h as em brac ed a lexibl e, hot-d esk ing envi ronme nt, with E xecu tive Committee members wor king alon gside team m emb ers in a n ope n- plan wo rkspa ce. We are mindfu l that as a re sult of c hang es in the wor kpla ce an d incre ase d digit alis ation , we ne ed to be v igilant re gardin g the se curit y of Co mpa ny informatio n and dat a. In 2 02 1, we ran a se ries o f glob al cybe rs ecuri ty teaching sessions that included t opics such as phi shin g, keepi ng inform ation s afe and se cure whil st work ing remo tely , s oc ial engi nee ring, an d se curing a nd safe ly trans ferring d ata. We al so inc reas ed c ontrol s aroun d IH G -ap proved too ls an d system s, and refre sh ed an d relaun che d our s ecuri ty pol icie s at the be ginni ng of 20 22 . S ee ou r pe opl e dis clo sur es on p ag es 23 to 2 6, and key m atte rs di sc uss ed by t he B oard on p age 9 1. Our behaviours Our M ove fast , Solu tions fo cus ed, T hink return and B uild on e team b ehavi ours e mpowe r and in spire o ur emp loyees to wo rk in a way that supports our pu rpose and st rat egic prio rities . The se are un derp inne d by our Code of Conduct a nd responsible business app roach, a nd tog ether i nlu enc e how we interac t with ou r sta kehold ers . By role modelling o ur behavi ours, IHG’ s leaders create a n environm ent that e nc ourag es rapid d eci sion m akin g that sup po rt s our grow th asp iration s, within a fr amewor k of due di ligen ce an d ass uranc e pro ces se s. Empl oyees h ave shown c ontinue d ada ptabi lity a nd res ilien ce in the f ace of the pa nde mic, whil e dem ons trating our be haviour s. D uring the ye ar , a s erie s of N ext T a lk events we re led by E xecu tive Co mmit tee mem ber s acro ss the o rganis atio n, to de ep e n unde rst and ing of the li nk bet wee n our be haviour s and s trategy. More than 2 ,00 0 emp loyees j oine d the se ss ion s, with p ositive fee dba ck from the m. Co de of C on duc t an d rel ated p oli cie s IH G’s Co de of C ondu ct (Co de) is the frame work for how we d o bus ines s at IH G, and un derp ins ou r strateg y and c ommitm ent to providin g T ru e Hos pit alit y for Go od. Our key prin cipl es an d poli cies a re inclu ded in the C od e, which e nab les e mploye es and colleagues wor king in IHG corporate oices, rese r vation c entres, m ana ged, ow ne d, lea se d, and m anag ed le as e hotel s to make the right d eci sion s, in co mpli anc e with the law and IHG’s ethical standards. Inc lude d in the C od e is an over view o f our valu es, re por ting c on cern s framewo rk and G roup po licie s, inc ludin g huma n rights, resp ec t in the work pla ce, dive rsit y , equit y , incl usio n and e qual o ppo rtun ities , acc urate repo rti ng, inform ation s ecu rity , anti- brib er y and c orrupti on, and th e environ ment . It als o provid es gui danc e on wh ere to go if c olle ague s have a con ce rn and ne ed f ur ther h elp. The B oard, E xec utive Co mmit tee an d all colleagues wor king in IHG corporate oices, rese r vation c entres, m ana ged, ow ne d, lea se d, and m anag ed le as e hotel s must com ply with t he Co de. We exp ect th ose we do business with , including our fr anchisees, to uphold sim ilar principles and standar ds . The C od e is reviewe d and a pproved by th e Bo ard on an an nual b asis , and is s upp or ted by annual e-learning requirements . In 2022, we will co ntinue to evol ve our C ode tra ining, engagement a nd measuremen t appr oaches, incl uding d evelop ing an d launc hing a n ew 37 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 How I HG do es b usin es s Ho w IHG does busi ness c o ntin u e d Co de e -l earni ng mo dule to sup por t an d provid e additi onal g uidan ce. I n additi on to our C ode e - lea rning s, we moni tor and a sse ss other a sp ect s of our c ulture throug h a variet y of methods, in cluding direct eng ageme nt, emp loyee en gage me nt sur veys, trac king of e -le arning c omp letio n and ou r con id ential repo rti ng hotlin e. The fo llowing p olic ies an d prin ciple s form so me of th e key areas of the C od e. Oth er are as of the C od e, suc h as our D E&I pol icy , an d huma n rights an d mo dern slaver y c ommitm ents , are outlin ed o n pag es 25 a nd 26. I nitiative s to resp ond to legal, regulatory and ethical comp liance risks a re on pag e 46 . I HG ’s Co de of C on duc t is avail abl e in 10 la ngu age s on th e Co mpa ny’s intr ane t and www.ihgplc. com/ responsible-business Ou r val ue s Led by th e Boa rd and E xecu tive Com mit tee and o ur value s unde rpin o ur be haviour s and bus ine ss ethi cs, gu ide how we d elive r our strate gy , m ake deci sion s and li ve our purp os e. Spea king up Ce ntral to our p eop le cul ture is res pe ct in the wor kpla ce, wh ethe r it be rel ating to a col lea gue, gu est o r anyone el se. I HG ha s zero -tole ranc e to any form of dis crimi nation, hara ss ment o r bullyi ng in line w ith our Res pec t in the Work pla ce Pol icy . W hilst we upho ld our re sp ons ibilit y to be have ethic ally and p rotect I HG ’ s repu tatio n, it is p oss ible that a few c olle ague s may ac t in a way which con lic ts with th e princ iple s set o ut in the Co de. G uida nce i s given to rep or t con cer ns direc tly to line m anag ers , supe rv iso rs or loc al Hu man Re sourc es re pres entati ves. For ins tanc es w here it i s more ap propri ate, a con id entia l repo rtin g hotlin e and on line repo rti ng faci lity i s availabl e and gl obal ly adve rti sed . The H ea d of Ris k and As sura nce and G ene ral C ouns el an d Co mpany Se creta ry are a lso avail able to b e cont acte d. Rep or ts are routi nely revi ewed by the B oa rd, who e nsure arr ange ment s are in pl ace for investig ation s and foll ow-up a ctio ns. Do th e right thing Show we c are Aim higher Celebrat e di eren ce Work bet ter to gethe r Safe ty a nd se cu rity IH G is co mmit ted to provi ding a s afe, se cure and h ealthy e nvironme nt for all ou r colleagues, guests and visit ors. All operations must comply with all applicable he alth, safet y an d sec urit y laws. B eyond c omp lianc e with the l aw , IH G works to ide ntif y fur ther improvem ents to th e way we mana ge safe ty and s ecur ity ri sk and h as ma ndator y B rand Safet y St and ards in pl ace fo r all hotel s glob ally to drive c ons isten cy in this a rea. Initia tives to res pon d to safet y and s ec urity risks a re on pag e 47 . Bribery and corr uption IH G is co mmit ted to op eratin g with inte grity. Brib er y and a ny form of in anci al crim e, including improp er payments, m oney laun derin g and t ax evasi on or th e facili tatio n of ta x evasio n, are not p ermit ted un der a ny circum sta nce s. Th is als o appl ies to any agents, consultants and ot her service provid ers wh o do work o n our be half. Our A nti- Brib er y Poli cy set s out our ze ro - tolerance approach and is applic able to all Directors, Executive Committee membe rs, emp loyees a nd co llea gue s in man age d, owne d, le ase d, and m anag ed l eas e hotel s. It is a cco mpa nied by a m andato ry Anti- B ribe ry e - lear ning mo dule . Our G ift s and Entertainment Policy and guidance fur ther s upp or ts our a pproa ch in thi s area. T o c ontinu e to enha nce o ur anti- brib er y progr amme a nd in line w ith be st pra ctic e, in 202 1 we un der too k a Group -w ide bri ber y and c orrupti on ris k ass es sme nt with the assistance of specialist exter nal counsel. The o bjec tive was to en sure tha t IH G’s key bribe ry ri sks co ntinue to b e addre ss ed and are as of im proveme nt are ide nti ied. The a ss es sme nt has re centl y con clud ed, and th e in dings w ill be in corp orate d and addressed throughou t the business unde r the le ad ers hip of the Ethic s and Co mplia nce te am. In itiative s to resp ond to legal, regulatory and ethical compliance risks a re on pag e 46 . IH G is a me mbe r of T r ansp aren cy Intern ation al UK’s Bus ine ss Inte grit y Forum and participates in its annual Co rpor ate Anti- C orrupti on B ench mark . Ea ch year , the res ults fro m this be nchm ark he lp to mea sure the ee ctiven es s of our a nti-b ribe ry a nd cor ruption p rogram me and i denti fy area s for co ntinuou s improvem ent. Handling inf ormation responsibly We are comm itte d to ens uring tha t gues ts, mem ber s of our l oyalty p rogramm es, colleagues, shar eholders, owners and other s takeh old ers tru st the way we ma nag e dat a. As pa rt of o ur priva cy and info rmatio n se curit y prog ramme s, we have st and ards, pol icie s and pro ce dures in p lac e to man age how pe rso nal d ata c an be us ed a nd prote cted. Our e -lea rning training for employees on ha ndling i nformati on res pon sibly i s a mandatory annual requirement, and covers topic s suc h as pa sswo rd and em ail se curit y , usin g per son al dat a in ac corda nce w ith our pol icie s and pri vacy co mmitm ents, h ow to work with ve ndor s and tran sfer ring d a t a s e c u r e l y. In ad dition to th e cybe rse curit y awaren es s lea rning s mentio ne d on the prev ious p age, we held t abl etop exercis es to pra ctis e our abilit y to dete ct an d resp ond to p otential se curit y events , such a s rans omware an d supp ly ch ain att acks . We contin ue to develo p our pr ivacy and s ec urit y progra mme s to addre ss evo lving re quirem ents a nd ta ke acc ount of d evelo ping b est p racti ce. The B oard re gards cy ber se curit y as a critic al bu sine ss di sci pline a nd it reg ularly rece ives updat es. S ee ini tiati ves to re sp ond to c ybe rs ecu rit y and i nform atio n gove rnan ce ri sks o n pag e 4 4. Sec tion 172 statement Det ails o f how the D irector s have had re gard to the m atte rs set fo rth i n Se ction 17 2(1)(a ) to (f) of th e Co mpani es Act 20 0 6 is provid ed in th e Se ction 17 2 sta tement o n pag es 9 0 to 91. Furthe r det ails c an be fou nd throu ghout the Str ategic an d Gover nanc e Rep or ts, including in our ke y stak eholder engagement disclosures on pages 20 to 28, 39, 9 2, 10 1, 107 , 10 8, 112 to 114, 2 27 and 2 28 . Non-inancial inf ormation statement Non -ina ncial information, including a des cripti on of po licie s, du e dilige nce proc es se s, outc ome s and ris ks and opp or tunitie s ca n be foun d as se t out b elow. Interna l veri icati on and dis clos ure contro ls app ly to all the inform ation c overed in th ese a reas . • Imp act o f the C ompa ny’s activi ties on the e nvironm ent on p age s 29 to 35 , and 2 29 a nd 23 0 • So cial m atte rs on p age s 27 an d 28 • Anti -c orrup tion an d anti- bribe r y mat ters o n pag e 38 • Emp loyee mat ter s on pa ges 24 to 26, 101, 1 07 , 10 8, 112, 114 and 2 2 7 • Re spe ct for h uman righ ts on p age 26 • A de scri ption of th e Group’s bus ines s mod el on p age s 10 to 13 • Th e Group’s princ ipal ri sks on p age s 42 to 47 • Th e Group’s KPI s on pa ges 5 0 to 53 Se e ou r relev ant po lic ies a t www.ihgplc. com/ responsible-business Strate gic Re po rt 38 IHG | Annua l Repo rt a nd Form 20 F 202 1 R esponsi ble pr ocur emen t G rowin g our b us ine s s in an innov ativ e and sustainable wa y , whil st wo rking to t he hi ghe st standards of business conduct, play s a key role b oth in o ur su pp lie r sel ec tion proc es s and h ow we cont inu e to work with o ur exi stin g sup pli er s. We are co mmit ted t o workin g with s up plie rs who m ee t our m inim um et hic al st and ard s an d sha re th e value s of o ur re sp ons ib le bu sin es s pl an – Jo urn ey to T om orrow. Wha t we do alr ea dy Our s uppl y chain a ctiviti es are s plit bet wee n co rporate a nd hotel s upp ly chai ns. Hote l purcha sing p redo mina ntly oc curs at a loc al hote l level, a s our hote ls are larg ely owne d by inde pen dent t hird- par ty ow ner s who are re spo nsib le for m anag ing the ir own sup ply ch ains . In so me key markets, IHG has pur chasing pr o gram mes in place for es se ntial go od s and se r vice s requ ired for op enin g, renovating a nd op eratin g a hotel, w hich hote ls have the o ppo rtu nity to buy . Our c orp orate sup ply ch ain cover s marketing, te chn olo gy and professional se rvice s. T o h elp ma nag e and mo nitor ou r corp orate supp ly ch ain, an auto mated p rocure ment system i s use d acro ss m any of our larg e o ice s. Seve ral strate gic sup plie rs als o rec eive han ds -o n supp or t in the fo rm of bus ine ss pe r forman ce review s to mitigate risk a nd prom ote value re alis ation. T o e nsure th at supp lier s act w ith the sam e integri ty an d resp ec t as we do, new cor porate s uppli ers are re quire d to con irm their a cc ept ance o f the IH G Sup plie r Co de of Conduct ( or demonstrat e the y ha ve equ ivalen t poli cies i n plac e), when th ey are onb oard ed, in a dditio n to it bein g a contract ual r equirement. Recommended guid ance i s als o provide d to our managed hotels. Wha t we ach ieved i n 202 1 In 20 21, we fo cus ed on o ur sup ply ch ain risk as suran ce pro gramm e, IH G’s Gree n Supp lier program me, ongoi ng collabora tion w ith diverse suppliers and i mpro ving employ ee awa reness of responsible pr o cur ement. Som e proc ureme nt acti vitie s were redu ce d due to sup ply ch ain dis ruptio n, including lo nger shippin g times, which impa cted o ur abili ty to s ource p roduc ts. However, other acti vitie s did co ntinue an d the B oard reviewe d initi atives to leve rage our sys tem- wide b uying p ower an d simp lif y the pro curem ent pro gramm e to lower c ost s for owne rs. S ee p age 9 1 for more i nfor mation. We refre she d ou r res po nsib le p rocu rem ent criteri a for pros pe ctive su pplie rs. The p re- c ontrac t as ses sm ent is p art o f IH G’s tende ring pro ce ss an d inclu de s due dil igen ce que stio ns ab out su pplie rs’ governance, labour and environmental prac tice s releva nt to suppl iers’ ow n operati ons and s upply cha ins. IH G com plie s with it s statu tory re por tin g dutie s on paym ent pr actic es an d pe rfor manc e and i s a volunta ry s ignato ry of the U K Prompt P ayment C od e. In 20 21, we upd ated ou r proc es ses to e nsure th at supp lier s with le ss th an 50 em ployee s were pa id within 3 0 days whe re ce ntrally acc ounte d for acro ss o ur UK c orpo rate and managed, o wned, leased, and managed lease hot el supply chains. With o ur hotel s and res or ts at th e hea rt of lo cal c ommun ities , we supp or ted m any progr amme s aroun d the worl d during 20 21, includ ing in the UK , whe re we don ated unus ed PP E to St Jo hn Amb ulan ce. Reco gnising the environmenta l impact textil es have ac ross th e entire valu e chai n, we conti nue d to coll abor ate with E xeter Unive rsit y (U K) to c arr y out a re sea rch as ses sm ent of the e nvironm enta l and in anci al co nsid eratio ns whe n so urcing textil es. We al so co ntinue d worki ng with CARE I nternati onal U K and c arrie d out a workp lac e gen der an alys is in fac torie s usin g inter views a nd foc us group s, whic h will infor m our work in 2 02 2. Wha t’s to com e We will co ntinue ou r goal to in crea se the con sid eratio n of sus tain able, d ivers e and risk re silie nt supp lier s. Thi s ena ble s the right co nvers ations to b e had a cros s the busi ness and incr e ase the amoun t of bu sine ss award ed to the m. T o that en d, we are in the p roce ss of evo lving th e digit al system s that su ppo rt o ur res pon sibl e proc ureme nt proc es se s, incl uding th e evaluati on of sup plie rs’ ris k, di versi ty and sustai nabili ty attribu tes. Co rpor ate and hote l supp ly acti vitie s are driven by o ur Procu reme nt func tion an d guide d by our responsible business agenda, w ith oversi ght from the B oard ’s Resp onsi ble Busine ss Co mmittee. S ee ou r sup ply c hain d isc lo sure o n pag e 26, and c om mitm ent to mi nimi se wa ste on pa ge 30. Suppli er engagemen t Res pon sibl e supp lier re lation ship s are vit al for IH G in driv ing e ici ency an d ee ctiven es s throug hout b oth hotel a nd corporate oice lifecy cles. What i mpacted them in 2021 Engagement Outc omes • P aymen t pract ices and performance • Supply chain integrity • En vironmental co ncerns, inclu ding waste • Communications with suppliers about paymen t ter ms • W ork ing w ith sup pli ers a s pa rt o f our ten der ing pro ce ss es , to und ers ta nd th eir responsible business activ ities • Collabora tion with suppliers r egarding bulk amenit y solutions • Revise d pay men t proc es se s for s mal l co mpa nie s that s upp ly IH G in th e UK • Incr eased collaborat ion wit h sustainable sup pli ers a nd ali gnm ent wi th our J our ney to T omorrow amb itions • Sustai nable bulk ameniti es solutions are be ing d epl oyed ac ros s our e st ate glo ba lly Furt her i nform atio n ab out ho w the B oard c on sid ere d sup ply c hain a nd p rocu reme nt is o n pa ges 9 1 an d 10 1, and o ur bu sin es s rel ation shi ps, inc ludi ng ou r sta teme nt of b usi ne ss re latio ns hips w ith su ppl ier s, cu stom er s and ot her s, is o n pa ge 2 28. Visit www.ihgpl c.com/ respon sible-business for fur the r info rmati on ab ou t our re sp ons ibl e pro cure ment a pp roac h. 39 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 How I HG do es b usin es s Risks identiied within irst -line decisions Ma nag em ent te ams h ave day-to - day re sp ons ibi lit y for id enti f ying a nd ma nag ing ri sk wi thin key de ci sio ns, program mes and t ransactions and escala ting where appropri ate. Ris ks id en ti ied a nd m on itor ed by s ec ond -l ine management funct ions Specialist fun ctions pr ovide expertise, su pport, monitori ng and c hal len ge to de ci sio n maker s on ri sk-rel ate d mat ter s. Risks considered at Executive Co mmittee Ongoing dynamic review of ris ks as p ar t of de ci sio n- mak ing a nd str ateg y set tin g, including considerati on of longer -term trends which co uld im pac t futu re grow th, com petitive nes s or reputa tion. Ou r r isk ma na gemen t Attit ude s to ris k wit hin key de cis ion s We have ass es se d risks an d con sid ered risk a ppeti te acros s our s trategic c hoic es and, wh ile we are not ex pos ed to gre ater risk ove rall acro ss th e strateg y , we conti nue to mo nitor ris ks to executing agai nst ou r plan a nd inh erent ri sks from the trad e -o s we h ave made. T here are als o several e me rging ris ks which a re likely to be dyn amic th rougho ut the de liver y of our str ategy , incl uding c ons umer d ema nd shif ts; d igita l disru ption; p eop le an d workforce changes; environmental, social and gove rnan ce (ESG) exp ec tation s; and a complex geopolitical a nd regula tory environ ment . We desc ribe th e Bo ard’s app roach to ri sk app etite on p age 37 a nd our at titud e is of ten le ss ab out d ownsi de risk m itigatio n and mo re abo ut po sition ing ours elve s to resp ond to un cer t ainty i n an agile w ay . Bo ard and C ommi tte e disc uss ion s during 202 1 have allowe d for c ons ider ation of eme rging an d evolvin g risks a cros s a wide rang e of topic s and tim efram es, in clud ing: • co mpe titor and m acro eco nomi c risk facto rs within t he Bo ard’s disc us sion of strate gy and p rese ntati ons from managem ent ( e.g. brand and lo yalty strategies, commercial and technolo gy developmen ts, indust ry cybersecurity risks, supply chain and pr ocurement stra tegi es , lon g- term in anc ial s trate gy , regul ator y develo pme nts an d the impe rative to drive own er return s); • work forc e -rel ated ris ks at the Re mune ration and N omin ation C ommi tte es, in cludi ng prep aratio n for the inte gration of a n ESG ele ment i nto target s for future l onge r -term inc entive cycle, re tention an d suc ce ssi on arrang eme nts; an d risks re lating to th e com petiti vene ss of re mune ration; • regulatory and inancial governance risks at the Aud it Co mmit tee (e.g. tax ri sks relatin g to digit al bus ines se s, trea sur y and li quidit y ris ks linked to vol atilit y and senti ment in th e cap ital m arkets, cor porate g overnan ce reform , potenti al risks f rom litigati on and ina ncial c ontrol risks i n a cos t-co nstrai ned e nvironm ent); • wid er cul tural ris ks at the Re spo nsib le Busin ess C ommitte e, including emp loyee well bein g and the i mpac t of lexible worki ng arr angements; gender and eth nicit y rep or ting; c ommun ity impact ; sustain ability; human rights; and evol ving su pply c hain ri sks; and • ris ks relatin g to the imp act of c limate cha nge on I HG h ave continu ed to rec eive clo se at tentio n in Bo ard and Respon sibl e Bus iness Commi ttees, incl uding o ur com mitme nts to the TCF D rec omme ndati ons an d an exte rnal brie in g on CO P 26 focu s area s. Proc ed ure s for i den tif ying , dis cu ss ing and escalating emerging r isks We reco gnis e that we are t argeting indu str y-le adin g grow th with an alre ady dyna mic ris k pro ile; with c omp etitive chal leng es in key market s; and with s ome area s of IH G cha lleng ed by em ergin g risks as we have evolve d to the new o pe rating norm s resul ting from C ovid -19. Som e of the se em erging ri sk are as – inc luding con straint s on own er inanc es o r availabil ity of tal ent – may no t be quic k to overcom e. The m anag eme nt team i s aware of the chal leng es thi s contex t crea tes and o ur strate gic prio ritie s are reviewed re gula rly at E xecutive C ommi tte e me etings , con side ring emerging r isks t hrough open roundtable dis cus sion w ithin the a gen da, and c er tai n eme rging th eme s are con sid ered th rough de ep dives with a smaller audience. Our inan cial pla nning al so inc lude s ide ntif ying l evers whic h coul d be pu lled to e nabl e lexi bilit y and a dapt abilit y to cha nge s to our i nanc ial as sumptio ns an d circum stan ce s and overa ll viabilit y and sust ainabilit y . M ore detail on the to pics c overed by th e Bo ard and Co mmit tee s is availab le in the G overn ance Rep or t, pa ges 8 0 to 127 . Su pp or ted by t he Ri sk a nd As su ran ce t eam The R is k and A ssu ran ce te am work s with G roup S trate gy an d othe r i rst- an d se con d- lin e team s to mai nta in and e volve th eir r isk p ro ile s, prov ide inte llige nc e, tra ck ea rly war ning i ndi cato rs an d any pote ntia l cha nge s to ris k tol eran ce an d ap peti te. Th ey upd ate th e Bo ard on a ny chan ge s to the prin cip al ri sks bu t als o exp lore o pp or tunit ies to c on sid er ri sk co ntinu ou sly th roug hou t the yea r and to i nl uen ce a nd info rm key de cis ion s. The t hird -lin e Inte rna l Audi t team wo rks th rough out t he yea r with th e Aud it Co mmi tte e to co nsi der w he re add itio nal c on id enc e may b e ne ed ed in rel ation to s trate gic p rogr amm e and o pe ratio nal d eli ver y , inc ludi ng the e sc al ation o f eme rgin g ris ks by man ag eme nt, th e res ilie nc e of key proc es se s and c ontro ls (i ncl udin g third -p ar ty re lat ion ship s and t ech nol ogy i nnova tion) an d the in tegri ty a nd gove rna nce o f dat a. Th e tea m als o mon itor th e co n ide ntial d isc lo sure ch ann el to i dent if y any em ergin g tren ds re quir ing m ana gem ent a nd/or Bo ard in ter venti on. Oversight by Board and Committees The B oa rd is re sp ons ibl e for c arr yin g out a ro bus t assessment of the Compan y ’ s emer ging risks and over se es th e cultu re acro ss t he Gro up thro ugh w hic h emp loye es are e nc oura ge d to le arn an d work at p ac e, foc us on s olu tion s and t ake th e right ri sks to g et ah ead of the m arket . The B oa rd and C om mit tee s rec ei ve pre sen tati ons f rom management t eams, second-line functi ons, Risk and Assurance and e xternal parties t hroughout the y ear . Ongoing escalation of emerging risks , deined as: • New ris ks, or e xist ing ri sks in a n ew co ntex t, wh en th e natu re and va lue of t he imp ac t is no t yet full y kno wn or un de rsto od • F acto rs wi th an in cre asin g imp act a nd p roba bili ty ove r a lon ge r time h oriz on (i.e . beyo nd ive yea rs) The B oa rd’s role i n risk m an age me nt – foc us ed on I HG ’ s res ilie nc e The B oard i s ultimate ly ac count abl e for est abl ishin g a framewo rk of pru dent an d ee ctive c ontrols , which e nabl e risk to b e as ses se d and m anag ed, a nd is su ppo rte d by the Audi t Co mmit tee, E xecu tive Com mit tee and d ele gated c ommi tte es. O ur gove rnanc e frame work and Committ ee agendas establish proc edu res for B oard m emb ers to rec eive inform ation on ri sk from th e Exe cutive Co mmit tee an d Sen ior Le ade rs and a ra nge of othe r interna l and ex ternal s ourc es. Our B oard a nd man age ment , supp or ted by the Ri sk and A ssu ranc e team, c ontinu e to focu s on the l evels of ri sk in the b usin es s (either in divid ually o r in total ), inclu ding the app ropriate b alan cing of o ppo rtu nities fo r strate gic adva ntag e or e icie ncy wit h the ne ed to buil d in res ilien ce in the s hor t and lo nge r term. D elive ring at p ace a cros s our str ategi c pilla rs places demands on our c apab ilitie s and c apa citie s and the com plexiti es of th e hos pita lity i ndus try requi re us to con sid er em erging tre nds (see pa ge s 14 and 15) ac ross a w ide ran ge of subj ect s given th e of ten lon g lea d time s to ee ct cha nge wi th our es tate of h otels . Strate gic Re po rt 40 IHG | Annua l Repo rt a nd Form 20 F 202 1 IH G’s resili enc e remain s an ong oing, cros s-f uncti onal, fo cus to id entif y opp or tunitie s to improve e ici ency , ee ctiven es s and c on ide nce . We are app lying re silie nce p rincip les a s we emb ed prep aredn es s for clim ate cha nge into existi ng proc es se s followin g the TCFD proje ct. T his inc lude s tran slatin g the key clim ate- relate d sc ena rios into as sum ptions that c an be e mbe dde d in our l ong -ran ge planning; co nside ring climate sentiment indic ators re lating to gu es ts, own ers an d investor s and oth er strate gic ini tiatives over time; a nd co nsi derin g sce nari os as an integ rated p art o f future Bo ard Stra tegy ses sions and horizon- scanning discus sions. We des cribe th e Bo ard’s appro ach to ris k app etite on p age 37 an d more d etail o n forma l risk ap petite a nd tole ranc e is provid ed els ewhe re in this rep or t. For exam ple, o ur app etite for inan cial ri sk is de sc ribe d in note 24 to the G roup Fin anci al Sta teme nts (see pa ge s 188 to 19 2), and our a ppro ach to taxati on on p age 57 . Thi s se ctio n sh ould b e re ad tog eth er wit h the res t of the S trate gic R epo r t, Go vern anc e on pa ges 8 0 to 12 7 , th e goi ng co nc ern s tate me nt on p age 2 30, an d Ris k Facto rs on p age s 23 1 to 23 6. procedures; and cross -function collaborat ion on k ey risks (includ ing thir d-part y due diligence , personal data, fraud p revention, re sp ons ible b usin es s); and • how we h ave adapte d monitor ing and repo rting of ri sks foll owing ne ce ss ar y adjustmen ts dur ing t he pandemi c, incl uding th e formati on in 20 21 of n ew govern ance c omm itte es for key ris k topic s, sp eci ic ex terna l ben chma rking s uch a s anti- brib er y and c orrupti on, pri vacy and TCFD mo de lling, an d the deve lopm ent of me dium- term strate gic me trics to m onitor strate gic executi on, whi ch are anc hore d com petiti vely wh ere po ssi ble. The R isk an d Ass uranc e team h ave repor te d to the Audit C om mitte e on d evelop ment s in executi ve and se nior l ead ers hip overs ight of ris k mana gem ent an d also th ose o f key func tions w ithin IH G (info rmatio n sec urit y , procurement, ethics and complianc e, privac y) , includ ing tr ade- os and choices mad e to maint ain an ap propri ate bala nce acro ss the p or tfo lio of ris ks and a ctive consideration o f acceptable risk t olerances. This i s contri buting to a n ongo ing evalua tion of the s ource s of as suran ce availa ble to the Board , complemen ted by the i ndependent intern al audit p lan. T his ha s incl ude d focu s on as sura nce o n data inte grit y in rela tion to ke y non- inancial metrics which will continue in 202 2 . Co ntin ue d evoluti on of o ur ris k management, internal control and ass uranc e arrangem ents The B oard h ave recei ved reg ular up date s on the o ngoin g evolutio n of our ri sk man age ment an d intern al contro l system . The se arr ange ment s are de signe d and ope rated to s uppo rt o ur res ilien ce and our ab ilit y to take advant age of u psi de opp or tunitie s and re main fu lly integr ated with the way we run th e bus ine ss, in clud ing: • how th e Exe cutive C ommi tte e has reinforc ed key princ iple s of cul ture and leadership (see pa ge s 24 to 26), includi ng our D ele gatio n of Autho rity p olicy; se ssi ons wit h all col lea gues to re inforce stra tegy a nd leadership behaviou rs; refres hing s everal c orpo rate pol icie s to ensure they remain appropriate (includin g Co de of C ond uct an d Inform ation Securit y ); reviewing decisio n-making protoc ols (for examp le to fur the r enh ance govern ance ove r Syste m Fund expen diture and Comme rcial and T echnolo gy delivery); and c ons ideri ng risk a ppe tite and str ategic progr amme d elive ry ri sk withi n the Bo ard Strate gy me eting s; • how we h ave adapte d key pr ocesses and controls as we recover f rom pan demi c disr uption s and ad apt to remo te working suc h as regu lar review s of risk p roil es; a review of in cide nt and c risis m ana gem ent Prac tic al ris k ma nag em ent l es so ns l earn ed fr om ou r Covi d-19 re spo ns e Re lec ting on th e chall eng es we have fa ce d during o ur resp ons e to the pa nde mic, we have he ld ‘le ss ons le arne d ’ disc uss ions acro ss the b usin es s aroun d a range of to pic s inclu ding pro ce ss, d eci sion -m akin g, com munic ation an d future pro o ing, am ong oth ers . Our g oal is to e nsure we grow fro m our exp erie nce to date, re inforce an d co ntinue go od p ractic es w hich were a lread y in pla ce and t hat we impl eme nt conti nuou s improvem ents to ou r ways of workin g going fo rwa rd. Ou r pra ct ice s in p la ce t hat w orke d wel l Opportunities identiied for future resilience planning Implementing opportunit ies in practice We identi ie d suc ce ss ful pra ctice s ado pted by ma ny IHG te ams in ou r pan demi c resp ons e to captu re and reinforc e for the fu ture inclu ding: • glo bal ali gnme nt on termi nolo gy an d respo nse proce dures, highlighting key acco untab ilitie s and escalation pr ot ocols; • proto col s to enga ge dive rse exp er tise and b est p racti ce ac ross o ur func tion s and re gion s, usin g a glob al ‘hub an d sp oke’ mode l. Thi s ens ured we rem aine d agile and adap table in the fast -changing and un cer t ain glob al enviro nme nt; an d • livi ng our val ues , beh aviour s and prio rities , emp owering te ams to b e sol ution s-fo cus ed an d move at pac e to supp or t hotel s and own ers a s well as c are for our e mploye es an d gues ts. While re co gnis ing what wo rked well, we als o identi ie d op por tuni ties to evolve an d strengt hen our crisis management and bus ine ss co ntinuit y pro gramm e launc he d prio r to the pan demi c, inclu ding: • wh ere po ssi ble, au tomatio n of proc es se s that all ow for real tim e dat a to be ea sily cap tured, tra cked, and m onitore d; and • en hanc ed s tructu res for stre amlin ing e icie ncy in ou r comm unic ation pro ce ss es up and downst ream i n the business. Ea ch key oppo rtu nity i denti ie d in our les so ns le arne d review wa s ass igne d a de dicate d worki ng group to id entif y prac tica l and ac hievabl e sol ution s for impl eme ntatio n in 202 2 an d beyon d. The se n ew ways of workin g will be emb ed ded into o ur co mmon p ractic es and cu lture, en suring gre ater re silie nce and re adine ss fo r future in cide nts or c rise s acro ss a wid e rang e of potenti al indi vidu al and c onne cte d risk top ics . 41 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Our ri sk managemen t IHG ’s princi pal ri sks a nd un ce rt ainti es The C ovid -19 crisi s did not f unda ment ally cha nge the p rincip al ris ks to our bu sine ss and s trategy; however i t heighte ne d the unc er taint y we fac ed in th e sho rt te rm and als o create d the po tential for l ong er -term impa cts b ase d on tra de - os th at were requi red to protec t liqui dit y in 2020. Covi d-19 was th erefore n ot man age d as a sep arate ris k, ra ther a s par t of how we evaluate d many of ou r existin g princ ipal risks , and thi s appro ach c ontinue d into 20 21, as sp ec ii c factor s relatin g to the safe ty an d se curit y of our c olle agu es an d gue sts or constrai nts on domestic and in terna tional travel ea se d, but oth er unc er tai nties – for exampl e relatin g to hotel -leve l tale nt and supp ly ch ains – may h ave a more rapi d impa ct in an un ce rt ain and l ow visibility en vir onment. While o ur prin cipa l risk gri d is de libe rately broa d in sc ope an d incl ude s facto rs whic h may be com e incre asi ngly imp or tan t over time, th e comp lexitie s involve d in the executio n of our in itiative s mea n there is me rit in mo re proac tive co nsid eratio n of em erging s cen ario s acros s multip le ris k topic s. Th es e can a ct as l ens es for u s to look at the na ture or pote ntial sp ee d of imp act of many of o ur ide ntii ed ris ks (as we have expe rien ced w ith Covi d-19) and to p rovide incre ase d ar ticul ation to the B oa rd of pote ntial se nsiti vitie s to, and stres s- testin g of, strategy execu tion. All the ri sks on th e grid b elow me et the de initi on of ‘princi pal ’ , however we h ave reviewe d the tren ds ca refully to mo re acc urately re le ct th e current b ehavi our of risks re lative to ea ch othe r and th e por t folio ov erall. This incl udes close considerat ion of ris ks with a more g radua l, long er-term impa ct beyo nd the p erio d con side red for inan cial planning, inclu ding the potential impa cts o f climate c hang e which h ave bee n evaluate d in our TC FD proje ct (see p age s 32 to 35) an d also i ntegrate d into other ri sks on the g rid. The B oard a nd E xecutive C omm itte e have not note d any majo r moveme nts on t he grid com pare d to last ye ar . In relati ve terms, som e risks re main d ynami c as we move into 202 2 wh ile othe rs are mo re stab le on 2 02 1 level s. We will co ntinue to mo nitor p otential shif ts i n 202 2 as a re sult of th e exte rnal environ ment , our bu sine ss m ode l or a complex and highl y int e rdependent port folio of intern al initia tives. By dis tributi ng the ris ks acro ss the g rid in this way , it all ows us to co nsi der th e diere nt resp on ses w hich may b e requi red to indi vidua l facto rs (for exampl e, rapid f actor s which m ay requi re contin uity p lann ing), or the overa ll leve l of ris k we are facin g and wh at it me ans for govern ance o f the who le po rt foli o and futu re resil ienc e. Th e princ ipal ri sks are co nsi dere d in the deve lop ment of s pe ci ic via bilit y sc enari os (see p age s 48 a nd 4 9). Our acti ons resul ting from o ur TCFD pro ject w ill als o be use d as a m ode l for othe r sce nari os whic h can b e integ rated into on going m ana gem ent monitoring and dynamic inancial planning, and wh ich c an als o fee d into the mo delli ng and s tress -te sting of s trategic re silie nc e rec omme nde d by the U K Govern ment re por t on corporat e go vernance ref orm. Ris k tre nd a nd sp ee d of im pa ct We ass es s wheth er the ri sk are a is sta ble o r dynam ic in its i mpac t and/or likeliho od (i nhere nt risk tre nd), an d the rate at whic h there c ould b e a materi al impa ct on I HG. T he tren d and sp ee d of impa ct are su mmari se d in the dia gram with fur the r det ail on ac tiviti es to man age e ach of th es e risks in th e follow ing pages. Prin cip al ris ks de sc ript ion s Inheren t r isk t rend Sp ee d of po tenti al im pac t Stable More Gradual Dynamic Rapid • En vironmental and social megatr ends • Cha nnel managemen t and technology • In vestment eect iveness and eiciency • Legal , regu lator y an d ethical compliance • Fi nancial management and cont rol s ystems • Safet y and s ec urit y • Macro ex ter nal f acto rs • Preferre d bran ds an d loyal ty • L eadership and talen t • Cyberse curity and inform atio n govern anc e Prin cip al ris k – as se ss me nt of tr end a nd s pe ed of i mp act Inheren t r isk t rend Dynamic/Rapid Dynamic/Gradual Stable/Rapid Stable/Gradual Ris k imp ac t – link to o ur st rate gic p riorit ies Build l oved and tr uste d bran ds Custo mer c entric in a ll we do Create digital advantage Care fo r our pe op le, co mmuniti es an dplan et Our r isk ma na gemen t c o ntin u e d Strate gic Re po rt 42 IHG | Annua l Repo rt a nd Form 20 F 202 1 Ris k & tre nd Ma cro ex tern al fac tor s Prefe rre d bran ds a nd l oyalty Descript ion Ma cro exte rnal fac tors s uch as p oliti cal an d ec ono mic disr uption, th e eme rging ri sk of infe ctiou s dise as es, actu al or thre atene d act s of terrori sm or wa r , natu ral or man -m ade di sas ters, a nd in latio nar y pres sure s co uld have an imp act o n our abi lity to p er form an d grow , including dis rupting hotel supply chains an d increasing co sts for o ur owne rs. Failure to deli ver prefe rred bra nds an d loyalt y coul d impa ct our c omp etitive po sitio ning, ou r grow th ambitio ns an d our repu tation w ith gue sts a nd owne rs. Co mpeti tion from oth er hote l bran ds and th ird- par ty interm edia ries c reate inhe rent ris ks and o ppo rtu nities to th e lon ger-term value an d attr active nes s of IH G ’ s franc hise d and m anag ed pro pos ition fo r our bra nds . Lin k to strategy Tr e n d s ob se rve d in 2021 Sec ondar y impact s and continuing unce rt ainty in relati on to the rec over y traje ctor y from the p and emic will co ntinue to exa cerb ate the se fac tors ac ross s everal markets . In latio nar y force s on la bour a nd en ergy co uld create s igni ic ant pres sure s to hotel an d owne r in ancia l po sition s and I HG o pera ting co sts . In ad dition to e pide mic s and pa nde mics , the ris k of natura l disa ster s and ex treme we athe r events may p ose an inc reas ing threa t to IHG o per ations i n the future . Loc al and inte rnatio nal po litic al tens ion s also c ontinu e to create unc er taint y for op erati ons in key market s. In an un cer t ain dem and e nvironme nt, an d with co nstra ints on lab our , sup ply ch ain and i nvestme nt cap acit y in m any markets , our hote ls and ow ner s contin ue to fac e dyna mic risks to d eliver y of g ues t expe ctati ons of exp erie nc e. Covi d-19 inc reas ed s hor t-term pre ssure s on availa bilit y of in anci ng for deve lopm ent, a nd the re may also b e slow ing of the p ace of c ons truc tion an d ope nings d ue to lab our an d supply cha in const rain ts and wider inla tionary pr essures. Initiatives to re sp on d IH G’s resili enc e remain s an ong oing, c ross -fun ctio nal, focu s. Th e launc h of a refre she d inci dent an d cris is man age ment p rogramm e and e nga gem ent of key lea der ship te ams in s ce nario trai ning pri or to the pan demi c has p roved ver y valua ble in e sta blis hing a common language and headline roles a nd responsibil ities. We have contin ued to mo nitor inte llige nce fro m a range of exte rnal an d intern al sou rces (e.g. governm ent h ealth and travel a dvic e), to evolve guidan ce for th e safe ope ration o f hotel an d corp orate o ic es . Lea der ship te ams ac ross I HG h ave also revi ewed le ss ons lea rne d from the p ande mic an d how they c an be ap plie d to future cri ses . As an exam ple th e EME A A le ade rsh ip team regularly re view global, regional, and busines s unit ris ks, work ing with B usi nes s Rep utatio n and Res pon sibili ty exp er ts to train te ams o n resili enc e, continui ty , and crisis planni ng. Crisis management teams have refres he d busi nes s co ntinuit y arran gem ents fo r the reo pe ning of c orpo rate o ice s (e.g. busin es s ser vic e ce ntres, res er vatio n oi ces a nd co rpor ate loc ation s) and conti nue d to monitor c ontinu ity a pproa che s for key supplier relat ionships. We mainta in a rang e of intellig enc e sou rces to ho rizon - sc an for em erging t hreats , provide i nsight to l ead ers hip on inc ide nts that im pac t ope ration s, and a nalys e future sc enari os to inform th e bus ine ss pl anning cyc le, incl uding at th e Bo ard and E xecu tive Co mmit tee leve l. Our in itiative s to focus o n owner re turns are de sc ribe d within th e ‘Pre ferred b rand s and loyalt y ’ and ‘ Inves tment ee ctiven es s and e ic ien cy’ ri sks and w ithin our p riori ty to be cu stome r ce ntric in all we do (se e pag es 19 to 2 1). In rec ent yea rs, we have fo cuse d on s trength ening our br ands, addr essing qua lity , build ing ou r master brand and enhancing our data and technolo gy capabilities. The se inves tment s have be en e ss ential to ou r multi-ye ar journ ey towards cus tome r centri cit y and have he lpe d est abl ish a stro ng foun dation fro m which to b uild cu stome r loyalt y (see pa ges 1 9 to 21). We have adde d the c apab ilitie s to launc h and m anag e new bra nds, i nclu ding st and ardis ed des ign, ma ndate d sp eci ic ation s, new p rocure ment capabilities, continuous produc t innova tion, and strengt hened franchise li cences. It will b e critic al to us e our loyalt y pro gramm e to drive bus ine ss to our h otels an d take sh are from our c omp etitor s. We are also i nvesting in i ndivi dual h otel- level m arketing to drive revenu e per form anc e of new b rand ho tel op ening s and im ple mentin g actio ns to enh anc e returns for o ur owne rs by dec reas ing c ost s to build an d ope rate hotel s, for examp le by evolvi ng our br and st and ards. We are co ordinati ng the op erati onal im pac t on hote ls in the n ear term as o ngoin g disr uption s mea n there wil l be co nstra ints on our a bilit y to train hote l coll eag ues . Our re gion al team s als o use d ata to prio ritis e atte ntion an d reso urces to drive p er fo rman ce. We track hote l- level dat a in rel ation to the s ust ainab ilit y of our b rand s in order to re sp ond to an in crea sing tren d of requ es ts from c orpo rate clie nts for thi s informa tion. Severa l IH G team s have also p rogre sse d an ag ree d set of bathro om bul k produ ct oe rings fo r all our b rands i n all our regio ns, n ot only to bu ild on ou r sus tain abilit y cre dentia ls but to imp rove gues t expe rienc e throu gh the pro duct s that will b ec ome avail able i n our hote ls. 43 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Our ri sk managemen t Our r isk ma na gemen t c o ntin u e d Ris k & tre nd Leadership and talent Cybersecurity and inf ormation gov ernance Descript ion Failure to attra ct, d evelop a nd retai n lea der ship an d tal ent cou ld imp act ou r abilit y to achi eve growth a mbitio ns an d execu te ee cti vely. Ris ks relatin g to peo ple un derp in the ma jorit y of proc es se s and c ontrols a cros s IH G, and our a bilit y to devel op tal ent is c ritic al to delive ring valu e to our bra nds and h otels in th e glob al market s where we o per ate and com pete. S ee p age s 24 to 26 for fur the r deta il on the impo r tanc e of our p eo ple to our p urpo se an d strategic goals. Inhe rent thre ats to cyb ers ecu rity a nd inform ation govern ance re main s igni ic ant and we are re spo nsi ble for a rang e of high -value a sse ts (critica l system s and e mployee, gue st and o ther s ens itive dat a) which may be t argete d by vari ous ‘thr eat act ors’ ( including organ ised crimina ls, third-par ties and colleague s ). Our p lans to tra nsfor m how we use o ur co mme rcial an d marketing d ata to imp rove the cus tome r experi enc e, grow market sh are and reve nue, an d emp ower our ow ners to make bet ter d eci sion s als o pres ent inh erent ri sks to how we man age info rmatio n acros s IH G. Lin k to strategy Tr e n d s ob se rve d in 2021 Our a bilit y to attra ct and re tain t alent re main s a chall eng e in an unc er ta in ec onom ic and hig hly co mpe titive environ ment . F ur therm ore, our g rowth am bitio ns inc reas e the ne ed fo r hotel t alent , par ticu larly fo r Gen eral M ana ger s in our Lu xury & L ifes tyl e est ate. We face dy nami c trends i n our abi lity to ret ain an d attra ct key and diver se ta lent , to delive r lear ning at pa ce an d to transition to hybrid wa ys of working while maintaining productivity and co llaboration. Dyn amic an d exte rnal at tac ks agai nst th e hos pita lity indu str y have con tinue d in 202 1, with ra nso mware att acks in par tic ular tren ding a gains t tech nolo gy provi ders , nationa l in frastr uctur e and supply cha in. Th is has t he pote ntial to impa ct b oth IH G and ou r third- par t y provide rs. Rapi d soc ieta l, leg al and re gulator y an d me dia sc rutiny of priva cy arrang eme nts, th e trans ition to mo re perm ane nt hybrid wor king c ondi tions fo r our em ployee s and su ppli ers, and a dvanc es in at ta ck so phis ticatio n als o heig hten inhe rent inform ation s ecu rity ri sks. Initiatives to re sp on d The E xec utive Co mmit tee re gularl y disc uss es t ale nt attra ctio n and retenti on ris ks, and e ach fu nctio nal and re gion al lea der ship te am has a c lea r tal ent pl an. We have expand ed p rogram mes to su ppo rt th e devel opme nt of dive rse t alen t, incre as ed our c on scio us incl usio n edu catio n and c ontinuo usly rev iew and a dapt our pr actic es to b e more inc lusi ve. Our e mploye e reso urce gro ups, wh o are key in helpi ng us bu ild a cultu re of inc lusio n, have grown ac ross a ll our glo bal m arkets. We are providin g active su ppo rt to o ur coll ea gues a s they trans ition to hybri d workin g and are t aking o ppo r tunitie s to re- e nergis e the wor kfo rce. Re gular al l- emp loyee c alls are hel d with the C hief E xec utive O ic er an d there are ong oing le ade rsh ip com munic ation s and vir tua l team me etings at re gion al and f uncti onal l evels . The H uman Re so urces o rgani satio n have develo pe d a ser ies of l ead ers hip tool s and l earni ng to ens ure our lea der s are eq uipp ed to le ad in a hybri d world an d can foste r a per form anc e- dr iven cultu re bas ed on tr ust. We are creatin g oi ce sp ace s that a re desi gne d for collaborat ion and connect ion. We have est abli she d a Glo bal Le arnin g Stee ring Co mmit tee with a fo cus o n supp or ting o ur owne r nee ds, reviewin g our le arnin g oerin g and util ising te chn olo gy to provide a v irtu al and s ust ainab le le arnin g environm ent. IH G has th e abilit y to man age t ale nt and reten tion ris ks direc tly in rel ation to IH G emp loyee s but rel ies on ow ner s and third -p ar ty su ppli ers to ma nage th es e risks w ithin their ow n bus ines se s. O ur Proc ureme nt, Le gal an d Risk team s also c on side r more in direc t work force ris ks relati ng to our third -pa rt y rel ations hips . The Re mune ration C om mitte e is res po nsib le for deter mining E xec utive Bo ard and E xec utive Co mmit tee remun eratio n and revie ws wide r work force re mune ration, align ed with th e intere sts of s hareh old ers an d the U K corporate gover nance envir o nment. Our I nformati on Se curit y team c ontinu es to imp lem ent new sol ution s and co ntrols to ad dres s pote ntial vuln erab ilitie s, and to foc us res ource s on th ose o pera tiona l tas ks that be st protec t our se nsi tive data s ets a nd syste ms and d etec t and resp ond to p otentia lly mali ciou s events in a n approp riate way . In 2 02 1 we built a ra nso mware resp ons e prog ramme, conduc ted tabletop ex ercises and clari ied decis ion rights to enha nce in cid ent prep ared nes s. We als o mature d our oversi ght of third -pa rt y provid ers th rough us e of se curit y que stion naire s and an in dep end ent cyb er sec urit y rati ngs platfor m. We work with ou r spe ciali st tec hnol ogy p rovide rs to conti nuou sly imp rove ke y op eratio nal se curit y pro ce ss es and c apa bilitie s suc h as Id entit y and Ac ce ss M anag eme nt, Se curit y Mo nitoring, I ncid ent Re spo nse , and the s upp or t and m aintena nce of te chni cal s olutio ns arch itectu re. As inanc es re main at a p remium for h otel own ers, o ur Inform ation S ecur ity an d T e chn olo gy team s conti nue to col labo rate to provide re liab le, sc alab le and c os t-ee ctive sol ution s, targ eted at are as of gre atest o pp or tunit y for future at ta cks. Our in formatio n se curit y strate gy and p rogram me is overs een by an E xec utive Se curit y C ompl ianc e Co mmit tee and su ppo rte d and revi ewed by inter nal an d extern al as suran ce ac tivitie s, inc ludin g PC I ass es sme nts . An ex tensi ve sec urity m etric s pac k is pro duce d mo nthly to track ri sk tren ds, op eratio nal e ec tivene ss an d mitiga tion ac tivitie s. T o m itigate sp ec ii c risks in re lation to o ur Gre ater Chi na regio n, our lo ca l team ha s co nduc ted intern al as se ss ment s of se curit y co mplia nce a nd reme diate d gap s, sup por ted by IH G’s Glob al Infor mation S ec urity te am. Se e also p age 3 8 for d etail of o ur app roac h to handli ng inform ation res po nsib ly in ac cord ance w ith our p olici es and p rivacy co mmitm ents , inclu ding work ing with ve ndo rs. Strate gic Re po rt 44 IH G | Annua l Repo rt a nd Form 20 F 202 1 Ris k & tre nd Channel management and technology Inv e stment e ectiv eness and eici ency Descript ion Failure to cap itali se on in novation in b oo king te chno log y and to ma intain a nd enh anc e the fun ction alit y and resilience o f our channel management and t echnology plat form s (incl uding th ose o f third- par tie s, on whi ch we rely dire ctly o r indire ctly), and to res pon d to chan ging gue st and ow ner n ee ds rem ains a pr incip al risk to I HG ’s revenue s and grow th am bition s. The im por t ance o f our inves tment e ec tivene ss a nd e icie ncy will b e critic al to ba lanc e sho rt- and lo nge r -term strate gic ne ed s ( e.g. devel opin g infras tructu re, incre asin g grow th of our sys tem, en hanc ing digit al c apab ilitie s) . Failure to mana ge ris ks as soc iated wi th investm ents m ay impa ct co mme rcial p er forma nce, l ead to inan cial l oss a nd undermine stakeholder conidence. Lin k to strategy Tr e n d s ob se rve d in 2021 Unc er tai n dem and as th e indu str y rec overs cre ates dyna mic and r apid tre nds to how we s er vic e dem and through var ious channel s and meet increasing gues t and owne r expe ctati ons, i nclu ding how we u se dat a to pers onalise experience s and build loyalty . The p ace o f innovatio n in digit al be haviou rs in the hos pit alit y indus tr y and wid er s ocie ty c ontinue s to acc ele rate, with fa st-movin g glob al and l oc al com petito rs, and te chno log y repla cing c er tain e lem ents o f bus ines s travel, and I HG m ust evol ve to eec tively grow an d com pete in th e marketpl ace . Additi onal ri sk co me s from the cu rrent co ntext, in clud ing in anci al and in lati onar y pre ss ures on ow ner s who rel y on us fo r their s cal e, cap abili ties an d enterp rise s trength , and c ons traints an d risks i n the hirin g and retenti on of top tal ent in th e hos pita lity i ndus try. We are highly d epe nde nt on sig ni icant c api tal inves tment to renovate our exi sting e st ate, sign ne w hotels a nd bui ld IH G’s pipe line an d the cur rent op erating e nvironm ent has c reated a dditi onal c halle nge s for own ers, i nclu ding in anci ng co nstrai nts, co mmo dit y and raw ma terial p rice inlat ion, su pply chai n constr aints , labour and general prod uct sh or tag es, s hif ting gu est ex pec tatio ns an d volatile dem and p atte rns. A s such, i t is par tic ularly i mpo rt ant that our e nterpris e ca pabil ity i s strong to all ow owne rs to deli ver con sis tently sup eri or returns th at ca n attra ct this c apit al. We are also i ncrea sing o ur interde pe nde ncie s with third- par tie s to deli ver our C omm ercia l and T ech nolo gy strate gy , p laci ng emp has is on ris k owne rshi p within ong oing ma nag eme nt of contr act rel ation ship s and the resil ienc e of, and due dilig enc e in rel ation to, key suppli ers . Initiatives to re sp on d While t he pan dem ic has b ee n limitin g due to de crea se d availabi lity o f capi tal, c apa cit y and c apab ilitie s, we be ne ited f rom prio r progre ss we ha d mad e in our organ isati ons to ma nage r isks, by si mplif yin g our work , se quen cing it m ore e ective ly and re moving o bst acl es and lim itatio ns with in eac h core are a. As s uch, we are able to re sp ond rap idly to shi ft s and o ppo rtun ities in the ma rketplac e and c an drive in crem enta l revenue by focus ing on th e bas ics o f pricin g, inventor y and booking-low opt imisati on. Our M arketing an d Co mme rcial an d T e chno log y teams work in p artn ers hip to prio ritis e eor ts a nd as so ciate d investm ents in d riving e nhan ce d cus tomer-c entrici ty , by develo ping an d iteratin g a roadm ap for key initiati ves, their p ac e, se quen ce an d intend ed foc us for te chno log y- ena ble d trans formati on over the n ext thre e year s and beyon d (see pa ge 2 2 for mo re detai ls). W e have als o est abl ishe d a ce ntral pro gramm e oversig ht func tion des igne d to supp or t and m onitor p rogre ss, c halle nge app roach es an d reso lve is sue s relatin g to execution . We will als o contin ue to focu s on deve lopi ng our cap abili ties an d ens uring th at we have the ta lent n ee ded . While we h ave see n the ad dition o f top se nior le ad ersh ip tal ent to our te ams, it w ill be key to prior itise di gital capabilities to drive our channel s, actively e xpanding the brea dth and d epth of o ur digit al rela tions hips wi th current and new guests. T o m itigate sp ec ii c risks for l oc al market s, we have devel ope d a Chin a Digi tal roa dmap a nd inves tment to stren gthen o ur lo cally re levant dig ital a nd loyalt y oer ing. Our F inan ce tea ms regu larly revi ew and evolve o ur gov ernance and con trol frame work s, includ ing delegat ed app roval authori ties an d proc es se s, to ena ble de cis ions on inves tment s to be ma de quic kly an d e icie ntly with con sid eratio n of the ris ks involved . The E xecu tive Co mmit tee dis cus ses o ur strate gic pri oritie s and c apab ilitie s to deliver them. Our gl oba l and reg iona l Ope ration s team s maint ain a glo bal proje ct trac ker which a llows us to h ave visibi lity a nd review any risks an d opp or tunitie s to any in- light o r pen ding proje ct with i mpac t on hote ls. With l earni ngs from th e pan demi c and c onsi derin g the new ope rating c ontex t, we es tabl ish ed a new s trategi c priori ty in be ing cu stome r centr ic in all we do to fu rth er stre ngthe n owne r return on inves tment a nd to ac cel erate our n et system s ize grow th in the re cover y . We are instill ing sp eci ic retu rn on inves tment di scip line s through o ur ‘ Think re turn’ beh aviour an d are app lying enh ance d de sign an d proc ureme nt proc es se s to reduc e the co st, a lleviate l abo ur pres sure s and m aintain th e qual ity of our b rand s in new bra nd protot ype s. We have als o simp li ied g overnan ce with a s enio r executive s teeri ng com mit tee provid ing overs ight of key glob al works treams . We are strateg icall y plan ning our s ourci ng acti vities a round know n or antici pated c os t and sup ply ch alle nge s for our owne rs. M any goo ds an d ser vic es in th es e area s are also intrins ica lly linked to ou r resp ons ible p rocure ment p lan to deliver sustainable , div erse and risk -managed supplies to our hote ls. S ee p age 3 9 for more d etai l. 45 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Our ri sk managemen t Our r isk ma na gemen t c o ntin u e d Ris k & tre nd Leg al, r egu lato ry a nd et hic al co mp lian ce Financial management and cont rol s ystems Descript ion As we op erate in m ore than 1 00 c ountrie s we are expo se d to many die rent co mpli ance, re gulato ry a nd litig ation and re puta tion ris ks. Sig ni icant ine s ca n be imp os ed for regu lator y non - co mplia nce, I HG m ay be expo se d to litigati on ris k and st akeho lde rs (inc luding c orp orate s ales clie nts) and inves tors foc us on I HG ’ s pe rfo rmanc e in upholding ethical and social expe ctations. A materi al bre akdown in i nanc ial ma nage ment a nd co ntrol system s would l ead to in crea se d publi c scru tiny , reg ulator y investig ation an d litiga tion. M ateria l weakn es se s may als o impa ct co n iden ce in I HG fro m our sh areho lde rs and w ider stakeholders includin g suppliers, debt holders, hotel owners and emplo yees. Lin k to strategy Tr e n d s ob se rve d in 2021 The global business regula tory and cont ractual environment and societal expect ations have continued to evolve throu ghout 2 02 1, with le gisl ative cha nge s in many lo catio ns we op erate in o n topic s suc h as dat a priva cy . M any cou ntries are intro duc ing le gisl ation or le gisl ative prop os als rel ated to ES G age ndas a nd a focu s on sa nctio ns as a fo reign p olicy too l conti nue s to i ncrease. E xpe ctati ons are al so in crea sing for I HG to m anag e and driv e r esponsible business t hroug h our supply cha ins and across our w ider business including with ou r franch isees. We expec t mon itoring an d scru tiny of corp orate hu man rights p er form ance to c ontinu e to incre ase a s a direc t resul t of the C ovid-19 c risi s and with h igh pro ile up com ing events in clud ing the FI F A World Cup Q ata r 202 2. Ris k levels h ave remain ed rel atively s tab le, with c ontinui ng moni toring re quired i n relatio n to owner c redit ri sks an d pote ntial co mme rcial dis pute s while th e pan demi c rec overy p rogre sse s. We have ma de so me revis ion s to our contro l testin g which a lign with th e app roach of o ur new audito rs, P wC, a nd the re were no ma jor new a cc ounting sta ndard s with a mate rial imp act e ec tive this ye ar . We are monitor ing t he UK Gov ernment consu ltation on corporat e gover nan ce refo rm. Initiatives to re sp on d Our Ethi cs an d Com plian ce te am focu ses o n ens uring IH G has a gl oba lly co ordina ted app roac h to materia l ethical and complianc e risks. The ov erarching framework is the I HG C od e of Co ndu ct (see p age s 37 and 3 8) and e -le arning i s provid ed to co rpor ate and res er vation emp loyees a nd man age d hote ls on an an nual b asi s. Our Ethi cs an d Com plian ce te am moni tor e -le arning training comple tion, gifts and e ntertainm ent repor ting and th e owner d ue dilig enc e proc es s. Th e team al so rec eive inform al que ries a nd/or esc alatio n of is sue s direc tly from c olle ague s and v ia an Ethic s and Co mplia nce e mail c hann el whic h is pub lici sed i n training and awareness materials. The Bo ard r eceives regular repo rt s on the C on id ential R epo rtin g Cha nnel . We also conti nue to par tic ipate in T rans pare ncy Inter nation al UK’s Co rpor ate Anti- C orrupti on B ench mark . We monitor a nd ad vise in ternal s takeh olde rs on ri sks acro ss a ran ge of reg ulator y is sue s, inc ludin g safet y , emp loyme nt, co ntract , privacy, anti-brib er y an d anti-tru st, as well a s co ntinuing to id entif y an d addre ss le gal a nd regul ator y iss ues th at have em erge d in relati on to C ov i d-1 9. We also m onitor a nd as se ss deve lopm ents i n relatio n to regul ation s, pote ntial sa nctio ns or di rective s imp ose d by governm ents , and ou r owner l ega l due dili gen ce pro ces s incl ude s scre enin g again st s anctio ns lis ts. Eth ics an d com plian ce c ountr y-leve l due dil igen ce is un der t aken for new c ountr y entr y as se ss ment s and we c ontinu e to develo p our su pplie r due dil igen ce pro ce ss. We are comm itte d to ongo ing as se ss ment an d work on huma n rights ri sks as an i ntegral p ar t of our J ourney to T omorrow commitments ( see page 26 ). The im pac t of Covi d-19 on o ur in anc ial rep or ting an d contro l environm ent h as be en si gni ica nt and pre se nted severa l chall eng es. T here h ave however als o be en opp or tunitie s to evolve our a ppro ach in c er tain a reas, and th e Fina nce l ead ers hip team h as co ntinue d to review controls and implement enhancements including increased use o f remote tes ting, rob otic pro ce ss au tomatio n and dat a analy tic s. We have al so es tab lish ed a c ommit tee w ith resp on sibilit y for c entral c o -o rdinatio n of co ntrol acti vit y whic h bring s togeth er Se nior Le ad ers in th e organi sati on resp on sible fo r as suran ce ac tivitie s to review st atus an d sc ope, eval uate co ntrol in ding s, and c ons ide r eme rging regulat or y dev elopments. We continu e to review our b usin es s conti nuit y arrang eme nts, i nclu ding for ou r Indi a- bas ed G lob al Bu sine ss S er vice C entre, g iven the o per ationa l impo rt anc e of proc es se s loc ated th ere su ch as ac co unts payab le, billin g and c ash c olle ctio n, and inan cial re por ting fo r both corporat e and ho tels. We have contin ued to op erate a n est abli she d in anci al contro l system, w hich i s veri ied th rough te sting rel ating to our S arban es - Oxley c omp lianc e resp on sibiliti es. S ee p age s 57 , 1 56, 16 9 to 173 for det ails o f our app roac h to taxatio n, pag es 9 6 to 97 for det ails of o ur app roac h to internal in anci al co ntrol, and p age s 188 to 19 2 for sp ec ii c det ails on inancial risk mana gement policie s. IH G’s mana gem ent of fra ud risk i s an integ ral par t of o ur broa der ri sk man age ment sy stem, in clud ing inhe rent ris ks to travel indu str y loyalt y progr amme s. Th e man age ment of frau d is the re spo nsib ilit y of man agem ent te ams with in regio ns an d functi ons an d is sup po rte d by exper tis e from Ris k and As sura nce an d Glo bal F inan ce who a lso tra ck a rang e of indic ators a nd rep or t per iodic ally to th e Audit Co mmit tee on f raud ris k man age ment p roce dure s, including inancial and no n- inancial fac tors. Our G roup in suran ce pro gramm es are al so mai ntain ed to supp or t in anci al st abilit y . Strate gic Re po rt 46 IHG | Annua l Repo rt a nd Form 20 F 202 1 Ris k & tre nd Sa fety a nd s ec urit y Env ironmen tal and socia l megatr ends Descript ion The m anne r in whic h IH G resp ond s to ope ration al risk and th e step s taken to sa fegua rd the safe ty an d se curit y of co llea gue s and gu est s will co ntinue to re ceive s crutiny , par ticu larly in li ght of the p ande mic, an d coul d resul t in avoidab le harm to I HG ’s reputati on for hig h stan dards of bu sine ss c ondu ct, re sult in ina ncial d ama ge, cla ims agai nst I HG an d unde rmine c on id enc e in our br ands . As a glo bal b usin es s, IH G fac es unc er ta inties re lating to evolvin g environm ent al and s oci al me gatrend s and o ur resp on se to the se ha s the pote ntial to imp act p er forma nce and grow th in key markets a nd is s ubje ct to scru tiny from a wide range of stak eholders, includ ing r egulators and investor g roups, c orp orate cli ents , gues ts an d coll eag ues . Lin k to strategy Tr e n d s ob se rve d in 2021 The s crutiny of o ur ope ration s in relati on to our C ovid -19 resp on se co ntinue d in 202 1 ac ross a ll markets . The ri sks above rel ate both to ou r direct o pe ration s in hotel s and other l oc ation s where we h ave mana gem ent res pon sibil ity , and al so to out sou rced a ctiviti es an d other s with who m we col labo rate and tra de, inc ludin g the owne rs of o ur franc hise d hote ls whic h ope rate as in dep end ent bu sine ss es . The fo cus o n comp anie s acti ng resp on sibly a nd be ing true to the ir purp os e has b ee n heighte ne d by the pan demi c and wil l contin ue into the fu ture. Thi s inclu des i nvestor focu s, whic h is re lec ted by the in crea sing re quirem ents fo r targ ets an d deta iled d ata from r atings an d res earch p rovider s. The d etail o f our TCFD ri sk as se ss ment i s inclu de d on pa ge s 32 to 35, h ighlightin g four mo st po tentially m ateria l medium- to long er-term risks, a nd we will c ontinu e to as ses s the a ggreg ate impa ct of cli mate cha nge on o ur wide r st akehol ders i nclu ding ou r third- par t y hotel own ers . Short-t erm climat e -related fact ors are also incr easingly bei ng co nsid ered w ithin othe r risk s, incl uding gu es t expe cta tions of t he sus tain abilit y of o ur bran ds and m acro exte rnal fa ctors in clud ing extre me we ather eve nts. Initiatives to re sp on d Our B usi nes s Rep utatio n and Re sp onsi bilit y team coordinat es and mon itors IHG’s g lobal safe ty management system , which i s des igne d to anticip ate and id entif y s afety and s ecur ity ri sks in an evol ving la nds cap e and p rovide app ropriate l evels of c ontrol ne ce ss ar y to mitigate a gain st signi ic ant in cide nts, wh ethe r in hotel s or co rpor ate o ice s. Re giona l and glo bal s ubje ct mat ter s pec ialis ts in safet y an d sec urit y work regu larly wi th hotel s, ope ration s lea der s, and o pe rations s upp or t team s such a s De sign an d Engin ee ring, Foo d and B everag e and H uman Re sou rces , to review an d set op erati onal s afet y and s ecuri ty p olic ies an d proc edu res. T his work ing rel ations hip ha s be en pa rtic ularl y impo r tant dur ing the p ande mic whi le gue st an d coll eag ue safet y ha s be en I HG ’ s core p riorit y . Subj ect m atte r spe cial ists h ave also c ontinu ed to mo nitor loc al law an d pub lic he alth gui danc e and ex terna l trend s that may im pac t the safe o pe ration of h otels, c ustom er expe cta tions , and deve lopm ent op po rtun ities (e.g. i re safet y , food a llerge ns, o per ationa l sec urit y threat s and natura l cat astrop hes), and we c ontinu e to review our relevant s tan dards a nd guid anc e as the se is su es evolve and n ew regul ator y require ment s and b est p racti ce s are published. Our sp ecialists regularly advise region al Deve lopm ent an d Op eratio ns team s abo ut pote ntial se curit y and thre at ris ks in relatio n to new co untr y entrie s and new hot el pro jects. Our s pe ciali sts al so mo nitor a ran ge of intern al ind icator s relatin g to safet y and s ecu rity to c on irm that o ur app roach to mitigatin g safet y ris ks acro ss our b usi nes s is b eing active ly ad opted in a ll regio ns, an d produ ce s expe cted outc ome s. D esp ite our be st e or ts, in cide nts will o cc ur acro ss our g lob al hotel o pera tions a nd co rpora te oic es; we use th es e incid ents a s an op por tunit y to le arn, es ca lating the mo st se riou s for se nior m anag eme nt atte ntion. The B oard re cei ves and rev iews reg ular s afet y repo rt s and monitor s safety performance. Throug h this monit oring, IH G can d etermin e whe re additi onal s tan dards o r guid ance may be n ece ss ar y or wh ethe r existin g contro ls may ne ed to be ad juste d. Our C orp orate Re spo nsib ilit y team have re in ed our app roach a nd enh anc ed ou r disc losu res to me et the expe cta tions of o ur investo rs and th e requ ireme nts of thi s evolvin g regul ator y environm ent. We al so work to gethe r with gove rnment s and in dus try a ss ociati ons to e nsure ou r voice i s hea rd amon g key stakeho lde rs, as we ll as b eing able to a dvoc ate for our in dus try a nd our own ers . Our p repare dne ss a nd resi lienc e to clim ate chan ge is bei ng emb ed ded i nto existing ‘ busi nes s as u sual ’ proc es se s followi ng our p rojec t to supp or t the TCFD re com men datio ns. T o re duc e our c arbo n footpri nt overall we have up grad ed our s cien ce -b ase d ta rget and c reated a ro adm ap with intern al targe ts to trac k and rep or t prog ress a gain st this com mitme nt. Key elem ent s of our roa dmap i nclud e supp or ting o ur hotel s to dec arbo nis e through im proved ene rgy e icie ncy an d switchin g to renewab le en ergy. Se e pag es 29 to 3 5 for de tail s of our envi ronme ntal p olici es and ini tiatives a nd the m eas ures we wil l use to trac k and repo rt p rogre ss ag ains t our new c omm itment s. Duri ng 202 1 seve ral IH G team s worked toward s an agre ed set of b athroo m bulk p roduc t oeri ngs, a s par t of our strate gy to redu ce sin gle us e pla stic s. We are als o fur ther investin g to provide tra ining an d tool s to increa se proc ureme nt cap abili ties in s ourcin g and imp lem enting supplier div ersity , sustainability and risk management. Our l ong -st andi ng co mmitme nt to ope rating o ur bus ines s resp on sibly h as un derpi nne d the ac tions we a re takin g in our lo ca l comm unitie s (see pa ges 2 7 and 28), for exa mple through j ob cre ation, up skil ling an d our sup por t for vuln erabl e pe opl e during th e pand emic . We also m aintain ed our fo cus on wo rking a nd livin g con dition s for migr ant workers a s well as to pic s such a s resp ons ible re cruitm ent and c ontinu e to enga ge on in dustr y c ollab orati on initia tives whic h are addre ss ing the se ris ks. Our val ues a nd be haviou rs, pro moted by ou r Co de of Co ndu ct, info rm our de cis ion -ma king at al l levels . Our P rocurem ent, L ega l and Ri sk team s als o moni tor supp ly chai n and la bour p racti ces r isks (see p age s 26 an d 39). 47 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Our ri sk managemen t Vi ab ilit y s t at e m e nt D urin g 202 1 th e hos pit alit y in dus tr y co ntinu ed to b e imp ac ted by th e ong oin g pan de mic . T ra din g did h owever rec over si gni ic ant ly duri ng th e year, with RevPAR up 46 % on 20 20 an d retu rnin g to 70% of 20 19’s pre -p an dem ic leve ls. The re si lie nce o f the G rou p’ s fee -b as ed m od el an d wid e ge ogra ph ic sp rea d res ulte d in G rou p adj uste d fre e ca sh l ow a of $57 1 mil lion duri ng 20 21 an d ne t deb t red uc ed by $6 48 m illi on. O ur we ight ing toward s up pe r mid sc ale h otel s in no n- urba n lo cati ons w ith l ower reliance on discretionary corporat e and i nternat ional tra vel has sup po rte d IH G’s per form anc e. Th e Gro up’s busi ne ss m od el is dis cu ss ed i n mor e det ail on p ag es 10 t o 13. Loo king for ward, th e Dire ctors h ave determin ed th at the thre e-ye ar pe riod to 31 D ec emb er 20 24 is an ap propri ate per iod to be c overed by the viability statement. The Group’ s annual inancial planning proc es s buil ds a thre e-yea r plan . This d etai led p lan t akes into Prin cip al ris ks The re lative stre ngth an d resili enc e of the I HG bu sine ss m ode l to severe s hoc ks has b ee n proven by pe rfo rmanc e throu gh the C ovid-19 pan demi c with po sitive c ash lows b eing g ene rated thro ugh on e of the mo st ch alle nging p erio ds of tra ding in th e histor y of th e indu str y . In as se ssi ng the vi abilit y of the G roup, the D irec tors have co nsi dere d the imp act o f the prin cipa l risks a s outlin ed on p age s 42 to 47 . The di scu ssi on on th ose p age s incl ude s a des criptio n of the tre nds obs er ved d uring 20 21 an d how the G roup cre ates re silie nce to an d man age s the ris ks. We have con side red whi ch prin cipa l risks c ould h ave the mos t signi ic ant an d direc t impa ct to the vi abilit y of the G roup dur ing the thre e -year pe riod of a ss es sme nt and th ey are shown b elow, alon gsid e the s cen ario that i s use d to mod el tho se ri sks. T he imp act of clim ate risks a nd co sts to ad dres s them h ave also b ee n as ses se d but are n ot con sid ered m aterial ove r the pe riod o f ass es sme nt. Scenarios modelled Rel ate d to p rin cip al ri sks Ch an ge s in RevPAR Dow nsi de C ase a nd S evere D own sid e Ca se The se s ce nar ios m od el a pro lon ge d de crea se in R evPAR, w hic h may be dr iven by ex ter nal o r inter nal f acto rs. Ma cro ex tern al fa ctor s Prefe rre d bran ds a nd loyal ty Leadership and ta lent Safe ty a nd se cu rit y Financial management and contr ol sy stems One-o events Thi s sc ena rio mo de ls th e imp act o f a spe ci i c mate rial in cid ent , whic h co uld re late to cy be r sec urit y or a n alte rnati ve mate ria l impa ct o n the cash low stat ement. Cy be rse cu rit y and in form atio n gover nan ce Leg al, re gul ator y an d ethic al c omp lia nce a U se of N on - GA AP m ea sure s: I n add itio n to p er form an ce m eas ure s dir ect ly ob se rv abl e in th e Gro up Fi nan ci al St ate me nts (I FR S me asu res), a ddi tio nal in anc ial m ea sur es (des cri be d as N on - GA AP) are p re sen ted t hat a re us ed in tern all y by ma nag em ent a s key me as ures t o as se ss p er for man ce . No n- GA AP m ea sur es ar e eith er n ot de i ne d und er I FR S or ar e adj ust ed I FRS ig ures . Fur the r exp lan ati on in re lat ion to t he se m eas ure s ca n be fo und o n pa ge s 73 to 7 7 an d rec on cil iati ons t o IFR S i gure s, w he re they h ave b ee n adj uste d, are o n pag es 2 18 to 2 2 3. con sid eratio n the prin cipa l risks, th e Grou p’ s strateg y and cu rrent and e mergin g market co nditi ons . The pl an the n forms th e bas is for strate gic acti ons t aken acro ss th e busi nes s and i s use d for lo nger- rang e plan ning. Th e pla n is reviewe d annu ally by the D irecto rs. Onc e app roved, the p lan is th en c asc ade d to the bu sine ss a nd us ed to set p er forman ce m etrics a nd obj ecti ves. P er forman ce ag ains t thos e metri cs an d obje ctive s is regu larly revie wed by the D irecto rs. The re contin ues to b e an ong oing l evel of mar ket volatilit y and ri sks of fur the r travel restr ictio ns in ce rt ain ma rkets. T here are a wi de rang e of pos sib le pl anning s ce nario s over the thre e -year pe riod con sid ered in th is review. In as ses sin g the via bilit y of the G roup, the Dire ctors h ave reviewed a nu mbe r of sc enari os, we ighting dow nsid e risks th at would th reaten th e bus ines s mo del, f uture pe rfo rmanc e, sol vency an d liqui dity o f the Gro up more h eavily th an opp or tunitie s. Viability scenarios and assumptions In pe r forming th e viabi lity a nalys is, the D irec tors have c ons idere d a ‘B as e Cas e’ whic h is ba sed o n a co ntinue d improvem ent in dem and wi th RevPAR expec ted to rea ch 10 0% of 20 19 l evels by 2024. T he as sum ptions a ppli ed in th e viabil ity a ss es sme nt are co nsis tent with th ose u se d for Grou p plan ning pu rpos es, the go ing co nce rn as ses sm ent, for i mpair ment te sting an d for reviewin g recove rabilit y of d eferre d tax a sse ts (see fu rth er de tail on pa ge 149). The D irec tors have als o co nsid ere d a ‘D ownsi de Ca se’ , w hich as sume s that Rev P AR grow th is red uce d by 8% co mpare d to the B ase C as e in 202 2, fo llowed by s imilar g rowth rate s to the Ba se C ase in 2 023 an d 2024 . This h as be en b uilt us ing exte rnal market fore ca sts for a p os sibl e down side s cen ario. The D irec tors have als o co nsid ere d a ‘Seve re Down side C as e’ , whic h ass ume s no rec over y in RevPAR during 20 2 2, with th e rec overy p roi le del ayed by one ye ar . T his woul d as sume th at the vol atilit y and dive rgenc e of ma rket appro ache s to man aging Covi d-19 co ntinue s durin g 202 2. The key as sumpti ons in clud ed in th e three -year p lan rel ate to RevPAR growth a s explain ed ab ove. Percenta ge poin t decr ease in RevPAR c om par ed t o Ba se C as e In dex (to 2 019) 2022 2023 2024 Downside Case 5 5 5 Seve re Dow nsi de C as e 15 8 7 Strate gic Re po rt 48 IHG | Annua l Repo rt a nd Form 20 F 202 1 We have also c ons ide red the p rincip al ris ks that may imp act the via bilit y of the G roup over a l onge r -term p erio d, for examp le, environmental and social meg atrends. The physical and transition clim ate risks to whi ch IH G is mo st exp ose d are dis cus se d in the TCFD st atem ent on p age s 32 to 35 . Physic al risks a re not co nsid ered materi al to the lo ng-te rm viab ilit y of the G roup, and tran sitio n risks pres ent b oth opp or tunitie s and ri sks. Fu n di n g The exi sting c ovenant s on the G roup’s syndic ated an d bilate ral revolvin g credi t facili ties (‘th e bank f aciliti es’ ) have be en ame nde d until D ece mbe r 202 2 . See n ote 24 for fur the r deta ils. T he othe r as sumptio ns rel ating to de bt maturiti es are as fo llows: • Th e $1. 35 b illion b ank fac ilitie s mature in S eptem ber 2 023 . It ha s be en as sum ed th at thes e facil ities a re renewe d as they m ature. • £ 173 million o f bon ds due i n Novemb er 20 2 2 are repa id on maturit y . • € 50 0 million o f bon ds due i n Octo ber 2 024 are rep aid on m aturit y . No oth er new o r addi tiona l in ancin g has b ee n ass ume d in the analysis per formed. Conclusion The D irec tors have as se ss ed the v iabil ity of th e Grou p over a three -yea r peri od to 31 D ec emb er 20 24 taki ng acc ount of th e Group’s current p os ition, th e Group’s strateg y and the p rinci pal ris ks doc ume nted in the S trategi c Repo r t. Ba se d on this a ss ess me nt, the Dire ctors h ave a reas onab le expe ct ation th at the Gro up will be a ble to contin ue in op eratio n and m eet it s liab ilities a s they fall d ue over the p erio d to 31 De ce mbe r 2024. S ee al so ou r bus ine s s mod el o n pag es 1 0 to 13, th e goin g co nce rn as se ss men t on pa ge 14 9, and t he imp ac t of the p rinc ipa l ris ks on pa ges 4 2 to 47 . Viabi lity assessment At 31 De ce mbe r 202 1 the G roup ha d ca sh and c as h equi valent s of $1, 30 5 millio n plus u ndrawn fa cilitie s of $1 ,35 0 millio n. Und er the B as e Ca se, Dow nsid e Ca se an d Severe D ownsi de Ca se, the G roup is fo rec ast to ge nerate p osi tive ca sh l ows over the 20 2 2 2024 pe riod a nd the b ank fac ilitie s remai n undrawn . The p rincip al ris ks which c oul d be app lic able h ave bee n con sid ered and are a ble to be a bso rbe d within th e coven ant requi reme nts. If the re were ad dition al tradi ng down side s to the as sump tions use d, the n addi tiona l actio ns co uld be t aken in o rder to mitig ate this ris k suc h as red uctio ns in di scretio nar y sp end . In the S evere Dow nsid e Ca se, the G roup stil l has su bst antial l evels of exis ting ca sh res er ves avail able a nd is no t expe cted to draw on the b ank fa cilitie s. Th e Dire ctors revi ewed a rever se stre ss te st sc enari o to determi ne how mu ch ad dition al RevPAR downs ide cou ld be ab so rbe d before u tilis ation of th e bank fa cilitie s woul d be re quired . The D irecto rs co nclu ded th at the ou tcom e of the revers e stres s test s howe d it was ver y unl ikely the b ank fac ilities would n ee d to be drawn a nd the refore the G roup do es not n ee d to rely on th e addi tiona l liquid ity p rovide d by the ban k facili ties . This m ean s that in th e event the c ovenant te st was f aile d, the ban k facil ities c ould b e ca nce lle d by the len der s but woul d not trig ger a repaym ent de man d which th reaten ed the v iabili ty of th e Group. In the eve nt that a fur the r coven ant ame ndm ent was re quire d, the Di rector s be lieve it is re aso nabl e to expec t that su ch an ame ndme nt co uld be o btain ed b ase d on th eir prio r expe rien ce in relati on to ne gotiatin g the 202 0 ame ndme nts. A s note d above it h as be en a ssu med th at the b ank fac ilitie s are renewe d as they m ature. Howeve r , a s explain ed ab ove the via bilit y of the group is n ot dep en dent o n the ban k facili ties an d there fore not rel ia nt on the s e a s sum pt ion s . Th e Grou p also h as alte rnative optio ns to man age thi s risk in clud ing ra is in g a dd iti on al fu nd ing in the c apit al markets . We contin ue to pla n to mainta in an investm ent grad e credi t rating. In the eve nt of add itiona l or multi ple pri ncip al risks o cc urring during th e pe riod of revi ew e.g. co ntinue d dep res sed R evP AR and a wi des prea d cybe rse curit y in cide nt, it is exp ec ted that t hes e risks c ould b e ab sorb ed wi thin the liq uidit y he adroo m availab le witho ut relyi ng on the a dditi onal li quidit y provi ded by th e bank facilities. 49 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Viabilit y statem ent A guide t o this KPI secti on K e y pe r f ormance indi cat ors (KP Is ) O ur KPI s are c are fully s el ect ed to al low us t o mon itor the d eli ver y of our s trate gy a nd lo ng -term s ucc es s . They ar e org ani se d aro und o ur st rate gy , w hic h ar ticu late s ou r purp os e, am biti on an d prio ritie s, (se e pa ge 16). Se nio r man ag em ent revi ew our K PIs a nnu ally to e ns ure c onti nue d alig nm ent to o ur st rate gy an d are in clu de d in inte rna l rep or ting and regularl y monit ored. Me asure s incl ude d are tho se co nsid ere d mos t relevant in a ss es sing the p er forman ce of th e bus ines s and re late to our grow th ag end a and c ommitm ent to our key st akehol der s incl uding own ers , gue sts, emp loyees , share hol der s and the c omm unitie s in which we wo rk. KPI s sho uld b e read in c onjun ctio n with the oth er se ctio ns of the Strate gic Rep or t, an d where a pplic abl e, refere nce s to spe ci ic relevant to pic s are noted a gain st ea ch KP I. KPIs 20 21 s tat us an d 20 2 2 pri orit ie s Ne t roo ms s upp ly Ne t total n umb er of ro om s in the IHG System. Increasing our rooms supply pro vides sig ni ic ant ad vant age s of s cal e, including increasing t he val ue of ou r loyal ty p rogra mme . Thi s me asu re is a key indi cato r of ac hieve me nt of ou r grow th ag en da (se e pag e 16). A LT 2021 stat us Gro ss sy stem g row th of 5.0 %; n et sys tem si ze de clin e of 0.6 % af ter 4 9,6 67 roo ms rem oved , inc lud ed 3 4,3 4 5 roo ms fro m Ho lid ay Inn an d Crow ne Pl az a, as we c onc lud ed o ur qu alit y revi ew, takin g tota l sup ply to 8 80, 327 ro om s. Sig ning s of 68 ,870 ro om s (437 ho tels) re pre sen ted 23 % grow th on t he pr ior year, but wa s bel ow pre - pan de mic le vels , as C ovid -19 rel ate d cha llen ge s rem aine d in p lac e in a num be r of ma rkets . T otal p ip elin e of 270, 96 0 roo ms, with m ore th an 40 % un der c on stru cti on, de cl ine d 0.4% c omp are d to 202 0 as sig ning s were o s et by 4 3,9 58 ro om o pen ing s and a n orm al leve l of at triti on. Ove rall p er for man ce wa s drive n by: • Contin ue d stre ngth o f the H oli day Inn B ran d Family w ith 25 ,766 roo ms op ene d an d 31,16 9 room s sig ne d, rep res entin g alm ost h alf o f all si gnin gs. • Conver sio ns, re pre se nting 2 5% of o pen ing s and 2 2 % of all s igni ngs . • Luxur y & Life st yle b ran ds ga inin g mom entu m with 2 8 hote ls op en ed an d a fur the r 75 p rop er tie s sig ned . • F urt her g row th of ou r rec entl y laun che d br and s with: – avi d hote ls, o ur se co nd la rge st co ntrib uto r to syste m grow th, d oubl ing the nu mb er of o pen p rop er tie s, t akin g the tot al e sta te to 48 h otel s, an d a fur the r 16 4 in th e pip eli ne. – th e fur the r glo bal ex pan sio n of vo co ho tels to 6 9 op en a nd si gne d hote ls since launch in 2018, across 25 coun tries. – c ontin ue d sign ing s pac e for At wel l Suite s re sulti ng in 2 3 pip elin e hote ls . – th e lau nch of V ign et te Co lle ctio n, wi th six p rop er tie s se cure d in the ye ar and o ur irs t hote l alre ady o pen . 202 2 pri oritie s • F oc us on o ur am bitio n to de live r sus tai nab le in dus try -le ad ing ne t syste m siz e grow th, wi th le adin g bra nds i n the la rge st ma rkets a nd se gm ents . • Contin ue d foc us on th e qua lit y of ou r est ate, w ith lowe r anti cip ated f uture overa ll rem oval rate t han hi sto ric leve ls . • F urt her ro llo ut of avi d hote ls an d Atwe ll Su ites i n the U S, an d voc o hote ls gl oba lly. • Exp and o ur Luxu ry & L ife st yle o er th roug h acq uire d bra nds Re ge nt, Six S en se s and K impto n, an d our re ce ntly la unc he d Vig net te C olle cti on. Signings Gro ss tot al nu mbe r of ro oms a dde d to the I HG p ipe lin e. Co ntinu ed s igni ngs s ec ure the f uture grow th of o ur Sys tem a nd co ntin ued eic iencies of sc ale. Signings indicate our a bili ty to d elive r su sta ine d grow th (see p ag e 16). A 2018 8 36, 541 2017 79 8 ,075 2019 88 3,563 2020 886 , 036 2021 88 0,3 27 2018 9 8,8 14 2017 83,4 81 2019 9 7, 7 5 4 2020 56 ,14 6 2021 6 8, 870 Lin k bet we en KP Is an d Di rec tor r em une rat ion Whil st p er form an ce co ntin ued to b e imp ac ted by Cov id-1 9 in 20 21, o ur lo ng -term fo cu s rem aine d to de live r high - qua lit y grow th an d, as in p rio r year s, Di rec tors’ re mun era tion fo r 202 1 wa s dire ctly re late d to key as pe cts o f our s trate gy. The foll owin g indi cat es wh ich KP Is have i mpa cte d Dire cto rs’ re mun erati on: For mor e inf ormati on on Dir ectors’ remu ne ratio n se e pag es 1 04 to 12 5. A The Annual Performance P lan • 70% was lin ked to op er ating p ro it from reportable segmen ts • 15% was lin ked to st rateg ic fo cus o n net sy stem siz e grow th thro ugh o pen ing s • 15% was lin ked to st rateg ic fo cus o n future n et syste m si ze grow th thro ugh s igni ngs LT The L ong Term In ce ntive Pl an • 40% wa s linke d to T otal S har eho lde r Retu rn • 20% was l inked to a bs olute n et sys tem siz e grow th • 20% was l inked to to tal g ros s revenu e grow th • 20% was l inked to c as h l ow gen era tion Lin k to ou r str ateg y Our s trate gic p rio ritie s, ref res he d in 20 20, are co re to our s ucc es s. O ur fo ur stra tegi c prio riti es are rep rese nted a s follo ws: Customer cent ric in all we d o Bui ld love d an d trusted brands Create digital advant age Ca re for ou r pe opl e, communities and planet Strate gic Re po rt 50 I HG | Annua l Repo rt a nd Form 20 F 202 1 KPIs 20 21 s tat us an d 20 2 2 pri orit ie s G l o b a l Re v PA R b grow th Reven ue p er avail abl e roo m: roo ms reve nue di vid ed by th e num ber of roo m nig hts th at are avail ab le. RevPAR grow th i ndic ate s the inc rea se d valu e gue sts a sc rib e to our b ran ds in th e mar kets in wh ich we op erate a nd is a key m ea sure wi de ly us ed in o ur in dus try (s ee p age 8). 2021 stat us • RevPAR improve d in 20 2 1 follo wing a n unp rec ede nte d dec lin e in 20 20, and re cove re d to 70% of 2 019 l evel s. Th e imp rovem ent wa s larg ely d rive n by d omestic leisur e demand, particularl y duri ng holida y periods, once vac cin ation r ates a llowe d for re str icti ons to b e lif te d in ma rkets in clu ding the U S and U K . • Throug h the c ontin ue d cha lle nge s of the p an dem ic we have re mai ne d co mmit te d to sup por tin g our ow ne rs to ma ximi se reve nue s thro ugh: – En han ce d reven ue ma nag em ent sys tem s to quic kly i de ntif y and a ct on re venue opportunities usi ng business in telli gence and da ta. – Im prove d rate n ego tiati ons o n be half o f our ow ne rs us ing I HG ’s award -win nin g cen trali se d RFP p roc es se s (CR FP), wit h 2, 20 0 hote ls now u sing t he se r vic e. – Re al -tim e targ ete d cam pai gns an d pro moti ons a ime d at key de mog raph ic s of retur ning l eis ure an d bus ine ss d em and . – Continued i mplementat ion o f mobil e- enabled i mpro vements includ ing the d evel opm ent an d pil otin g of a nex t ge ner atio n IH G mob ile a pp, en abli ng a ric her c us tome r exp erie nc e whic h is exp ec ted to i ncre as e dire ct b ook ing s and i ncre me ntal s pe nd du ring s tays . – C on duc ted d etai le d room i nvento ry a ss es sm ents a cro ss 5, 30 0 hot els by en d of 20 21, i n prep arat ion fo r att ribu te pric ing w hich w ill en ab le own ers to ge ner ate max imum v alue f rom the ir ho tel ’s uniqu e attr ibu tes. • Enterpr ise c ontr ibu tion im prove d to 74% in 202 1, drive n by digi tal a nd onl ine trave l ag ent (OT A ) grow th fro m stron g lei sure d em and i n the su mme r mon ths, e sp ec iall y in the U S. T his wa s par tl y os et by c ontin ue d weak ne ss in Gl ob al Di stri buti on Se r vic es (G DS) as c orp ora te dem and re ma ine d wea k. Rewar d night b oo kin gs la rgel y rec overe d to pre - pan dem ic leve ls , with par ti cip ation r ates o f our hi ghe r tiere d me mb ers , and p ar tic ular ly le isure customers, exceeding 2019 lev els. • Laun ch ed ou r ‘ Welc ome B ac k to Bu sin es s’ ca mpa ign, a nd IH G B usi nes s Edg e, our aw ard- winn ing de di cate d SM E pro gra mme, w hich i ncre as ed i ts ac co unts by 4 4% to over 57,000, g aini ng sh are. • F urt her d evel opm ent o f IH G Rewar ds pro po siti on thro ugh gro wt h in Rewa rd Nig ht Dyn ami c Pric ing an d the ex te nsi on of th e pau se o n poi nts exp irati on and membersh ip t iers. • New mar keting c amp aig ns to str eng then o ur I HG H otel s & Res or ts ma ster bran d to be tte r prom ote ou r bran ds . 202 2 pri oritie s • Contin ue to ap ply t arg eted d ata a nal yt ics a nd ma rketin g to ide ntif y an d yie ld reve nue e nha nci ng op por tu nitie s. • Conti nue to d evelo p our d igit al - irs t app roac h by leve ragi ng our c lou d- ba se d IH G Co nc er to TM platform. • Comp lete i nventor y wo rk on th e rem ainin g hote ls in o ur es tat e, in sup po rt of the ro llo ut of at tri bute p rici ng via o ur dir ect c han ne ls. • F ull roll - out o f the n ext g ene rati on IH G mo bil e app, o eri ng up grad ed ana ly tic s and p er son al m arketin g as p ar t of our tr ans form ed l oyalt y oe r . • F urt her e nh anc e our l oyalt y oe r throu gh the r ela unc h of IH G Rewa rds, to provi de m emb ers w ith ri che r be ne it s and i ncre as e enro lme nt. • Maint ain ou r foc us on i ncre asi ng c ontri buti on fro m IH G Reward s me mbe rs and t hroug h dire ct b ook ing s via o ur web sit e or ca ll ce ntre s. Gr owt h in un de rlyi ng fee r even ue s a Gro up reven ue fro m rep or tab le se gme nts exc ludi ng reve nue fro m owned, leased and managed lease hotels, signiicant liquidat ed damages and c urre nt year a cq uisi tion s, s tate d at co ns tant c urre ncy. Un derl yin g fee reve nue g row th demonstrat es the continued at trac tiven es s to own ers a nd gu es ts of IH G ’s franch ise d an d man age d bu sine s s (see p age 11). T ot al gross revenue from hotel s in IH G’s Sys tem a T ota l room s reven ue fro m fran chi se d hote ls an d tota l hote l reven ue fro m man age d, own ed , le ase d an d man age d le as e hote ls. Oth er th an fo r owne d, le as ed a nd man ag ed le as e hote ls, i t is no t reven ue wh olly a ttri but ab le to IH G, as it i s mai nly de rive d from h otel s own ed by thi rd par tie s. The g row th in gro ss reve nue f rom IHG’s Sy stem i llustra tes t he value of ou r overal l Sys tem to ou r owne rs (see p ag e 11). A LT Enterpr ise contr ibution to r evenue The p erc ent ag e of roo m reven ue bo oked t hrou gh IH G ma nag ed cha nne ls an d so urce s: di rect v ia our we bs ites , app s and c all c ent res; throu gh ou r inter fa ce s with G lo bal Distribut ion Syst ems ( GDS) and agre em ent s with O nli ne T ravel Age nci es (OT A s); othe r dis trib utio n par tn ers d irec tly c onn ec ted to o ur res er vati on sys tem; an d Gl ob al Sa les O ic e bu sin es s or IH G Rew ard me mbe rs th at bo ok di rec tly at a ho tel. Ente rpri se c ontri buti on is o ne ind ica tor of I HG va lue - add a nd th e suc ce ss o f our te chn olo gy p lat form s and o ur ma rketin g, sa les a nd loya lt y dis trib utio n cha nne ls (se e pag e 11). a U se of N on - GA AP m ea sure s: I n add itio n to p er form an ce m eas ure s dir ect ly ob se rv abl e in th e Gro up Fi nan ci al St ate me nts (I FR S me asu res), a ddi tio nal in anc ial m ea sur es (de sc rib ed as N on - GA AP) are p res en ted th at ar e use d int ern all y by man ag em ent a s key me asu res to a ss es s p er form an ce. N on - GA AP m ea sure s are e ith er n ot de i ne d und er I FRS o r are a dju ste d IF RS igur es . Furt her e xpl ana tio n in rel ati on to th es e me asu res c an b e fou nd on p ag es 7 3 to 7 7 and re c onc ili atio ns to I FRS ig ure s, wh ere th ey hav e be en a dju ste d, are o n pa ge s 21 8 to 22 3. A rec on cil iati on of to tal g ros s reve nu e to own ed, l ea se d and m an age d le as e reve nue a s re cor de d in the G rou p Fin an cia l St atem ent s ca n be fo un d on pa ge 6 0. b C o mpa rab le Rev PAR inc lu des t he im pa ct of h ote ls tem po rar ily c los ed a s a res ult o f Cov id -19. 2018 2.5% 2017 2 .7 % 2019 - 0.3 % 2020 - 52. 5% 2021 46 .0% 2018 6.4% 2019 2 .0% 2020 -4 5 .0% 2021 3 7. 7 % 2018 $27 .4bn 2017 $25.7bn 2019 $ 2 7. 9 b n 2020 $13.5bn 2021 $19.4bn 2018 78% 2017 76 % 2019 76 % 2020 72% 2021 74% 51 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Key per forma nce in dic ators (K PIs) K e y per f or ma nce i ndi ca t ors ( KPIs ) c o ntin u e d KPIs 20 21 s tat us an d 20 2 2 pri orit ie s Gu es t Love IHG’s g uest satisfact ion measuremen t indi cator . Gu est s ati sfa ctio n is fu nda men tal to our c onti nue d su cce s s and i s a key me asu re to mon itor th e ris k of fai ling to de liver p refe rred b ran ds th at me et gue st s’ exp ec tati ons (se e pa ge 4 3 for de tails ). A 2021 stat us • Gues t sa tisf acti on of 78 .9 % drop pe d sli ghtly c omp are d to 20 20 re le ctin g lab our s ho rt ag es as w e eme rge fro m the p and emi c. E xte rna lly me as ure d Gu est S ati sfa ctio n Ind ex (GS I) ach ieve d sc ores o f 10 0 or b ette r for e ac h bra nd in 20 2 1, outp er fo rmin g our p ee rs, a s ucc es sf ul outc om e give n the evolv ing gu est re quire men ts res ultin g from Cov id-1 9. • Reviewe d our H oli day In n and C rowne P laz a e sta te, rem oving 3 4, 34 5 ro om s to foc us on p rotec ting t he qu alit y an d con si sten cy of th e bran d. A fu rt her 83 h otel s in the A me ric as an d EME A A re gio ns have c om mit ted to imp rovem ent pl ans o r sc op es of wo rk. • Contin ue d to co mmit to c le anlin es s- sp ec i ic pro ce dure s, wi th our I H G Way of Cl ea n prog ramm e and I H G Cle an Pro mis e, to prov ide c on id en ce an d prote cti on to ou r frontl ine h otel c oll eag ue s and e nab le th em in tu rn to de liver c le an an d safe h otel s for al l our gu es ts . • F urt her te ch nol ogy e nha nc eme nts i ncl udin g the p ilot of a n ex t gen erat ion IH G mo bile a pp an d the ex pan sio n of dig ita l arriv als, o er ing gu es ts the abi lit y to so cial ly dis ta nce . • Provide d fur th er tra inin g and s upp or t for evo lvin g bra nd st an dard s and pro ce dure s, to me et c han ging g ues t exp ect ati ons . • Contin ue d to upd ate gu est ro om a nd pu blic s pa ce d esi gns to f urt her enh anc e the g ue st exp eri enc e. 202 2 pri oritie s • Contin ue to inve st in b ran d inno vatio n, inc ludi ng roo m de sig n and fo od & beve rag e enh anc em ent s to me et evol ving g ue st ne ed s. • Maint ain a hi gh leve l of gu est s ati sfa ctio n acro ss o ur en tire po r tfo lio and fo cu s on qu alit y an d cle anl ine ss s tan dard s. • Contin ue to inve st b ehi nd dig ita lis atio n of the g ues t jou rney a nd imp rove on -p rope r ty p roc es se s to improv e gue st s atis fac tion a nd str eam line hotel operations. Fee m ar gi n a Op era ting p roi t as a p erc ent age of reve nue, exc ludi ng Sy stem Fun d, reim bur se ment o f co sts , reven ue an d op erati ng pro i t from ow ned , lea se d and m ana ge d le ase h otel s, si gni ic ant liqu ida ted d ama ges , the re sul ts of th e Group’ s captive insurance company and e xcept ional items. Our f ee m argin p rogre ss ion i ndi cate s the p ro ita bilit y of o ur fe e revenu e grow th an d be ne it o f our a ss et-lig ht bu sine s s mod el (se e pa ge 10). A 2021 stat us • Growt h in fee r evenu e of over 4 0 %, c oup le d with di sc ipli ne d cos t man ag eme nt ta ken ac ros s the bu sin es s, re sul ted in a fe e ma rgin of 4 9.6 % , 4.5ppts belo w 2019 lev els. • Achieve d sus ta inab le fe e bu sin es s co st sav ing s of $7 5m co mp ared to 2 01 9, whil st c ontin uing to i nves t for grow th . 202 2 pri oritie s • Continue to invest in growth initiatives, whilst maintaining our strong cost f ocus. • Contin ue to lo ok fo r fur the r op era tion al e ic ien cie s throu gh gre ater app lic atio n of tec hno lo gy. Adj us ted fr ee c as h lo w a Ca sh low fro m ope rati ng ac tivit ies exclu ding p ayme nts o f con ting ent purchase considerat ion, less purchase of sh are s by emp loyee s ha re trus ts, maintenance c apital expenditure and lease pa yments. Adju ste d fre e cas h l ow provi de s fun ds to inve st in th e bu sin es s, sustainably gro w the dividend and retur n any surp lus to s har eho lde rs (see p ag e 13). It is a key c omp on ent in me as urin g the on goi ng via bili ty of ou r bus ine ss (se e pa ge 4 8). LT 2021 stat us • Adjuste d fre e ca sh low of $ 57 1m was u p $5 42m ye ar-on -ye ar drive n by an im provem ent i n ope rati ng pro it f rom rep or t abl e seg me nts a and wor king ca pit al an d othe r adju stm ent s. C los ing li qui dit y was $ 2,6 55 m. 202 2 pri oritie s • Prioritise in vestment be hind growth with further cos t focus, maintaining cha lle nge a roun d all are as of d is creti ona ry s pe nd. • Contro l cap it al de ploy ment i n lin e with b usin es s pri ori ties . a U se of N on - GA AP m ea sure s: I n add itio n to p er form an ce m eas ure s dir ect ly ob se rv abl e in th e Gro up Fi nan ci al St ate me nts (I FR S me asu res), a ddi tio nal in anc ial m ea sur es (de sc rib ed as N on - GA AP) are p res en ted th at ar e use d int ern all y by man ag em ent a s key me asu res to a ss es s p er form an ce. N on - GA AP m ea sure s are e ith er n ot de i ne d und er I FRS o r are a dju ste d IF RS igur es . Furt her e xpl ana tio n in rel ati on to th es e me asu res c an b e fou nd on p ag es 7 3 to 7 7 and re c onc ili atio ns to I FRS ig ure s, wh ere th ey hav e be en a dju ste d, are o n pa ge s 21 8 to 22 3. 2018 8 1.7 % 2017 8 0.9 % 2019 82.4% 2020 8 1.6% 2021 78. 9% 2018 53.3% 2017 5 3.4% 2019 54 .1 % 2020 34 .1 % 2021 4 9.6% 2018 $ 611m 2017 $516 m 2019 $50 9m 2020 $29m 2021 $571 m Strate gic Re po rt 52 IHG | Annua l Repo rt a nd Form 20 F 202 1 KPIs 20 21 s tat us an d 20 2 2 pri orit ie s Employ ee engagement surve y scor es a Colleague HeartBe at su rvey , co mpl eted by I H G emp loyee s or tho se c olle ag ues w ho are e mp loyed at ma nag ed o r man age d le as ed hote ls (exclu ding o ur joi nt vent ures). We measure emplo yee eng agement to mon itor ri sks re lati ng to ta len t (see p ag e 44) an d to he lp us und er sta nd th e iss ue s that a re rel evant to o ur pe op le as we b uil d a dive rse a nd in clu sive c ulture (see p ag e 24). A 2021 stat us • The 20 21 s co re of 85 % was 8% h igh er th an ext erna l be nch mark s. • Rolle d out a hyb rid wo rki ng mo del a cro ss c orp orate o i ce s to enc our age l exibi lit y and wo rk-life b ala nce , provi ding re so urce s an d guid eli ne s to sup po rt evo lvi ng ways of wo rki ng. • Priorit ise d su ppo r t for em ploye e he alth a nd we llbe ing i nclu din g: – Pu bli she d gui de line s an d lea rnin g ser ies to f acil ita te wellb ei ng conversat ions. – El evate d Emp loyee R es ourc e Grou ps (E RGs) to ch amp ion a nd dri ve our d iver se an d inc lus ive cul ture. – Pro mote d lo ca l initi ative s, su ch as m ent al h eal th ir st ai d. – In trodu ce d Re cha rge D ays and Fo cus Frid ays for c orp ora te emp loyee s. • Deliv ere d con sc iou s incl usi on tra inin g to cor por ate em ploye es . • Laun che d ta lent p rog ramm es s uch a s As cen d and W iH TL ( Wome n in Ho spi tal ity Travel & Le isu re) to supp or t Bl ac k and Eth nic Mi nor ity Tale nt. • Refres he d our G M deve lop me nt and o nb oard ing p rogra mme s, in clu ding the l aunc h of ne w as se ssm ent s to deve lop t al ent. 2022 prior ities • Maint ain ou r foc us on t ale nt ma nag em ent an d pur po sef ully d evelo p our C orp or ate Se nior L ea der s and G en era l Ma nag ers to e na ble o ur future grow th. • Build o ur ta len t attr act ion c apa bili tie s via a c omp ell ing e mploye r valu e prop os itio n, tha t ena ble s us to re tai n and re - att ract t al ent to th e indu str y. • Build o ur fut ure le arni ng oe r to rem ain a l ead ing e mpl oyer wit hin th e ind ustr y a nd he lp sup po rt o ur re cove ry s trate gy an d hote l pe rfo rma nce . • Contin ue to b uild a n incl usi ve cul ture an d main tain a s tron g foc us on in cre asi ng the d iver sit y of ou r le ade rs hip an d tal ent p ipe lin es. IHG® Academ y Num be r of pe op le pa rt icip atin g in IH G Ac ad emy pro gram me s. Sustain ed par ticipation in the IH G Ac ade my indi cate s th e stren gth of ou r prog res s in cre atin g ca ree r building oppo rtunities and engagement with the communit ies in whi ch we o per ate (see p ag e 27 ). 2021 stat us • Incre ase d th e numb er of i ntern shi ps an d work ex pe rien ce s thro ugh IH G Ac ade my com par ed to 20 20. • Glob al roll o ut of I HG S kil ls Ac ade my , a vir tua l lea rnin g plat fo rm, wit h a pha se d rel ea se of b oth th e lea rnin g syste m and c ont ent avai lab le in mu ltip le lan gua ge s. Th is en sure s we c an make a t ang ibl e impa ct o n a broa de r sc ale for p eo ple of a ll ba ckgrou nds , with a v iew to c onver t pa rt icip ant s into IHG emplo yees. 2022 prior ities • F urt her ro ll- o ut of I HG S kill s Aca de my with p has ed wo rld wide r ele as e of the p lat for m, oe ring b oth th e le arni ng sys tem an d co ntent in multi ple languages. • Contin ue to in cre ase t he num be r of inte rns hip s and wo rk exp erie nc e placements across hot els and cor porate f unctions, ut ilising both in-house experience s and virtual solutions. Ab sol ute c arb on fo otp rint We work wi th our h otel s to drive en ergy e i cie ncy an d ca rbo n red ucti ons a cro ss o ur es tate . In 20 21 , we up grad ed o ur sc ien ce - bas ed tar get to b e in lin e with th e Par is Agre em ent to lim it war ming to 1 .5° C. Thi s will i nvolve re duc ing o ur abs olu te ca rbo n foot print by 4 6 % in en erg y use d by our f ranc his ed , managed, o wned, leased a nd man ag ed le as e hote ls by 20 30, ba se d on ou r 201 9 ca rbo n footp rint (see p ag e 29). We have up da ted our K PI to re le ct th e ch ang e from an inte ns ity m etri c to an ab sol ute carbon target. A 2021 stat us • At the end o f 202 1, o ur abs ol ute ca rbo n foot print re du ce d by 12 % aga ins t our 2 019 b as eli ne, dri ven by t arge ted e or ts to m inimi se e ne rgy co nsu mptio n duri ng hot el cl osu res, m axi mis e en ergy e i cie ncy at re -o pe ning a nd th e ong oing e o rt s to imp lem ent e ne rgy e ic ien cy measures across ou r hot el estate. 202 2 pri oritie s • Contin ue to rol l out o ur de ca rbo nis atio n roa dmap fo cu sin g on en ergy e ici enc y mea sur es in th e exis ting e st ate, tra nsi tion ing to re newa ble en ergy a nd op era ting ve ry l ow/zero c arb on new -b uild h otel s. • Enhan ce ou r enviro nm ent al rep or tin g syste ms, to c onti nue b uild ing m ore robust a nd complete datasets, a nd pro vide mor e detailed performance ins ight s and g uid anc e for ou r hote ls to su ppo r t con tinuo us im prove men t. a I n 202 0, du e to the c omp lex it y of su rve y adm ini stra tio n in ho tels d uri ng th e pan de mic, o nly e mp loye es i n cor po rate o i ce s and re se r vati on ce ntre s, a nd ma na ge d hote l ge ner al man ag er s (exclu ding o ur jo int ve ntu res), we re inv ite d to par ti cip ate. R es ult s for 2 017 to 2 01 9 are b ase d on a ggr eg ate re sul ts fro m the t wo s ur veys c ond uc ted a mon g the e ntir e IH G em ploy ee p opu lat ion e ac h year. 2018 8 6.0 % 2017 8 5.0% 2019 8 7. 0 % 2020 79.0 % 2021 85 .0 % 2018 13,5 31 2017 13,633 2019 1 5,08 1 2020 3,277 2021 5,815 2019 5. 8m tC O 2 e 2020 4.4m tC O 2 e 2021 5.1 m tC O 2 e 53 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Key per forma nce in dic ators (K PIs) Gre ater Chi na rec overed in th e se con d quar ter a lthou gh the se co nd hal f of the yea r saw re stricti ons rei mpo sed a nd inc reas ed trading volatilit y . System gr owth Gros s syste m grow th of 5.0% wa s ahe ad of 202 0, althou gh remai ned b elow pre - pan dem ic leve ls . Net sy stem si ze dec line d by 0.6% as o ur focu s on the l ong -term he alth an d quali ty of o ur established brands resul ted in the remov al of 49,6 67 room s, 70% of w hich rel ated to our review of th e Holi day Inn an d Crowne P laz a est ate. We antici pate a lower ove rall rem oval rate goin g for wards, su ppo rtin g our amb ition to achieve in dus try- lea ding n et room s grow th. Focused cost mana gement We deliv ered sustai nable f ee business cost savin gs of $7 5m co mpare d to 201 9. At the sam e time, we m aintai ned o ur investm ent in grow th opp or tunitie s, su ch as the l aunc h of our ne west b rand, th e Vign ette C oll ecti on. Op eratin g pro it of $4 94 m improve d from an op eratin g los s of $(1 53)m i n 2020. Op eratin g pro it from rep or tab le se gme nts a rec overe d to $5 3 4m. The re cove r y in revenue c omb ine d with our s ust ainab le co st man age ment an d a de creas e in co rpo rate trade re ce ivable s, re sulted i n fee ma rgin a improvin g to 49.6 %, 4 .5 ppts b elow 2 019. Cash gene ration and liquidity The re silie nce o f our bu sine ss m ode l was dem ons trated thro ugho ut the yea r . O ur stron g ca sh co nversio n, co mbine d with o ur ongo ing focu s on co st s avings, h as he lpe d gen erate net c ash f rom ope rating a ctiviti es of $ 63 6m and $ 57 1m of adju sted f ree ca sh l ow a . This h as co ntribu ted to sub sta ntial pro gres s in returnin g levera ge level s mea sure d as a ratio of n et debt : adjus ted EB IT DA to 3.0x and within the 2.53 .0x range we aim to maintain, supp or ting th e Bo ard’s deci sion to p ropo se a in al divi den d of 85 .9 ¢ in resp ec t of 202 1. a U se of N on - GA AP m ea sure s: I n add itio n to p er form an ce m eas ure s dir ect ly ob se rv abl e in th e Gro up Fi nan ci al St ate me nts (I FR S me asu res), a ddi tio nal in anc ial m ea sur es (de sc rib ed as N on - GA AP) are p res en ted th at ar e use d int ern all y by man ag em ent a s key me asu res to a ss es s p er form an ce. N on - GA AP m ea sure s are e ith er n ot de i ne d und er I FRS o r are a dju ste d IF RS igur es . Furt her e xpl ana tio n in rel ati on to th es e me asu res c an b e fou nd on p ag es 7 3 to 7 7 and re c onc ili atio ns to I FRS ig ure s, wh ere th ey hav e be en a dju ste d, are o n pa ge s 21 8 to 22 3. T rad ing re cover ed s igni ic ant ly in 202 1, wit h RevPAR ahe ad of 20 20, and tr ending cl oser to pre-pandemic level s by the fo ur th qu art er . We saw de man d retu rn at pa ce in m arket s whe re Covi d-19 re stric tio ns we re lif ted , driven prim aril y by dom est ic le isu re an d es se ntia l bu sin es s trave l. The s tro ng re cover y in trading de mons trates the att ractive long-t erm f undamentals that underpi n our industry , including t he inheren t desire for tr avel an d new exp erie nc es . T rading performance Throu gh the ch alle nge s of the pa nde mic, we remai ned c omm itte d to take acti ons to drive de mand to o ur hotel s and sup po rt our own ers by ma ximis ing the ir revenue s. This , com bine d with ou r weighting towa rds es senti al bus ine ss an d dom esti c leis ure demand, par ticularly in the midscale se gment s, res ulted in Rev P AR rec overing to 70% of 20 19 leve ls. Enc ourag ingly in th e four th quar ter , rate was alm ost in l ine with 2 019 an d oc cupa ncy aroun d 85% of 2 019 l evels. T here we re also sign s of more di screti onar y bu sine ss tr avel, and gro up bo okin gs and inte rnatio nal trip s sta rtin g to return. Regi onal p er form ance wa s subj ect to lo ca l Covi d-19 rel ated res trictio ns. T he rec over y was stro nge st in the A meric as , driven by our wei ghting towards n on- urb an markets that are l ess re liant o n internati onal inbo und travel a nd larg e groups a nd event s. The re cover y in th e US was b oo sted by stro ng dom esti c leis ure dem and an d resi lient es senti al bus ine ss de man d. T ra ding in E ME A A was le d by Europ e, which is le ss re liant on inte rnatio nal travel, a nd the Mid dle E ast, w ith both m arkets b ene it ting from the li ftin g of res trictio ns. Our u ses o f cas h rema in unch ange d: en suring the busi ness is appr opriat ely inv ested in to optimi se grow th; fund ing a su stain ably growing di vide nd; and th en return ing exces s funds t o shar eholders. Future gr owt h and 2 02 2 pri oritie s Loo king to the f uture, we are en cour age d by the sig ns of rec over y , al thoug h tradin g in som e markets re main s volatil e. The a cce ler ation in devel opm ent ac tivit y through 2 02 1 contr ibute d to a pipe line th at is over 30 % of our exi sting sys tem size, a nd will s uppo rt o ur ambi tion to return to ind ustr y-l ead ing level s of net sys tem si ze growth . Imp or tantly, we have continue d to prio ritise i nvestme nt to supp or t lon g-ter m sus tain able g rowth . Many of the se are multi -year in natu re with fur the r investme nts pla nne d for 202 2 b ehin d our bra nd po rt folio, loyalty programme and digital channels. We remain fo cus ed on i mproving retu rns for owne rs throu gh investm ent s in revenue managem ent, operational e iciencies and pr ocuremen t progr ammes. Our a ss et-light bu sine ss m ode l is proven to be high ly ca sh ge nerati ve. As we lo ok to future grow th, with at trac tive indu str y RevPAR chara cteris tics a nd a sub st antial pip eline o f hotels to o pen , we will focu s on growing o ur fee reven ues an d fee m argins . With li mited re quirem ents fo r cap ital, thi s will en abl e us to grow the bu sine ss w hilst gen eratin g high return s on investe d ca pita l. Paul Edgeclie- J ohnson Chief Financial O icer & Group H ea d of Strate gy Chief Financ ial O ice r ’ s r ev iew Paul Edgeclie- J ohnson Chief F inan cial O icer & G roup H ea d of Strate gy “ S tro n g tra d i n g re c ove r y i n 2 0 2 1 de monst r at ing at tra c ti ve in d u s tr y f unda me n tals . ” Strate gic Re po rt 54 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Income S tatemen t summary 12 mo nths end ed 31 December 2021 $m 2020 $m 2021 vs 2020 % ch ang e 2019 $m 2020 vs 2019 % ch ang e Reven ue a Americas 7 74 512 51. 2 1,0 40 ( 50. 8) EME AA 303 221 3 7.1 723 (6 9. 4) Greater China 116 77 50. 6 135 (4 3. 0) Ce ntral 197 182 8.2 185 (1.6) Rev enue f rom reportable segmen ts b 1,390 992 4 0.1 2,08 3 (5 2.4) System Fu nd re venues 928 765 2 1.3 1,373 (4 4 . 3) Reimbursement of costs 589 637 ( 7. 5 ) 1,1 7 1 (4 5 . 6) T ot al revenue 2,9 07 2,394 21.4 4,627 (4 8 . 3) Ope rating proit a Americas 559 296 88.9 70 0 ( 5 7. 7 ) EME AA 5 ( 50) NM c 217 NM c Greater China 58 35 6 5.7 73 (5 2 .1) Ce ntral (88) (62) 41 .9 (125) (5 0.4) Op era ting p roi t from re po rt abl e se gme nts b 534 219 14 3 .8 865 ( 74 . 7 ) Analyse d as: Fee B usi ne ss excl udin g ce ntral 658 340 93. 5 938 (6 3. 8) Owned, leased and managed lease (36) (59) (39 .0) 52 NM c Ce ntral (88) (62) 41 .9 (125) (5 0.4) Sys tem Fund re sul t (11) (10 2) (89. 2) (4 9) 108. 2 Op era ting p roi t be fore exce ptio nal i tem s 523 117 3 4 7. 0 816 (8 5 .7 ) Operati ng ex ceptional it ems (2 9) (2 70) (8 9.3) ( 186) 45. 2 Ope rating proit/(los s) 494 (15 3) NM c 630 NM c Net inancial expens es (13 9) (14 0) (0 .7 ) (115) 21 .7 Analyse d as: Adjust ed int erest ex pense b (142) ( 130) 9. 2 (1 33) (2. 3) System Fu nd int erest 3 4 (2 5.0) 18 ( 7 7. 8 ) Exceptional inan cial expenses – (14) – – – Fair v alue gains on continge nt purchase considerat ion 6 13 (5 3. 8) 27 (51. 9) Proit/(los s) before tax 361 ( 28 0) NM c 542 NM c Ta x (96) 20 NM c (156 ) NM c Analyse d as: T ax be fore exc epti ona l item s and S yste m Fund b (12 5) (32) 29 0.6 (176) (8 1. 8) T ax on exc ept ion al item s 3 52 (9 4. 2) 20 16 0.0 Exceptional tax 26 – – – – Proit/(los s) 265 ( 26 0) NM c 386 NM c Adjust ed earnings d 269 57 371.9 555 (8 9.7 ) Ba sic we ighte d aver age n umb er of o rdina r y shares (millions) 183 182 0.5 183 (0.5 ) Earni ngs/ (loss) per ord inary sha re Basic 145.4¢ (142. 9) ¢ NM c 21 0.4¢ NM c Adjusted b 1 4 7. 0 ¢ 31.3¢ 369.6 303.3¢ (8 9 .7 ) Dividend per share 85.9¢ – NM c 29 6. 2¢ NM c Avera ge US d oll ar to s ter lin g excha ng e rate $1: £ 0.73 $ 1: £ 0.7 8 (6. 4) $ 1 : £ 0.78 – a A mer ic as an d EM EA A i ncl ude r even ue an d op era tin g pro it b efo re exce pti on al ite ms fr om bo th fe e bus in es s and o wne d, l eas ed a nd m ana ge d le as e hote ls . Gre ate r Chi na in clu de s reve nue a nd op er atin g pro i t bef ore exc ept ion al it ems f rom fe e bu sin es s. b D e in iti ons fo r No n- GA A P me asu res c an b e fou nd on p ag es 73 t o 7 7 . Rec on cil iati ons o f the se m ea sur es to th e mo st di rec tly c om par abl e lin e ite ms wi thin t he G roup F ina nc ial St atem en ts c an be f oun d on p age s 2 18 to 2 23 . c Pe rce nta ge c han ge c ons id ere d not m ea nin gful , suc h as w her e a po siti ve ba lan ce i n the l ates t pe rio d is c omp ar abl e to a ne gat ive or z ero b ala nc e in the p rio r pe rio d. d A dju ste d ea rnin gs a s us ed wi th ad jus ted e ar ning s pe r sh are, a n on - GA AP me as ure . P e r fo r m a n c e G ro u p 55 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Perfor mance co nti nu e d G ro u p c o ntin u e d Hig hlig hts fo r the ye ar e nde d 31 De ce mb er 2 021 T rading imp roved signiicantly during the yea r , with G roup c ompa rabl e RevPAR a getting c los er to pre -p ande mic leve ls. Mo re travel dem and return ed a s vacci nes rolled out, gov ernment -mandated restri ction s ea sed a nd ec ono mic ac tivit y sta rte d to rebuil d. Thro ugh the s umme r month s, many ma rkets, inc ludin g the US and U K , saw sig ni icant i mproveme nts, driven by do me stic le isure travel . Whils t the abilit y of travel lers to fre ely m ove bet wee n and wi thin co untries c ontinu ed to var y signi ic antly , the s eco nd ha lf of the yea r saw a gra dual f urth er imp roveme nt in overall tra ding c onditi ons . Reve nu e Over all, whe n com parin g to 2020, Gro up comparable Re vP AR a dec line d 34% in th e ir st qua rte r , the n grew 151% in th e sec ond quar ter , 66 % in the th ird quar ter , 71% in the four th qu ar ter and 4 6% i n the full ye ar . Whe n com pare d to the pre -p ande mic level s of 201 9, Group c omp arabl e RevPAR a dec line d 51% in the irst q uar ter , 36 % in the se co nd qua rte r , 2 1% in the third q uar ter , 17% in th e four th qua rte r and 30 % in the full year . Our oth er key driver of reve nue, ne t system size, d ecre ase d by 0.6% ye ar - on-yea r to 88 0,327 ro oms, i mpac ted by 3 4.3 k Hol iday Inn a nd Crown e Plaz a rem ovals as we con clud ed ou r qualit y review o f these bra nds. Duri ng the yea r end ed 31 D ec emb er 20 21, total reven ue inc reas ed by $ 513m (2 1.4%) to $2,9 07m inclu ding a $ 48 m redu ction i n co st reimb urs eme nt revenue. R evenue fro m reportable segments b incre ase d by $3 98 m (40. 1%) to $1,39 0 m, driven by im proved tradin g con dition s. Un der lying reven ue b incre ase d by $3 87m to $1,37 3m, with unde rlyin g fee revenu e b increasing b y $3 14m. Own ed, le as ed an d man age d lea se revenu e incre ase d by $6 8m . Op era ting p ro it an d mar gin Op eratin g pro it improve d by $647m from a lo ss of $ 15 3m to a pro it of $ 49 4m, incl uding a $ 241m net redu ctio n in ope rating exceptio nal ite ms, a $ 91m im proveme nt in the Sys tem Fund res ult, from a $ 102 m de icit to an $11m de i cit, an d a $3 6m d ecre ase in the ch arge for exp ec ted cre dit lo ss es on corporat e trade receivables. Op eratin g pro it from rep or tab le se gme nts b incre ase d by $3 15m (14 3. 8%) to $5 34m , driven by im proved de man d and the d elive ry of sustai nable f ee business cost sa vings. Und erlyi ng op erating p roi t b increased $3 08 m to $5 31m. Fee margin b incre ase d by 15. 5p pts to 49.6 % , be ne it ting from th e improvem ent in tra ding and fo cus ed co st ma nag eme nt. S ys t e m Fu n d The G roup op erate s a Syste m Fund to colle ct and adm inist er cash assessments fr om hot el owne rs for the s pe ci ic purp os e of us e in marketing , rese rvati ons, a nd the h otel loyalt y progr amme, I HG Rew ards. T he Sys tem Fund als o ben e its from p roce e ds from the s ale o f loyalty points und er third-par ty c o- branding arrang eme nts . The Fund is n ot man age d to gen erate a pro it or l os s for IH G over the lon ger term , althou gh an in -year sur plus o r de ici t can ari se, b ut is ma nage d for the be ne it of hote ls in the I HG S ystem w ith the obje ctive of d riving reve nues fo r the hote ls. In the ye ar to 31 D ece mbe r 202 1, Sys tem Fund revenue s incre ase d $1 63 m (2 1%) to $9 28m, p rimaril y driven by the re cover y in trav el dem and yielding highe r assessment r ev enues. The S ystem Fund in com e state ment de ici t reduc ed by $ 91m to $ 11m, prima rily due to the re bou nd in travel de man d and as soc iated a ss es sme nt inco me, pa rti ally os et by the rever sal o f tempo rar y savin gs real ise d in 2 020. Reimbu rsement o f costs Cost rei mbursemen t r ev enue r epresen ts reim bur sem ent s of exp en se s inc urre d on be hal f of man age d and fran chis ed prop er ties a nd relate s, pre domi nantly , to payroll c ost s at man age d prop er ties w here we are the e mployer. As we record c ost reimbu rsements based upon costs incur red with no a dde d mark u p, this revenue a nd relate d expe nse s have no imp act o n eith er our op erati ng pro it or n et pro it for the ye ar . In the ye ar to 31 D ece mbe r 202 1, reimb urs able reve nue de crea se d by $4 8m (7.5%) t o $5 89 m. Th e redu ction re le cts th e impa ct of th e prior ye ar termin ation of th e SVC por tfo lio in the A meric as e st ate, mean ing the overal l sca le of reim burs eme nts fel l. Ope rating exceptional item s E xceptio nal ite ms are id enti ied by vi rtu e of the ir size, n ature, or inc ide nce an d are exclude d from th e calc ulatio n of adju sted earn ings p er ordin ar y sha re as well a s other Non - GA AP me asu res (see U se of N on - GAA P me asure s, pa ges 2 18 to 2 23) in orde r to provide a m ore me aning ful co mpari son of pe rfo rman ce and c an in clud e, but are not res tricte d to, gains an d los se s on the disp os al of as se ts, imp airme nt cha rges an d reversals, the costs of individually signiic ant leg al ca se s or co mme rcial dis pute s and reorgan isation costs. Op eratin g exceptio nal item s totall ed $2 9m, comprising t he $25m pro visionally agreed co sts to se ttle t wo co mme rcial di spute s in the Am eric as an d EME A A , and th e revers al of a $4 m fair valu e gain re cord ed in 20 20 on the p ut optio n over pa rt of th e Group’s investme nt in the Inte rC ontine ntal B arclay hotel . F ur ther in formatio n on excep tiona l items c an b e found in n ote 6 to the Gro up Financi al Sta temen ts. Net ina nc ial exp en se s Net ina ncial ex pen se s dec reas ed by $ 1m to $139m. Adjus ted int eres t b , as rec onc ile d on pag e 2 23, and w hich exclu des exce ption al in anc e expe nse s, and a dds b ack inte rest relatin g to the Sys tem Fund, incre as ed by $12m to an ex pen se of $ 142m. Th e incre ase in adj usted i nter est b was prim arily driven by incre ase d averag e bon d debt . Fin ancia l expe nse s inclu de $ 91m (2 020 : $6 9m excluding e xceptional inancial expens es) of total i nterest c os ts on p ublic b ond s, whic h are i xed rate deb t. Intere st exp ens e on le ase liabi lities wa s $29 m (20 20: $ 37m). a Comparable RevP AR incl udes the i mpact of ho tels tem po rari ly cl os ed a s a res ult of C ov id-1 9. b D e in iti ons fo r No n- GA A P reve nue a nd op er atin g pro i t mea su res c an b e foun d on p ag es 73 to 7 7. Rec on cil iati on s of th es e mea su res to t he mo st d irec tly co mpa rab le li ne it ems w ith in the G rou p Fin an cia l St atem en ts c an be f oun d on p age s 2 18 to 2 23 . Strate gic Re po rt 56 I HG | Annua l Repo rt a nd Form 20 F 202 1 Fair valu e gai ns on c ont ing ent purchase considera tion Co ntinge nt purch ase c ons ide ration aro se on the a cqui sitio ns of Re gent, t he UK por t folio an d Six S ens es (see n ote 25 to the Group F inan cial S tatem ent s) . The n et gain of $6 m (20 20: $ 13m) prima rily aris es fro m the co nditi ons rel ated to the S ix Se nse s conti ngen t purcha se c onsi dera tion no lon ger b eing m et. Th e total c onting ent purch ase c ons ide ration li abilit y at 31 D ec emb er 202 1 is $7 3m (20 20: $ 79m). T axation The e ec tive rate of ta x on pro it be fore exceptio nal ite ms an d Syste m F und a was 31% (2 020 : 38%); this wa s lower th an 20 20 large ly due to th e improved p roi t bas e. In M ay 202 1, a chan ge to the U K rate of Co rpor ation T ax was e nac ted whi ch le d to a $3 0m cre dit ; $26m wa s rec ode d as an excepti onal c redit w ithin the I nco me Statem ent a nd $4m wi thi n th e Stat ement of Oth er C omp rehe nsive In com e. A ne t cred it of $3 m aros e on othe r acc ountin g exceptio nal ite ms (20 20: $ 52m). F urth er inform ation on t ax with in exceptio nal ite ms can b e foun d in note 6 to the Gro up Fin ancia l St ateme nts. N et ta x paid in 2 02 1 totall ed $8 6m (2 020 : $41m), and inc lude d refun ds in the U S of $1 5m (20 20: $ 24m). No more signiic ant refunds ar e expected. IH G purs ue s an app roach to t ax that i s consistent wit h its bus iness stra tegy a nd its o vera ll business cond uct prin ciples. The a pproa ch se eks to en sure full c omp lianc e with all t ax iling, p ayment an d repo rti ng obli gation s on the b asi s of co mmunic ative and tra nsp arent rel ations hips w ith tax autho ritie s. The I HG Au dit C ommit tee reviews IHG’s appr oach to tax annually , incl uding c ons ide ration of th e Group’s current t ax pro ile . Furthe r inform ation on tax c an b e found in n ote 8 to the Grou p Financi al Sta temen ts. IH G’s Ap proa ch to Tax pol icy is ava ilab le at www.ihgplc. com/ responsible-business under policies Earnings per or dinary share The G roup’s basic e arnin gs pe r ordin ary sha re is 145 .4 ¢ (202 0: ba sic lo ss p er ordin ary s hare: 142 .9 ¢). Adjusted e arnin gs pe r ordinar y s hare a inc rea se d by 115.7¢ t o 1 4 7. 0 ¢ . Dividends The B oard i s prop osin g a in al divid end of 85 .9 ¢ in resp ec t of 202 1, an am ount equ ivalen t to the withd rawn in al paym ent in res pec t of 20 19. No inte rim divi den d was pa id in res pe ct of 20 21. G oin g forwa rd, divid end p ayment s will b e rel ecti ve of IHG’s prior a pproach to sus tainably gro w the ordi nar y divid end , whils t targe ting a level of lever age that m aint ains an inve stme nt grad e credi t rating an d ens uring c areful con sid eratio n of our res po nsib ilitie s to all stakeholders. The Board w ill a lso contin ue to active ly as ses s the o ppo rtu nity fo r any surpl us ca pita l to be add ition ally returne d throug h spe cial d ivid ends or sh are buy back s. Share price and mark et capitalisation The I HG s hare pri ce cl ose d at £ 47 .8 1 on 31 D ec emb er 202 1, up fro m £4 6. 90 o n 31 D ece mb er 202 0. The m arket cap itali satio n of the G roup at the ye ar - end wa s £8. 8bn . For dis cus sion o f 2020 re sult s, and th e cha nges c omp ared to 20 19, refe r to the 202 0 Annua l Repo rt a nd Form 20 F . www.ihgplc.com/i nv estors under Annual Repor t a D e ini tio ns fo r No n- GA AP r even ue an d op era ting p ro it me asu res c an b e fou nd o n pag es 7 3 to 7 7 . Rec on cil iati on s of th es e mea su res to t he mo st d irec tly co mpa rab le li ne it ems w ith in the G rou p Fin an cia l St atem en ts c an be f oun d on p age s 2 18 to 2 23 . Accounting principle s The Grou p res ults a re pre pare d unde r Intern ation al Fin anci al Rep or ting St anda rds (IFR S). The app licati on of IFR S require s man age ment to m ake judg eme nts, e stim ates and a ss umption s, and th ose c ons idere d criti cal to the prep aratio n of the Gro up resu lts are set o ut on pa ge 15 0 of the G roup Financi al Sta temen ts. The G roup di sclo se s cer t ain in anc ial information both including an d ex cluding exceptio nal ite ms. For c omp arabi lity of the p erio ds pre sente d, so me of the p er forman ce in dicato rs in this pe rfor manc e review are c alcu lated af ter elim inating th es e exceptio nal items . An an alysi s of exceptio nal ite ms is inc lude d in note 6 o n pag e 165 o f the Group Finan cial Statemen ts. 57 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Perfor mance co nti nu e d G ro u p c o ntin u e d Gro up C as h Flow su mm ary 12 mo nths end ed 31 December 2021 $m 2020 $m 2021 vs 2020 $m change 2019 $m 2020 vs 2019 $m change GAAP cash l ow summary Ne t cas h from o pe ratin g act iviti es 636 137 499 653 (5 16) Ne t cas h from i nves ting a ctiv itie s (12) (6 1) 49 (4 9 3) 4 32 Ne t cas h from in anc ing a ctiv itie s (860 ) 1,3 54 (2, 214) (6 6 0) 2,0 14 Net mo vement i n cash and cash equi valen ts in th e yea r (2 36) 1,4 30 ( 1, 666 ) (5 00) 1,9 30 12 mo nths end ed 31 December 2021 $m 2020 $m 2021 vs 2020 $m change 2019 $m 2020 vs 2019 $m change Su mma ry o f ca sh low an d ne t de bt Op era ting p roi t from re po rt abl e se gme nts 534 219 865 Depreciation and amortisat ion 98 110 116 Adjusted EBIT DA a 632 32 9 303 981 (6 52) Work ing c apit al an d oth er ad jus tme nts 110 (27 ) (77) Imp airm ent l os s on ina nci al as set s – 40 8 Oth er n on -c as h adj ustm ent s to op erat ing proit/loss b 71 60 54 Sys tem Fund re sul t (11) (10 2) (4 9) System Fu nd depreciat ion and amortisation 94 62 54 Oth er n on -c as h adj ustm ent s to Sys tem Fund r esu lt 6 97 52 Ca pit al exp end iture : con trac t ac quis itio n co sts (key mo ney) ne t of rep ayme nts (42 ) (6 4) (6 1) Capit al expenditure: maintenance (33) (4 3) (8 6) Ca sh lows re lati ng to exce ptio nal i tems (12) (87) (5 5) Ne t intere st p aid (12 6) (13 0) (107 ) Ta x p a i d (86) (41) (141) Princi pal elemen t of lease pa yments (32) (6 5) (59) Purc has e of s hare s – – (5) Adj us ted fr ee c as h lo w a 571 29 542 509 (4 8 0 ) Ca pit al exp end iture : gros s rec yclab le inve stm ent s (5) (6) (19) Capital expen diture: gr oss System Fund c apit al inve stm ent s (19) (3 5) (98) Acq uis itio ns of b usi nes se s, n et of c ash a cq uire d – – (2 92) De ferre d an d con ting ent pu rcha se consideration paid (13) – (8) Disposals and repa yments, includ ing o ther inancial assets 58 18 4 Di strib utio ns fro m as so ciat es an d join t ventu res – 5 – Other it ems – 3 – Dividends and shareholder r etur ns – – ( 723) Ne t ca sh l ow be fore o the r ne t de bt move me nts 592 14 578 (62 7) 6 41 Add b ack p rin cip al el eme nt of l eas e rep ayme nts 32 65 59 Exchange a nd ot her non-cash adjustmen ts 24 57 (132) De cre a se in n et de bt 648 136 512 ( 70 0) 836 Ne t deb t at the b egi nnin g of the ye ar (2 ,5 29) (2,665) (1,9 65) Ne t deb t at th e en d of th e yea r (1,881) ( 2,52 9) 648 (2,665) 136 a D e ini tio ns fo r No n- GA AP m ea sur es c an be f oun d on p age s 73 to 7 7. Rec on cili atio ns o f the se m ea sure s to th e mo st di rec tly c omp ara bl e line i tem s wit hin th e Gro up F ina nci al St atem en ts c an be f oun d on p age s 2 18 to 2 23 . b 2 02 0 Exc lu des $ 4 8m re lat ed to tr ade d ep os its a nd l oan s whi ch we re re co gnis e d as exc epti on al ite ms . Strate gic Re po rt 58 I HG | Annua l Repo rt a nd Form 20 F 202 1 Cas h from operating ac tivities For the yea r end ed 31 D ec emb er 20 21 n et ca sh from op erati ng acti vitie s totalle d $6 3 6m, an inc reas e of $4 9 9m on th e previo us year, prim arily re lec ting th e incre ase in o per ating pro it and i mproveme nt in work ing ca pita l and ot her adj ustments. Ca sh l ow from op eratio ns is the p rinci pal sou rce of ca sh us ed to fu nd the on goin g ope rating exp en ses , interes t payme nts, maintenance capit al expenditure and normal divid end p ayment s of the G roup. The G roup b elieve s that the re quirem ents of its exi sting b usin es s and fu ture investm ent can b e met fro m ca sh ge nerate d intern ally , disp os ition of a ss ets, an d exte rnal inan ce expe cted to b e availab le to it. Ca sh fro m inves ting a ctiv itie s Net c as h out low s from investi ng acti vitie s dec reas ed by $ 49 m to $12m, d riven by $4 4 m net pro ce eds fro m the s ale of thre e hotel s in the Am eric as reg ion. T here wa s an overall d ecre as e in purch ase s of prop er t y , plant and equipmen t and intang ible assets of $24m . Defe rred c ons ider ation p aid of $13 m relate d to the ac quis ition of th e Rege nt bran d (202 0: $n il). The G roup h ad co mmit ted contr actua l cap ital exp en diture of $ 17m at 31 D ec emb er 20 21 (2 020 : $19 m). Ca sh u se d in i nan cin g act iviti es Net c as h out low s from i nanc ing ac tivitie s totall ed $ 86 0m (2 020 : $1,3 5 4m in low). This wa s prim arily du e to the repaym ent of the £6 0 0m co mme rcial p ape r unde r the U K Covi d Co rpora te Finan cing Facil ity (CC FF ). Adju ste d fre e ca sh l ow Adjus ted fre e cas h low a was an in low of $5 71m, a n incre ase of $ 5 42m on 20 20, driven by an i mproveme nt in op eratin g pro it from rep or ta ble s egme nts a partially os et by relate d ta x payme nts, c oupl ed with a $137m imp rovement i n workin g cap ital as ex plained belo w . Except ional cash costs of $12m d ec reas ed by $7 5m due to lowe r restr ucturin g expe nse s and th e timing of litigati on paym ents . Wor king capital On th e Group s tatem ent of inan cial p osi tion, trade a nd othe r rec eivabl es in crea sed by $6 0m, fro m $514m to $ 57 4m, pri marily d ue to the sign ii cant in crea se in Rev P AR in the four th quar ter c omp ared to 20 20. T rade and othe r payable s incre as ed by $1 08 m, from $ 560 m to $6 68 m, prim arily du e to an inc reas e in bo nus ac crua ls co mpare d to prio r year . Defe rred reven ue inc reas ed by $4 4 m, from $1, 56 9m to $ 1,613 m, rel ecti ng an inc reas e in the futu re rede ema ble p oints bal ance re lated to th e loyalt y progra mme. a D e ini tio ns fo r No n- GA AP m ea sur es c an be f oun d on pa ge s 73 to 7 7. Reco nci lia tion s of th es e me as ure s to the mo st di rec tly c omp ara bl e lin e item s wit hin th e Gro up Fin an cia l St atem ent s ca n be fo un d on pa ge s 21 8 to 2 23. Sources of liquidity As at 31 D ec emb er 20 21 th e Grou p had tot al liqui dity o f $2,6 55 m (31 De cem ber 2 020 : $2, 925 m), compri sing $ 1,3 50m of u ndrawn bank f aciliti es an d $1,3 0 5m of ca sh an d cas h equivalents (net of overdrafts and restricted ca sh). The redu ctio n in total liq uidit y from De ce mbe r 2020 i s due to the re payme nt of the £ 60 0m C CFF i n March 2 02 1, large ly os et by the n et ca sh low b efore oth er ne t debt m oveme nts of $ 592m . The G roup cur rently ha s $2,786 m of sterlin g and eur o bonds ou tstanding. The cur ren t bon ds ma ture in Novem ber 2 02 2 (£173 m), Oc tobe r 2024 (€50 0m), Augu st 202 5 (£3 0 0m), August 2 026 (£ 3 50m), May 20 27 (€50 0m) and O ctob er 202 8 (£4 0 0m). The re are curren cy swaps i n plac e on b oth the eu ro bond s, ixing th e Octo ber 2 024 bon d at £ 45 4m an d the M ay 2027 b ond at £ 43 6m . The G roup cur rently ha s a sen ior uns ec ured lon g-term c redit r ating of B BB - fro m St anda rd and Poo r’s. In th e event this ra ting was dow ngrad ed b elow B BB - th ere woul d be an a dditio nal s tep -up of 1 25bp s payabl e on the b ond s whic h would re sult in an additi onal in ter est cost of appro ximately $3 5m p er year. The $ 1,2 75 m revolving sy ndic ated b ank facil ity (the Sy ndic ated Facil ity) and th e $75 m revolving bilateral facilit y (the Bilateral Facility) mature in S eptem ber 2 023 . The fa cilitie s were und rawn at 31 D ec emb er 20 21. The S yndic ated a nd Bil ateral Faci lities cont ain the s am e terms an d two inan cial coven ants: inte rest c over and a l everag e ratio. C ovenant s are moni tored on a ‘ frozen GAA P ’ ba sis exclud ing the im pac t of IFR S 16 and are te sted at h alf yea r and full ye ar on a trailin g 12-month b asi s. Th e interes t cover coven ant requ ires a ratio o f Coven ant EBI TDA to Coven ant intere st payab le above 3 .5:1 and the l everag e ratio req uires Cove nant ne t debt to C ovenant E BIT DA of be low 3. 5:1. Covena nt EBI TDA is c alcul ated (on a frozen GAAP b asi s) as ope rating pro it befo re exceptio nal item s, de prec iation a nd amo rti satio n and Sys tem Fund revenu es and exp ens es . Se e note 24 to the Gro up Fin ancia l State ment s for fur the r inform ation. The se c ovenant s have be en am end ed for test d ates in 20 2 2. A mini mum liqui dit y coven ant of $ 40 0m h as be en intro duc ed whic h will be te sted at e ach te st date up to and in cludi ng 31 D ec emb er 20 22 . The a men ded l everag e ratio and i nterest cover c ovenant te st leve ls for th e facili ties are as follow s: June 2022 December 2022 Lever age ratio Less t han 7.5x L es s tha n 6. 5x Inte rest cove r Gre ater th an 1. 5x Gre ater t han 2 .0x At 31 De ce mbe r 202 1 the l everag e ratio was 3.0x an d the intere st c over ratio was 4 .5x. Se e note 24 to the Gro up Fin ancia l St ateme nts for fur the r inform ation. The G roup is in c omp lian ce with al l of the applicabl e inancial covenants in its loan doc ume nts, no ne of whi ch are exp ecte d to pres ent a m aterial re stric tion on fu nding i n the ne ar futu re. In the G roup’s opinio n, the availab le fac ilitie s are su ici ent for th e Group’s pres ent liqu idit y requi reme nts. H owever , th e Grou p contin ues to ass es s its li quidit y po sitio n and inan cing optio ns and w ill take fur the r acti ons as necessary . The G roup ha s taken c er tai n actio ns durin g 202 1 reg arding th e disc ontinu ation of L IB OR . The G roup’s main expo sure to LI BO R is the unde rlyin g referen ce rate in th e Synd icate d and B ilatera l Facilitie s. Th e terms of th es e agre eme nts will n ee d to be ren egoti ated to addre ss th e disc ontinu ation of L IB OR . The re plac em ent of LI BO R with alte rnative referen ce rate s is not exp ec ted to have a materi al imp act on th e Grou p at this st age . The G roup ha d net li abiliti es of $ 1,47 4 m at 31 D ec emb er 20 21 ($1, 84 9m at 31 D ec emb er 202 0). Net d ebt Net d ebt of $ 1,8 81m (20 20: $ 2,52 9m) is anal yse d by currency a s follow s: 2021 $m 2020 $m Borrow ings Ste rlin g 2,860 3,7 16 US dollar 431 416 Euros 5 20 Othe r 35 52 Cash and cash equivalents Ste rling (53 2) (1,3 05) US dollar (756) (2 61) Euros (18) (12) Canadian dollar (7) (8) Chines e renminbi (10 5) (60) Othe r (32) (2 9) Ne t deb t 1,881 2,529 Avera ge ne t de bt leve l 2,33 4 2,5 54 * In clu din g the im pa ct of c urre ncy s wap s. Ca sh and c as h equi valent s incl ude s $7 7m (20 20: $ 4 4m) that is not avail abl e for use by the Gro up due to lo cal exch ange c ontrol s and $ 9m (2 020 : $5m) whic h is res tricte d for us e on ca pita l expe nditure un der h otel lease agr e ements. Inform ation o n the maturi ty p roil e and inte rest s tructu re of borrowi ngs is incl ude d in notes 2 2 a nd 24 to the Gro up Financi al Sta temen ts. 59 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Perfor mance co nti nu e d G ro u p c o ntin u e d Bo rrowings in clud ed b ank overdraf ts o f $5 9m (2 020 : $51m), which were m atche d by an equ ivale nt amount o f cas h and c ash equ ivalen ts und er the G roup’s cash p oo ling arr angements. Under t hese ar rang ements, eac h po ol co ntain s a numb er of b ank acc ount s with the s ame ina ncial i nstitu tion, and th e Group p ays interes t on net ove rdraf t bal ance s withi n eac h poo l. The c as h po ols are us ed for d ay-to- day c ash m anag eme nt purp ose s and a re mana ged d aily a s clos ely as po ss ible to a ze ro bala nce o n a net ba sis for ea ch po ol. O vers eas s ubs idiari es are ty pic ally in a c ash -p ositi ve pos ition, wi th the mo st sig ni icant b alan ce s in the U S, and th e matchin g overdraf ts are h eld by the Group’s cent ral treas ur y com pany in the U K . Inform ation o n the Gro up’ s app roach to allo catio n of ca pita l reso urces c an b e found on pa ges 1 2 and 13 . O-balance sheet arr angements At 31 De ce mbe r 202 1, the G roup ha d no o-balanc e sheet arrangements that have, or are rea so nabl y likely to have, a curre nt or futu re materia l ee ct on the G roup’s in anci al co nditio n, revenue s or exp ens es, resul ts of op erati ons, li quidit y , cap ital expe nditure s or c apit al res ource s. Contin gent liabiliti es Co ntinge nt liabi lities i nclu de guar antee s over lo ans ma de to fac ilitate third -p ar ty owne rship o f hotel s of up to $6 9m an d out stan ding l ette rs of cre dit of $ 45 m. The G roup may al so be ex pos ed to ad ditio nal liabi lities re sultin g from litig ation an d se curit y inci dent s. Se e note 3 1 to the Group Financi al Sta temen ts f or fu rther deta ils. Future cash req uireme nts from contra ctual oblig ations The G roup’s future ca sh l ows arisi ng from contr actua l com mitme nts rel ating to lon g term de bt obl igation s (inc ludin g interes t payabl e), derivative s, lea se lia bilitie s and other inancial liabilities are analysed in note 24 to the G roup Fin anci al Sta teme nts. Oth er c ash re quirem ents re late to future pe nsio n sch eme c ontrib ution s (see note 2 7 to the Gro up Fina ncia l State ment s) and cap ital c ommi tment s (see note 3 0 to the Group Finan cial Statemen ts ). The G roup al so ha s future co mmitm ents fo r key money paym ents w hich are c onting ent upo n future event s and m ay reverse. T ot al gr os s revenu e a in IH G’s Syste m 12 mo nths end ed 31 December 2021 $bn 2020 $bn % change b Analysed by brand InterC ontin ental 2 .7 2.0 31.6 Kim pton 0.7 0.4 83.9 HUA LUXE 0.1 0 .1 36.5 Crowne Plaza 2.3 1. 8 25.7 Hotel Indigo 0.4 0. 3 73.9 EV EN H otel s 0.1 0.0 1 2 7. 0 Holiday Inn 4.0 2.8 42 .7 Ho liday I nn E xpr es s 6.5 4. 2 54.2 Staybridge Suites 1.0 0 .7 38. 2 Candle wood Sui tes 0.7 0 .7 11. 5 Othe r 0.9 0. 5 51.9 To t a l 1 9.4 13.5 42.8 An alys ed by ow ne rsh ip t ype Fee busi ness 19. 2 13.3 42.8 Owned, leased and managed lease 0.2 0. 2 40.3 To t a l 1 9.4 13.5 42 .8 a D e ini tio ns fo r No n- GA AP m ea sur es c an be f oun d on p age s 73 to 7 7. Rec on cili atio ns o f the se m ea sure s to th e mo st dire ct ly co mp arab le l ine i tem s with in th e Gro up Fi nan cia l St ate men ts c an be f oun d on p age s 2 18 to 2 23 . b Yea r-on -ye ar pe rce nt age m ove men t cal cul ate d fro m sou rce ig ures , to pro vid e bet te r illu str atio n of re lat ive im pac t of C ovid -19 o n bra nd s and o n fee b us ine ss a nd ow ne d, le as ed a nd ma na ge d lea se h ote ls. T ot al gros s revenu e in IH G’s System i ncrea se d by 42.8 % (40.5% inc reas e at co nst ant curren cy) to $19.4b n (70 % of 20 19 level s), driven by the improve ment in tra ding c ondi tions in many ma rkets, pa rtic ularl y through th e sec on d half of 2 02 1. Strate gic Re po rt 60 IHG | Annua l Repo rt a nd Form 20 F 202 1 Duri ng 202 1, the gl oba l IH G Syste m (the numb er of hote ls and ro oms w hich are f ranchised, managed, o wned, leased or ma nage d le ase) inc reas ed by 27 h otels (decre ase d by 5,7 09 ro oms) to 5,9 91 ho tels (880 ,327 r ooms ). Op ening s of 29 1 hotel s (43,9 58 ro oms) was 11.6 % high er than i n 2020. 1 51 hotels (15,739 roo ms) were ope ne d in the Ame rica s, inc ludin g 85 hote ls (9,016 roo ms) in the H olid ay Inn Bra nd Family . 52 hotels (10, 162 ro oms) were op ene d in EM E AA , with the G reate r Chin a regio n contrib uting ope ning s of 88 h otels (18 ,057 roo ms). 26 4 hotels (49,6 67 roo ms) lef t the I HG Syste m in 202 1, in cludin g 151 Ho liday Inn and C rowne Pla za h otels (34 ,3 4 5 room s) as we co nclu de d our review o f thes e bran ds. In 20 20, 224 h otels (36 ,91 9 room s) left the I HG Sys tem, of w hich 10 2 hotel s (16,6 55 ro oms) relate d to the termin ation of the SVC po rt folio in t he Ame rica s es tate. a Includes 41 Holi day In n Resort properties (10, 454 rooms) and 2 8 Ho lid ay Inn C lu b Vacat ion s pro pe rt ies (8,6 79 ro oms) ( 20 20: 47 H ol iday I nn Re so rt p rop er ti es (11, 44 6 ro oms) a nd 28 H oli day I nn Cl ub Vac ati ons properties ( 8,679 r ooms) ). b I nc lud es th ree o pe n hot els t hat w ill b e re -b ran ded to voc o an d on e hote l tha t will b e re -b ran de d to Vignette Collection . T ota l num be r of ho tel s 5,9 9 1 T ota l num be r of ro om s 8 8 0, 3 2 7 Gro up ho tel an d roo m co unt Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 21 5 1,412 283 Rege nt 7 – 2 ,1 9 0 – InterC ontin ental 204 (1) 69,4 02 (5 39) Vignette Colle ction 1 1 146 14 6 Kim pton 75 2 13,283 198 HUA LUXE 16 4 4,603 1,1 7 0 Crowne Plaza 404 ( 25) 111,178 ( 7, 7 0 1 ) Hotel Indigo 130 5 16,343 739 EV EN H otel s 21 5 2,9 94 584 voc o 31 13 7, 4 4 5 2,368 Holiday Inn a 1,218 (58) 2 24 ,68 4 (11, 870) Ho liday I nn E xpr es s 3,0 16 50 31 7 ,329 7, 8 4 2 avid hote ls 48 24 4,280 2 ,12 4 Staybridge Suites 315 12 34,306 1,411 Candle wood Sui tes 361 (5) 3 2 ,0 25 (41 0) Othe r b 123 (5) 3 8 ,70 7 (2,054) To t a l 5,99 1 27 88 0,3 27 (5,709) An alys ed by ow ne rsh ip t ype F ranchised 5,0 3 3 28 6 2 6 ,1 1 5 (1, 23 3) Manag ed 939 3 2 4 9,59 1 (3 ,6 97 ) Owned, leased and managed lease 19 (4) 4,6 21 (7 79) To t a l 5,99 1 27 88 0,3 27 (5,709) 61 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce At the en d of 202 1, the gl oba l pipe line totall ed 1,797 hotel s (270,9 60 ro oms), a dec reas e of 18 ho tels (1,097 ro oms), as the incre ase i n signin gs to 68 ,870 room s was more th an o set by stron g ope ning s pac e out of th e pipe line a nd a nor mal leve l of termin ation s from the pi peli ne. The I HG p ipe line rep rese nts hote ls wh ere a contr act h as be en si gne d and the appropr iat e fees pai d. Group s ignin gs inc reas ed from 3 60 h otels in 202 0 to 437 h otels , and roo ms inc reas ed from 56,146 in 20 20 to 68 ,870 room s. Signin gs in 20 21 i nclu ded 2 05 hote ls (31, 16 9 room s) signed fo r the Ho liday In n Bran d Family , a lmos t half o f which we re contr ibute d by Greate r Chin a (89 hotel s, 16,260 rooms ). Conversions represent ed 22 % of Group signings in 202 1, including six for our n ewes t brand, V ign ette C olle ctio n. Active m anag eme nt of the pi peli ne to remove de als th at have be com e dorm ant or no l onge r viab le red uce d the pip elin e by 164 h otels ( 26,00 9 roo ms), comp ared to 178 hotels ( 27 ,7 40 roo ms) in 2020. a Includes 35 Holiday Inn R esort properties (8 ,219 rooms) (20 20 : 34 H ol iday I nn Re so rt p rop er ti es ( 7 ,2 51 ro oms)). b Include s f our Vignette Collection pipeline hotels. T ota l num be r of ho tel s in th e pi pe lin e 1 ,7 9 7 T ota l num be r of ro om s in th e pip el ine 2 70, 9 6 0 Group pipelin e Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 33 2 2,42 4 185 Rege nt 8 2 1,938 403 InterC ontin ental 79 10 19,6 79 1,90 5 Kim pton 35 3 6,852 587 HUA LUXE 23 (2) 6,0 4 5 (86 2) Crowne Plaza 96 7 25,2 61 1,0 33 Hotel Indigo 114 10 18,452 2 ,74 8 EV EN H otel s 29 (2) 4,907 (13 9) voc o 38 9 10,0 9 0 1,9 11 Holiday Inn a 244 (18) 4 8,07 8 (3,0 8 5) Ho liday I nn E xpr es s 645 (38 ) 83,026 (4 ,1 26 ) avid hote ls 164 (28) 14,4 95 (3,0 3 1) Staybridge Suites 156 1 16,84 3 (64 7) Candle wood Sui tes 93 20 7,7 6 5 1,39 6 Atwe ll Su ites 23 4 2,275 426 Othe r b 17 2 2,83 0 199 To t a l 1,7 9 7 (18) 270 ,960 (1,097 ) An alys ed by ow ne rsh ip t ype F ranchised 1,290 (2 0) 157 ,832 (1, 23 6) Manag ed 506 2 112 ,973 139 Owned, leased and managed lease 1 – 155 – To t a l 1,7 9 7 (18) 270 ,960 (1,097 ) Perfor mance co nti nu e d G ro u p c o ntin u e d Strate gic Re po rt 62 IHG | Annua l Repo rt a nd Form 20 F 202 1 56% Ame ric as revenu e 2021 ($ 7 74 m) 57% Ame ric as num be r of roo ms ( 49 9,0 8 9) Comparable Re vP AR a mov ement on p reviou s yea r (12 month s end ed 3 1 De cem ber 2 02 1) Fee business InterC ontin ental 73.0 % Kim pton 9 0.1 % Crowne Plaza 54 . 4% Hotel Indigo 82 . 4% EV EN H otel s 112 . 4% Holiday Inn 56.8% Ho liday I nn E xpr es s 53.3% avid hote ls 11 5. 4% Staybridge Suites 40 .4% Candle wood Sui tes 30. 5% All brands 53.8% Owned, leased and managed lease All brands 91.6 % Industry performance in 2021 Indu str y RevPAR in the Am eric as inc reas ed by 63 .4% com pare d to 2020 (dec line d by 20.7% ag ainst 2 019), dri ven by a 19.5% incre ase i n average d aily rate an d a 14.6p pt incre ase i n occ upan cy . M any market s acros s the Am eric as st ar ted to rec over durin g 202 1, le d by improving o ccu pancy l evels, a lthou gh remai ned b ehin d pre -p ande mic leve ls. Over all dem and for h otel roo ms inc reas ed by 38. 4% and su pply in crea se d by 1.2 % . The U S lod ging in dustr y s howed th e earl iest a nd stron ges t rec overy i n the regi on, com pare d again st pre - pan demi c levels . US in dustr y Rev P AR incre as ed by 63 .9 % com pare d to 2020 (dec line d by 18. 2 % agai nst 20 19), drive n by increa se s in both oc cupa ncy and aver age da ily rate. RevPAR in the U S upp er mid sca le ch ain sc ale, wh ere the H oliday In n and H olid ay Inn E xpres s bran ds op erate, in creas ed by 5 9.3% . Indu str y RevPAR incre ase d by 46 .9% i n Can ada a nd 81. 3% in M exic o, driven by incre ase s in b oth occ upan cy and avera ge daily rate. IHG ’s regio nal p er form anc e in 2 021 IH G’s comp arab le RevPAR a in the Am eric as incre ase d by 54 .0% c ompa red to 202 0 (declin ed by 19. 8% aga inst 2 019), drive n by a 15.9 ppt i ncrea se in o ccu pancy cou ple d with a 12. 2 % incre as e in average daily r ate. The re gion i s pred omina ntly repre sente d by the US , whe re comp arab le RevP AR a incre ase d by 54 .4% co mpare d to 2020 (de cline d by 17 .0% a gain st 20 19), and wh ere we are mo st rep rese nted by our up per m idsc ale b rand s Hol iday Inn and H olid ay Inn E xpres s. U S RevPAR a for the H oliday In n bran d incre ase d by 58. 2 % whils t the H oliday In n Ex pres s bran d incre ase d by 53 .5% . RevP AR a in Ca nad a incre ase d by 46 .0% , whils t Mexi co inc reas ed by 5 5. 2% . a Comparable RevP AR and occupancy incl ude the imp ac t of ho tel s temp or aril y clo se d as a r esu lt of Covi d-19. “ In 2021 as we w elcomed guests back, we met t heir ev olving needs, suppor t e d our ow ners as t he pace of r ecov e ry incr eased and ex ecuted our s tr ateg y t o dr iv e gr ow th f or the y ears t o come. We ’v e cont inued t o se e conidence in our esta blished bra nds and r eached new gr ow th m ilest ones for our ne west br ands: a vid® hot els, Atw ell Sui t es ™ , and v oco ™ . ” Eli e Maa lou f Chie f E xecutive O icer, Americ as Amer icas voc o™ St. J ame s Hote l, New O rle an s, US 63 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce E xcluding th e resu lts of thre e owne d E VEN hotel s which we re disp os ed an d retain ed unde r fran chis e contra cts in N ovemb er 20 21, and th e impa ct of on e lea se d hotel th at exited in D ec emb er 2 020, revenu e incre ase d by $3 4m an d ope rating pro it im proved by $14 m. For dis cus sion o f 2020 re sult s, and th e cha nges c omp ared to 20 19, refe r to the 20 20 Annu al Rep or t and Form 2 0 F . www.ihgplc.com/i nv estors under Annual Repor t a D e ini tio ns fo r No n- GA AP r even ue an d op era ting pro i t mea su res c an b e foun d on p ag es 73 to 7 7. Rec on cil iati on s of th es e mea su res to t he mo st d irec tly co mpa rab le li ne it ems w ith in the G rou p Fin an cia l St atem en ts c an be f oun d on p age s 2 18 to 2 23 . b C omparable Re vP AR and occupancy include the im pact of ho tel s tem por ari ly cl os ed as a r es ult of C ovi d-1 9. c Pe rce nta ge c han ge c ons id ere d not m ea nin gful , suc h as whe re a p osi tive b al anc e in th e late st p er iod i s co mpa rab le to a ne gat ive or z ero b ala nc e in th e prio r pe rio d. Review of t he yea r en de d 31 December 20 21 With 4 ,26 8 hote ls (499,08 9 roo ms), the Ame rica s repre sent s 57 % of the G roup’s room c ount. T he key pro it-ge nerati ng regi on is the U S, and th e Grou p is als o repre sente d in L atin Ame rica, C ana da, M exico a nd the Cari bbe an. 9 2% of ro oms i n the regi on are ope rated u nde r the fran chis e busi nes s mod el, pri marily u nde r our bra nds in th e mids cal e se gment s (inc luding t he Ho liday Inn Brand Family ). In the upscale market se gment , Crowne P laz a is pre dom inantly franc hise d whe rea s, in the lu xury m arket se gment , Inter Co ntinent al bra nde d hotel s are op erated u nde r both fra nchis e and managemen t agr eements, whi lst Kim pto n is pre domi nantly m anag ed. 14 of th e Group’s 17 hotel b rands a re repre sente d in the Am eric as . The im pac t of travel res trictio ns co ntinue d to impa ct the irs t two mo nths of 20 21, befo re we saw a not abl e pick-up in de man d in Ma rch, be ne it ting from d ome stic le isure trips aro und the s pring b reak p erio d. As the s ec ond qu ar ter pro gres sed, d ema nd conti nue d to grow par ticul arly in no n- urban and re sor t de stin ations . Over th e summ er mon ths, l eis ure de ma nd re cove red ra pidl y . De mand f rom es sen tial bu sine ss travell ers remai ned re silie nt and we s aw sign s of cor porate d ema nd and gro up me etings s tar t to return. By th e end o f the se co nd qua rter, 13 st ates in the U S saw Rev P AR b ahead of 201 9 level s and a fur the r 17 were at le ast 90 % of 20 19 RevPAR b . The re cover y co ntinue d into the thi rd quar ter , le d by the US fra nchis ed e st ate, which be ne its fro m a weightin g towards hotel s in the mi dsc ale s egm ents . Leis ure dem and remai ned s trong, dri ving rate. We al so s aw an inc reas e in dis cretion ar y bus ines s travel dem and an d group de man d. The re cover y co ntinue d into the fou rth quar ter , with o ccup ancy of 6 0% (down 5ppt s com pare d to 201 9 with rate 1% high er tha n 2 019 ). Ame rica s com parab le RevPAR b declin ed 28% in th e ir st qua rte r , the n grew 15 4% in the se co nd qua rte r , 76% i n the third qu arte r , 80 % in the four th qu ar ter and 5 4% in the full yea r , all wh en c ompa red to 20 20. Whe n com parin g to 2019, p rior to the pandemic, Americ as comparable RevP AR b dec line d 4 3% in the irs t quar ter , 26 % in the se con d quar ter , 10% i n the third qu arte r , 6 % in the fou rth qu ar ter and 2 0% in th e full year. Revenu e from the rep or ta ble se gme nt a incre ase d by $26 2m (51%) to $774m, (a decre ase of $ 266 m co mpare d to 201 9). Op eratin g pro it incre ase d by $3 59 m to $5 37m driven by the in crea se in reven ue and a $ 96 m de creas e in op eratin g exceptio nal c harge s. O perati ng pro it from the re por t able s egm ent a increased by $26 3m (89 %) to $55 9m (a dec reas e of $141m co mpare d to 201 9). On an un derly ing a bas is, reven ue inc reas ed by $26 8m (5 4%), whilst unde rlying a proit incr eased by $257m (84 %) . Revenu e and op eratin g pro it from the reportable segment a are further analysed by fee bu sine ss a nd owne d, le ase d and managed lease hotels. Fee bu sine ss reve nue a incre ase d by $23 4m (51%) to $69 1m. Fee bu sine ss o pe rating pro it a incre ase d by $24 5m ( 76%) to $56 8m, be ne it ting from th e improvem ent in de man d, alon g with the d elive ry of s ust aina ble fe e bus ine ss co st s avings . Op erating p roi t from the rep or tab le se gme nt a also included the be ne it of $ 11m payroll t ax cred its, wh ich relate s to the Gro up corp orate o ic e presen ce in certain coun tr ies. Owned, leased and managed lease rev en u e in crea se d by $28m to $ 83 m, with comparabl e RevPAR b up 92 % co mpare d to 2020, (down 41% co mpare d to 201 9), lea ding to an own ed, l ea se d a nd m an age d lea se op erati ng los s of $ 9m co mpa red to a $27m lo ss in th e prior ye ar . Ameri cas results 12 mo nths end ed 31 December 2021 $m 2020 $m 20 21 v s 2020 % ch ang e 2019 $m 2020 vs 2019 % ch ang e Reven ue fr om th e re por ta bl e se gm ent a Fee busi ness 691 4 57 51. 2 853 (4 6 .4 ) Owned, leased and managed lease 83 55 50.9 187 (70 .6) To t a l 7 74 512 51. 2 1,04 0 (50. 8) Op er atin g pro it f rom t he re po rt ab le se gm en t a Fee busi ness 568 323 75.9 663 (51. 3) Owned, leased and managed lease (9) (2 7) (6 6 .7 ) 37 NM c 559 296 88.9 700 ( 5 7. 7 ) Operati ng ex ceptional it ems (2 2) (11 8) (81 .4) (62) 90. 3 Ope rating proit 537 178 20 1 .7 638 ( 7 2 .1) Perfor mance co nti nu e d Amer icas c o nti nu e d Strate gic Re po rt 64 IHG | Annua l Repo rt a nd Form 20 F 202 1 Ame ric as ho tel an d roo m co unt Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 1 1 20 20 InterC ontin ental 43 (3) 1 5,6 51 (1 ,1 3 8 ) Kim pton 64 – 11,0 0 8 (8 9) Crowne Plaza 112 (24) 2 7, 9 3 0 ( 7, 4 7 5 ) Hotel Indigo 66 (1) 8 , 74 5 (4 8) EV EN H otel s 19 4 2 ,74 3 504 voc o 5 4 469 420 Holiday Inn a 716 ( 50) 1 20, 8 50 (10,0 9 2) Ho liday I nn E xpr es s 2,4 36 11 221, 727 1,3 85 avid hote ls 48 24 4,280 2 ,12 4 Staybridge Suites 296 11 31, 097 1,0 40 Candle wood Sui tes 361 (5) 3 2 ,02 5 (410 ) Othe r b 101 (2) 22,544 ( 1,1 6 4) To t a l 4,268 (3 0) 499, 089 (14 ,9 23) An alys ed by ow ne rsh ip t ype F ranchised 4,087 (1 8) 46 0,2 57 (11,5 4 5) Manag ed 178 (9) 37 ,505 (2,88 6) Owned, leased and man ag edle as e 3 (3) 1,327 (49 2 ) To t a l 4,268 (3 0) 499, 089 (14 ,9 23) a I ncl ude s 19 H ol iday I nn Re so rt p rop er ti es (5 ,3 34 ro om s) and 2 8 Hol ida y Inn C lub Vac ati on s pro per ti es (8 ,67 9 roo ms) (20 20 : 2 2 Ho lid ay Inn R es or t pro pe rti es (6 ,00 3 roo ms) an d 28 H oli day In n Cl ub Vac atio ns p rop er tie s (8,6 79 ro om s)). b I nc lud es o ne op en h ote l tha t will b e re -b ran de d to voc o. T ota l num be r of ho tel s 4 , 26 8 T ota l num be r of ro om s 499 , 089 Ame rica s system s ize de crea se d by 30 hotel s (14,92 3 room s) to 4,26 8 hotels , a redu ction of 2. 9% yea r - o n-year. 151 hotels (15 , 739 ro oms) ope ne d in the yea r , c ompa red to 167 h otels (16,7 4 6 room s) in 2020. O pen ings in clud ed 85 h otels (9,016 ro oms) in the H olid ay Inn Bran d Family , a f ur ther 24 avid h otels an d the voc o Tim es S quare S outh in N ew Y ork. 181 h otels (30,6 62 roo ms) were remove d from the A meric as sys tem in 20 21, i nclu ding 92 H olid ay Inn and C rowne Pla za h otels (20,127 room s) , driven by th e con clus ion of our qu alit y review. This c ompa res to 176 hotels ( 27 , 38 1 room s) that lef t the Ame rica s system i n 2020, of wh ich 10 2 hotel s (16,6 55 ro oms) relate d to the termin ation of the SVC po rt folio in t he Ame rica s es tate. T ota l num be r of ho tel s in th e pi pe lin e 9 26 T ota l num be r of ro om s in th e pip el ine 9 6,6 0 3 At 31 De ce mbe r 202 1, the A meric as pip eline tot alle d 926 h otels (9 6,60 3 room s), repre senti ng a de crea se of 6 0 hotels (6, 15 4 rooms) over the p rior ye ar . Signin gs of 17 5 hotels (17 ,647 roo ms) were ah ead of l ast ye ar by 38 ho tels (3,60 8 room s) . The m ajorit y of 20 2 1 signi ngs were w ithin our m idsc ale a nd upp er mids cal e bran ds inc ludin g the Ho liday In n Bran d Family ( 75 hote ls, 7 ,49 3 room s) and avid h otels (13 h otels , 892 ro oms). Signin gs in ou r Suite s brand s (Stayb ridge Suite s, Ca ndlewo od S uites an d Atwel l Suites) amou nted to 6 4 hotels (5 ,66 9 room s). 84 h otels (8,0 62 roo ms) were remove d from the pip elin e in 20 21 c ompa red to 10 5 hotel s (11,3 98 room s) in 202 0. Americas pipe line Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 6 (1) 471 (4 8 ) InterC ontin ental 9 2 2 ,2 52 528 Kim pton 19 (1) 3,431 ( 52) Crowne Plaza 8 2 1,64 3 393 Hotel Indigo 29 ( 2) 4,0 70 (85 ) EV EN H otel s 10 (6) 1 ,1 6 6 (80 9) voc o 5 3 1,04 5 7 71 Holiday Inn c 74 (6) 9, 468 (978) Ho liday I nn E xpr es s 338 (4 8) 3 2 ,70 1 (4 ,6 5 4 ) avid hote ls 164 (27 ) 14,49 5 (2,816) Staybridge Suites 137 2 1 4,0 5 0 (11) Candle wood Sui tes 93 20 7, 7 6 5 1,3 96 Atwe ll Su ites 23 4 2,275 426 Othe r 11 (2) 1 ,7 7 1 ( 21 5) To t a l 926 (60) 96 ,60 3 (6,1 5 4) An alys ed by ow ne rsh ip t ype F ranchised 889 (5 5) 9 0,73 2 ( 5,7 9 6) Manag ed 37 (5) 5,871 (3 58 ) To t a l 926 (60) 96 ,60 3 (6,1 5 4) c In clu de s one H ol iday I nn Re so r t prop er t y (16 5 ro oms) ( 202 0: th re e Hol iday I nn Re so r t prop er ti es (4 90 ro om s)). 65 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce 22% EME A A revenu e 2021 ( $ 303m ) 25% EME A A num ber of roo ms (2 24 ,2 0 0) Industry performance in 2021 Indu str y RevPAR in EME A A in crea sed by 44 .0% c ompa red to 20 20 (declin ed by 49. 9% ag ains t 201 9). An occ upan cy incre ase of 8. 9ppt s was c oupl ed with a 1 0.5% incre ase i n average d aily rate. I n Europe, RevPAR increa se d by 64 .7% com pare d to 202 0 ( de cline d by 49. 2 % agai nst 20 19) driven by b oth oc cupa ncy and aver age daily r ate. In the U K , indu str y RevPAR incre ase d by 9 0.3% c omp ared to 20 20 (declin ed by 4 0.4% again st 20 19). UK ro om dem and in crea se d by 54. 4% whilst s upp ly grow th remain ed s uppre ss ed at 0.8 % par tly due t o construct ion dela ys fr om supply chain issues. In German y Re vP AR incr eased by 9.3%, whil st RevPAR in France inc reas ed by 6 8 .7 % . RevPAR increa se d by 61. 5% in the M iddl e Ea st, dri ven by both o ccup ancy a nd averag e daily r ates, as re stric tions e as ed, an d dem and sta rte d to return. In dia s aw RevPAR increa se by 30 .4% . Els ewhere i n EME A A , RevPAR in Austral ia incre ase d by 33 .6% , whi lst J apan an d Tha iland dec line d by 11.5% a nd 41. 2% re spe ctive ly , driven p rimaril y by large re ducti ons in average daily rate. IHG ’s regio nal p er form anc e in 2 021 EME A A c omp arabl e RevPAR a increased by 35 .0% co mpare d to 2020 (de cline d 51.8 % agai nst 20 19), drive n by a 9. 1ppt inc reas e in oc cupa ncy co uple d with a 5 .3% in crea se in averag e daily rate . In the U K, w here I HG has th e large st re giona l pres enc e, RevPAR a incre ase d by 70.4% com pare d to 2020 (declin ed by 41.0% a gain st 20 19), led by the Provin ce s (76. 4%) , re lec ting lowe r weightin g to inbo und inter nation al travel. Ge rmany saw a Rev P AR a incre ase o f 1. 2% and Franc e incre ase d by 55. 2 % . RevP AR a in the M iddle E as t incre ase d by 34 .9 %, wi th the four th qu arte r up 10 9.7% rel ecti ng the E xp o 2020 d ema nd in D ubai. Indi a RevPAR a incre ase d by 38 .6% . Els ewhere i n EME A A , RevPAR a increas ed in Austra lia by 17 .6 % , whils t travel restr iction s resul ted in o ccup ancy l ed de clin es in Jap an (9. 1%) and Tha iland (4 4.7%). a Comparable RevP AR and occupancy incl ude the imp ac t of ho tel s temp or aril y clo se d as a r esu lt of Covi d-19. Comparable Re vP AR a mov ement on p reviou s yea r (12 month s end ed 3 1 De cem ber 2 02 1) Fee business Six Senses 32 .7 % InterC ontin ental 26.9% Kim pton (8.4 )% Crowne Plaza 34.3% Hotel Indigo 62 .6% voc o 2 4 .1% Holiday Inn 34 . 4% Ho liday I nn E xpr es s 46.2% Staybridge Suites 46.2% All brands 34.8% Owned, leased and managed lease InterC ontin ental 0.1 % Kim pton 111.1% voc o 136.6% All brands 46.6 % “ Alt hough Cov id- 19 conti nued t o impac t tr avel , our f ocus r emained on supporting our col leagues, guests and o wners , while lev eraging ou r model to su ppor t susta inable long- t erm gr owth. W e launched and signed deals f or our new L ux ury & Lif e style brand, Vi gnet t e TM Collecti on, susta ined str ong int eres t in our establi shed brands and made meani ngful pr ogr ess t o impr ov e the qua lity of our es tat e. ” K enneth Macpherson Chie f E xecutive O icer, EME A A Perfor mance co nti nu e d EM E A A Ho lid ay Inn D ubli n Airp or t, I rela nd Strate gic Re po rt 66 IHG | Annua l Repo rt a nd Form 20 F 202 1 Own ed, le as ed an d man age d lea se revenu e incre ase d by $4 0m to $ 15 4m, with Rev P AR b up 47% c omp ared to 20 20 (down 69 % com pare d to 2019), l eadi ng to an owne d, lea se d and m anag ed le as e ope rating lo ss of $2 7m compa red to a $ 32m los s in the prio r year , as the lif tin g of travel res trictio ns, pred omin antly in the U K , be gan to ea se the trad ing ch allen ges o n this la rgely urb an- c entre d p or tfo lio. For dis cus sion o f 2020 re sult s, and th e cha nges c omp ared to 20 19, refe r to the 20 20 Annu al Rep or t and Form 2 0 F . www.ihgplc.com/i nv estors under Annual Repor t a D e ini tio ns fo r No n- GA AP r even ue an d op era ting pro i t mea su res c an b e foun d on p ag es 73 to 7 7. Rec on cil iati on s of th es e mea su res to t he mo st d irec tly co mpa rab le li ne it ems w ith in the G rou p Fin an cia l St atem en ts c an be f oun d on p age s 2 18 to 2 23 . b C omparable Re vP AR and occupancy include the im pact of ho tel s tem por ari ly cl os ed as a r es ult of C ovi d-1 9. c Pe rce nta ge c han ge c ons id ere d not m ea nin gful , suc h as whe re a p osi tive b al anc e in th e late st p er iod i s co mpa rab le to a ne gat ive or z ero b ala nc e in th e prio r pe rio d. Review of t he yea r en de d 31 December 20 21 Co mpris ing 1,137 hotels ( 2 24,2 00 roo ms) at the en d of 20 21, EM E A A repre sente d 25% of the G roup’s room cou nt. Revenu es are prim arily ge nera ted from h otels in th e UK and g ateway cities in c ontin enta l Europe, th e Mid dle E ast an d Asia . The l arges t prop or tion of room s in the U K and c ontin enta l Europe are op erated u nde r the fran chis e bus ines s mod el, pri marily u nde r our upp er mi dsc ale bran ds (Ho liday In n and H oliday In n Ex pres s). In the up sc ale m arket seg ment , Crowne P laz a is evenl y prop or tione d bet we en the fra nchi se d and m anag ed op erati ng mo dels , whe reas in the luxu ry m arket se gment , the maj orit y of Inter Co ntinent al bra nde d hotel s are ope rated under ma nagement agr eements. T he maj ority of hotel s in market s outs ide of Eu rope are operated u nder the ma naged business model. Per form ance i n the regi on co ntinue d to rel ec t the die ring leve ls of gove rnmen t - mandat ed closur es and r estrict ions. Per form ance i n the irst qu ar ter was impa cted by travel re stric tion s in a numb er of market s. Th e sec ond q uar ter s aw mod est improvem ents i n tradin g as the U K pe rmit ted lei sure travel towards th e end o f May , w hilst gov ernment mandat ed restr ictions remai ned in muc h of conti nent al Europ e, and S outh Ea st Asi a conti nue d to be imp acte d by lower level s of intern ationa l dem and. Throu gh the se co nd hal f of the yea r , RevPAR conti nue d to improve befo re restri ction s were rein state d in ce r tain m arkets follow ing incre ase d c ase s from the O micro n variant in December . Hote ls co ntinue d to reop en, with o nly 21 h otels re mainin g temp orarily c los ed at th e end o f the year , co mpare d to 21 5 at the st ar t of the ye ar ; all 1 6 of the own ed, le as ed an d man age d lea se hote ls were o pen . EME A A c omp arabl e RevPAR b declined 62% in the irst q uar ter , then grew 17 9% in th e se con d quar ter , 86 % in the third q uar ter , 11 8% in the fou rth qu ar ter and 3 5% in the f ull year whe n com parin g to 2020. Wh en co mpa ring to 201 9, prior to the p and emic, EM E A A comparable Re vP AR b dec line d 71% i n the i rst quar ter , 65% i n the se co nd qua rter, 43% in the third qu ar ter , 3 3% in th e four th quar ter and 52 % in the ful l year . Revenu e from the rep or ta ble se gme nt a incre ase d by $8 2m (37%) to $30 3m (a decre ase of 5 8% c ompa red to 20 19). The o per ating lo ss de crea se d by $176m to a los s of $2m, dr iven by an inc reas e in revenue a nd a $12 1m de crea se in o pera ting exceptio nal c harge s. O perati ng pro it from the rep or tab le se gme nt a incre ase d by $5 5m to $5m (a de cline o f $2 12m com pare d to 201 9). On an un derly ing a ba sis , revenu e incre ase d by $79 m (35%), whilst u nde rlying a pro it inc reas ed by $ 59m, f rom a $5 4m lo ss to a $5m p roi t. Revenu e and op eratin g pro it from the reportable segment a are further analysed by fee bu sine ss a nd owne d, le ase d and managed lease hotels. Fee bu sine ss reve nue a incre ase d by $4 2m (39%) to $14 9m . Fee bus ine ss op erati ng pro it a improve d by $50 m to $32m , be ne iting fro m the imp rovement in t rading and the deliv ery of sustai nable f ee business co st savin gs. Re sult s incl ude d $29 m of inc entive ma nage me nt fees re co rded (20 20: $ 14m; 20 19: $ 90 m), driven by an improvement in trading, par ticularly in the Midd le East. EMEA A results 12 mo nths end ed 31 December 2021 $m 2020 $m 20 21 v s 2020 % ch ang e 2019 $m 2020 vs 2019 % ch ang e Reven ue fr om th e re por ta bl ese gm ent a Fee busi ness 149 107 39. 3 337 (68 . 2) Owned, leased and managed lease 154 114 3 5 .1 386 (70 .5) To t a l 303 221 3 7. 1 723 (6 9.4) Op er atin g pro it /(lo ss) fro m th e rep or ta bl e se gme nt a Fee busi ness 32 (18) NM c 202 NM c Owned, leased and managed lease (27) (3 2) (15 .6) 15 NM c 5 ( 50) NM c 217 NM c Operati ng ex ceptional it ems (7) (128) (94. 5) (1 09) 1 7. 4 Ope rating (loss)/ proit (2) (178) (98.9) 108 NM c 67 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Perfor mance co nti nu e d E ME A A c o ntin u e d EME A A hot el an d roo m cou nt Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 19 4 1, 2 70 263 Rege nt 3 – 771 – InterC ontin ental 108 – 32,561 87 Vignette Colle ction 1 1 146 14 6 Kim pton 10 2 2 ,1 4 6 287 Crowne Plaza 182 (6) 44 ,828 (1 ,69 6) Hotel Indigo 48 2 5 ,1 8 3 117 voc o 21 5 5,882 1,0 02 Holiday Inn a 380 ( 2 1) 70,824 (4 ,1 6 0) Ho liday I nn E xpr es s 333 4 48,548 1,1 9 2 Staybridge Suites 19 1 3,209 37 1 Othe r b 13 (4) 8,8 32 (1,2 58) To t a l 1, 137 (12) 224,200 (3, 649) An alys ed by ow ne rsh ip t ype F ranchised 767 (7) 12 5 ,70 7 (13) Manag ed 354 (4) 9 5 ,1 9 9 (3, 34 9) Owned, leased and man ag edle as e 16 (1) 3,2 94 (287 ) To t a l 1, 137 (12) 224,200 (3, 649) a I ncl ude s 14 H oli day In n Re sor t p rop er tie s (3, 2 29 ro oms) ( 202 0: 17 H ol iday I nn Re so r t prop er ti es (3, 3 30 ro oms)). b I nc lud es t wo op en h ote ls th at wil l be re - bra nde d to vo co a nd Vi gne tt e Co lle cti on. T ota l num be r of ho tel s 1 ,1 3 7 T ota l num be r of ro om s 2 24 , 2 0 0 EME A A sys tem size d ecre as ed by 12 hote ls (3,64 9 room s) to 1, 137 h otels ( 224 ,20 0 room s) during 202 1, a re ducti on of 1.6 % year-on -year . 52 hotel s (10, 162 roo ms) ope ne d in the yea r , c ompa red to 61 h otels (11,28 8 room s) in 2020, inc ludin g Hotel X Bris ban e For titude Valley , Austral ia, as p ar t of the V ignet te C olle ction . 64 h otels (13, 811 roo ms) were remove d from the E ME A A syste m in 202 1, inc ludin g 48 H olid ay Inn and C rowne Pl az a hotels (10,7 41 room s), driven by the co mple tion of the qu alit y review. This co mpa red to 38 h otels (6,8 09 ro oms) that le ft th e EME A A sys tem in 20 20. T ota l num be r of ho tel s in th e pi pe lin e 41 8 T ota l num be r of ro om s in th e pip el ine 8 0, 9 3 2 At 31 De ce mbe r 202 1, the E ME A A pip eline tot alle d 418 hote ls (80,93 2 room s), repre senti ng an inc reas e of 29 h otels (4,812 roo ms) over the pri or year. Signings o f 10 9 hotels ( 20,376 roo ms) were ahe ad of la st year by 27 h otels (6,473 ro oms), inclu ding a multi -prop er t y dea l which e nco mpa ss ed a new pro per t y for voc o in Alg ar ve, Por tugal a nd three h otels s igne d to the Vig net te Coll ec tion in Austr ia and Po rtu gal. 28 hotel s (5,4 02 roo ms) were remove d from the pip elin e in 20 21 c ompa red to 36 h otels (7 ,60 1 room s) in 2020. EMEA A pipeline Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 23 2 1 ,72 0 169 Rege nt 6 1 1,341 86 InterC ontin ental 43 10 9,520 2,03 5 Kim pton 9 3 1 , 6 74 546 Crowne Plaza 40 5 1 0,4 61 1,360 Hotel Indigo 44 3 7, 0 0 4 957 voc o 31 5 8,7 5 3 979 Holiday Inn a 98 (10) 21 ,0 14 (1 ,5 40) Ho liday I nn E xpr es s 99 7 15,59 3 360 avid hote ls – (1) – ( 21 5) Staybridge Suites 19 (1) 2 ,79 3 (63 6) Othe r b 6 5 1,0 5 9 711 To t a l 418 29 80, 932 4,812 An alys ed by ow ne rsh ip t ype F ranchised 175 20 2 7, 0 4 5 1, 393 Manag ed 242 9 53 ,73 2 3,419 Owned, leased and man ag edle as e 1 – 155 – To t a l 418 29 80, 932 4,812 a I ncl ude s 20 H ol iday I nn Re so rt p rop er tie s (4, 84 9 roo ms) (2 02 0: 18 H ol iday I nn Re so r t prop er ti es (3, 5 53 ro om s)). b I nc lud es fo ur ho tel s tha t will b e re -b ran de d to Vi gne tte C ol le ctio n. Strate gic Re po rt 68 IH G | Annua l Repo rt a nd Form 20 F 202 1 8% Gre ate r Chin a revenue 20 21 ($ 11 6 m) 18% Gre ate r Chin a numb er of room s (157 ,03 8) Comparable Re vP AR a mov ement on p reviou s yea r (12 month s end ed 3 1 De cem ber 2 02 1) Fee business Rege nt 9.6% InterC ontin ental 20. 8% HUA LUXE 1 3.1 % Crowne Plaza 20.4 % Hotel Indigo 33.4% Holiday Inn 21.8% Ho liday I nn E xpr es s 20. 9% All brands 20.6 % Industry performance in 2021 The in dus try p er form ance a cros s Gre ater Chin a lu ctuate d in 202 1, imp acte d by the reintrod uctio n of temp orar y lo cal ise d loc kdowns. I ndus tr y RevPAR in Greate r Chin a incre ase d by 27 .8% c omp ared to 20 20 ( decreased b y 26.9% agai nst 2019 ). Su pply grew by 3.8 % and d eman d by 16. 9% . Inc reas es in Rev P AR were ac hieved a cros s all of M ainla nd Chin a aga inst 20 20, however, citie s in the up per ti ers re maine d fur the r be hind 20 19. RevPAR In Ti er 1 citie s incre ase d by 31. 3% , drive n by an occ upan cy incre ase o f 8.3 ppt s and avera ge dail y rate grow th of 12. 5% . Tie r 2 citie s saw a sim ilar recovery pr oile with RevP AR increasing b y 27 .3% , ag ain drive n by both oc cup ancy an d rate, whil st grow th in Tie r 3 citie s was mo re limite d at 12.6 % . Tie r 4 contin ued to b ene it from stro ng dom esti c dem and with R evP AR incre asin g by 23. 5% . Hon g Kong SAR in crea sed by 5 6.6 % com pare d to 2020 (dec reas e of 55 .0% agai nst 20 19), with a 17 .4p pt improvem ent in oc cupa ncy and a 7.5% incre ase in average d aily rate. M ac au SAR im proved agai nst 20 20 by 26.6 % (decre ase o f 76.7% agai nst 20 19), drive n by occ upan cy , bu t remains signi icantly be hind 2019 due to its reli anc e towards travel from Mainlan d China. IHG ’s regio nal p er form anc e in 2 021 IH G’s region al co mpar able Rev P AR a in Gre ater Chi na inc reas ed by 20.6 % com pare d to 2020 (dec reas ed by 28 .7% agai nst 20 19), drive n by a 6.9 ppt inc reas e in oc cupa ncy and a 3 .6% i ncre ase in average daily rate. In M ainlan d Chin a, RevPAR a increased by 19.7% , with the g reates t incre ase i n Tie r 1 citie s, up 25 .6% , whil st Ti er 24 citie s incre ase d by 17 . 3% . RevP AR a in Ho ng Kong SAR in crea se d by 81.0% w hilst Rev P AR a in Ma cau SA R incre ase d by 3. 2 %. a Comparable RevP AR and occupancy incl ude the imp ac t of ho tel s temp or aril y clo se d as a r esu lt of Covi d-19. “ Domestic tr av e l demand show ed st eady reco very amidst spor adic Covid- 19 outbr eaks and t r av el rest ri ct ions. W e deploy ed an agile business r ecov e ry plan t o capt ur e our shar e of demand, dr iv e ow ner r etu rns and ensur e the sa f ety of our guest s, colleagues and commun it ies. In line w it h the gr owth str at e gy , our new deal si gnings and hot el openings ex ce eded 2019 lev els. ” Jolyon Bulle y Chief E xec utive O ic er , Greate r Chin a G r eater Chin a InterC ontine ntal ® Kaohs iung , China 69 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Review of t he yea r en de d 31 December 20 21 Co mpris ing 58 6 hote ls (157 ,038 ro oms) at 31 D ec emb er 20 21, G reater C hina repre sente d app roximately 1 8% of the Group’s room c ount. T he maj orit y of roo ms in Gre ater Ch ina op erate un der th e mana ge d business model. Inc reas es in C ovid -19 cas es an d the reintrod uctio n of temp orar y res trictio ns impa cted tr ading in J anu ar y and Febr uar y , thou gh the rec over y resu med i n March with de man d returning at p ac e as restr ictions eased. The re cover y co ntinue d into Apri l and M ay befo re loc al res trictio ns were rei nst ated acro ss so uth, ea st an d west c ities i n June . In Ju ly , Rev P AR b was jus t 6% l ower than 2 019 level s, driven by s trong do mes tic lei sure demand. The r eint roducti on of t emporary restri ction s me ant that Aug ust we akene d to more tha n 50% l ower than 2 019. The fo urth q uar ter s aw volatile tr ading, impa cted by th e reintrod uctio n of temporar y restrictions. Gre ater Chi na co mpara ble Rev P AR b grew 78% in th e irs t quar ter a nd 107 % in the se con d quar ter , then d ecl ine d 8% in the third qua rte r and 17 % in the four th qu ar ter . Full year grow th was 2 1% whe n comp ared to 2020. W hen c omp aring to 20 19, prio r to the pa nde mic, Gre ater Ch ina co mpa rable RevP AR b dec line d 38 % in the irst q uar ter , 16 % in the se co nd qua rte r , 30 % in the th ird quar ter , 33 % in the fou rth qu ar ter and 2 9% in the ful l year . Revenu e from the rep or ta ble se gme nt a incre ase d by $3 9m (51%) to $116 m (a decre ase of 14% c ompa red to 20 19). Op eratin g pro it improve d by $28m, dri ven by the inc reas e in revenue a nd a $5 m dec reas e in op eratin g exceptio nal ch arge s. Op eratin g pro it from the re por ta ble s egm ent a incre ase d by $23 m to $58 m (a decli ne of 21% c omp ared to 20 19). The i mproveme nt in dem and at o ur man age d hotel s led to $ 25m rec ogniti on of inc entive m anag eme nt fee s com pare d to $16 m in 202 0 (20 19: $ 48 m). Revenu e and op eratin g pro it from the reportable segment a also included the bene it of a $6m individually signiic ant liqui dated d amag es s ettl eme nt. For dis cus sion o f 2020 re sult s, and th e cha nges c omp ared to 20 19, refe r to the 20 20 Annu al Rep or t and Form 2 0 F . www.ihgplc.com/i nv estors under Annual Repor t a D e ini tio ns fo r No n- GA AP r even ue an d op era ting pro i t mea su res c an b e foun d on p ag es 73 to 7 7. Rec on cil iati on s of th es e mea su res to t he mo st d irec tly co mpa rab le li ne it ems w ith in the G rou p Fin an cia l St atem en ts c an be f oun d on p age s 2 18 to 2 23 . b C omparable Re vP AR and occupancy include the im pact of ho tel s tem por ari ly cl os ed as a r es ult of C ovi d-1 9. Great er China resul ts 12 mo nths end ed 31 December 2021 $m 2020 $m 20 21 v s 2020 % ch ang e 2019 $m 2020 vs 2019 % ch ang e Reven ue fr om th e re por ta bl e se gm ent a Fee busi ness 116 77 50.6 135 (4 3 .0 ) To t a l 116 77 50.6 135 (4 3 .0 ) Op er atin g pro it f rom t he re po rt ab le se gm en t a Fee busi ness 58 35 6 5.7 73 (5 2 .1) Operati ng ex ceptional it ems – (5) – – – Ope rating proit 58 30 93.3 73 (58.9) Perfor mance co nti nu e d G r eater Chin a c onti nu e d Strate gic Re po rt 70 I HG | Annua l Repo rt a nd Form 20 F 202 1 Gre ate r Chi na ho tel an d roo m co unt Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 1 – 122 – Rege nt 4 – 1,419 – InterC ontin ental 53 2 2 1 ,1 9 0 51 2 Kim pton 1 – 129 – HUA LUXE 16 4 4,603 1,1 7 0 Crowne Plaza 110 5 38,42 0 1, 470 Hotel Indigo 16 4 2 ,415 6 70 EV EN H otel s 2 1 251 80 voc o 5 4 1,0 94 946 Holiday Inn a 122 13 3 3 ,01 0 2,3 82 Ho liday I nn E xpr es s 247 35 47,05 4 5, 265 Othe r b 9 1 7 ,3 31 368 To t a l 586 69 157 ,038 12,86 3 An alys ed by ow ne rsh ip t ype F ranchised 179 53 4 0 ,1 5 1 10,3 25 Manag ed 407 16 116,8 87 2, 538 To t a l 586 69 157 ,038 12,86 3 a Includes eight Holiday Inn Resort pr operties (1,891 r ooms) (2020: eigh t Holida y Inn Resort properties (2, 113 rooms )). b I nc lud es o ne op en h ote l tha t will b e re -b ran de d to voc o. T ota l num be r of ho tel s 586 T ota l num be r of ro om s 1 5 7, 0 3 8 The G reater C hina sy stem si ze incre ase d by 69 hote ls (12, 86 3 room s) in 2021 to 58 6 hotels (1 57 ,03 8 roo ms), an incre ase of 8.9 % year-o n-year. 88 hotel s (18,057 ro oms) ope ne d, incl uding th e ir st Inter C ontine ntal hotel in Taiwan, voc o Wuhan Xinh ua and th e Crown e Plaz a Ch ongli re sor t, c omp ared to 57 hote ls (11,3 58 roo ms) in 2020. 19 hote ls (5,194 room s) were removed in 202 1 co mpare d to 10 hote ls (2,729 ro oms) in 2020. T ota l num be r of ho tel s in th e pi pe lin e 453 T ota l num be r of ro om s in th e pip el ine 93,425 At 31 De ce mbe r 202 1, the G reate r China pip eline tot alle d 4 53 ho tels (93, 425 roo ms), com pare d to 44 0 hotel s (93,180 roo ms) at 31 D ec emb er 202 0. Signin gs of 15 3 hote ls (30,847 ro oms) were ahe ad of l ast ye ar by 12 hotel s (2,6 4 3 room s) . 89 h otels (16, 260 ro oms) were sig ned fo r the Hol iday Inn B rand Famil y . O the r notab le signi ngs inc lude d Re gent S anya Hait ang B ay and H otel In digo S anya Hait ang B ay as par t of a co mbine d co mpl ex, and th e Inter Conti nent al T ai pei. 52 hotels (12 ,5 4 5 rooms) were rem oved from the pip elin e in 20 21 c ompa red to 37 hote ls (8,7 41 room s) in 2020. Greater China pipe line Hotel s Rooms At 31 December 2021 Change over 202 0 2021 Change over 202 0 Analysed by brand Six Senses 4 1 233 64 Rege nt 2 1 597 3 17 InterC ontin ental 27 ( 2) 7,907 (6 5 8) Kim pton 7 1 1 , 747 93 HUA LUXE 23 (2) 6,04 5 (86 2) Crowne Plaza 48 – 13 ,1 5 7 ( 72 0) Hotel Indigo 41 9 7 ,378 1,876 EV EN H otel s 19 4 3 ,74 1 6 70 voc o 2 1 292 161 Holiday Inn a 72 (2) 1 7, 5 9 6 (567 ) Ho liday I nn E xpr es s 208 3 3 4 ,73 2 168 Othe r – (1) – (2 97) To t a l 453 13 93,425 245 An alys ed by ow ne rsh ip t ype F ranchised 226 15 40, 055 3, 167 Manag ed 227 (2) 53,37 0 (2,922) To t a l 453 13 93,425 245 a I ncl ude s 14 H oli day In n Re sor t p rop er tie s (3, 20 5 roo ms) (2 02 0: 12 H oli day I nn Re so rt p rop er tie s (3, 20 8 roo ms)). 71 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Review of t he yea r en de d 31 December 20 21 Ce ntral revenu e, which m ainly c omp rise s tech nolo gy fee i nco me, inc reas ed by $ 15m (8. 2%) to $197m, drive n by the temp orar y dis count s on tec hnol ogy fe es in 2 020 no lo nger b ein g appli cab le. Gros s co sts i ncrea se d by $41m (16. 8%) year-on -year , as temp orar y c ost s aving me asure s were introd uce d from the s ec ond quar ter o f 2020, whi ch were no t repe ated in 202 1. W hen c omp aring to 20 19, gros s co sts de cre ase d by 8.1%, whic h incl ude s sus tain able c ost s aving s achi eved in 20 21. The o per ating lo ss b efore excepti onal i tems incre ase d by $26 m, a de crea se of $ 37m co mpa red to 2 019. C entral res ults 12 mo nths end ed 31 December 2021 $m 2020 $m 20 21 v s 2020 % ch ang e 2019 $m 2020 vs 2019 % ch ang e Reven ue 197 182 8.2 185 (1.6) Gross costs (2 85) ( 24 4) 16.8 (31 0) (2 1. 3) (88) (6 2) 41.9 (125) (5 0.4) Operati ng ex ceptional it ems – (1 9) – (15) 26 .7 Ope rating loss (88) ( 81) 8.6 (14 0) (4 2.1 ) Perfor mance co nti nu e d C e ntra l Ho lid ay Inn Q ue ens town Rem arka ble s Par k, N ew Zeal and Strate gic Re po rt 72 IHG | Annua l Repo rt a nd Form 20 F 202 1 Lin kag e of pe rf orm anc e me as ur es to D ire cto rs’ re mu ne rati on an d KPI s A The A nnua l Per fo rman ce Pl an LT The Lo ng Term Inc ent ive Pla n KPI Key Per form anc e In dic ator s S ee p age s 104 to 1 25 for more i nforma tion on Directors ’ remu ne ratio n and p age s 50 to 53 fo r mor e infor matio n on K PIs . Key per forma nc e me asu re s (inc ludi ng N on- GA AP me as ure s) us ed by ma nag em ent The A nnual Re po rt an d Form 20 F p rese nts c er tain ina ncial m ea sures w hen di scu ssi ng the G roup’s per forman ce whi ch are not m eas ures of i nanc ial pe rfo rman ce or li quidit y un der Inte rnatio nal Fi nanc ial Rep or ting S tan dards (I FRS). In man age ment ’s view the se m eas ures provi de investor s and oth er st akeho lder s with an e nhan ce d unde rst andin g of IH G’s ope rating p er forma nce, p roit abili ty , in anci al stren gth and fundi ng requ ireme nts. T hes e me asure s do not h ave stan dardis ed m eani ngs un der I FRS, a nd co mpani es do n ot ne ces sa rily ca lcula te thes e in the s ame way . As the se me as ures exclud e ce rt ain item s (for example i mpairm ent an d the co sts o f indiv iduall y signi ic ant le gal c as es or com merci al dis putes) the se inan cial m eas ures may b e materi ally di erent to the m ea sures p resc ribe d by IFR S and may res ult in a mo re favourab le view of p er form anc e. Acc ordingl y , they s houl d be vi ewed as c omp lem enta ry to, an d not as a su bstitu te for , th e mea sure s pres crib ed by IF RS and a s incl ude d in the G roup Fin anci al St ateme nts (see p age s 142 to 148). Measure Commentary Global rev e nue per a vai lable room (RevP AR) grow t h KPI RevPAR, averag e daily r ate and oc cupa ncy st atistic s are dis clo se d on pa ges 2 24 an d 2 25. RevPAR is the pri mar y metri c use d by mana gem ent to trac k hotel p er forma nce a cros s regio ns and b rands . RevPAR is als o a com monly u se d pe rfor manc e me asure in th e hotel in dus try. RevPAR comp rise s IH G’s Syste m (see Gl os sar y , page 2 56) room s revenue d ivid ed by the nu mbe r of room n ights avail able an d can b e de rived fro m occ upan cy rate multip lied by avera ge dail y rate (AD R). ADR i s room s revenue di vide d by the num ber o f room nig hts so ld. Refere nce s to RevPAR, oc cup ancy an d ADR a re pres ented o n a com parab le ba sis, c omp risin g groupi ngs of h otels tha t have trade d in all mo nths in b oth the cu rrent and p rior yea r . T he prin cipa l exclusi ons in d erivi ng this me as ure are new hote ls (in cludin g thos e acq uired ), hotel s clos ed fo r majo r refurbi shm ent and h otels s old in e ithe r of the t wo years . The se m eas ures in clud e the impa ct of ho tels tem pora rily clo se d as a res ult of C ovid-19. RevPAR and AD R are quote d at a co nst ant US $ conve rsio n rate, in orde r to allow a be tter unde rst and ing of the c omp arabl e year-on -year tra ding p er forman ce exclu ding dis tor tions create d by lu ctuatio ns in excha nge rate s. T ot al gr os s revenu e from h otel s in IH G’s Syste m A LT KPI Owned, leased and managed lease revenue a s rec orde d in the Gro up Financial Stat ements is r econciled to total gros s revenu e on pa ge 60. T ot al gros s revenu e is revenu e not who lly at tribut able to I HG, howeve r , ma nag eme nt bel ieves this me as ure is me aning ful to investor s and oth er st akehol der s as it provi des a m ea sure of Syste m pe rfor manc e, givin g an indi catio n of the stre ngth of I HG ’s brands an d the c ombin ed impa ct of I HG ’s growth strate gy and Rev P AR pe r forman ce. T ot al gros s revenu e refers to reven ue whic h IH G has a rol e in drivi ng and fro m which I HG deri ves an in com e strea m. IH G’s busi nes s mo del i s des crib ed on p age s 10 to 13. Total gros s revenu e co mpr ise s: • tota l room s revenue from f ranch ise d hotel s; • tota l hotel reven ue from ma nag ed hote ls inc ludin g food a nd beve rage, m eetin gs and o ther revenue s and re le cts th e value I HG d rives to man age d hote l owner s by optimis ing the pe rfor manc e of the ir hotel s; and • tota l hotel reven ue from own ed, le as ed an d mana ge d lea se hote ls. Oth er tha n total hote l revenue fro m owne d, lea se d and ma nag ed le as e hotels , total gro ss hote l revenue i s not revenu e attrib uta ble to I HG as th es e mana ge d and fran chis ed h otels are own ed by third par tie s. Revenue and ope rating proit m eas ures The re con ciliati on of the m ost di rectly com para ble lin e item with in the Gro up Fin ancia l State ment s (i.e. tota l revenue and o perati ng pro it, a cco rdingly) to the no n- IF RS revenue a nd op eratin g proit measures is included on pages 21 8 to 223 . Revenu e and op eratin g pro it from (1) fee bu sine ss a nd (2) own ed, le as ed an d mana ge d lea se hotel s, are de scrib ed a s ‘revenue from rep or tab le se gme nts’ an d ‘ ope rating p roit f rom rep or tabl e se gment s’ , res pe ctivel y , with in note 2 to the G roup Fin anci al St ateme nts. T hes e me asure s are pres ente d for ea ch of the G roup’s region s. Man age ment b eli eves revenu e and op eratin g pro it from rep or tab le se gme nts is m eani ngful to investor s and oth er st akehol der s as it exclud es th e followin g ele ment s and re le cts h ow management moni tors t he business: • S ystem Fund – the Fund i s not man age d to gen erate a pro it o r los s for IH G over the l ong er term, but i s mana ged fo r the be ne it of th e hotel s within th e IH G Syste m. As de sc ribe d within th e Group’s acc ountin g poli cie s (pa ge 149), the S ystem Fund i s ope rated to c olle ct and a dmini ster ca sh as se ssm ents f rom hotel ow ner s for the sp ec ii c purp ose o f use in m arketing, th e Gue st Res er vation S ystem an d hotel l oyalty p rogram me. K e y p er f ormance mea sur e s 73 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Per fo rman ce Measure Commentary Revenue and ope rating proit m eas ures co ntinue d • Reven ues re lated to th e reimbu rse ment of c os ts – as de sc ribe d within th e Group’s acc ountin g pol icie s (pa ge 149), th ere is a c ost e qual to th ese reve nue s so the re is no pro it im pac t. Co st reim burs eme nts are no t appli cab le to all hote ls and g rowth in th es e revenue s is not rel ec tive of grow th in the p er forman ce of th e Group. A s such , mana gem ent do n ot incl ude the se revenu es in the ir ana lysis o f result s. • E xcepti onal i tems – th ese a re identi ie d by vir tue of e ither th eir si ze, nature, or i ncid enc e and can i nclu de, but a re not res tricte d to, gains an d los ses o n the di spo sal o f ass ets, i mpairm ent cha rges an d revers als, th e cos ts of in divid ually s igni ica nt leg al ca se s or co mme rcial dis pute s and re organi satio n co sts . As ea ch item is d iere nt in nature an d sc ope, th ere will b e lit tle conti nuit y in the de taile d co mpo sitio n and si ze of the rep or ted a mount s which a ec t pe rfor manc e in suc ce ss ive per iods . Se parate di sclo sure of th es e amount s facil itate s the unde rst and ing of pe r forman ce inc ludin g and exclu ding su ch item s. Th e Group’s acc ountin g pol icy for excep tiona l items an d fur the r deta il of thos e item s pres ented a s suc h are incl ude d in the G roup Fin anci al St ateme nts (see p age s 152 and 1 65 to 16 7 ). In fur the r dis cus sing th e Group’s per form anc e in resp ec t of revenue a nd op eratin g pro it, addi tiona l non -I FRS m eas ures are u se d and expl aine d fur the r bel ow: • Un de rlyin g reven ue; • Un derl ying op eratin g pro it; • Un derl ying fe e revenue; a nd • Fee margin. Op eratin g pro it mea sure s are, by their n ature, befo re interes t and t ax. M anag eme nt be lieves suc h mea sures a re use ful for inves tors an d other s takeh olde rs wh en co mpari ng pe rfo rmanc e acro ss di erent c omp anies a s intere st and t ax c an var y wide ly acro ss di erent i ndus tries o r amo ng com pani es withi n the sa me ind ustr y . For exampl e, intere st expe nse c an b e highly dep en dent on a c omp any’s cap ital s truc ture, debt l evels an d cred it ratings . In ad dition , the ta x po sition s of co mpan ies c an var y be cau se of th eir di ering ab ilitie s to take advant age o f tax be ne its an d be cau se of th e tax p olici es of th e variou s juris dictio ns in whi ch they op erate. Altho ugh ma nage me nt beli eves the se m eas ures are u seful to inve stors a nd othe r sta kehold ers in as se ssin g the Gro up’s ongoing ina ncial p er form ance a nd provid e improve d com parab ilit y bet wee n pe riod s, there a re limitati ons in th eir us e as c omp ared to me asu res of inanc ial pe rfor manc e und er IF RS. As s uch, th ey shou ld not b e con sid ered in i sol ation o r viewed a s a sub stitute for I FRS m eas ures . In add ition, th ese m ea sures m ay not ne ces sa rily be c omp arabl e to other s imilarl y title d mea sure s of other c omp anie s due to po tential in con sis tencie s in the meth ods of c alc ulatio n. Und erly ing reve nue a nd u nde rlyin g ope rating proit The se m eas ures ad just reven ue from re por ta ble s egm ents an d ope rating p roit f rom rep or tabl e se gment s, res pe ctivel y , to exclud e revenue an d ope rating p roit g ene rated by own ed, l eas ed and m anag ed le as e hotel s which h ave bee n disp os ed, an d signi ic ant liq uidate d dam age s, whic h are not co mpar able ye ar - on-yea r and are n ot indic ative of the G roup’s ongoi ng pro itab ilit y . T he revenu e and op erati ng pro it of curre nt year a cqui sition s are als o exclude d as the se o bsc ure unde rlyin g busi nes s resu lts an d trends w hen c omp aring to the p rior ye ar . In ad dition, i n order to re move the imp act of luc tuation s in forei gn exchang e, which wo uld disto rt th e com parab ilit y of the G roup’s operatin g per for manc e, prio r year me asu res are rest ated at c ons tant c urrency u sing c urrent yea r exchang e rates. Man age ment b eli eves the se are m eanin gful to inves tors and o ther s takeho lde rs to bet ter understand compar able y ear - on-y ear tr ading a nd enable assessment o f the underly ing t rends in the G roup’s inan cial p er forma nce . Und erly ing fe e reven ue grow t h KPI Und erlyi ng fee reven ue is u sed to c alcu late und erlyin g fee reven ue grow th. Un derl ying fe e revenue i s cal culate d on the s ame b asi s as und erlyi ng revenu e as de scrib ed a bove but fo r the fee b usin es s only . Man age ment b eli eves und erlyi ng fee reven ue is m eanin gful to inves tors an d other sta kehold ers a s an ind icator o f IH G’s abilit y to grow the co re fee -b ase d bu sine ss, a ligne d to IH G’s ass et-light strate gy . Perfor mance co nti nu e d K e y per f or ma nce meas u r es c o nti nu e d Strate gic Re po rt 74 IHG | Annua l Repo rt a nd Form 20 F 202 1 Measure Commentary Fee ma rg in A KPI Fee ma rgin is pre sente d at actu al exchan ge rates a nd is a m eas ure of the pro it ar ising f rom fee revenue . Fee margi n is cal culate d by divid ing ‘fe e ope rating p roit ’ by ‘fe e revenu e’ . Fee reven ue and fe e ope rating p roit a re calc ulate d from revenu e from rep or tabl e se gment s and o per ating pro it from rep or ta ble s egme nts, a s de ine d ab ove, adjus ted to exclud e revenue an d ope rating p roit f rom the G roup’s owned, le as ed an d mana ge d lea se hote ls and s igni ic ant liquida ted damages. In ad dition, fe e margi n is adju ste d for the res ults of th e Grou p’ s capti ve insura nce c omp any , whe re premium s are inten ded to m atch the exp ec ted cl aims over th e long er term (se e pag e 186 in the G roup Fin anci al St ateme nts), and as su ch the se am ounts a re adjus ted from t he fee m argin to bet ter de pict th e pro ita bilit y of the fe e bus ine ss. Man age ment b eli eves fee m argin is m eani ngful to inves tors an d other s takeh olde rs as a n indic ator of the su st ainab le lon g-te rm growt h in the pro it abilit y of I HG ’ s core fe e -b ase d bus ine ss, a s the sc ale of I HG ’s operatio ns inc reas es wi th growth i n IH G’s System s ize. Adju ste d intere st Financial incom e and inancial expe nse s as re corde d in the G roup Financial Stat ements is r econciled to adjus ted inte rest o n pag e 22 3. Adjus ted inte rest is p res ented b efore exce ption al items a nd exclud es the fo llowing i tems of intere st whic h are rec orde d within th e Syste m Fund: • IH G rec ords a n interes t charg e on the ou tst andi ng ca sh bal anc e relatin g to the IH G Rewards progr amme . The se intere st paym ents a re reco gnis ed a s interes t inco me for th e Fund and interes t expe nse fo r IH G. • Th e Syste m Fund also b ene i ts from th e capi tali satio n of intere st relate d to the deve lop ment of the n ext-g ene ration G ue st Res er vation S ystem . • O ther c omp one nts of Sy stem Fund intere st inc om e and exp ens e, incl uding l eas e intere st expe nse a nd intere st inc ome o n overdue re cei vable s. As the Fund is i nclu ded o n the Gro up inc ome s tatem ent, th ese a mount s are inc lude d in the repo rte d net G roup inan cial exp ens es , reduc ing the G roup’s eec tive interes t co st. G iven res ults relate d to the Sys tem Fund are exclud ed from a djus ted me asu res us ed by ma nage ment , the se are exclud ed from a djus ted intere st an d adjus ted e arning s per o rdinar y sh are (see b elow). Man age ment b eli eves adju sted i nteres t is a me aning ful me asure for i nvestor s and othe r sta kehold ers a s it provid es an in dic ation of th e com parab le year-o n-year ex pen se as so ciate d with inan cing the b usi nes s incl uding th e intere st on any ba lanc e hel d on be half o f the System F und. T a x exclud ing t he im pac t of excep tion al ite ms a nd S ystem Fun d A rec oncil iation of th e tax c harge as rec orde d in the G roup Fi nanc ial St ateme nts to tax exclu ding th e impa ct of excepti onal i tems an d Syste m Fund can b e foun d in note 8 to the G roup Fin ancia l State ment s on pa ge 16 9. As outl ine d above, excep tiona l items c an var y year-o n-year a nd, whe re subje ct to t ax at a die rent rate than th e Group a s a who le, they c an impa ct the c urrent yea r’s tax ch arge. T he Sys tem Fund is not m anag ed to a pro it o r los s for IH G over the l ong er term an d is, in g ene ral, not s ubje ct to t a x e i t h e r. Man age ment b eli eves remov ing the se provi des a b et ter view of th e Grou p’ s unde rlyin g tax rate on ordin ar y ope ration s and ai ds co mpar abilit y year-o n-year, thus providing a m ore me aning ful unde rst and ing of the G roup’s ongoin g tax c harge. Adjusted ear nings per ordinary share Ba sic e arning s per o rdinar y sh are as rec orde d in the G roup Fi nanc ial St ateme nts is re con cile d to adjus ted earn ings p er ordin ar y sha re in note 10 to the Gro up Fina ncia l State ment s on p a g e 1 74 . Adjus ted e arning s per o rdinar y sh are adju sts th e pro it availab le for e quit y hol der s use d in the cal culati on of ba sic e arning s per s hare to rem ove System Fund reven ue and ex pen se s, the item s of intere st rel ated to the Sy stem Fund as exclu de d in adju sted inte rest (above), cha nge in fai r value of c ontin gent p urcha se co nsid eratio n, excepti onal ite ms, an d the rel ated t ax imp acts of such adjustmen ts. Man age ment b eli eves that a djuste d ea rnings p er s hare is a m eanin gful m eas ure for investo rs and oth er st akehol der s as it provi des a m ore co mpar able e arnin gs pe r share m ea sure align ed with how management monit ors the business. Net d ebt Net d ebt is i nclu ded in n ote 23 to the Group Finan cial Statemen ts. Net d ebt is u se d in the mo nitorin g of the Gro up’s liquidit y and c apit al stru cture an d is us ed by man age ment in th e cal culati on of the key ratio s att ache d to the G roup’s bank coven ants a nd with the o bje ctive of ma intain ing an inves tment g rade c redit ratin g (see pa ge 12 for f urth er dis cus sion). Net d ebt is u se d by investors a nd othe r sta kehold ers to eval uate the inan cial streng th o f the business. Net d ebt c ompri se s loan s and oth er bo rrowings , lea se lia bilitie s, the exch ange e lem ent of th e fair valu e of de rivatives h edg ing de bt value s, le ss c ash an d ca sh e quivale nts. 75 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce Measure Commentary Adjuste d EBITDA Op eratin g pro it reco rded i n the Gro up Fin ancia l State ment s is rec onc ile d to adju sted E BIT DA on pag e 2 23. On e of the key mea sures u se d by the Grou p in moni toring it s debt a nd ca pita l struc ture is the ne t debt: a djus ted EB ITDA ratio, wh ich is m anag ed wi th the obj ecti ve of maint aining a n investm ent gra de cre dit rating . The G roup ha s a state d aim of m aintain ing this ra tio at 2. 53 .0x. Adjus ted EB ITDA is d e ine d as op eratin g pro it, exclud ing Sys tem Fund revenue s and exp en ses , exceptio nal ite ms an d depre ciati on and a mor tis ation. Adjus ted EB ITDA is u sef ul to investor s and othe r st akehol der s for com parin g the pe r forman ce of die rent co mpan ies as d epre ciati on, amo rti satio n and exce ption al item s are elimin ated. I t can a lso be us ed a s an app roximation o f ope ration al ca sh l ow gen eratio n. Thi s mea sure is re levant to the Group’s bank ing c ovenant s, whic h have be en ame nde d for tes t dates i n 202 2. D eta ils of c ovenant level s and p er forman ce ag ains t thes e is provi ded i n note 24 to the Grou p Fina ncial S tate ment s. The l everag e ratio us es a C ovenant E BIT DA mea sure whic h is ca lcula ted on a ‘ frozen GAA P ’ bas is, exclu ding the e ec t of IF RS 16. Gros s capit al expend iture, net cap ital expen diture, adj us ted fre e ca sh low The re con ciliati on of the G roup’s sta tement o f cas h low s (i.e. net c as h from inves ting ac tivitie s, net c as h from ope rating a ctiviti es, a cco rdingly) to the non - IFRS c api tal exp end iture and c ash low m eas ures are in clud ed o n page 22 2. The se m eas ures have lim itatio ns as th ey omit c er tain c omp one nts of the ove rall ca sh low sta tement . They are n ot intend ed to rep rese nt IH G’s resid ual c ash low availab le for di screti onar y expe nditure s, no r do they re lec t the G roup’s future capi tal c ommitm ent s. The se m eas ures are use d by many co mpa nies, b ut the re can b e die renc es in how e ach c omp any de ine s the ter ms, limitin g their u sefu lnes s as a c omp arative me asu re. The refore, it is i mpor t ant to view the se me asure s only a s a com plem ent to the G roup st atem ent of c ash lows. Gros s capit al expend iture Gros s ca pita l expe nditure rep res ents th e con soli dated c api tal exp endi ture of IH G inc lusive of Sys tem Fund cap ital i nvestme nts (see p age 1 3 for a des cripti on of Sys tem Fund ca pita l inv e stments and r ecent e xamples ). Gros s ca pita l expe nditure is d e ine d as ne t cas h from inves ting ac tivitie s, adju sted to in clud e contr act ac quis ition c ost s (key mon ey) . In ord er to dem ons trate the c apit al out l ow of the G roup, ca sh l ows arisi ng from any dis po sal s or dis tributio ns from a ss ocia tes and j oint venture s are exclude d. Th e me asure al so exclud es any mate rial inves tment s mad e in ac quiring b usin es se s, incl uding a ny subse que nt payme nts of d eferre d or co ntinge nt purch ase c ons ide ration in clud ed within inve sting a ctiviti es, wh ich rep rese nt ongo ing paym ents fo r acq uisiti ons . Gros s ca pita l expe nditure is re por te d as eith er ma intena nce, re cyclab le, or Sy stem Fund. This d isa ggreg ation p rovide s usef ul inform ation as i t enab les u se rs to disti nguis h bet wee n: • Sys tem Fund ca pita l investme nts wh ich are stra tegic inves tme nts to drive grow th at hote l level; • Re cyclabl e investm ents (suc h as inves tment s in as soc iates an d joint ve ntures), which are intend ed to b e recove rable i n the me dium term a nd are to drive the g rowth o f the Grou p’ s brands and expansion in priority markets; and • M aintena nce c apit al exp enditu re (inclu ding c ontrac t acq uisiti on co sts), which re pres ent s a pe rmane nt ca sh out low. Man age ment b eli eves gros s cap ital ex pen diture is a u sefu l mea sure as it i llustra tes how th e Group c ontin ues to inves t in the b usin es s to drive grow th. It al so allow s for co mpari son yea r - on -ye ar . Perfor mance co nti nu e d K e y per f or ma nce meas u r es c o nti nu e d Strate gic Re po rt 76 IHG | Annua l Repo rt a nd Form 20 F 202 1 Measure Commentary Net cap ital expen diture Net c apit al exp endi ture provide s an in dicato r of the c apit al intens it y of IH G’s busin es s mod el. Net c apit al exp endi ture is de rived fro m net c ash from i nvesting a ctivi ties, a djus ted to inc lude contr act ac quis ition c ost s (net of repaym ent s) and to exclude any mate rial inves tment s mad e in acq uiring b usin es ses , inclu ding any su bse que nt payme nts of d eferre d or co ntinge nt purch ase con sid eratio n inclu ded w ithin inves ting ac tivitie s, whic h repre sent o ngoi ng payme nts for acq uisiti ons . Net c apit al exp enditu re inclu des th e in lows aris ing from a ny dispo sal re ce ipts, or dis tributi ons fro m ass oci ates an d joint ventu res. In ad dition, S ystem Fund d epre ciatio n and am or tisati on rel ating to prop er ty, plant and e quip ment and int angib le as set s, res pe ctivel y , is a dde d bac k, re duci ng the overa ll cas h out l ow . This re le ct s the way in whic h Syste m Funded c apit al inves tment s are rech arge d to the Sys tem Fund, over the life of the a ss et (see p age 13). Man age ment b eli eves net c apit al exp endi ture is a us eful me as ure as it illu strates t he net c apit al investm ent by IH G, af ter tak ing into ac cou nt cap ital re cycling thro ugh as set d isp os al and th e fundi ng of strate gic inves tment s by the Sys tem Fund. It p rovide s investor s and oth er st akehol der s with vi sibili ty of th e cas h low s which a re alloc ated to lo ng- term inves tment s to drive the Gro up’s strate gy. Adju ste d fre e ca sh l ow LT KPI Adjus ted fre e cas h low i s net c ash fro m ope rating a ctiviti es ad juste d for : (1) the in clus ion of the c ash o ut low ari sing fro m the purc has e of sha res by emp loyee sh are trus ts re lec ting the req uirem ent to sati sf y inc entive sc hem es whi ch are linke d to ope rating pe r forman ce; (2) the in clus ion of m aintena nce c apit al expe nditu re ( excludin g contr act ac quis ition c ost s); (3) the inclu sion o f the prin cipa l ele ment of l eas e paym ents; an d (4 ) the exclus ion of p ayment s of defe rred or c onting ent pu rchas e co nsid eratio n inclu de d within ne t cas h from op eratin g activ ities . Man age ment b eli eves adju sted f ree c ash low is a us eful m eas ure for inves tors an d other sta kehold ers , as it rep rese nts the c as h availabl e to invest b ack into the b usin es s to drive future grow th and p ay the ordina ry di vide nd, with a ny surplu s bein g availabl e for ad dition al returns to sha reholders. Th e per fo rman ce rev iew s houl d be re ad in c on junc tion w ith th e No n- GA AP re co nci liati ons o n pag es 2 18 to 2 23 a nd th e Glo ss ar y on p ag es 25 5 to 25 6. 77 Strate gic Repo rt IHG | Annua l Repo rt a nd Form 20 F 202 1 Per fo rman ce 80 C ha ir’s overvi ew 81 Bo ard and C ommi tte e mem ber ship and at tend anc e in 202 1 82 Ou r Boa rd of D irec tor s 86 Ou r Exec utive C om mit tee 88 G overna nce s tru ctur e 89 B oa rd ac tivit ies 89 M at ters di scu sse d in 20 21 90 K ey mat ters di scu sse d in 20 21 a nd Se ction 17 2 state ment 92 Our shar eholders and i nv estors 93 Director a ppointmen ts and inducti on 94 B oard deve lopm ent an d ee ctiven es s evaluati on 95 Audit Co mmit tee Re por t 10 0 Res pon sibl e Bus ine ss C ommit tee R epo rt 102 N omin ation C ommi tte e Repo rt 104 Directors ’ Remunerat ion Report 126 Stateme nt of compli ance G ove r n a n c e Kim pton ® St H ono ré, Par is, Fran ce 78 IHG | Annua l Repo rt a nd Form 20 F 202 1 79 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Gove rna nc e C hair ’ s o v e r v iew IHG f ace d on goi ng pa nd emi c- rel ated c ha lle nge s in 2 021 de sp ite so me are as o f rec overy. The ap pe ara nce o f new Covi d-19 varia nts l ed to fu rt her wave s of infe cti on, c rea ting an un ce rt ain e nviron me nt, w ith tr avel and o pe rati ng res tric tio ns co ntin uin g to imp act t he in du str y . Str etch ed sup ply c ha ins , lab ou r sh ort ag es a nd re sur ge nt in lati on pu t pre s sure o n grow th , whil e the p an de mic ac ce le rate d the ad opti on of ne w tec hno log y and h igh ligh ted t he ne ed fo r businesses t o operat e sus taina bly . Again st this b ackgroun d, the Bo ard ha s contin ued w ith the ada pted gover nanc e, overs ight pra ctice s and n ew ways of workin g est abli she d at the s tar t of the p and emic. B oa rd me etings h ave continu ed to b e vir tual, bu t there h as be en more fre que nt interac tion an d coll abo ration . The B oard h as provid ed bo th supp or t and c halle nge to ma nag eme nt within a cle ar fram ework of de le gated re sp onsi bilit y . I n addi tion, unc er tain c ond itions re quire d an inc reas ed at tentio n on ris k and val ue at ris k. Th e focus o n long -term s trateg y has b een maint aine d, with a ction s taken re garding th e imp act of n ew technology , succession planning and business growth. Loo king b ack over my tenu re as Ch air , th e notio n of what con stitute s goo d govern anc e has evo lved su bst antially. It is now as m uch ab out ad dres sing o ur enviro nment al an d soc ieta l impa cts a s repo rti ng on ou r in ancia l per form anc e – and sha rehol der s frequ ently u se the ir inl uentia l role s to exercise stewards hip on b eha lf of othe r sta kehold ers a nd the wi der environ ment . I am proud to s ay that this b road er app reci ation of the rol e of bus ine ss with in so ciet y has b ee n ce ntral to IH G’s app roach to gove rnan ce for m any years an d doing b usin es s resp on sibly re main s at the he ar t of our c ommitm ent to T rue Ho spit alit y for G ood a nd our J ourn ey to T om orrow. The G roup’s relation s with hote l owne rs was a no tabl e feature of Bo ard activ ity. The Bo ard so ught to und ers tand th e po sition o f hotel owne rs throug hout th e pan demi c, reco gnis ing the tra ding di ic ultie s they exp erien ce d, the availa bilit y of ca pita l and the i mpac t of lab our sho rt age s within th e hos pit alit y indu str y . I t was als o aware of the com mitme nt ne ede d to maint ain high s tan dards a nd keep brands f resh. T e chn olo gy conti nue d to be a regu lar are a of focu s, both b ec aus e of the in crea sed c ybe rse curit y threat s and ri sks as so ciate d with an inc reas e in remote wo rking b ut als o in the way that te chno log y can b e harn es se d to drive revenue, g rowth a nd gue st s atisfa ction . Board composition Suc ce ssi on pl anning wa s a majo r con side ration d uring th e year as the B oard i s currentl y going th rough a p erio d of cha nge in it s com pos ition . A key part o f the refre shme nt proc es s is to en sure that we c ontinue to h ave the right mix of s kill s, expe rienc e and knowl ed ge aroun d the ta ble a s well as th e gen der an d ge ograp hica l repre sent ation th at add s value a s the C ompa ny pursu es it s strategic objectives. Inform ation o n the pro ces s rela ting to De anna O pp enh eime r’s app ointme nt to suc ce ed me a s Cha ir from 1 Se ptemb er 20 2 2 is se t out on p age 9 3. As pa rt of N on -E xec utive Di rector s ucc es sio n plann ing, we deter mine d that the B oard wo uld be ne it fro m fur ther exp er tis e in tech nolo gy an d innovatio n, incl uding in re latio n to ESG is sue s. We also s ought to fu rth er drive di versi ty on th e Bo ard and p repare for the retire ment s of Ann e Bus que t and Da le Mo rriso n in May an d De ce mbe r 202 1 resp ec tively. Thes e obje ctive s were suc ce ss fully fur there d whe n Dan iela B aron e Soa res join ed th e Bo ard in Marc h 202 1 and G raha m Allan wa s app ointed a s Sen ior In dep end ent Non - E xecutive D irec tor from 1 Ja nuar y 20 22 . Det ails o f Danie la’s bio graphy , inclu ding he r ski lls and exp eri enc e, are incl ude d on pa ge 8 4. The B oard al so ap proved th e appo intme nt of Duri ya Farooqui to as sume re spo nsi bilit y for its Voice o f the Emp loyee en gage me nt pla n. Furthe r det ails of B oard s ucc es sion p lann ing are inc lude d in the N omin ation C ommit tee R epo rt o n pag es 10 2 and 10 3. Com mittee ac tivities The B oard d ele gates c er ta in resp ons ibiliti es to its C omm itte es to as sist i n ens uring that e ec tive co rpora te governan ce p er vade s the busi ness: • Th e Audit C ommi tte e focu sed o n the G roup’s material ac co unting judg eme nts an d estim ates, ri sks, inte rnal c ontrol s and bu sine ss conti nuit y , an d going c onc ern a nd viab ilit y (see its re por t o n page s 95 to 9 9); • Th e Remun eratio n Co mmit tee foc use d on in centi ve plan t arget s and p er forma nce an d review of wo rkfo rce remu nerati on con sid eratio ns (see it s repo rt o n pag es 10 4 to 125); • Th e Resp on sibl e Bus ine ss C ommit tee fo cus ed o n the de liver y of the G roup’s 2030 re spo nsib le bu sine ss c ommi tment s as well as the a nnual o pe rationa l targe ts (see it s repo rt o n pag es 10 0 and 10 1); and • Th e Nom inatio n Com mit tee pro gres sed t he impl eme ntatio n of Bo ard refres hme nt pla ns (see it s repo rt o n pag es 10 2 and 1 03). A des cripti on of the G roup’s governan ce str ucture is g iven on p age 8 8. Focu s are as a nd a ctivi tie s The B oard h ad an ac tive year in 2 02 1 and a ful ler de sc ription of i ts activ ities i s given o n pag es 8 9 to 91. A key theme of th e year wa s the foc us on the G roup’s long er -term strate gy and grow th op po rtun ities, g iven the c ontinu ing improvem ent of th e Group’s in anci al pos ition . This c an be s ee n in the de cis ion to ap prove the lau nch of th e Vign ette C olle ctio n, a new c onversi on bra nd in the Lu xur y & Lifes tyl e se gment . Anoth er op por tunit y aro se from th e new ways of work ing acc ele rated by th e pand emic . The B oard too k the de cis ion to ad opt lexi ble wor king wh ere po ss ible fo r corp orate em ployee s. It t as ked manag ement to impleme nt this while sustaining organi sational resil ienc e and o pera tiona l e icien cy . T he B oard so ught to en sure that IH G’s value s and cul ture were main taine d an d that ta lent at trac tion and p rogres sio n, as well a s diver sit y and in clus ion, we re enha nce d. The B oard ’s delib eration s were su ppo rte d by its co ntinuin g dialo gue a nd eng age ment w ith the G roup’s workforc e through our Voice of th e Empl oyee progr amme . Gove rn an c e 80 I HG | Annua l Repo rt a nd Form 20 F 202 1 Board performance re view Duri ng the yea r , we imp lem ented th e agre ed ac tion s arisin g from the 20 20 intern al Bo ard and C omm itte e ee ctive nes s evaluati on and c ondu cted a f ur ther inte rnal evalu ation p roce ss . I am ple as ed to repo rt th at the 20 21 inte rnal eval uation c onc lude d that th e Bo ard and it s Co mmit tee s contin ue to op erate ee ctive ly . F ur ther d etail s of the eval uation c an be fo und on p age 9 4. We als o con duc ted indiv idua l Direc tor fee dba ck as se ss ment s, det ails of wh ich c an be fou nd on p age 94 . Compliance and our dual listing IH G conti nue s to oper ate as a dual -li sted c omp any with a pre mium listi ng on the L ondo n Stoc k Exch ange a nd a se co ndar y lis ting on th e New York Stock E xch ange. U nde r the U K listi ng rule s, we are ob lige d to make a sta temen t as to how we have app lie d the prin cipl es of the U K Co rporate G overn ance C od e (the Co de) and und er the N YSE listi ng rule s, as a fore ign pri vate iss uer , we are requi red to dis clo se any signi ic ant ways in whi ch our c orpo rate govern anc e prac tice s die r from tho se of U S comp anie s. T o ens ure co nsis tency of inform ation provi ded to b oth UK a nd US inve stors , we produ ce a com bine d Annu al Rep or t and Form 2 0 F . Our S tatem ent of C omp lian ce with th e Co de is o n page s 126 an d 127 . A summ ar y outlini ng the di eren ces b et wee n the Grou p’ s UK c orp orate govern ance p racti ce s and tho se foll owed by US c omp anie s c an be found o n pag e 246. Looking f orward In 20 22 , the B oard will c ontinu e to ens ure that a robu st gove rnanc e frame work op erates th rough out the G roup, en ablin g IH G to focus on the a chievem ent of th e Group’s long -term s trategi c obje ctive s while doing bus iness res pons ibly and remaining mindful of stak eholder int erests. Patr ick Cescau Cha ir of the B oard 21 Feb ruar y 20 2 2 Bo ard an d Co mm itte e me mb ers hip a nd at ten dan ce i n 202 1 Appoint ment date Com mittee appoint ments Board Audit Com mittee Responsible Business Com mittee Nomination Com mittee Remune ration Com mittee T ota l mee ting s he ld 8 5 3 5 5 Chair Patrick Ce sc au a 01/0 1/1 3 N 8/8 – – 5/5 – Ch ief E xec uti ve O ice r Kei th B a rr 0 1 /0 7/ 1 7 8/8 – – – – Executive Dire ctors Paul E dgeclie- Johnson 0 1/0 1/14 8/8 – – – – Elie Maalouf 01/0 1/ 18 8/8 – – – – Senior Independent Non-Executi ve Di rector b Dale Morrison b, c 01/0 6/ 11 A N R 7/8 3/5 – 4/5 3/ 5 Non-Executive D irectors Graham Allan b, d 01/0 9/2 0 A N R 8/8 5/5 – – 4/5 Richard Anderson e 01/0 3/2 1 A R 1/2 0/ 1 – – 1/2 Daniela Barone Soares f 01/0 3/2 1 R RB 7/ 7 – 2 /2 – 3 /4 Anne Busquet g 01/0 3/ 15 A RB 3/3 2/2 1/ 1 – – Ar thur d e Ha ast 0 1/01/ 20 R RB 8/8 – 3/3 – 5/ 5 Ian D ys on h 0 1/09/ 13 A N R 7/8 5/5 – 5/ 5 5/ 5 Duriya F arooqui 07/ 1 2 / 2 0 A RB 8/8 5/5 3/3 – – Jo H arl ow i 01/0 9/ 14 N R 7/8 – – 5/5 5/5 Jill McDonald 01/0 6/ 13 A N RB 8/8 5/5 3/3 5/ 5 – Sharon Rothst ein 01/0 6/ 20 A RB 8/8 5/5 3/3 – – a I n prin ci ple t he Ch air a tte nd s all C om mit te e me etin gs, a nd th e ful l Bo ard at te nds t he re leva nt se cti on s of th e Audi t Co mmi tte e me eti ng s whe n i nan cia l res ult s are c on sid ere d. b D al e Mo rri son r etire d fro m the B oa rd fro m 31 D ec em ber 2 02 1 an d Gr aha m All an wa s app oin ted a s Se nio r No n- E xec utiv e Dire cto r fro m 1 Jan ua ry 2 02 2. c Da le M orri so n was u nab le to a tte nd a B oa rd me etin g, an A udi t Co mmi tte e me eti ng, a N om inat ion C om mit te e me etin g an d a Rem une rati on C omm it tee m ee tin g due to i lln es s. He wa s al so un ab le to at ten d an Au dit C om mit te e me etin g an d a Rem une rati on C om mit tee m ee tin g due to a p rio r en gag em ent . d G ra ham A lla n was u nab le to at te nd a Re mun era tio n Co mmi tte e me eti ng du e to a pr ior e nga ge me nt. e Ri cha rd An der so n was a pp oint ed to th e Bo ard o n 1 Ma rch 20 2 1 and re si gne d on 2 6 May 2 02 1. Ri ch ard wa s una bl e to att end a B o ard me eti ng, a n Aud it Co mm itt ee m eet ing and a R emu ne rati on C omm it tee m ee ting d ue to a p rio r eng ag em ent . f D ani ela B aro ne S oa res wa s ap poi nte d to the B oa rd fro m 1 Mar ch 20 21 . Da nie la wa s una bl e to att end a R em une rati on C omm it tee m ee ting d ue to a p rio r eng ag em ent . g A nn e Bu squ et ret ire d from t he B oar d from 7 M ay 20 21 . h Ian D ys on wa s una bl e to att end a B o ard me eti ng du e to a pr ior e nga ge me nt. i Jo H ar low wa s una bl e to att end a B o ard me eti ng du e to a pr ior e ng age me nt. Board Committ ee member ship ke y A Audit C ommit tee m emb er R Remun eratio n Com mit tee me mbe r RB Resp ons ible B usi nes s Co mmit tee m emb er N Nomi nation C omm itte e mem be r Chair of a B oard C omm itte e 81 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Chair ’ s overview Patrick Ces cau Non -E xecutive Chair N App oin ted to th e Bo ard: 1 Jan uar y 20 13 Skills and exper ience: From 200 5 to 20 0 8, Patri ck wa s Grou p Chi ef E xecu tive of U nil ever Gro up, havi ng prev iou sly b ee n Ch air of U nil ever PLC, V ice - C hai r of Uni leve r NV an d Food s Di recto r , foll owin g a prog res sive c are er w ith the c om pany, whi ch be ga n in Franc e in 1973 . Pri or to be ing app oin ted to th e bo ard of U nileve r PLC an d Uni lever N V in 19 9 9, as Fi nan ce D irec tor, he was C hai r of a num ber o f the c omp any ’s major operating com panies and divisio ns, including in the U S, In don es ia an d Por tug al. H e was fo rme rly a Se nior I nd epe nd ent D irec tor an d No n- E xec utive Dire cto r of Pe ars on p lc, Tesco P LC and Inte rnati on al Co ns olid ate d Airli ne s Grou p S. A ., and a D ire ctor a t IN SE AD. Board contr ibution: Patri ck ha s he ld bo ard po siti ons fo r mo re than 2 0 year s in le adi ng gl oba l businesses and br ings e xtensive int ernat ional experience in st rat egy , brands, consu mer products and in anc e. As C hai r , P atric k is re sp ons ibl e for le adin g the B oa rd and e nsu ring i t ope rate s in an eective manner , and promot ing const ructiv e relati ons with s hareholders and wider stakeholders. As C hair o f the N omin atio n Co mmi tte e, he i s res po nsi ble fo r revie wing a nd ma kin g recommendations on the Group ’ s leadership needs. Other appointments: Patri ck is a P atron of t he St J ude I ndi a Chil dre n’s Charit y an d a Me mb er of the Tema se k Europ ea n Advi so ry P ane l. Kei t h B a rr Chi ef E xec utive O ice r (CEO) App oin ted to th e Bo ard: 1 Jul y 20 17 Skills and exper ience: Keith h as sp ent m ore tha n 25 yea rs wor kin g in the h osp ita lit y ind ust ry acro ss a w ide r ang e of role s. H e st ar ted h is ca ree r in hote l op erat ion s and jo ine d IH G in 2 00 0. Sin ce Ap ril 20 11 he h as b ee n a me mbe r of IH G ’s E xecu tive C ommi tte e. D irec tly b efore b ei ng app oin ted C EO, Keith se rve d as C hie f Co mme rcia l O ic er fo r four ye ars . In th is rol e, he le d I HG ’s glo bal b ran d, loyal ty, sale s and m arketi ng fun ctio ns, a nd ove rsa w IH G’s loyalt y p rogra mme , IH G ® Reward s. Pr ior to th is, Kei th was C EO of IH G’s Gre ate r Chin a bu sin es s for fou r year s, s ett ing the fo und atio ns for g row th in a key mar ket and over se eing t he la unc h of the H UALUX E® Ho tels and Resorts br and. Board contr ibution: Keith i s res pon sib le for t he execu tive m ana gem ent o f the G roup an d en suri ng the im ple me nta tion of B oa rd stra tegy a nd p olic y . Other appointments: Keith is a N on - E xecu tive Dire cto r of Yum! Br and s. H e als o sit s on th e Bo ard of Wi HT L (Wo men i n Ho spi tali ty Travel & Le isur e), the Wor ld Travel & T ouri sm C oun cil E xec utive Co mmi tte e and t he Inte rna tion al Adv iso r y Bo ard of EH L. Ke ith is a g radu ate of C orn ell U nive rsi ty ’s Sc hoo l of Ho tel Ad mini strat ion an d is c urren tly a me mbe r of th e De an’s Advis or y B oard fo r The S ch ool o f Hote l Adm inis trati on, C orn ell S C Johnson College of Business. Paul E dgeclie-Johnson Chi ef Fi nan cia l O ic er (C FO) and G roup H e ad of S trate gy App oin ted to th e Bo ard: 1 Jan uar y 20 14 Skills and exper ience: Paul i s a fell ow of th e Ins titu te of Ch ar tere d Acc oun tant s an d is a gra duate o f the H ar vard B usi nes s Sc ho ol Advanced Managem ent Programme. He was prev iou sly C FO of IH G ’s Europe a nd As ia, M iddl e Ea st an d Afric a re gion s, a p osi tion h e he ld si nce Se ptem ber 2 011 . He jo ine d IH G in Au gus t 20 04 and h as h eld a n umb er of s eni or-leve l in an ce po siti ons , inc ludi ng He ad o f Inves tor Re lati ons , He ad of G lo bal C orp or ate Fin anc e an d Fin anci al Pla nnin g & T ax, a nd H ea d of Hote l D evelo pm ent, Europ e. P aul al so ac ted a s Inte rim C EO of the Europ e, M iddl e Ea st an d Afri ca re gion ( pri or to the re co n igura tion o f our o pe rating r egi ons). Board contr ibution: Paul i s res po nsi ble, to ge ther with th e Bo ard, fo r over se ein g the ina ncia l op erati on s of the G roup a nd for l ea ding Gro up strate gy. Elie Maalouf Chief Executive Oic er , Americ as App oin ted to th e Bo ard: 1 January 2018 Skills and exper ience: Elie wa s app oin ted C EO, Ame ric as at I HG i n Febr uar y 20 15 a nd ha s more tha n 20 yea rs’ exp eri en ce wor kin g in maj or gl oba l fran chi se b usin es se s. H e joi ne d the G roup h aving sp ent s ix yea rs as P resi de nt and C EO of H MS Ho st Co rpo ratio n, wh ere h e was al so a m emb er of t he bo ard of di rec tors . Elie b rin gs bro ad exp eri en ce spanning hotel develop ment, branding, in ance, rea l est ate an d op erati on s man age me nt as we ll as fo od an d beve rag e exp er tis e. Eli e was S eni or Advi se r with M cK in sey & C omp any from 2 01 2 to 20 14. Board contr ibution: Elie b ring s a de ep und er sta ndin g of th e glob al ho sp ita lit y se ctor to t he Bo ard. H e is re sp ons ibl e for b usin es s deve lo pme nt and p er for man ce of a ll hote l and re so r t bran ds an d prop er ti es in th e Ame ric as re gio n and h as gl oba l responsibility for cust omer dev elopment, pr ovidi ng over sigh t of the G lob al S ale s org anis atio n, as w ell as our owner management and services st rat egy . Other appointments: Elie i s a mem be r of the Ame ric an H otel & Lo dg ing As so cia tion E xe cuti ve Co mmi tte e of the B oa rd, an d mem be r and c hair man of the U .S. Travel As so cia tion C EO Rou ndt abl e. In ad diti on, El ie se r ves as a b oa rd me mbe r of the Atl ant a Co mmit te e for Pro gre ss an d is on t he CEO C oun cil of t he G lob al Bu sin es s All ianc e. Ou r Boa r d of D i r ect ors Board Committ ee member ship ke y A Audit C ommit tee m emb er R Remun eratio n Com mit tee me mbe r RB Resp ons ible B usi nes s Co mmit tee m emb er N Nomi nation C omm itte e mem be r Chair of a B oard C omm itte e Gove rn an c e 82 IHG | Annua l Repo rt a nd Form 20 F 202 1 Graham Allan Senior I ndependent No n- E xecu tive D irec tor (S ID) N R A App oin ted to th e Bo ard: 1 Sept ember 2020 Skills and exper ience: Gra ham wa s Gro up Ch ief E xecu tive of D air y Farm In tern ation al H old ing s Ltd fro m 201 2 to 2017, a lead ing A sia n reta iler headquartered in Hong K ong. He previousl y se rve d in s evera l se nior p os itio ns at Pe ps ico/ Yum! Bra nds f rom 19 9 2 to 201 2, as sum ing th e role o f Pre sid ent Yum! Re st aura nts In tern ation al in 2 00 3, and l ed th e deve lop me nt of gl oba l bran ds K FC, Piz z a Hut a nd Taco B ell in m ore th an 12 0 inte rnati ona l marke ts. P rior to h is ten ure at Yum! Res ta urant s, he wo rked a s a co nsu lta nt, in clu ding at Mc Ki ns ey & Co mpa ny . Board contr ibution: Gra ham b ring s to the B oa rd mor e than 4 0 yea rs of s trate gic, c omm erci al and bra nd ex perience wit hin consumer –focused businesses across m ult iple geogr aphi es. Graham w as appoin ted as Senior Independent No n- E xecu tive D irec tor fro m 1 Jan uar y 20 2 2. Other appointments: Gra ham i s Sen ior Ind ep en dent N on - E xecu tive Di rec tor at In ter tek plc a nd In de pe nde nt No n- E xec utive D ire ctor of As so ciate d Br itis h Foo ds pl c. He a lso s er ve s as a dire ctor o f pri vate co mpa nie s as C hair man of Bat a Foo twe ar an d Dire cto r of Am eric an a Foo ds. Ian Dyson Independent No n- E xecu tive D irec tor N R A App oin ted to th e Bo ard: 1 Sept ember 2013 Skills and exper ience: Ian h as h eld a n umb er of se nio r execu tive an d i nan ce rol es , inc ludi ng Gro up Fin anc e an d Op erat ion s Dire cto r for M arks and S pe nc er Gro up pl c for ive ye ars fro m 20 05 to 20 10, whe re he ove rs aw sig ni ic ant ch ang es in the b usi nes s. I n ad ditio n, Ia n was C EO of Pu nch T avern s plc, F ina nc e Dire cto r for the R ank G roup Plc, a nd G roup F inan cia l Co ntroll er a nd Fi nan ce Dire cto r for th e hote ls div isi on of H ilto n Grou p plc . Mo re rec entl y , I an wa s a No n- E xecu tive D irec tor of SS P G roup p lc an d Sen ior I nde pe nde nt N on- E xecu tive Di rec tor of Fl ut ter Ente r tain me nt plc . Board contr ibution: Ian has gaine d signiicant exp erie nc e from wo rkin g in vari ous s en ior ina nc e role s, p red omin antl y in the re tail , lei sure a nd ho spit ali ty s ec tors . Ia n be cam e Ch air of th e Audi t Co mmit te e on 1 Ap ril 20 14, a nd, as s uc h, is re sp ons ibl e for le adi ng th e Co mmit te e to ens ure eectiv e in terna l cont rols and r isk managemen t syste ms a re in pl ace . Other appointments: Ian i s Ch air of th e Bo ard of ASO S pl c. Jo Ha rlow Independent No n- E xecu tive D irec tor N R App oin ted to th e Bo ard: 1 Se ptem ber 2 014 Skills and exper ience: Jo mo st re ce ntly h eld t he po siti on of C orp ora te Vic e Pre sid ent o f the Ph one s Bu sin es s Uni t at Mic ros of t Co rpo ratio n. Sh e was prev iou sly E xec utive V ic e Pres ide nt of S mar t Dev ice s at N oki a Co rpo ratio n, fol lowi ng a num be r of se nio r man age me nt rol es at N ok ia from 2 00 3. Prio r to that , sh e hel d mar keting , sal es an d management roles at R eebok Int ernat ional Limit ed from 1 99 2 to 20 03 a nd at Pro cte r & Gam ble Co mpa ny from 1 98 4 to 19 92 . Board contr ibution: Jo h as mo re tha n 25 yea rs’ exp erie nc e work ing in va rio us se nio r role s, predominan tly in t he branded and t echnology se ctor s. J o be ca me Ch air o f the Re mun erati on Co mmi tte e on 1 O ctob er 2 017 an d, as s uch , she le ads th e C ommi tte e res po nsi ble fo r set tin g our remune ration policy. Other appointments: Jo is a N on - Exe cut ive Dire cto r and C hai r of the R emun era tion C om mit tee of H alma p lc, an d No n- E xec utive D ire ctor a nd Ch air of the Corporate Responsibili ty and Sustainabi lity Co mmit te e of J Sa ins bur y pl c. Sh e is al so a m emb er of the B oa rd of Ch apte r Zero, th e Dire cto rs’ Climate Forum. Jill McDonald Independent No n- E xecu tive D irec tor A N RB App oin ted to th e Bo ard: 1 Jun e 20 13 Skills and exper ience: Jill i s curre ntly C EO of C ost a C oe e. Sh e st ar ted he r ca ree r at Colgate-Palmolive Compan y , spent 16 years w ith Bri tish A ir ways Pl c and h as he ld a nu mbe r of s enio r mar keting p os itio ns in th e UK a nd over se as . Jill wa s CEO U K and P res ide nt for th e No rt h West Eu rop e divi sio n of M cD ona ld ’s, and he ld a nu mb er of othe r se nio r role s in th e com pany fro m 20 0 6. From May 20 15 u ntil Se pte mbe r 20 17 , J ill s er ved as C EO of the H alfo rds G roup p lc. From 20 17 to 20 19, Jil l ser ve d as M ana gin g Dire cto r of Ma rks an d Spe nc er C lothi ng an d Hom e. Board contr ibution: Jill h as ove r 30 ye ars’ experience working with high-proile international co nsu mer-fa cing b ran ds at b oth ma rketing a nd op erati on al leve l. As C hai r of the R esp on sib le Bu sin es s Co mmit te e, sh e lea ds th e Co mmit te e responsible for r esponsible busi ness objectiv es and s trate gy an d revie wing o ur ap proa ch to sustainable de velopment. Other appointments: Jill i s CEO of C os ta C oe e. * Gr aha m was a m emb er o f the B oa rd fro m 1 Jan uar y 2 010 t o 15 Ju ne 2 012 p rio r to be ing a pp oint ed a s Chi ef O pe ratin g O i cer o f Da ir y Farm In tern ati ona l Ho ldi ngs L imi ted 83 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Our B oard of D irec tors Our Boa r d o f Dir ect ors co ntin u e d Daniela Barone Soares Independent No n- E xecu tive D irec tor RB R App oin ted to th e Bo ard: 1 Ma rch 20 21 Skills and exper ience: Dan iel a is cu rrentl y Chi ef E xecu tive O i cer o f Snow bal l Imp act M an age me nt Ltd. S he was f orme rly C hie f Exe cuti ve O ic er of inan cia l adv iso r y and s trate gic c ons ult ancy, Gra nito G roup. P rior to t his, s he wa s Chi ef E xecu tive O i cer a t Imp etus , a pri vate eq uit y foun dati on an d Exe cut ive Ch air of G ove.d igit al, a pri vate tec hno log y bu sin es s work ing wi th the pub lic s ec tor to imp rove so cia l se rv ice s in B razi l. She h as s er ved o n vari ous c om merc ial an d non -p ro it b oard s and a dvi sor y b oard s, in clu ding Ha lma p lc, Evora S .A . i n Bra zil an d the U K Na tion al Advi so ry B oa rd to the G 8 So cia l Imp act I nves tme nt T ask fo rce. S he al so s pe nt ne arly 1 5 year s co mbin ed in rol es at S ave the C hil dren, B an cB os ton Ca pit al pri vate eq uit y , Citi ban k and G old man S ac hs. Board contr ibution: Dan iel a brin gs to th e IH G Bo ard a cl ea r com mitm ent to ES G res po nsi bili tie s and i n- de pth kn owl edg e of th e role o f tech nol og y in dri ving c han ge. Other appointments: Dan iel a is a D esi gnate d Me mbe r of S nowb all Im pa ct Inve stm ent s GP L LP , a dive rsi i ed inve stm ent f und fo cus ed o n ge ner ating in anci al retu rns w ith a po sit ive so cia l and e nviro nme nta l imp act . She i s als o a T rus tee of the H ad dad Fo und ation , a Me mbe r of th e Advi so ry Bo ard of Fo rwa rd Ins titu te and Truste e of th e Ins titu te for th e Future of Work . Ar thu r de H aa st Independent No n- E xecu tive D irec tor RB R App oin ted to th e Bo ard: 1 Jan uar y 20 20 Skills and exper ience: Ar thur h as he ld s evera l se nior ro le s in the J on es L ang L a Sall e (J LL) gro up, inc ludi ng Ch air o f JL L ’s Ca pit al M arkets A dvi sor y Co unc il and C ha ir and G lo bal C EO of J LL ’s Hote ls and H os pit alit y G roup. A rth ur is a lso a fo rme r Ch air of th e In stitu te of Ho sp ita lit y . Board contr ibution: Ar thur h as mo re tha n 30 ye ars ’ expe rie nce i n the c api tal m arket s, hote ls and h os pit alit y se cto rs, a lon g with s igni ic ant board-level kno wledge around sustainability . Other appointments: Ar thur i s Cha ir of J LL ’s Ca pit al Ma rkets A dvis or y C oun cil, an I nd epe nd ent No n- E xecu tive D irec tor of C hal et H otel s Limi ted and c hai r of its R is k Man age me nt Co mmi tte e, an d a me mbe r of th e Advi sor y B oar d of the S cot tis h Business School, University o f Strat hclyde, Glasgow . Duriya Farooqui Independent No n- E xecu tive D irec tor RB A App oin ted to th e Bo ard: 7 De ce mb er 20 20 Skills and exper ience: Duri ya is an I nd epe nd ent Dire cto r at Inte rco ntine nt al E xchan ge, I nc. (I CE ), a le adin g op erato r of gl oba l excha nge s and clearing houses, and pr ovider of mortgage tec hno log y , dat a and li stin gs s er vic es . Dur iya was prev iou sly Pre si den t of Sup ply C ha in Inn ovatio n at Georgia-Paciic, leading an organisat ion responsible for solving supply chain chal lenges through digital technology and collaboration. Prio r to this , sh e was E xec utive D ire ctor o f Atlant a Co mmi tte e for Pro gre ss , a coa liti on of ove r 30 C EOs p rovidi ng le ad ers hip o n ec ono mic grow th an d inc lus ion o ppo r tuniti es in At lant a. Dur iya ha s als o be en a p rinc ipa l at Ba in & Co mpa ny and C hie f Op erat ing O i ce r of the C it y of Atla nta . Board contr ibution: Dur iya’s diver se b oard a nd execu tive -l evel ex pe rien ce b ring s valu abl e ins ight s and p er sp ect ives to I HG . She c omb ine s mo re than two d ec ad es of re leva nt exp er tis e in bu sin es s strat egy , transfor mation and inno vat ion, w ith a cle ar c omm itme nt to dri ving re sp on sib le operations and div ersity . Other appointments: Duri ya is a m emb er of the B oa rd of T rib e Cap ita l Grow th C orp I a nd an Ind ep en dent D ire ctor a t Inte rcon tine nta l Exc han ge, Inc . She s er ve s on the b oa rds of N YSE a nd I CE NGX , both s ubs idi arie s of I CE , and c o -c hai rs th e NYS E Bo ard Ad vis or y Co unc il of C EOs. D uri ya is als o a T rus tee of A gne s Sc ott C ol le ge, a G overni ng Bo ard me mb er of th e Woo dru Ar ts C ente r , a me mbe r of th e Bo ard of C oun cilo rs of T he C ar ter Ce nter a nd a me ntor fo r the E xC o Gro up, LLC . Sharo n Rothstein Independent No n- E xecu tive D irec tor RB A App oin ted to th e Bo ard: 1 Jun e 20 20 Skills and exper ience: Sha ron cu rrentl y se rve s as O pe ratin g Par tne r of St ripe s Gro up, a grow th equit y irm investing in high-growth con sumer and S aa S (Sof t ware a s a Ser vi ce) co mpa nie s. She p revi ous ly se r ved a s Exe cuti ve Vic e Pre sid ent , Global Chief Marketing Oice r , and subsequ ently , as E xec utive V ic e Pres ide nt, G lob al C hief P rodu ct Oicer for Starbucks Corporati on. In add ition, Sharon has held senior mar ket ing a nd brand man ag eme nt po sit ion s at Se pho ra LLC, G od iva Ch oc olat ier, Inc., St ar woo d Ho tels & R es or ts World wid e, In c., Na bis co B isc uit C om pany an d Procter & Gamble Company . Board contr ibution: Sharon brings e xtensive bra nds , marke ting an d digi tal e xpe rt ise, h avin g worke d in se nio r po siti ons fo r more t han 2 5 year s at ic onic g lob al c omp anie s. I n add itio n to he r kno wle dge o f the h osp ita lit y ind ust ry, Sharo n has wid e -ran gin g boa rd- leve l exp erie nc e in a num be r of consumer -focused businesses. Other appointments: Sha ron se r ves o n the b oard s of Yelp, Inc . and B loc k, I nc. ; and al so fo r priv ate co mpa nie s T r ue Foo d Ki tche n, In c., C ali ia Farm s, LLC an d Levai n Bake ry, Inc. Board Committ ee member ship ke y A Audit C ommit tee m emb er R Remun eratio n Com mit tee me mbe r RB Resp ons ible B usi nes s Co mmit tee m emb er N Nomi nation C omm itte e mem be r Chair of a B oard C omm itte e Gove rn an c e 84 IH G | Annua l Repo rt a nd Form 20 F 202 1 Ma le, 7 Femal e, 5 Board composition Ge nde r split of Directo rs 0 –3 year s, 4 3– 6 yea rs, 1 6– 9 year s, 3 9+ ye ars, 1 a T e nur e of Non -E xec utive Dir ecto rs Ch ang es to t he B oar d and it s Co mmi tte es , and E xec utive C omm itte e Graham Allan G rah am was a pp ointe d as S eni or No n- E xec utive D ire ctor a nd me mb er of th e No min ation C om mit tee from 1 J anu ar y 202 2 Richard Anderson Rich ard wa s app ointe d to th e Bo ard from 1 M arc h 202 1 an d res igne d on 2 6 May 20 2 1 Daniela Barone Soares Dan iel a was ap po inted to t he B oard f rom 1 Ma rch 20 2 1 Anne Busquet Ann e retire d fro m the B oard f rom 7 M ay 202 1 Dale Morrison D al e retire d from t he Bo ard fro m 31 D ec em ber 2 02 1 In ad dition to th e above ch ange s, in J anuar y 20 2 2 the C ompa ny announ ce d that Patric k Ce sc au will retire a s Non - E xecutive C hair of th e Bo ard with e ect fro m 31 Augu st 20 2 2, with D ean na Op pen heim er to be a ppoi nted to the B oard a s Non - Exe cutive D irecto r and Ch air De sign ate ee ctive 1 Jun e 202 2 , to succ ee d Patric k Ce sc au as N on- E xecu tive Cha ir from 1 Se ptemb er 20 22 fo llowin g his retirem ent. a P atri ck C es cau h as s er ve d on th e Bo ard fo r nin e yea rs. A s no ted a bove, P atr ick w ill ret ire fro m the B oa rd from 1 S ep tem ber 2 02 2 af te r han din g ove r to De ann a Op pe nhe im er, who joi ns th e Bo ard fr om 1 Ju ne 2 02 2 to su cc ee d Pat rick a s Ch air. 85 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Our B oard of D irec tors In a ddi tio n to Keith B arr, Paul E dg ecl ie -Jo hn son a nd E lie M aa lou f, the E xec uti ve Com mi tte e co mpr ise s: Claire Bennett Gl oba l Chi ef Cu stom er O ice r App oin ted to th e Executive Committee: Oc tob er 20 17 ( joi ne d the G roup: 2 017 ) Skills and exper ience: Cla ire ha s an in - dep th kno wle dge o f the h osp ita lit y ind ust ry h aving s pe nt 11 yea rs at Am eri can E x pres s in a ra nge o f sen ior le ade rs hip rol es a cros s ma rketing , con sum er tr avel and l oyalt y . In h er ten ure the re, C laire w as Ge ne ral Ma nag er (G M), Gl oba l T ravel an d Life st yl e, whe re sh e led a te am re sp ons ibl e for d elive rin g luxur y life st yle s er vi ce s, an d she h eld a ddi tion al rol es inc ludi ng G M for C ons ume r Loyal ty, GM for U S Co nsu me r T r avel, an d Se nio r Vic e Pre sid ent, Gl oba l Mar keting a nd B rand M an age me nt. C laire ha s als o hel d se nior m arketi ng p osi tion s at De ll, as we ll as ina nc e and g ene ral m ana gem ent role s at Pe ps iC o/Qua ker Oat s Co mp any , b uil ding signiicant e xpertise across technology , retai l e -c om merc e, inan cia l se rv ice s, an d trave l and hospital ity secto rs. Cl aire ha s be en a n Exe cuti ve Bo ard M emb er o f the World Travel an d T ouri sm C oun cil ( W T TC), se rve d as a B oard M em be r of T umi I nc. an d par ti cip ated on mu ltip le in dus try a dvi so ry b oa rds. C lai re is a Ce r ti ied P ubl ic Acc ou ntan t and h old s an M BA from th e J. L. Ke llo gg Gr adu ate Sc hoo l of Management at North wester n Univ ersity . Ke y resp onsibi lities: These include a ll aspects of br and d esi gn an d com me rcial d eli ver y , loyalt y, partner ships, mark eting ex ecution and data analytic s. Jolyon Bulley Chi ef E xec utive O ice r , Gre ater C hina a nd Gro up T ran sfor matio n Le ad, Lu xur y & Life st yl e App oin ted to th e Executive Committee: Nove mbe r 2017 ( joi ne d the G roup: 2 00 1) Skills and exper ience: Prio r to his ap po intm ent as CEO fo r Gre ater C hin a, Jo lyon wa s Chi ef O per ating O ic er (C OO) for th e Am eric as , lea din g the re gio n’s op erati on s for fra nch ise d an d man age d hote ls , in addition to cultivating franchisee relations hips and enh anc ing h otel o pe ratin g per fo rman ce . Jol yon als o se rve d as C OO fo r Gre ate r Chin a for al mos t four ye ars , with ove rs ight of t he reg ion’s hote l po rt fol io an d bran d pe rfo rma nce , foo d and beve rag e bra nd so luti ons , new h otel o pe ning s and ow ne r rela tion s. In 2 02 1, he w as ap poi nted to le ad the L uxur y & Li fes ty le T ran sfor mati on Team. Jo lyon jo ine d IH G in 2 00 1, as D irec tor of Op era tion s in Ne w Sou th Wale s, Au stra lia, a nd then held r oles of i ncreasing r esponsibility across IH G’s As ia- Pa ci ic re gio n. H e be ca me Re gion al Dire cto r Sal es a nd M arketin g for Au stra lia, New Z eal and a nd So uth P aci ic i n 20 03, re lo cate d to Sin gap ore in 2 00 5 an d hel d po siti ons o f Vic e Pre sid ent O pe ratio ns S outh E as t Asi a and I ndi a, Vic e Pre sid ent R eso r ts, a nd Vi ce Pre si den t Op era tion s, So uth E as t and S outh We st As ia. Jo lyon gr adu ated f rom Wi llia m Angl is s Ins titute in M elb ourn e with a c on ce ntratio n on Touris m and Hospit ality . Ke y resp onsibi lities: These include the man ag eme nt, gro wt h and p ro ita bilit y of I HG ’s fas tes t-grow ing re gio n, Gre ate r Chin a, an d work ing to d evel op an d de in e a cle ar st rateg y for ou r Luxu ry & L ife st yle b rand s. Y as min D ia mon d, C B E xecu tive Vi ce Pre si den t, Global Corporat e Aair s App oin ted to th e Executive Committee: April 2016 ( joi ne d the G roup: 2 01 2) Skills and exper ience: Be fore jo ining I H G in 20 12, Y as min wa s Dire cto r of Co mmu nic atio ns at th e Ho me O i ce, w here s he a dvis ed t he H ome Se cret ar y , mini ste rs an d sen ior o ic ial s on th e stra tegic devel opment a nd dai ly manag ement of all t he Ho me O ice’s ex tern al an d inter nal communicati ons. She w as pre viously Dir ector of C omm unic atio ns at th e De pa rtm ent fo r Enviro nme nt, Fo od an d Rura l Aa irs; H ea d of Co mmu nic ation s for We lfare to Wo rk and N ew De al; an d He ad of M arke ting at th e De pa rtm ent fo r Education and Skil ls. Befor e join ing go vernment communic ations, Y as min was Publicity Co mmi ss ion er for t he B BC, w here s he l ed co mmun ica tion s act ivit y aro und th e lau nch o f a new d igit al le arni ng ch ann el an d arou nd th e BB C ’s ed uca tion al ou tput f or bo th adu lts an d chi ldre n. In 20 11, Yasmi n was awa rde d a Co mpa nion o f the Ord er of th e Ba th (CB) in t he Ne w Y ear ’s Hon our s Lis t in re co gniti on of h er c aree r in gove rnm ent co mmun ica tion s. In a ddi tion , Y as min si ts on t he Bo ard of Truste es fo r the B riti sh C oun cil, th e UK ’s inter national organisat ion f or cult ural relati ons and ed uca tion al op po rtu niti es, a nd is a B oa rd T rus tee me mbe r of th e Sus tai nab le Ho sp ita lit y Alli anc e. Ke y resp onsibi lities: Yasmi n is res po nsi ble fo r all gl ob al co rpo rate a air s acti vit y , focu se d on supporting a nd enablin g IHG’s broader strat egic pri oriti es . Thi s incl ude s all ex te rnal a nd inte rna l co mmun ica tion s, co verin g both c orp or ate and co nsu mer b ran d PR ; glo bal g overn ment a ai rs work ; an d le adin g IH G’s C orp orate Resp onsibilit y strategy . Nicolette Henfr ey E xecu tive Vi ce Pre si den t, General Counsel a nd Company Secretary App oin ted to th e Executive Committee: Feb rua r y 20 19 ( joi ne d the G roup: 2 00 1) Skills and exper ience: Nic ole tte j oin ed I HG in 20 01, a nd pr ior to l ead ing th e Bu sin es s Rep uta tion and R esp on sib ilit y fun cti on, he ld a nu mb er of se nior l eg al rol es, i ncl udin g De put y C omp any Se cret ar y , duri ng whi ch tim e she w orked w ith the B oa rd, E xecut ive C ommi tte e an d wide r organisat ion t o ensure best-i n-clas s deliv ery and compliance acr oss legal, go vernance and reg ulato ry a rea s. Ni co let te is a s olic itor q uali i ed in En glan d and S out h Afric a an d worke d as a corporate lawyer a t Linkla ters i n London and Fin dlay & Tait (now Bow man s) in Sou th Afri ca . Nic ol ett e was ap poi nted a s Co mp any Se cret ar y on 1 M arch 2 019. Ke y resp onsibi lities: Nico lette has global res po nsib ilit y fo r all are as of c orp ora te gover nan ce, legal, risk management, insura nce, regula tory co mpli anc e, inte rna l audi t, an d hote l st and ards . O ur E xec ut iv e C ommit t e e Gove rn an c e 86 I HG | Annua l Repo rt a nd Form 20 F 202 1 Ma le, 7 Femal e, 3 Exe cuti ve Comm itte e comp os itio n Ge nde r split of Execu tive Commi tte e Wayn e H oa re Chi ef Hu man R eso urc es O i ce r App oin ted to th e Executive Committee: September 2020 ( joi ne d the G roup: 2 02 0) Skills and exper ience: Wa yne has more than 30 ye ars o f expe rie nce i n HR a nd joi ne d IH G from RC L FOO DS, w here h e sp ent s even ye ars a s the co mpa ny’s Chi ef Hu man R eso urc es O i ce r , le adin g RC L FOO DS ’ cult ure bui ldin g and t ale nt stra tegy fo r 25,0 0 0 emp loye es. P rio r to joini ng RC L FOO DS, Wayn e sp ent 2 6 year s at Uni leve r , whe re he wo rked a cros s a bro ad ra nge o f role s in bo th matu re and d evel opi ng ma rkets a cros s Europ e, N or th Am eric a, As ia, Af ric a and th e Middle East. Wayne’s mo st re cen t role at U nil ever wa s as SV P , HR – G lo bal C ent res of E xp er ti se, wh ere h e hel d res po nsi bilit y fo r the G lob al Talent , Lea der shi p Deve lo pme nt an d Reward te am s. H e led t he deve lop me nt of the c om pany ’s HR st rateg y on e nab ling a p er for man ce cu lture fo cus ed on grow th . Ke y resp onsibi lities: These include global talent manage ment, learning and c apability buildin g, diversity , organ isation development, rew ard and be ne it p rogr amm es, e mpl oyee re lati ons a nd al l as pe cts o f the p eop le an d org anis ati on str ateg y for th e Gro up. Kenne th Macpherson Chi ef E xec utive O ice r , EME A A App oin ted to th e Executive Committee: April 2013 ( joi ne d the G roup: 2 01 3) Skills and exper ience: Kenne th be ca me C EO, EM EA A i n Jan uar y 20 18 . Kenne th was p revio usl y IH G’s CEO fo r Gre ater C hin a, a rol e he he ld fro m 20 13 to 20 17 . Kenne th ha s exte nsi ve exp erie nc e acro ss s al es, m arketi ng str ateg y , b us ine ss deve lop me nt and o pe ratio ns . In ad diti on to 12 yea rs liv ing a nd wor king i n Chi na, Ken neth’s ca ree r incl ude s exp eri enc e in As ia, th e UK , Fran ce and S out h Afric a. B efo re IH G, Kenn eth wor ked for 20 ye ar s at Dia ge o, one o f the U K’s lea ding branded com panies. His s enior management po siti ons i ncl ude d se rv ing a s Ma nagi ng Di rec tor of Di age o Gr eate r Chi na, wh ere h e hel pe d to bui ld the c omp any ’s pres enc e an d led t he la ndm ark de al to ac quire S huiJ ing Fang, a l ead ing m anuf act urer of Ch ina’s nati ona l drin k, an d on e of the ir st fore ign ac qui siti ons o f a Chi nes e lis ted c om pany. Ke y resp onsibi lities: Ken neth i s res po nsib le fo r the m ana gem ent , grow th an d pro it abi lit y of the EM EA A re gio n. H e als o man ag es a p or tfo lio of hote ls in s om e of the wo rld ’s mos t excitin g de stin atio ns, i n both m ature a nd em ergi ng ma rkets . G e o r g e Tu r n e r Chi ef C omm erci al and Tech nol ogy O ice r App oin ted to th e Executive Committee: January 20 09 ( joi ne d the G roup: 2 00 8) Skills and exper ience: In Feb ruar y 2 019, Ge org e was ap po inted a s Ch ief C omm erc ial an d T ech nol og y O ic er. Prior to th is, G eo rge sp ent over a d ec ade a s IH G’s E VP , Ge ne ral C oun se l and C om pany S ec reta ry, with res po nsi bili ty fo r corporate governance , risk a nd assurance, legal , corporate responsibili ty and in format ion securi ty . He i s a sol icito r , qua lif yin g to priva te pra ctic e in 19 9 5. B efore j oini ng IH G, Ge org e sp ent ove r 10 ye ars wi th Imp eri al C hem ica l Ind ust ries P LC, whe re he h eld v ario us key po siti ons i ncl udin g Deput y Company Secretary and Senior Legal Coun sel. Ke y resp onsibi lities: These include dist ributi on; channels; re venue management; property , owner , guest and enterpri se solutions ; guest r eservations and c usto me r car e; digi tal; i nform atio n se curi ty; tec hno log y and g lob al s ale s. 87 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Our E xec utive Co mmit tee G ove r n a n c e s t r u c t u re Management C ommi ttees Op eratio nal ma tter s, routin e bus ines s and i nformati on dis clo sure proc edu res are de leg ated by the B oa rd to Mana gem ent C ommit tee s. The M ana gem ent C ommit tee s are co mpri sed o f seni or execu tives, incl uding w here rel evant, the E xec utive Dire ctor s. The E xec utive Co mmit tee i s chaire d by the C EO and con sid ers an d man age s the day-to - day strate gic and o per ationa l iss ues f acing th e Group. I ts rem it inclu de s executing th e strate gic pl an onc e agre ed by the Bo ard, mo nitoring th e Group’s per for manc e and p roviding as suran ce to the B oard in re lation to overa ll pe rfor manc e and risk management. The G en eral Pu rpos es C omm itte e is ch aired by an E xec utive Co mmit tee me mbe r and at ten ds to item s of a routine n ature and to the adm inistra tion of m atter s, the p rincip les o f which h ave bee n agre ed prev ious ly by the Bo ard or an a pprop riate C ommit tee . The D isc los ure Co mmit tee is c haire d by the Grou p’ s Fina ncial Co ntrolle r and en sure s that prop er p roce dures a re in pla ce for sta tutor y and lis ting re quirem ents . This C omm itte e rep or ts to the Chie f Exe cutive O i cer, the Chief F inan cial O i cer a nd the Audit Commit tee. Co ndu ct of B oa rd an d Com mit tee M ee ting s The C hair an d Co mpany S ecret ar y ope rate a co llab orative pro ce ss for se tting th e Bo ard age nda to e nsure th at the foc us and d iscu ss ion strikes th e appro priate b alanc e be twe en the s hor t-term ne ed s of the bus ine ss an d the lon ger te rm. Th e Chai r or Co mmit tee C hairs , CEO and C omp any Sec retar y al so liai se in a dvanc e of ea ch Bo ard and Co mmit tee me etin g to ina lise th e age nda s, set th e order i n which items a re con side red an d ens ure that e ach ma tter i s allo cate d suicie nt time. The Company Secretar y maintains an annual agenda sch edu le for B oard me eting s that se ts out s trategi c and op erati onal mat ters to b e con side red. The B oard h eld e ight sc hed uled m eeti ngs dur ing the yea r and indiv idua l atten dan ce is s et out o n pag e 81. All D irec tors are expe cted to at ten d all Bo ard me etings a nd rel evant Co mmit tee me etings u nles s they are p revented fro m doing s o by prior com mitme nts, illn es s or a co nl ict of inte rest . If Dire ctor s are unab le to atten d Bo ard or C ommi tte e mee tings, th ey are sen t the releva nt pap ers a nd as ked to provide c omm ents to th e Chai r of the B oard or C ommit tee i n advan ce of the m eeti ng so th at their c omm ents can b e duly c ons ide red. Tim e is set a sid e at the st ar t and en d of ea ch Bo ard me eting fo r the CEO to me et with th e Chai r and No n- E xecu tive Direc tors, a nd for th e Cha ir to mee t privatel y with the S enio r Inde pe nde nt Non - E xecutive Dire ctor (SI D) and No n- E xecuti ve Direc tors to dis cus s any mat ters arisi ng. Th e SI D contin ues to b e availabl e to disc uss c onc ern s with sh areho lde rs, in a dditio n to the nor mal ch anne ls of shareholder commu nication. Our g overnan ce fram ework is h ea ded by th e Boa rd, which d ele gates ce rt ain man age ment a nd overs ight res pon sibil ities to vari ous com mit tees to fu rth er IH G’s purp os e, value s and str ategy , while con duc ting bu sine ss in a re sp onsi ble ma nne r . E xecu tive man agem ent are res pon sibl e for the imp lem ent ation of s trategy w hich is d elive red by the Gro up’ s work force . The B oa rd an d its Prin cip al C omm itte e s The B oard i s resp ons ible fo r promoti ng the lo ng- term sus tain abl e suc ce ss of th e Group a nd es tab lish es it s purp ose, val ues a nd strate gy . O pe ration al mat ters , routine b usin es s and info rmatio n dis clos ure proc edu res are de leg ated by the B oa rd to Mana gem ent Co mmit tee s, with the exc eptio n of a numb er of key dec isio ns and mat ters th at are res er ved for th e Bo ard. The s che dul e of mat ters rese r ved for th e Bo ard was reviewe d at the D ec emb er 20 21 B oard me eting an d is availab le on o ur webs ite. The B oard i s supp or ted by it s four Prin cipal C om mitte es (Au dit, Nom inatio n, Remun eratio n and Re sp onsi ble B usin es s), all of which con sis t of No n- E xecutive D irec tors. T hes e co mmit tee s ass ist th e Bo ard in ca rry ing out i ts func tion s and in th e oversig ht of the de liver y of the s trategic o bje ctives i t sets fo r mana gem ent. C omm itte e Re po rt s, inc lud ing in form atio n on the ir ac tivi tie s durin g 202 1, ca n be fou nd on p ag es 9 5 to 125 . Purs uant to Se ctio n 172 of the C omp anie s Act 20 0 6, the B oard h as a dut y to act in a way mo st likely to p romote the s ucc es s of the C omp any for the b ene i t of its m emb ers, w hile havin g rega rd to six add itiona l facto rs, inc ludin g the intere sts o f key stakeho lde rs. Th e Bo ard’s Se ction 17 2 state ment d es cribin g how st akehol der c ons ider ations are taken i nto acc ount is in corp orate d in the d esc ription o f the activ ities o f the Bo ard on p age s 90 a nd 91 . Furth er d eta ils of key s take hol der s and e ng age me nt duri ng 20 21 c an b e foun d on p age s 20 to 28 , 36, 3 9, 92 , 10 1, 107 , 10 8, 112 to 114 , 22 7 an d 22 8. The B oard i s also re sp onsi ble for rev iewing th e mea ns for th e work force to rai se co nce rns in c on ide nce a nd the re por ts a risin g from its o pe ration (comm only k nown a s whistl ebl owing) and it reviewe d con id ential d iscl osu re chann el rep or ts thro ughou t 202 1. In ad dition, a N on - Exe cutive Di rector i s nomi nated to rep res ent the Voice of the Em ployee in B oa rd discu ss ions . Se e our Voice of th e Empl oyee dis clos ure on pa ge 10 1. M ore in form atio n on our B oa rd and C om mit tee s is ava ilab le at ww w .ihgplc.com/i nv estors under Corpora te g overna nce. Gove rn an c e 88 I HG | Annua l Repo rt a nd Form 20 F 202 1 B o a rd a c ti v iti e s Ma tt ers t he Boa r d di scussed in 2 021 Board Meeting s The B oard m et for ei ght sch edul ed m eetin gs durin g the year. Du e to the ong oing imp act o f the pan dem ic, Bo ard me etings were co ndu cted by vi deo c onfere nce . The foll owing t able g ives an over view of th e regul ar and s tand ing item s dis cus sed a nd de cis ions mad e. Th e tabl e overle af det ails the key mat ter s disc uss ed by the Bo ard in 202 1 an d our Se ctio n 172 st ateme nt, inc ludin g informati on Regular and standing it ems In ad dition to key focu s area s outlin ed on th e followi ng pag es, th e Bo ard con sid ers a nu mbe r of regul ar and s tan ding item s at ea ch me eting: Are a of d isc us s ion Discussion topic and decisions made Chair' s matters T he Ch air provi ded a n update o n Bo ard develo pme nts an d me eting pl ans an d his cur rent area s of focu s and e ngag eme nt. Chie f Exe cutive O i cer 's mat ter s Th e Chie f Exe cutive O i cer p rovide d an up date of deve lopm ents w ithin the b usin es s. Up dates fro m eac h of the Bo ard C om mit tee s The C omm itte e Cha irs rep or ted b ack to the B oard o n mat ters c overed dur ing the ir me etings . Det ails o f Com mit tee ac tivitie s during 2 02 1 can b e found o n pag es 9 5 to 125. Financial per formance Th e Bo ard rece ived re gular u pdate s from the C hief F inan cial O icer o n rec ent and c urrent tra ding, incl uding Rev P AR, o pe rating pro it , net syste m size grow th an d cas hl ow , and th ese we re com pare d to com petitor s’ resu lts. I nternal p roje ction s were co mpare d with th e con sen sus of a nalys ts’ fore cas ts to ens ure that the C omp any’s pros pe cts we re approp riatel y rel ecte d in market exp ec tatio ns. Co rp orate g overn anc e The B oard re cei ved reg ulator y deve lopm ent up dates f rom the C omp any Sec retar y an d Gen eral Co unse l, coveri ng regul ator y chan ges i n areas s uch a s corp orate re por ting, exe cutive rem unera tion, clim ate chan ge, diver sit y , wo rkfo rce eng age ment , huma n rights, d ata p rotectio n and sh areh olde r bo dy voting guidelines . Cyb erse curity The Bo ard rec eive d regul ar upd ates on cy ber a ctivi ty an d inform ation se curit y , inclu ding a de tail ed pres ent ation from th e Chie f Co mme rcial an d T e chno log y O ice r and th e Chie f Inform ation Se curit y O ic er . The se c overed thre ats an d trend s in the ho spit alit y indu str y , th e Group’s key systems and ri sk app etite as we ll as ma nagi ng cybe r risks i n a remote e nvironme nt. Th e Boa rd also revi ewed the p olici es and a ctio ns taken to a ddres s thre ats and m itigate ris ks. Princi pal ris ks, interna l control s and ri sk man age ment sy stems The B oard re cei ved reg ular up dates o n prin cipal a nd em erging ri sks, inte rnal c ontrols , risk m anag eme nt system s, the G roup’s risk app etite, bu sine ss c ontinu ity a nd the gl obal i nsura nce p rogram me. C ommit tee Cha irs als o del ivered re por t s on risk to pic s in relatio n to the are as of remi t for thei r resp ecti ve Com mit tees . The B oard re gards th e man age ment of ri sks in b usin es s as fund ame ntal to it s role an d doe s this by ens uring th at appro priate c ontrols a nd pro ces se s are in pl ace. T he reg ular m onitorin g of the G roup’s risk man age ment sys tems al lows the B oard to en sure th at iss ues th at might oth er wis e impa ct the G roup’s repu tation fo r high st and ards of b usin es s con duct a re avoided o r mitigate d as ap propr iate and th at the Group i s po sition ed to re spo nd to unc er taint y in an a gile ma nne r . Inv estor r elations The B oard re cei ves a reg ular rep or t outli ning sh are regi ster move ment , relative s hare pri ce pe r forman ce, investor re latio ns acti vitie s and en gag eme nt with sh areho lde rs. T he Bo ard als o con sid ered v iews sh ared from the re gular i nvestor an d anal yst pe rcep tion stu dies a nd fee dba ck sur veys as we ll as in divid ual me etings w ith investor s. abo ut how st akeho lde rs were co nsi dere d. In b oth tab les , com merci ally se nsi tive inform ation ha s be en exclud ed. I n severa l area s, muc h of the sub st antive prep aratio n work too k plac e within the B oard ’ s Co mmit tee s and wa s later c on irme d by the Bo ard or the wh ole B oard at tend ed c er tain s ec tions of C om mitte e me eting s. Whe re this was th e ca se, the di scu ssi ons are tre ated a s having t aken pla ce at B oard leve l. 89 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Bo ard activ ities Key matte rs di sc us se d in 20 21 an d Se cti on 172 st ate men t Se ction 17 2 of the C omp anie s Act 20 06 re quire s a direc tor of a co mpany to ac t in a way most l ikely to promo te the suc ce ss of th at com pany for th e ben e it of its m emb ers , while h aving reg ard to six ad dition al fac tors. T hes e are: the l ong -term c ons equ enc es of a d eci sion; the intere sts o f its em ployee s; bu sine ss rel ation ship s with sup plie rs, cu stome rs an d other s; its im pac t on the c ommun ity an d environ ment ; the de sirab ilit y of maint ainin g high st and ards of bu sine ss c ond uct ; and th e nee d to act fa irly be twe en me mbe rs of the c omp any . T he ta ble be low summ aris es so me of th e main m atter s dea lt with by the B oard d uring the ye ar and h ow it took th e Se ction 17 2 factor s into acc ount . The re levant Se ctio n 172 fac tors are id enti ie d in the key at the bo ttom of th e pag e. Finance and perfor mance Three-y ear inancial plan and competitor performance The B oa rd app roved t he Gro up’s thre e-ye ar ina nci al pla n and m oni tore d per fo rma nce i n light o f cha nge s to ec ono mic a nd in dus try g row th fore ca st s durin g t h e y e a r. A F In ap provi ng the G rou p’s three -yea r in an cial p lan , the B oard c on sid ere d the a ss umpti ons a nd ri sks inh eren t in the p lan i ncl udin g the o utlo ok fo r sign ings a nd b ad de bt ris k, e xpe cte d ca sh low s and pro spe ct s for th e Sys tem Fund . The th ree -ye ar pl an for th e bu sin es s put s its m ed ium -term t arg ets into a qu anti ia ble f orm, a nd mo nito ring p rogre ss a gai nst t he pl an prov ide s a me cha nis m for th e Bo ard to ba lan ce th e inte rest s of st akeh ol der s suc h as ho tel own er s, em ploye es a nd le nd ers w ith tho se of s hare ho lde rs . It al so for ms the b as is on w hic h targ ets fo r exec utive re mun erati on are s et. The B oa rd als o rec ei ved pr ese nt ation s on th e Gro up’s main c omp etito rs an d the ir pe r form anc e. By exa mini ng the p er for man ce of th e Gro up’s com pet itors , the B oa rd can a ss es s the G rou p’s pe rfo rma nce i n co ntext a nd dr aw out ar eas w he re lon ger-ter m improv eme nts c an b e mad e. Financial stat ements The B oa rd co nsi der ed th e full a nd ha lf yea r res ults s tat eme nts , the go ing c onc er n and vi abi lit y st atem ent s mad e in the A nnu al Re por t an d whe the r the An nua l Rep or t was f air , bal anc ed and understandable. E F Thro ugh th e tim ely p ubli cat ion of a cc urate an d ba lan ce d in anc ial s tate me nts, t he Bo ard e nsu res that s har eho lde rs an d oth er st akeh old ers h ave eq ual a cc es s to imp or ta nt info rmati on an d the busine ss maintains its reput ation for high r epor ting standa rds. Dividend The B oa rd co nsi der ed di vid end p ayme nts a nd co ncl ude d that i t woul d not b e app rop riate to p ay a divi de nd dur ing 20 2 1. A B C E F The B oa rd wei ghe d vario us s take hol der i ntere st s whe n con si deri ng div ide nd p ayme nts a s well a s the ne ed to ex hibi t high s tan dard s of bu sin es s co ndu ct. I t co nsi der ed th e Grou p’s ina nci al pe r form anc e, mar ket expe ct atio ns, t he inte res ts of s hare ho lde rs an d len de rs as w ell a s the p osi tion o f broa de r st akeho ld ers , incl udi ng em ploye es , supp lie rs an d hote l own ers . It c onc lud ed th at it wo uld no t be app rop riate fo r the C omp any to pay a d ivid en d durin g the ye ar , noti ng tha t it wou ld co nsi de r futur e divi de nds o nc e vis ibili ty o f the p ace a nd sc al e of ma rket rec over y im prove s. Sub se que ntly, the Bo ard is p rop osi ng a inal d ivi den d of 8 5.9 ¢ pe r ordi nar y s hare in re sp ec t of 20 21 , payab le in M ay 20 22 s ubj ect to s ha reho lde r ap proval at t he 20 2 2 AGM . Strategic an d operationa l matters Brand integ rity The B oa rd co nsi der ed th e prog res s of it s stra tegi c init iative to i mprove th e qu alit y an d con sis ten cy of the H ol iday In n and C rown e Pla za e st ates i n the Ame ric as an d EM E AA . The B oa rd fur th er en dor se d on goin g eo rt s to enh anc e the p os itio ning o f the H oli day Inn b ran d in the U S. A C The B oa rd foc use d on m aint ain ing th e integ rit y of the G rou p’s brand s to en sure th at gu est s ca n be co n ide nt in the ir exp ec tat ion s whe n st aying in a n IH G hote l. In a ss es sin g the in itia tive to en gag e with the ow ner s of c er tai n Crown e Pla za a nd H oli day Inn h otel s that re qu ired i mprove me nts to qu alit y of se rv ice a nd pro pe rt y c ond itio n, the B oa rd weig hed t he sh or t-term i mpa ct on s yste m size a gai nst th e po siti ve lon ger-ter m be ne it s of ma inta inin g bran d st and ards i n the bro ad er e sta te for ho tel own er s and guests. As p ar t of the B oa rd’s over sight o f bra nd str ateg y and re co gni sin g the ne e d to keep g ues t exp erie nc es an d hote l own er retu rns re levan t and at tra ctiv e, the B oar d con sid ere d and e nd ors ed ong oin g eo rt s for c ontin uou s imp rovem ent in re lati on to var iou s asp ec ts of t he Ho lid ay Inn b rand , tak ing i nto co nsi der atio n the im pac t on gu es ts fro m an imp roved ex pe rien ce a nd the i mprove d ec ono mic s tha t woul d low t hrou gh to hote l own ers . Se e pa ges 1 0 to 13 for a d es crip tion o f the bu sine s s mod el an d pa ge s 19 to 2 2 for ho w the G roup e nga ge s with it s hote l own ers a nd gu es ts. Brand portfolio The B oa rd co nsi der ed th e opp or tun ity to a dd a co lle ctio n bra nd to the G rou p’s Luxur y & Life st yl e po rt fol io an d it app roved t he la unch o f the V ign ette Collection br and. A C D In ap provi ng the n ew br and l aunc h, th e Bo ard ha d reg ard for va riou s st akeho ld ers a nd co ns ide ratio ns . The B oa rd rec og nis ed ho tel own er s’ de sire fo r a co lle ctio n bra nd tha t woul d give th em ac ce ss to IH G’s dis trib utio n and l oyalt y pro gram me s, whi le all owin g light-to uch b ran ding t hat wo uld ret ain the in div idu alit y of th eir p rop er tie s with re lati vely l ow ca pit al req uire men ts an d att ract ive ec on omic s. The B oa rd als o ha d reg ard for s hare ho lde rs in re lati on to th e lon g-te rm imp ac t on sys tem s ize an d the lowe r envi ronm ent al imp ac t of co nvers ion p rop er tie s. Th e Bo ard al so c ons ide re d the ap pe al of h aving mor e diver se s ty les o f prop er t y , whic h woul d inc rea se gu est s’ op tion s whe n bo ok ing wi th IH G an d enh anc e the I H G Reward s pro gram me’s valu e. For mo re info rmat ion o n the G roup’s pri orit y to ‘b uild love d and tr uste d br and s’ , s ee p ag es 17 an d 18 an d fur th er info rmat ion o n its e nviron me ntal fo otp rint is avai lab le on p age s 29 to 3 5. Loy alty Strategy The B oa rd co nsi der ed an d app roved t he rel aun ch of IH G Rew ards . A C In ap provi ng ma teria l cha nge s to the I HG R eward s pro gram me, th e Bo ard co nsi de red th e co mpe titive po siti on of th e pro gram me, it s abi lit y to drive rev enu e for own er s and a cc ele rate sys tem s ize grow th , the e nha nce d val ue pro po siti on for m em ber s and g ue sts , and th e imp ac t of the c han ges o n own ers ’ co st ba se a nd op era tion s. B o a rd a c ti vi tie s c o nti nu e d Ke y to conside rations A Long term C Suppliers and cust omers E High standards B Emp loye e s D Com munit y and e nvironme nt F Act fairly b et wee n memb er s Gove rn an c e 90 IHG | Annua l Repo rt a nd Form 20 F 202 1 Strategic an d operationa l matters continued T echnolo gy The B oa rd co nsi der ed an d app roved ev olvi ng the Gro up’s relati ons hip w ith the m ain s upp lie r in res pe ct of the G rou p’s Gues t Re ser vat ion S yste m (GRS). C The B oa rd co nsi der ed an d app roved ev olvi ng the G rou p’s relatio ns hip wi th its s upp lie r from a jo int proj ec t deve lop men t mod el to a p rodu ct de velo pm ent an d sup po rt m od el. I n mak ing it s de cis ion , the B oa rd care full y co nsi dere d the r isks a ss oc iate d with t hes e ch ang es an d the ir imp ac t on the sup pli er , the c omp etit ive ad vant age s of revi se d fun ctio nal it y , a nd th e cos t imp lic atio ns of th e ch ange . De tail s of th e tech nol og y-re late d ris ks to the b usi nes s are g iven o n pag e 4 5. Supply cha in and procuremen t The B oa rd rec eive d an ove r view o f the st rateg y and a ppro ac h to cor por ate and h otel p roc urem ent and endorsed t he st rategy and a pproach. C D E In c ons ide ring t he pro cure me nt stra tegy a nd ap pro ach , the B oard p aid p ar ticu lar a tte ntion to t he init iative s tha t leve rage o ur sys tem -wi de bu ying p owe r and s imp lif y the p rocu rem ent pro gra mme to lowe r co sts fo r own ers w hile m aint ain ing a hi gh- qu alit y gu es t expe rie nc e, sup po rti ng su sta ina bili ty with in the s upp ly ch ain, a nd en sur ing th at sup pli ers o pe rate in a re sp ons ibl e man ner. Furth er info rmati on on t he Gro up’s res pon sib le pro cu reme nt pro gram me i s incl ude d on p ag e 39. Gr owt h Str ate gy in Re gi ons – Gr eate r Ch in a, EM EA A a nd Am eri ca s The B oa rd rec eive d in - dep th reg ion al up date s from the C EOs of e ac h of the G rou p’s three re gion s, an d provi de d over sight w ith re gard to th e Gro up’s grow th stra tegy ove r bo th the s hor t an d lon g term . A C The B oa rd rec eive d re gula r upd ate s from th e Grou p’s ope ratin g regi ons , cove ring th e Gro up’s po siti onin g and p er for man ce in re leva nt mar kets, u nde rly ing grow th d river s and t he co mp etiti ve envi ronm ent , and fu rt her fo cu se d on ac tion s to ac ce ler ate the G roup’s grow th . In it s dis cus sio ns, the B oa rd pai d par tic ula r atte ntio n to criti ca l owne r co nsi der atio ns in re lati on to grow th, s uch a s inancing and cost a nd supply constra ints. Board gov e rnance Director succession The B oa rd pro gres se d su cc es sio n pla nnin g in rel atio n to the C hai r of the B oa rd and a ppo inte d a new S eni or Ind ep en dent N on - E xecu tive Di rec tor (SI D) and Non-E xecutiv e Dir ector f or wor kforce engagement. A B E Whe n pro gre ssi ng B oard s ucc es si on pl ans , the B oar d bal anc ed th e de sire to m aint ain hi gh st and ards by co mply ing w ith the U K C orp orate G ove rnan ce C od e with th e sh or t-term n ee d to kee p Non - E xecu tive Dire cto rs in p os itio n for lo nge r tha n prefe rre d in ord er to ma inta in exp er tis e and c ont inuit y. The Bo ard als o ha d con sid era tion fo r the i mpo rt an ce of e mpl oyee fe ed bac k and c on sid ere d and a pprove d the tran siti on of re sp ons ibi litie s in re latio n to the N on - Exe cuti ve Dir ecto r with re sp on sib ilit y for wo rk force eng ag eme nt, t aki ng into a cc ount N on - Exe cuti ve Dire cto r time c om mitm ent s and b road er B oa rd succession plans. Peo pl e & Pla net O ic e rel oc ati on an d new w ays of work ing The B oa rd revie wed th e le as e arran ge men ts for th e Gro up’s main c orp orate o i ce l oc ation s in th e US and t he U K and d eci de d to relo ca te its U K co rpo rate o ice to a n ew lo ca tion in 2 02 2. The B oa rd fur th er co ns ide red a nd en dor se d new hybri d ways of wo rkin g. A B D E The B oa rd co nsi der ed var iou s relo ca tion o ptio ns for t he Gro up’s glo bal h ea d oi ce in t he U K. In ma kin g the d eci sio n to le ase a n ew o ic e in Wi nds or, the Bo ard ha d reg ard for th e imp ac t of the move o n emp loyee s, th e co mmun ity a nd th e envi ronm ent. A d es cri ption o f the B oar d’s acti vit y an d co nsi der atio n of Se ctio n 172 fa cto rs is i nclu de d in the c as e stu dy on p ag e 92. In c ons ide ring a nd e ndo rsi ng a res hap e d, le xibl e app roa ch to wor king fo r the G roup’s co rp orate o ice s as C ovi d-19 - rel ated re str icti ons e as ed, th e Bo ard h ad co ns ide ratio n for th e imp act o n emp loye es an d the ir wel lne ss a s well a s e ici enc y , c ultu re and te amwo rk. T he Bo ard we igh ed th es e aga ins t the c ost s avin gs fro m a sm alle r rea l est ate fo otpr int, th e e ici enc y availa ble f rom uti lisi ng mor e mod ern c omm unic ati ons te chn ol ogy, and the a bili ty to at tra ct n ew and m ore di vers e em ploye es at trac ted by lexib le wo rkin g. St a sh or ta ge s an d tal ent r ete ntio n The B oa rd co nsi der ed re por t s of st a sh or ta ge s in the h osp ita lit y ind ust ry i n vario us re gion s foll owin g the e asi ng of l ockd own. T he C EO outli ne d the im pac t this c oul d have o n hote l owne rs an d leve ls of g ues t sat isf acti on if p rolo nge d an d the ne e d to focu s act ivit y on t ale nt rete ntio n in a co mpe titiv e market . B C The B oa rd co nsi der ed st a s hor t age s in th e broa de r hos pit ali ty in dus tr y and th e imp ac t that th is co uld h ave on em ploye es in o wne d and m an age d le as e hote ls, a s well a s the wi de r man age d an d franchised estate. In te rms of t ale nt rete ntio n amo ngs t the G roup’s co rpo rate e mpl oyee s, the B oa rd note d the in cre as ed co mpe titio n in the j ob m arket an d revie wed it s me asu res o f sta eng ag eme nt an d well bei ng an d level s of st a tu rnove r . I n co nsi der ing th e emp loym ent m arket , the B oard to ok in to acc oun t the n ee d to bal anc e ap prop riate ly rewa rding a nd mo tivati ng it s emp loyee s whi le dri ving p ro ita bili ty, growt h and e ici enc y throu gh the b us ine ss o n be half o f sha reh old ers . Se e pa ge 5 3 for de tai ls of th e emp loye e eng ag eme nt sc ore K PI an d pa ge 4 4 for h ow ris ks as so ciate d wit h tal ent re tentio n are m ana ge d. Ou r pe op le an d cu ltur e The Board regularl y considered w orkplace cu lture , tak ing i nto ac cou nt the fe ed bac k prov ide d from th e Voice of t he Em ploye e eng ag eme nt pl an an d acti ons take n to sup po rt e mpl oyee s. Th e Bo ard rev iewe d emp loye e com muni cat ion s and we llb ein g me asur es and f ur the r had ove rs ight of th e Gro up’s DE &I ini tiative s. B D The B oa rd as se ss ed a nd mo nitor ed cu lture th roug hou t the ye ar , rec eiv ing re gula r upd ate s from th e CEO an d from t he Voice o f the Em ploye e en gag em ent pl an. T he Voic e of the E mpl oyee e nga gem ent pla n ha s playe d a key role in i nform ing th e Bo ard re gard ing em ploye es ’ intere st s and s upp lyin g ins ight s for th e Bo ard to un der st and th e imp act o f its d ec isi ons o n emp loye es. T he B oa rd fur the r co nsi dere d stra tegi c upd ates f rom ma nag em ent in re lati on to t ale nt and l ea der shi p deve lop me nt and l ear ning , cha mpi onin g a dive rse , equ ita ble a nd in clu sive c ulture , and fu ture ways o f work ing. I nfor matio n on th e Voice of th e Emp loye e eng age me nt pl an duri ng th e year i s set o ut on p age 1 01 a nd fu rth er info rmati on in re lati on to em ploye e an d work pla ce cu lture i s inc lud ed on p ag es 24 , 25 an d 37 . Dec arbonis ation strategy The B oa rd app roved t he Gro up’s upg rad ed sci en ce -b as ed t arge t (SBT ) fro m a 2.0 °C to 1. 5° C alig ne d targ et an d fur the r app roved t he G roup’s co mmitm ent to t he ‘ UN R ace to Ze ro’ . A C D F In ap provi ng the e nh anc ed S BT , the B oa rd took i nto co nsi de ratio n the la tes t in cli mate s cie nce a nd the l ong -ter m imp act o f clim ate ch ang e on th e enviro nme nt an d the G roup’s bu sin es s, the ex pe ct atio ns of inve stor s and o the r sta keho lde rs, l ever s availa ble to t he G roup to ac hieve t he SB T , and th e imp act to own ers i n achi evin g hote l- level t arg ets . S ee p age s 20 to 28 , 39, 9 2, 10 1, 107, 108, 112 to 114 , 2 27 an d 2 28 for i nform atio n abo ut how w e have en gag ed w ith ou r sta keho lde rs in 2 02 1. Fur the r det ails of ou r rega rd for th e envi ronm ent are o n pa ge s 15, 2 9 to 35 an d 10 0 to 10 1. 91 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Bo ard activ ities B o a rd a c ti vi tie s c o nti nu e d Our shar eholders and in vest ors Shareholders and in vestors engagement Fundame ntal to I HG ’s ability to a cce ss c apit al ma rkets, and s ust ain it s truste d reput ation a nd lon g-te rm suc ce ss, i s its abi lity to maint ain stron g relatio nshi ps with it s sha reho lder s and in stituti onal inve stors . Discussion poin ts in 2021 Engage ment Outcom es • The co ntinu ed im pa ct of th e pan de mic on th e hos pit ali ty s ec tor an d IH G whic h in lue nc e IH G’s trad ing p er form anc e, i nan cial re su lts an d ca pit al alloc ation strateg y • Executive remuneration policies including the p otent ial u se of di sc retio n; alig nme nt with wo rk forc e pay an d tal ent re tenti on • Conc ern s ab out c lima te cha nge a nd wi der sustainability issues • DE&I , st a ing sh or ta ge s and l abo ur pr acti ce s • Regul ar roa dsh ow inve stor m ee ting s and par ti cip ation a t inves tor c onfe renc es by E xecu tive Di rec tors , Sen ior L ead er ship a nd the I nvesto r Rel atio ns te am • Cons ult atio ns b etw een t he Ch air o f the Remun eratio n Comm itte e and insti tutiona l inves tor s and p roxy vote a dvi so rs • Meet ings w ith th e Cha ir , Inves tor Re lati ons , IH G’s Ch ief S ust ain abil ity O ic er an d ins titut ion al inve stor s to dis cus s gove rna nce , sus ta inab ilit y an d work forc e pr acti ce s • W ritten and electr onic corr espondence, inc ludi ng qu es tion s rec eive d at th e AGM , on a ra nge of to pic s rel ate d to ESG • Strong i nvesto r co ni de nce i n IH G’s per formance, long-term viability and leadership as demonstrat ed thr ough fee db ack re ce ive d and a cros s AGM re su lts • Parti cip atio n in CO P 26, jo inin g Rac e to Zero and deeper understandin g of sha reholder and i nvesto r foc us are as re late d to ES G and stakeh older engagemen t • Dee pe ned c om mitm ent to D E&I , inc lud ing a refre sh of I H G’s pol icy an d fur the r app oin tmen ts to th e Bo ard Se e al so a de sc ripti on of o ur div ide nd p olic y on pa ge 13 , our K PIs o n pa ge 50 to 5 3, key ma tte rs di scu ss ed by th e Bo ard o n pag es 9 0 an d 91 an d eng ag eme nt wit h sha reho ld ers re lati ng to E xecu tive D irec tor re mun erati on on p ag es 107, 113 and 114 . Visit ww w .ihgplc.com/i nv estors for further in format ion. Duri ng 202 1, IH G co ntinue d its o pen d ialo gue with s hare hold ers a nd investor s, and c ond ucte d its an nual pro gramm e of investo r relatio ns activ ities , with sup por t fro m its broker s and a dvis ers . The B oard rec eived re gula r upda tes and c ons ide red fee db ack as o utline d on pa ge 8 9. In addi tion, ou r Regi strar an d Ame rican D es po sita ry Receipts (ADR) pr ogramme custodi ans ha ve s upported sharehold ers and AD R ho lde rs with th eir que ries . Co mmit tee C hairs a nd the S enio r Inde pe nde nt Dire ctor are availa ble for sh areho lde rs if they h ave conc erns t hey wis h to discu ss . An outli ne of the e ngag eme nt with sh areh olde rs in rel ation to E xecu tive Remun eratio n durin g 202 1 can b e foun d on pa ges 1 07 , 113 and 114 . Ann ual G en era l Me etin g (AGM) The 2 02 1 AGM was a gain he ld in c ons traine d circum sta nce s in com plian ce wi th UK C ovid-19 m ea sures . We were enc oura ged that ou r retail s hareh old ers e ngag ed wi th the AGM , liste ned in a nd subm itte d que stion s, whi ch we were ab le to addre ss . We continu e to evaluate how o ur AGM on Friday 6 M ay 202 2 will b e hel d given the evolvin g nature of th e pand emic . The no tice of m eetin g will be s ent to share hol der s and be avail abl e on our we bsite in d ue co urse . Visit ww w .ihgplc.com/i nv estors under Sha reholder cent re. Boar d o v ersi gh t o f IHG’ s Global Head oi ce r elocat ion Even before C ovid -19 and the e nforce d cha nge s to working remote ly , th e Exe cutive C ommi tte e, with overs ight from th e Bo ard, had b ee n loo king at evo lving wo rking p ractic es a nd the suit abilit y of th e Group’s oi ces to s uppo rt c oll abor ative workin g, our str ategic p rioritie s and c ulture. T he imp endi ng expir y of the lea se for th e Co mpany ’s global h ead o i ce als o promp ted the s earch for a new l oc ation. T he Bo ard was c los ely en gag ed in th e proje ct and it wa s a regul ar Bo ard me eting a gend a item in c onjun ction with dis cus sio ns on e mploye es an d culture. As pa rt of th e se arch pro ces s, a p ostc ode an alys is was un der ta ken to ens ure there wo uld be m inimal d iere nce s in co mmutin g time s for mos t emp loyees . Co nsi derati on was al so give n to public t ransp or t links, l oc al ame nities a nd ac ce ss for di sab le d and wh eel chai r use rs. The B oard c ons ide red vario us opti ons for a lternati ve oic e arrang eme nts . As well a s its foc us on th e impa ct on e mployee s, the B oard too k into acc ount th e environm ent al impli catio ns of the move, notin g the opp or tunit y for th e new pre mise s to be de sign ed and con igured in a sustainable and energy-e icient manner. The B oard al so s crutini se d the i nanc ial imp act of th e move. In Ju ne 202 1, foll owing th e Boa rd’s cons ide ration an d app roval of man age ment ’s recom men datio n, the Gro up anno unce d that i ts glob al he ad o ice wo uld move to W inds or durin g 202 2. An en gage men t progra mme ha s kept emp loyee s informe d and involved th rough e lec tronic ne wslet ter s, a de dicate d intran et site (incl uding FA Qs) and e mploye e fee dbac k sur veys loo king at workp lac e culture an d hybrid wo rking. In ad dition, a s par t of th e prep aration fo r the move, the exi sting o ice s pac e at De nham wa s reco n igured to gi ve a tas te of the future with t he introdu ctio n of hot de ski ng ‘neighb ourh ood s’ , more c olla borati ve spac es a nd the rem oval of execu tive oi ce s, incl uding th at of the C EO. The B oard w ill conti nue to mon itor and ove rse e the move a s it progre ss es du ring 20 22 , with a pa rtic ular fo cus o n the imp act on em ployee s and c omp any culture. Gove rn an c e 92 IH G | Annua l Repo rt a nd Form 20 F 202 1 Dir e ct o r ap pointments and induction C hair su cc e s si on Appoin tment p rocess In antic ipatio n of Patric k Ce sc au’s retirement du ring 20 22 , on att ainm ent of nin e years o n the B oard, the B oa rd initiate d a full, rigoro us and tr ansp arent s earch p roce ss at t he en d of 2020, l ed by Dale M orri son, a s the Se nior I nde pen dent D irec tor (SI D) and a Se arch Co mmit tee c omp rising D ale a nd the C omm itte e Cha irs. Followin g a com petitive te nde r proc es s, Rus sel l Reynol ds was app ointed to a ssi st the S earch C om mitte e and B oard in i denti fy ing a diver se lis t of pote ntial c andid ates with th e expe rien ce and pe rso nal qua litie s to bec ome C hair. The S earc h Com mit tee prep ared a c an didate pro il e identi fy ing the ke y competencies , characteristics and experience required for the rol e of Ch air . Russ ell Reyn old s also h ad det aile d dis cus sio ns with all B oard m emb ers to s eek th eir vi ews on B oard dy namic s and cu lture and th e key strategic c halle nge s faci ng the G roup. A full Ch air sp ec ii catio n was the n prep ared by Rus se ll Reyno lds and s hared w ith the ful l Boa rd for com ment a nd inp ut. Key comp etenc ies in clud ed: exp erie nce a s a Cha ir , str ategic orie ntatio n and vi sion, b ringin g a glob al pe rsp ecti ve, a coll abo rative and in clus ive pe rson al st yle a s well as a g oo d unde rst andin g of the co rpo rate governa nce e nvironm ent. The S earc h Com mit tee and th e Bo ard were co nce rne d to ens ure that dive rsit y in it s broa des t sen se was t aken into co nsi derati on in the rol e pro ile an d the ca ndid ates pre sente d for co nsi derati on. A lon g list of c andi dates w hich h ad be en c ompil ed by Rus sell Rey nold s was reviewe d an d disc uss ed by the S earc h Co mmit tee, an d a sho rte r list of c and idates w as the n inter viewe d by Russ ell Reyn old s, the S ID an d the Ge ner al Co unse l and Co mpany Se cret ar y togeth er , and the C EO. Rel ectio ns from th es e me etings we re sha red with th e Sea rch Co mmit tee an d a sho rt-li st of four c andi dates wa s then in ter viewed by th e remai ning mem ber s of the S earch C omm itte e. T wo of th e can didate s were se lec ted to me et with th e Cha ir and for fur the r me etings w ith the C EO and SI D, before the p referre d can didate m et with th e remain ing E xecuti ve and No n- E xecuti ve mem ber s of the B oard. T he prefe rred c andi date als o met wi th the C omp any’s extern al Audito r , P wC . Se arch Co mmit tee m eetin gs were at ten ded by th e CEO, the Ge neral Co unse l and C omp any Se creta ry , the C hief Hu man Re sourc es O ic er and R uss ell Reyn old s and Da le Mo rriso n kept the B oard inform ed on th e progre ss a nd the s tatus of th e proc es s throug hout . Followin g det aile d con side ration, i nclu ding as se ss ment a gains t the com pete ncie s ide ntii ed in th e can didate p roil e and the fe ed bac k from the m eetin gs with m emb ers o f the Bo ard, the S earch Co mmit tee re comm end ed to the B oa rd that De ann a Opp enh eime r be ap pointe d as a N on- E xecu tive Dire ctor an d Chai r De signa te from 1 Ju ne 202 2 and that s he as sum e the rol e of Cha ir from 1 September 202 2, fo llowin g Patrick C es cau ’ s retirem ent on 31 Aug ust 20 2 2. The B oa rd approved a nd co n irme d the app ointme nt. Patric k Ce sca u was not invol ved in the s el ectio n or ap pointm ent of his s ucc es sor a nd Rus sel l Reynol ds ha s no fur the r conn ec tion with the G roup or a ny of the Dire ctor s, beyond u nde rt akin g sea rch and re cruitm ent ac tivit y . D ea nna O ppe nhe imer di d not have a ser vi ce co ntract w ith the C omp any in 202 1. • o ur appro ach to inte rnal c ontrols a nd our ri sk man age ment s trateg y; • infor mation o n the B oard, it s Com mit tees a nd IH G’s govern ance proc es se s, with a p arti cular fo cus o n the Rem uner ation an d Respon sibl e Bus iness Commi ttees ; • a remi nde r of the rul es rel ating to maint ainin g the co ni denti alit y of ins ide info rmation a nd res trictio ns in de alin g in IH G sha res, toget her wi th a brie ing o n the po licie s and p roce dure s IH G has in pla ce to en sure co mpli ance w ith suc h rule s; and • me etin gs with m emb ers of th e Bo ard and the E xec utive C ommit tee, sen ior ma nag eme nt from func tion s acros s the G roup, the ex terna l Auditor a nd othe r key externa l advi ser s. Dan iela’s induc tion p lan als o incl ude d visi ts to IH G co rporate o ic es and h otels ac ross o ur bran ds, to me et c olle ague s and s pe nd time with our G en eral M ana ger s. In lig ht of the imp act o f the pan dem ic, suc h visit s have not yet t aken pla ce, howeve r they will b e arrang ed as appr opriat e when circ umstances permit. Indu ctio ns were al so co ndu cted in re sp ect of th e app ointme nts of Gra ham All an as S enio r Inde pe nde nt Non - Exe cutive D irecto r and D uriya Faroo qui as N on- E xecu tive Dire ctor res po nsib le for the Voice of th e Empl oyee eng agem ent p lan. Direc tor appointm ents Det ails o f the app ointme nts to the B oard m ade d uring 20 21, a s well as the a ppo intment s of a new S enio r Ind epe nde nt Non - E xecutive Dire ctor an d a Non - Exe cutive D irecto r resp ons ible fo r the Bo ard’s Voice of the Em ployee e ngag eme nt pla n, are de scrib ed in t he Nom inatio n Co mmit tee Rep or t on p age s 102 to 10 3. In ad dition, a d es criptio n of the Ch air su cce ss ion ap pointm ent proc es s is se t out b elow. New Dir ector inductions Up on app ointme nt, all n ew Dire ctors u nde rgo a com preh ensi ve and for mal ind uctio n prog ramme w hich is t ailo red to me et the ir indiv idua l nee ds . We believe thi s is cru cial to en sure ou r Direc tors hav e the full understandi ng of all aspects o f our business and famili arit y with the G roup’s purpo se, cul ture and valu es, to e nsure they are ab le to contr ibute e ecti vely to the B oard. For Dan iela B aron e Soa res, a t ailore d indu ction p lan wa s prep ared in a dvanc e of he r app ointme nt to the Bo ard in M arch. Daniela’ s plan incl uded: • infor mation o n the G roup’s purpos e, culture, va lues a nd strate gy , incl uding it s bus ine ss mo de l, brand s and th e markets in w hich it op er ates ; In ea ch c ase, th e Bo ard took into ac co unt othe r appo intme nts, the tim e comm itment re quire d for ea ch role a nd the c ontex t of the U K Co rporate G overn ance C od e, incl uding in stituti onal i nvestor and p roxy adv ise r guide line s con ce rning over-bo arding. I t was con clud ed th at the ad dition al app ointme nts s hould n ot adve rse ly impa ct the ir pe rfo rmanc e but s houl d enh ance th eir ab ilit y to provide constructive challenge and strategic guidance. Addition al appoint ments Duri ng 202 1, the B oard c ons ide red the p ropo se d appo intme nts of Duri ya Farooqui a s non - executive dire ctor of Tribe Cap ital G row th Co rp I and to the B oard o f Cou ncillo rs of th e Car ter C enter, which ope rates a s an adv iso ry b oard; D ale M orris on as C hairm an of T w in Ridg e Cap ital A cqui sition C om pany Limi ted; and J o Ha rlow as a non - executive di rector o f Chap ter Zero. The B oa rd also c ons ide red and e ndor se d the app ointm ent of I an Dys on as C hair of A SOS pl c. 93 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Bo ard activ ities B o a rd a c ti vi tie s c o nti nu e d Boar d dev elopme n t and eect iv ene s s e v al uat ion • the B oard ’s involvement i n the Gro up’ s strate gic pro ces s, in par ticu lar in rel ation to rec over y and p ost- C ovid-19 s trategie s; • B oard work p roc ess es , inclu ding qu alit y of inform ation provi ded to the B oard, an d Bo ard dyna mics a nd the e ec tivene ss of m eeti ngs; • B oard en gag eme nt with sh areho lde rs and e mploye es; an d • the p rogre ssio n of Bo ard refre shme nt and s ucc es sion p lan s. The re spo ns es of B oard me mbe rs to the qu es tionn aire were large ly favourab le in rel ation to all a reas of th e Bo ard’s ope ration . The fe edb ack h ighlighte d that th e Boa rd equ ally and e ec tively supp or ted a nd cha llen ged m anag eme nt ’s r es pon se to the p ande mic, while e nsu ring ong oing an d app ropriate g overnan ce to safe gua rd the G roup’s r ep utatio n, in anci al viab ilit y and st akeho lde r value. Bo ard mem ber s com mente d po sitivel y on the B oard ’s inv olve ment in the st rategic p roce ss , noting th at the B oard strate gy days an d the shif t in B oard a gend a and di scu ssi on in the s ec ond h alf of the ye ar allowe d for a greate r focu s on the G roup’s long -term strate gy ver sus sho rt-term c ons ide rations . Bo ard me mbe rs were s atis ie d with the timing, a mount a nd qua lity o f enga gem ent with m ana gem ent. Fee dbac k noted s trong en gag eme nt with sh areho lde rs, hig hlighted the en hanc ed Voice o f the Emp loyee pro gramm e, and ind icate d strong e nga gem ent an d follow up by the B oard w ith its C ommi tte es. Bo ard mem ber s gen erall y agree d that th e impl eme ntatio n of the acti ons ari sing fro m the 202 0 Bo ard ee ctiven es s evaluati on ha d progre ss ed we ll, par ticu larly in re lation to an i ncre ase d focu s on lon g-term s trateg y and imp lem enta tion as we ll as B oard su cce ss ion pla nning. I t was wid ely n oted that a retu rn to in- per son B oard me etings wo uld be we lc ome an d drive pro gres s in relati on to enhance d Board discus sion and debate. The B oard ’s positi ve feed bac k in relatio n to the overall pe rfor manc e of the B oard c onc lude d as to the e ec tivene ss of the B oard ’s per forman ce. The C EO evaluatio n was le d by the Ch air , w ho co lle cted fe edb ack from the N on -E xec utive Dire ctor s. Key areas o f focus i nclu ded: • the G roup’s ina ncial p er form ance a nd the im pac t of the C EO; • le ade rshi p ee ctiven es s through th e pan demi c; • po sitio ning I HG for th e lon g term; • reg ard for co mmuni ty an d the enviro nme nt; and • the re latio nship a nd abil ity to wor k coll abo ratively an d trans pare ntly with the B oa rd. On goin g Di rec tor tra inin g an d devel opm ent We unde rst and the i mpo rt anc e of an ong oing trai ning pro gramm e for Dire ctor s to enab le the m to fully und ers tan d the Gro up’s bus ine ss an d ope ration s in the co ntext of th e rapi dly devel opin g environ ment in w hich it o pera tes. T he Ch air co ntinue s to review the train ing and d evelo pme nt nee ds wi th eac h Direc tor on a re gular bas is and t he Bo ard is ma de aware of tra ining op por tuni ties . Bo ard and C ommi tte e mee tings a re regula rly use d to upd ate Dire ctors o n develo pme nts in th e environm ent in wh ich the b usin es s ope rates a nd in- d epth pre se ntation s are provid ed o n key t opi cal area s. In 20 21 , thes e se ssi ons in clud ed cyb er ris k man age ment ; environ ment al, so cial an d govern ance (E SG) con sid eratio ns; and audit a nd corporat e go vernance refor m pr oposals. In ad dition, th e Co mpany S ecret ar y provid es reg ular up dates o n regulat or y , corporate gov ernance and legal matters and Dir ectors are able to meet individually with senior manag ement if nece ssar y . Internal evaluation Followin g the full ex tern al evaluati on ca rried o ut by Chri stoph er Sa ul of Chri stop her S aul As so ciates i n 201 9 and an inte rnal evalu ation in 202 0, during the ye ar the B oard o nce a gain un der too k an intern al evaluati on. Bo ard mem ber s were as ked to con side r the B oard ’s o verall ee ctiven es s by com pletin g an intern al ee ctive nes s que stio nnaire, whic h focus ed o n the follow ing are as: • pro gres s in impl eme nting ag ree d actio n items fro m the 20 20 ee ctiven es s review; • the ro le the B oard c ontinue s to play in re lation to th e pand emic and re cove r y; • infor mation low to the B oard, an d Bo ard eng age ment wi th man age ment an d eac h of its C omm itte es; Directors ’ performance e valuat ion In ad dition to th e interna l Boa rd evaluatio n proc es s outlin ed above, th e Chai r con ducte d an ind ividu al evaluati on of ea ch of the N on- E xecu tive Dire ctors, t aki ng fee dba ck from the C EO, and focu sing o n their c ontrib ution an d eng age ment in th e co ntext of a more vi rtu al environ ment . Par ticul ar point s of note we re share d with the i ndivi dual D irecto rs and ove rall, the C hair c oncl ude d that the Di rector s pe rfor m their du ties e ec tively an d de dicate s u icien t time to dis cha rge thei r Boa rd resp ons ibiliti es. The p er form ance a ss es sme nt of the C hair was l ed by the S ID. The C hair ’s evaluation c ons iste d of gath ering fe edb ack fro m the Dire cto rs, c overi ng: • B oard le ade rshi p, strategy evo lution a nd pe rfo rman ce mo nitoring in the c ontext o f a pand emic - aec ted yea r ; • overal l Boa rd culture, en gag eme nt and p arti cipati on; and • mai ntenan ce of hi gh sta ndard s of cor porate g overnan ce. The fo llowing a reas of c ontinu ed fo cus an d reco mme nde d acti ons for 2 02 2 were no ted: Are a for f oc us Action items Lon g-te rm stra tegy Board m em ber s po siti vely n ote d the lo nge r-term st rateg ic dis cu ss ion th roug hout t he yea r , but fe lt tha t this c oul d be fu rt her e nha nc ed in 2 02 2 wit h add itio nal fo cus o n the i mpl eme nta tion o f the lo ng -ter m strate gy an d co mp etitiv e po siti onin g in rel atio n to del iver ing on t he Gro up’s obj ect ives . Bo ard ma teri als an d ag end a Fe ed bac k note d tha t Bo ard ma teria ls, p ar ticu larl y the m ateri als p rep are d for it s strate gy m eet ing, we re info rmat ive and h igh qu alit y. It was al so no ted th at, al tho ugh th ere h ad be en s om e prog res s on m akin g the re gul ar B oard info rmati on pa ck m ateri als m ore for wa rd- loo kin g, thi s sho uld re mai n a focu s in 20 2 2. Boar d m eeti ng dyna mics Boa rd me mbe rs al so n oted th e co ntinu ed c on strai nts of v ir tual m ee ting s and th e ne ed fo r inc rea se d dis cus si on tim e, bot h form al and i nform al, an d the n ee d to rever t to fu ll ‘in -p er so n’ mee ting s as s oon a s po ss ibl e. Gove rn an c e 94 I HG | Annua l Repo rt a nd Form 20 F 202 1 Au d i t C o m m i t te e R e p o r t I am pl ea se d to pre se nt th e Co mmi tte e’ s rep or t for th e year e nd ed 31 D ec em be r 202 1. Th es e pa ge s out line h ow the Co mmit te e dis ch arge d th e res po ns ibil itie s de le gate d to it by the B oar d over th e cou rse o f the ye ar , and t he key are as of foc us fo r the C om mit tee in d oin g so. The C omm itte e ful ils a v ital rol e in the C omp any’s governa nce frame work, p roviding va luab le ind epe nde nt oversi ght acro ss the Co mpany ’s inan cial re por ting a nd intern al co ntrol proc ed ures. It provi des th e expe rt s crutiny to en sure that th e nec es sa ry intern al contro ls to run the b usin es s are in pl ace, th at risks a re app ropriate ly man age d, that th e Com pany ’ s pe rfo rmanc e is cor rectly ve ri ied by the ex tern al Audito rs and th at the rep or ting of this to ou r share hol ders a nd st akehol der s is fair , bal anc ed and understanda ble. The o ngoin g impa ct of the p and emic a nd the ri sks that acc omp anie d it co ntinue d to be a maj or foc us given th e cha ngea ble n ature of the op erati ng environ ment . Ass es sing th e Group’s risk m anag eme nt and in ternal c ontrol ar range ment s duri ng the pandemic a nd thei r appr opriat eness as condi tions sta rte d to norm alis e contin ued th rougho ut the ye ar . I n earl y 202 1, the tra nsiti on of ex ternal Au ditor from E rnst & Young LLP (EY ) to Pri cewaterh ous eC oo per s LLP (P w C) was co mple ted and th e Com mit tee’s attentio n shif ted to P w C’s ir st year a udit. Throu ghou t the pe riod, P w C has p rovide d insig hts into the Group’s proc es se s and co ntrols an d the Aud it Co mmit tee ha s reviewe d and di scus se d man age ment ’s resp ons es. In ad dition, th e Co mmit tee h as rec eive d regul ar repo rt s on intern al audit s and s teps b eing t aken to add ress ind ings; contro ls as suran ce wor k and rem edia tion ac tivit y; and othe r de ep - dive reviews in clud ing a po st-c omp letion rev iew of sp endin g on larg e proje cts a nd a review of th e Ame rica s man age d hotel inan cial c ontrol e nvironme nt. The o ngoin g focu s on the ap proa ch to in anci al rep or ting through t he year e nsure d the C ommi tte e was co mfor tab le that all late st gui danc e from reg ulator y bo die s such a s the Fi nanc ial Rep or ting C ounc il (FRC) ha d bee n co nsid ered . The C omm itte e als o chall eng ed ma nag eme nt to ensu re climate ri sk ha d be en appropriately and consistently relecte d thr ough the Annual Rep or t and Form 20 F , pa rti cularl y with reg ard to impa cts o n for ward- loo king a ssu mption s supp or ting th e Fina ncial S tate ment s. Loo king fu rth er out , the C ommit tee eva luate d the pote ntial impa ct of th e Dep ar tment fo r Bus ine ss, E nergy an d Ind ustria l Strate gy (BE IS) con sult ation d ocum ent on a udit an d corp orate govern ance re form, app roved a res pon se to the c ons ultati on and c ons idere d prep arator y ac tions p ar ticul arly in rel ation to the prop ose d Res ilien ce S tatem ent and Au dit & As sura nce Po licy . I would li ke to thank all tho se wh o have ass iste d the C ommit tee in ful illin g its du ties dur ing the yea r , whi ch I am c on ide nt have be en c arrie d out e ective ly and to a hi gh sta ndard, p roviding inde pe nde nt oversig ht with the s upp or t of as suranc e from th e exte rnal Aud itor . Ian Dyson Cha ir of the Aud it Co mmit tee 21 Feb ruar y 20 2 2 Key dutie s and r ole of t he C omm itte e K ey objectives and summary of r espons ibili ties The Au dit C ommit tee i s resp ons ible fo r ens uring that I HG m aint ains strong c ontrol e nvironm ent. I t monito rs the inte grit y of IH G’s inan cial repor ting, including signi icant inancial rep orting judg eme nts, m aintai ns overs ight and rev iews our sy stems o f interna l contro l and ris k man age ment , monito rs and rev iews the e ec tivene ss and p er forma nce of i nternal a nd exte rnal au dit fun ction s, as we ll as reviewin g the be havio urs exp ecte d of IH G’s emp loyees th rough the Co de of C ond uct an d relate d pol icie s. The C omm itte e’s r ole, re sp onsi bilitie s and au thorit y de leg ated to it by the B oard are s et out in it s T e rms of Re feren ce ( T o R), whic h are re viewed annually and approv ed by the Board. The ToR are ava ilab le at w ww.ihgplc. com/inv estors under Co rpo rate gover nanc e. The C omm itte e’s k ey areas of fo cus ove r the year h ave bee n: • review ing the G roup’s approa ch to the ma nage me nt of risk incl uding c ons ide ring the c ontinu ed evolu tion of th e impa ct of Cov id-19 on th e bus ine ss; • as se ssi ng and o btain ing as suran ce on th e ee ctive nes s and resil ienc e of the G roup’s internal c ontrol e nvironme nt and it s app ropriate nes s given th e cha nging e nvironme nt in whic h the Gro up o pera tes ; • review ing and c hall engin g in anci al repo rti ng throug hout th e year to ens ure the Fin anci al St ateme nts provid e a true an d fair vie w of the G roup’s per forman ce an d that late st gui danc e and re por ting regul ation s by regulato rs were ap propri ately ap plie d; • review ing the G roup’s Internal Au dit pla n and b udge t; • review ing and eva luating g oing c onc ern an d viabi lity a ss es sme nts, the ne ed fo r impai rment te sting a nd provis ionin g for mate rial litigati on and c omm ercia l disp utes; an d • overs ee ing the tra nsiti on of the ex tern al Audito r and P wC ’s irs t year a s Auditor of th e Grou p. Membership and attend ance a t meet ings Det ails o f the Co mmit tee’s memb er ship an d atte ndan ce at me eting s are set o ut on p age 81 . The C EO, CFO, Gene ral Co uns el and Co mpany S ecret ar y , G roup Fin anci al Co ntrolle r , H ead o f Risk and As sur ance a nd our ex tern al Auditor (E Y Feb ruar y onl y; PwC all me eting s), attend ed all m eetin gs in 20 21 . The C hair of th e Bo ard als o aims to at tend all m ee tings an d in 202 1 at tend ed four m eeti ngs . Oth er at tend ee s are invited to me eting s as ap propri ate and the C EO and all o ther D irecto rs were invite d to Co mmit tee me eting s whe re the ap proval of inanc ial rep or ting was c on side red an d disc uss ed . The C omm itte e conti nue s to hold p rivate se ssi ons wit h the intern al and ex terna l Auditor s witho ut the pre se nce of m anag eme nt to ens ure that a cu lture of trans pare ncy is m aintai ned . The C ommi tte e Cha ir conti nues to h ave rece nt and rel evant in anci al expe rien ce and all m emb ers o f the C ommit tee a re Inde pe ndent N on - Exe cutive Dire ctors . In ac cord anc e with the C od e, the Bo ard als o con sid ers that the C om mitte e as a wh ole p os ses se s co mpete nce re levant to the C omp any’s sec tor , h aving a ran ge of inanc ial an d comm erci al expe rien ce in the h osp itali ty in dustr y an d the bro ade r com merci al environ ment in w hich the G roup o pera tes. Fur ther d etail s of the sk ills and exp erie nce o f the C ommit tee m emb ers c an be fo und on pag es 82 to 8 4. Rep or ting to t he B oar d Followin g eac h Co mmit tee me eting , the Co mmit tee C hair up date s the B oard on key is sue s disc us sed . The p ape rs and m inutes fo r eac h me eting are ci rculate d to all Bo ard mem ber s, who are i nvited to requ est f urth er info rmatio n if requi red and to p rovide any ch allen ge where necess ary . 95 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Audit C omm itte e Rep or t Alon gsi de this revi ew , the C ommit tee c ons ide red the g uidan ce upd ates provi ded by th e FRC throu ghout th e year in clud ing on Non - GA AP me asu res, Provi sion s, Co ntinge nt Liab ilitie s and Co ntinge nt Ass ets , Goin g Co nce rn and V iabili ty an d con clud ed that appropr iat e enhancements had been made t o ensure al ignment with the l atest g uidan ce. Followin g a review of the c ontent s of the A nnual Re po rt al ongs ide the afore menti one d criteri a, the C ommit te e repo rte d its rec omme ndati on to app rove the Annua l Rep or t to the Bo ard. The C omm itte e has b ee n moni toring deve lop ment s in the U K’s audit a nd co rpo rate governa nce e nvironme nt, inc ludin g the reform s prop ose d by BE IS follow ing its c on sult ation ‘ Resto ring T rust in Audit an d Co rpo rate Govern anc e’ . Th e Com mit tee co nsid ere d the p otential im pac t of the pro pos ed refo rms an d reviewed a nd app roved a subm iss ion su mmari sing th e Group’s pos ition in resp on se to the qu esti ons in th e con sult ation. T he C ommit tee a lso requ este d a numb er of p rese ntatio ns from P w C to provide fu rth er insi ght on the key prop os als an d disc us sed p ape rs from s enio r man age ment o n the pote ntial imp lic ations o f key propos als to ens ure that the C om pany is c ompli ant with any ne w regula tions whe n they co me into force, i nclu ding so me of th e deta iled p ropo sal s be hind the R esili enc e Sta tement a nd Audi t and As sura nce Po licy . Sig ni ica nt ma tte rs in th e 20 21 Fi nan cia l Sta tem ent s Throughout 2021, the Committee pr ovided ongoi ng challenge to mana gem ent ’s acco unting, re por ting a nd intern al co ntrols to ens ure the co ntinuing i mplic ation s of the p ande mic ha d be en dul y con side red. A s always, the C omm itte e dis cus se d with man age ment an d the ex ternal Au ditor th e signi ic ant are as of com plexit y , mana gem ent ju dgem ent an d esti mation i n relatio n to the Fin anci al St ateme nts, an d the imp act of a ny acco unting devel opme nts or l egi slative c hang es . The C ommi tte e has s atis ie d its elf tha t mana gem ent ha d ade quate ly ide nti ied an d con sid ered all potentially s igni ic ant ac counti ng and di scl osure m atte rs. The key item s disc uss ed a re outline d on p age 9 9. Co rres po nd enc e wit h UK re gul ator The G roup rec eive d a let ter date d 15 J uly 202 1 from th e FRC followi ng its revi ew of the An nual Re por t an d Acco unts for t he in anci al year e nde d 31 D ec emb er 20 20 as pa rt o f the FRC ’s routine pe riodic rev iew of lis ted c ompa ny annual re por ts . The l ette r rais ed no que stio ns req uiring a re spo nse . The ap pe ndix to the l ette r set o ut a numb er of ob se rvati ons o n cer ta in disc los ures, w hich have b een taken into a cco unt in the p repa ration of th e 202 1 Annu al Rep or t and Accoun ts. The F RC ’ s review is b ase d on th e publ ishe d Ann ual Rep or t and Acc ounts a nd do es not b en e it from det aile d know led ge of the business or an understandi ng of the und erlying tra nsactions. It provi des n o ass uranc e that th e Annua l Repo rt a nd Ac count s is cor rect in al l materia l resp ec ts. T he FRC ’s role is not to ve rif y the inform ation provi ded, b ut to co nsid er co mpli anc e with rep or ting requi reme nts. T he FRC a cce pts no l iabili ty for re lianc e on the F RC ’s review by the C omp any or any third pa rt y , i nclu ding bu t not limite d to i nv estors and shareholders. Int ernal control a nd r isk ma nagement The B oard i s resp ons ible fo r est abli shing p roc edure s to mana ge risk , overs ee ing the inte rnal c ontrol fra mework a nd dete rmining th e nature an d exten t of the prin cipa l risks th e Co mpany is w illing to ta ke to achieve it s lon g-te rm obje ctive s. Th e Com mit tee sup por t s the Bo ard by reviewing th e ee ctive nes s of the G roup’s internal c ontrol and ri sk man age ment sy stems a nd as se ssi ng eme rging an d princi pal risks . Effe ct ivene s s of th e Com mit tee The e ec tivene ss o f the Co mmit tee i s monito red an d ass es se d regul arly by the C hair of th e Co mmit tee an d the Ch air of the B oa rd. In 20 21, th e Com mit tee me mbe rs were al so as ked to con sid er the Co mmit tee’s eec tivene ss by revi ewing an e ec tivene ss que stion naire an d the res pon se s to it. The eva luatio n resp ons es po sitivel y highlig hted the over sight of th e exte rnal Aud itor tran sition , noted t he ne ed for c ontinu ed revi ew of the train ing and k nowle dg e devel opme nt ne ed s of Co mmit tee me mbe rs in th e contex t of the cha nging re gulator y e nvironme nt and c oncl ude d that the Co mmit tee rem ains e ec tive. Focu s are as a nd a ctivi tie s Financ ial and narrative repo rting Duri ng the yea r , the C omm itte e reviewe d and re comm en ded ap proval of the inte rim and an nual F inan cial S tatem ents (con side ring th e relevant a cc ounting a nd rep or ting mat ter s such a s key judge ment area s, goin g con cern a nd via bilit y sta teme nts, the ina ncial re po rtin g impa cts o f litigatio n and c omm ercial di spu tes and i mpair ment reviews) and th e Group’s quar terly tr ading up date s. All m emb ers of the B oard are a sked to at tend th ese m eeti ngs. As well a s rec eivin g input a nd guid anc e from the ex terna l Auditor on the a reas o utline d above, th e Com mit tee als o rec eive d regul ar repo rt s from the C hair o f the Di sclo sure C ommi tte e, which li aise d clo sel y with othe r exter nal ad vise rs of th e Group to e nsure th at dis clos ure and re gulator y re quirem ents we re bein g app ropriate ly con sid ered a nd met . Co pies o f the Di sclo sure C ommi tte e’ s minute s were als o provid ed to the C omm itte e. The C omm itte e rec eived e arly dr aft s of the An nual Re por t an d Form 20 F 2 02 1 (Annu al Rep or t), and whe n providi ng co mment s con sid ered: (i ) the proc es s for pre parin g and veri fy ing the A nnual Rep or t, whic h inclu de d review by me mbe rs of the E xec utive Co mmit tee an d input f rom se nior em ployee s in the C omp any Se creta riat, O pera tions , Strateg y , H uman Re sou rces , Finan ce, Ris k and As sura nce an d Leg al team s; (ii) a rep or t from the C hair of the D isc losu re Com mitte e; an d (iii) the ch eck list p repa red by the Ann ual Re por t tea m con irmi ng co mplia nce wi th the releva nt regu lator y re qui reme nts . The C omm itte e als o con side red m anag eme nt ’ s anal ysis of h ow the conte nt, ta ken as a who le, was ‘ fair , bala nce d and un der sta ndab le’ , and wh ethe r it con tain ed the n ec es sar y inform ation fo r share hol der s to ass es s the G roup’s positi on, pe rfo rman ce, bu sine ss m ode l and s trategy. In order to rea ch this c onc lusi on, a de dic ated proj ect team wo rked on the c ontent s of the An nual Re por t an d a det aile d veri ic ation pro ce ss to co n irm the ac cura cy of the infor mation cont aine d withi n the Annu al Rep or t was un der ta ken by the Fin anci al Plan ning an d Analy sis de par tme nt. Th e Co mmit tee the n con sid ered both th e struc ture and c ontent of th e Annu al Rep or t to ens ure that the key mes sa ges we re ee ctivel y and c onsi stentl y comm unic ated and th at mea ningfu l links be twe en the b usin es s mod el, str ategy , KPI s, pri ncip al risks a nd remu nerati on were cl early i denti ie d through out th e Annua l Rep or t. This rev iew als o con sid ered th e use of No n- GA AP m eas ures an d con side red th eir co ntinue d suit abili ty , pres ent ation an d relative p romine nce t akin g into acc ount gu idan ce from bo th the FRC an d the S ecuri ties an d Exch ang e Com mis sion (SEC). The C ommit tee s pe ci ica lly rec ons idere d the c ontinu ed impa ct of th e pand emic o n pe rfor manc e, strate gy and b usin es s resil ienc e and w here it im pac ted the n ature of the ju dge ment s and e stima tion unc er tai nty. The Co mmit tee al so co nsid ere d the prop or tiona te and co nsi stent c onsi derati on of cli mate mat ters acro ss the A nnual Re po rt , inclu ding th e TCFD st ateme nt, an d in par ticu lar the p otentia l impa ct on for ward -lo okin g as sumptio ns supp or ting im pairm ent tes ting, de ferre d tax as se ts, go ing co nce rn and via bility assessments. A udit C ommi ttee Repor t c o nti nu e d Gove rn an c e 96 IHG | Annual R epo rt a nd Form 20 F 202 1 In orde r to ee ctivel y review the inte rnal c ontrol an d risk man age ment sys tems, t he Co mmit tee: • rec eive s regul ar rep or ts from m anag eme nt, the R isk an d As suranc e team a nd the ex tern al Auditor o n the e ecti vene ss of the syste ms for ri sk ma nage men t and intern al co ntrol, inc luding inancial, ope rational and compliance controls; • review s the pro ces s by whic h risks are i denti ie d (inc luding proc edu res in pl ace to id entif y em ergin g risks an d linka ge to wide r co nsid eratio n of strate gy and re silie nce) and a ss es ses the tim eline ss a nd ee ctive nes s of ac tion t aken by mana gem ent, incl uding re gular re por t s and pre sent ation s on the C om pany ’ s overall inte rnal c ontrol, ris k man age ment sys tem and p rinci pal risks; a nd • rec eive s addi tiona l repo rt s through out the ye ar releva nt to intern al contro l and ris k man age ment , both inan cial an d non - in anci al, to ens ure that cur rent and e mergi ng risks a re identi ie d and assessed and tha t ther e is an appr opria te ma nagement resp on se (see p age s 40 to 47 for fur the r det ail on ou r risks an d initiati ves to man age th em). As pa rt of th e Co mmit tee’s review of the inte rnal c ontrol an d risk man age ment sys tems, key inanc ial, op erati onal an d co mplia nce contro ls ac ross th e bus ines s co ntinue to b e monito red an d teste d through out th e year . The C omm itte e as ses se s the ap proac h to Sarb ane s- O xley Act 20 02 (S OX) comp lian ce in ac co rdanc e with our U S oblig ation s and review s repo rt s on the p rogre ss of th e SOX progra mme at e ach m eetin g. Duri ng 202 1, the C omm itte e rec eived a n upd ate on hotel ina ncia l contro ls in the A meri cas re gion a nd a po st-c omp letion rev iew of sp endin g on larg e proje cts . The C omm itte e con sid ers th e Group’s treasury and tax strategy policie s annually and during 202 1 approv ed mino r chan ges to th e Group Tr ea sur y Polic y and the G roup’s published ‘ Approach to T ax’ . Our A pp roac h to T ax do cum ent i s availa ble a t www.ihgplc. com/ en/responsible-business/ policies Havin g reviewed th e intern al con trol and ri sk man age ment sy stems through out th e year , the Co mmit tee c onc lude d that th e Group conti nue s to have an ee ctive syste m of risk m ana gem ent an d intern al contro ls, an d that the re are no mate rial we akne ss es in th e contro l environm ent an d no othe r signi ic ant fai lings o r weak nes se s. Prin cip al ris k ar ea s Duri ng the yea r , pa rti cular at tentio n was p aid to the review a nd as ses sm ent of pri ncip al and e mergi ng risks fo llowing th e cha llen ges create d by the pa nde mic and i n light of the G roup’s strategi c growth ambi tions . The C omm itte e obs er ved th at risks to th e executio n of the G roup’s strategy rem aine d hei ghtene d and im pac ted by con strain ed re sourc es (in clud ing i nanc ial an d mana gem ent time). The C omm itte e con sid ered th e followi ng area s: • the p otentia l for add itiona l stres s on ris k man age ment a nd intern al contro l arrang eme nts from c ontinu ed C ovid -19 -rel ated dis ruptio n; • the im pac t on the G roup’s busin es s of fur ther w aves of the pan demi c or a mo re prolon ged p eri od of rec over y for the i ndus try, incl uding o n our sup ply c hain arra nge ment s; • the im pac t of orga nisati onal c hang es an d lexi ble wor king arrangemen ts for corporat e emplo yees; • the im pac t of st a sho rt age s and wa ge in latio n within th e hospitalit y industry; and • cyb ers ecu rity a nd inform ation g overnan ce in the c ontex t of a rapid ly evolvin g exte rnal thre at and re gulator y envi ronme nt. Furthe r det ails of o ur princ ipal ri sks, un cer t ainties a nd review proc es s can b e foun d on pa ges 4 0 to 47 . Fin anc ial Re po rti ng C oun cil Au dit Q ual ity Rev iew The F RC Audit Q ualit y Revi ew (AQR) se le cted th e exter nal aud it by EY of t he Grou p’ s Fina ncia l State ment s for the ye ar end ed 31 D ec emb er 202 0 for review a s par t of it s annua l insp ec tion of audit irm s. As p art o f this pro ce ss, th e Co mmit tee’s Chair s hare d his and th e Boa rd’s view of the q ualit y of the E Y au dit. Th e Co mmit tee con sid ered th e in al ins pe ction re por t whi ch highl ighted g ood p racti ce in res pec t of ce rt ain as pe cts of th e Grou p audit wo rk. Th e repo rt incl ude d one o bse rvati on, req uiring li mited im proveme nt which was not c ons ide red sig ni icant by th e Co mmit tee. T he Co mmit tee dis cus sed th e resu lts an d agree d ac tions w ith the le ad au dit par tne r and a gree d with the over all as ses sm ent whi ch was c onsi stent w ith its own v iew of the qu alit y and e ec tivene ss o f the exte rnal au dit. In co nsi derin g the aud it plan , the Co mmit tee c ons ide red the obser vat ion wou ld not i mpact PwC ’ s approach. Non-audit services The in dep en den ce and o bje ctivit y of th e non -au dit se rv ice s provid ed by the ex terna l Auditor to th e Group are s afeg uarde d by IH G’s Audit an d Non -Aud it Ser vi ces P re- App roval Policy. The Policy is reviewe d by the Audi t Co mmit tee ann ually. The Po licy req uires th at pre -ap proval is o btain ed from th e Audit Co mmit tee for a ll ser vic es p rovide d by the exte rnal Au ditor be fore any work ca n com men ce, in lin e with US S EC require ment s witho ut any de minim is thres hol d and U K ethic al st anda rds. Th e Co mmit tee reviewe d the aud it and no n- audi t fees i ncurre d with the ex tern al Auditor a nd note d that the re had b ee n no proh ibite d ser vic es (as de ine d by SOX or unde r UK e thica l stan dard s) provided to the Group d uring th e year . The C omm itte e is proh ibited f rom del ega ting non- audit servic es approval t o managem ent and compliance with the p olicy is a ctivel y mana ge d. IH G is co mmit ted to ma intaini ng non -a udit fe es at a low l evel and the C ommit tee i s co gnis ant of inves tor advi sor y b odie s’ guid elin es on no n- audit fe es . Durin g 202 1, 11% of se r vice s provid ed to the Group we re non -a udit se r vice s (20 20: 18 % provid ed by E Y ), prim arily rel ated to Sys tem and O rgani satio n Co ntrols (SO C) Rep or ts. D eta ils of the fe es p aid to P wC for n on -aud it and s tatutor y audit wo rk durin g 202 1 can b e foun d on pa ge 16 4. Th e Co mmit tee is s atis ie d that the C omp any was co mpli ant during th e year wi th the FRC ’s Ethical a nd Audi ting St anda rds in res pe ct of the s co pe and m aximum p ermi tte d level of fe es in curre d for non -au dit se r vice s provid ed by P wC. W here n on- audi t work is p er forme d by P wC, both th e Co mpany and P w C ens ure adh erenc e to robu st proc es se s to prevent the o bje ctivit y an d inde pen den ce of th e exter nal Audi tor being comprom ised. Ris k an d as sur anc e – Inte rna l Audit The C omm itte e dis cus ses a nd app roves the I nternal Au dit annu al pla n, which a ims to provid e obje ctive an d insi ghtfu l ass uranc e that app ropriate c ontrols a re in pla ce to sup por t our s trateg y and grow th ambi tions . Progre ss ag ains t the Inte rnal Aud it plan i s repo rte d at ea ch me eting an d, during 2 02 1, the C ommit tee revi ewed th e allo catio n of intern al audit re sou rces to a dy namic i nhere nt risk p roi le, incl uding organ isati onal a nd proc es s cha nge s which h ave resulte d from Covi d-19 dis ruptio n. Org anis ation al culture h as be en a d ei ned p ar t of our ri sk man age ment sy stem for s everal ye ars an d therefo re is subj ect to re gular fo cus a s an integra l par t of inter nal aud it work. The 2 02 2 pla n pres ented to th e Co mmit tee in D ec emb er 20 21 wil l maint ain foc us on th e integrit y of th e risk ma nag eme nt and inte rnal contro l system a nd will a sse ss th e ado ption an d ope ration o f evolved govern ance f ramewo rks (for example, c omp lianc e with n ew poli cies , tal ent fram eworks, p rocure ment p roce ss es, h otel initi ative del iver y , business cont inuity pla ns and s upply cha in r esilience a rrangemen ts ). The p lan al so aim s to identif y an d con sid er othe r sou rces of a ss uranc e availab le to the B oard and s eni or man age ment in re latio n to overall obje ctive s and ex terna l disc los ures an d the level o f relian ce whi ch can b e pla ce d on the se s ource s in the s hor t to me dium term . 97 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Audit C omm itte e Rep or t A udit C ommi ttee Repor t c o nti nu e d Followin g con side ration , the Co mmit tee c on irme d its a gree ment to the 20 22 I nternal Au dit pl an, inc ludin g the as suran ce ob jec tives ide ntii ed. T he C ommit tee revi ews the re sult s of com plete d audi ts and o bse rvati ons fro m other o ngoin g ass uranc e and c ontrol improvem ent su ppo rt , as well a s actio ns t aken by mana gem ent in res pon se to Intern al Audi t’s work. The f unctio nal e ec tivene ss of I nterna l Audit is a ss es sed o n an ong oing ba sis a nd rep or ted to the C ommi tte e through out the ye ar . Duri ng 202 1, this h as involve d dis cus sion s bet wee n the C ommi tte e Cha ir and p art ners f rom third- par t y par tne r irm s, fe edb ack from audite es a nd se nior le ad ers hip and a ss ess me nt of executio n agai nst meth odo logy. This ha s highligh ted po sitive fe edb ack o n the ba lanc e bet wee n cha llen ge and s uppo r t provide d to man agem ent an d the agile d evelo pme nt of the au dit pla n and id enti ie d opp or tunitie s for co ntinuo us enh anc eme nt of as suran ce rep or ting an d use of tech nolo gy to sup por t execu tion. Gov ernance and compliance The C omm itte e is res pon sib le for review ing the G roup’s Cod e of Co nduc t (a revised ve rsio n of whic h was ap proved in D ec emb er 20 21) and related policies. Looking f orward Duri ng 202 2, th e Co mmit tee wil l remain fo cus ed o n the key areas of resp on sibilit y de leg ated to it by the B oa rd, ensu ring that s tan dards of go od gover nanc e are maint aine d and th at app ropriate a ssu ranc e is obt aine d acro ss all a reas of th e bus ine ss, w ith a par ticu lar foc us on the G roup’s princip al ris ks, co ntrol environ ment a nd app roach to in anci al repo rti ng tak ing into ac cou nt develo pme nts in rep or ting resp on sibiliti es in cludin g thos e rec omme nde d by the TCF D, the con sid eratio n of clim ate risk in p repar ation of th e in ancia l state ment s and ch ang es in the g overnan ce e nvironme nt, pa rtic ularly t hos e relate d to chan ges i n the audi t regim e. Ex tern al Audito r In Augu st 20 19, the C omp any annou nce d the B oard ’s intention to prop ose to s hareh old ers th at Pw C be ap poi nted as th e Co mpany ’s sta tutor y Auditor fo r the i nanc ial year e ndin g 31 D ece mbe r 202 1. The au dit ten der p roce ss un der t aken was exp laine d in de tail in the 20 19 Ann ual Rep or t and Fo rm 20 F an d the app ointm ent was con irm ed by sh areh olde rs at the 2 02 1 AGM . A det aile d audit p lan was re ce ived from P w C at the b eginn ing of the au dit cycle for th e 202 1 inanc ial yea r , whi ch gave an over view of its a pproa ch to the au dit, ou tlining th e signi ic ant ris k area s and in par tic ular the a ppro ach to mate rialit y and s co ping of th e audit . The C omm itte e regul arly reviewe d the s igni ic ant audit r isks an d as ses se d the pro gres s of the au dit throu ghou t the year. The C omm itte e as ses se d P wC ’s per forma nce, in clud ing its inde pe nde nce, e ec tivene ss a nd obj ecti vity. As par t of its rev iew, the C ommit tee d etermi nes th e inde pe nde nce of th e exte rnal Auditor, consi derin g, amo ng othe r things , its ch allen ge to man age ment an d level of p rofes sion al sc eptic ism, th e amou nt of time p as sed s inc e a rotation o f audit p ar tner a nd the leve l of non -au dit work th at it und er takes (det ails of w hich c an be fo und on pa ge 16 4). Gile s Han nam too k on the rol e of le ad aud it par tne r for the irs t time in 20 21 a nd will b e requi red to rotate af ter ive years to s afeg uard P wC ’s indep en denc e. The e ec tivene ss o f the exte rnal au ditor is eva luated by th e Audit Co mmit tee thro ugh a fee dba ck que stio nnaire s ent to C ommit tee mem ber s and a nu mbe r of sen ior I HG em ployee s. Th e 202 0 evaluati on was th e last o f EY a s outgoi ng audi tor ; the s ur vey ide ntii ed th e areas th at worked we ll in the E Y audi t proc es s and as ses se d if ad equ ate plan s were in pl ace fo r Pw C ’ s i rst yea r . The re were no are as id enti ied w hich re quire d Pw C ’ s sp eci ic fo cus . An evalu ation was a lso c omp leted p rior to the 2 02 1 year-en d; the Co mmit tee c oncl ude d that the P w C audit te am was p roviding the req uired q ualit y in rel ation to the p rovisio n of the se r vice s. The au dit tea m had s hown the n ec es sar y co mmitm ent an d abilit y to provide th e ser vi ces to geth er with a d emo nstrab le de pth of knowledge, robust ness, independence and objectiv ity as wel l as an ap prec iation o f comp lex is sue s. Th e team h ad po se d construct ive challenge to ma nagement wher e appr opria te. In ad dition, q ualit ative co nsid eratio ns were t aken into ac count . The se fo cuse d on th e depth o f knowl edg e of the ex terna l auditor whic h was evid enc ed by: • co ntinue d me eting s with se nior m anag eme nt and exec utives across the business; • frequent go vernance sessions wit h management, includ ing a focu s on the p lannin g and s tatus of wo rk by key workstream as well a s the st atus of th e dep loyme nt of P wC ’s tools an d technology acr oss the audit. The gov ernance sessions focused on key mile stone s and p rovide d a way for any matte rs to be es cal ated an d deal t with on a tim ely b asis ; • vario us pri vate meeti ngs with t he Ch air of the B oard, th e Audit Co mmit tee C hair an d the he ad of Inte rnal Au dit; • the p rovisio n of a ‘ irst i mpres sio ns’ rep or t and i nsight s into the G roup’s proce sse s and c ontrol s; and • the a udit pl an, inc ludin g signi ic ant ris ks, and h ow Pw C ’s app roach evo lved as th e pro ile of ri sks ch ange d. Over all, no sig ni icant i ssu es we re raise d in the revi ew of Audito r pe rfor manc e and e ec tivene ss a nd, as a re sult, th e Co mmit tee con clud ed th at Pw C provid es an e ec tive audit a nd mai ntain s independence and ob jectivity . The G roup ha s com plie d with the re quire ment s of St atutor y Audit Ser vi ces fo r La rge Co mpan ies M arket Investi gation (M and ator y Us e of Co mpeti tive T e nde r Proc ess es a nd Audit C om mitte e Res pon sibili ties) Orde r 2014 , which re lates to th e frequ ency an d govern ance o f tende rs for th e app ointme nt of the ex terna l auditor and th e set ting of a p olicy o n the provis ion of n on- aud it ser vi ces . Gove rn an c e 98 IHG | Annual R epo rt a nd Form 20 F 202 1 Sig ni ica nt ma tte rs in th e 20 21 Fi nan cia l Sta tem ent s Are a for f oc us Is su e/R ole o f th e Co mmi tte e C onclusions/ Actions taken Accoun tin g f or IH G Rewa rds Acc oun ting fo r IH G Rewa rds re quire s signiicant use of est imation techniques and r epresents a ma teria l def erred rev enue bal anc e. T he C ommi tte e revi ews th e controls , judgements and estima tes r elated to ac cou nting fo r IH G Rewa rds . The C om mit tee r eviewe d th e defe rred r evenu e bal anc e an d que stio ne d the va luat ion app roa ch, th e res ults o f the ex tern al ac tua rial rev iew an d pro ce dure s co mpl ete d, to dete rmin e the b rea kag e ass ump tion fo r out st and ing I HG Rew ards p oint s. T he C omm itte e revie wed a p ape r from m an age me nt outl inin g curre nt loyal ty t rend s (b oth me mb er be havi our, which re main s dis tor ted d ue to th e pan de mic, an d pl anne d ch ang es to pro gram me be ne i ts). A mo di ie d app roac h was a dop ted u sing p re - Cov id be havi our pat ter ns as a b as e but g ivin g som e wei ght to ac tivi ty du ring t he pa nde mic a nd in cor por ating es tima ted im pac ts o n mem be r eng age me nt of fu ture kn own p rogra mme c han ge s. The C om mit tee c on clu de d that th e def erre d reven ue ba lan ce is a ppro pri atel y sta ted. Accoun tin g f or the S yste m Fund Give n the u niqu e natu re of th e Syst em Fund, th e Co mmit te e review s the c ontro ls and p roc es se s rel ated to S yste m Fund accounting. The C om mit tee m et wi th se nio r in anc e man ag eme nt to revi ew an d evalu ate the ri sk ar eas as so ciate d wit h the Sy ste m Fund. Th e Co mmi tte e revie wed a p ap er fro m man age me nt sum mari sin g the p rinc ipl es de term inin g the all oc atio n of reve nue s and ex pe nse s to th e Sys tem Fund , and th e rel ated g overn anc e and i ntern al c ontro l enviro nme nt. T he C omm itte e co ncl ude d that t he ac co untin g trea tmen t of the S yste m Fund an d rela ted di sc los ures were appropr iate. Expected cred it losses Es tima ting exp ec ted c red it lo ss es o n trad e rec eiva ble s co ntin ues to b e su bje ct to an in crea se d leve l of un ce rt aint y. The Committee reviews the pr ovision and co nsi der s the a de qua cy of the d is clo sure . The C om mit tee r eviewe d ma nag em ent ’s pap er s set ting o ut th e app roac h to ca lcu latin g the p rovis ion fo r exp ecte d cre dit l os se s, in clud ing up dat es ma de to th e provi sio n matr ix to re le ct the G rou p’s most re ce nt ca sh c oll ect ion ex per ien ce. E x pe cted c red it lo ss es are stil l subj ec t to inc reas ed u nc er tai nty a s, al thou gh c ash c oll ec tion h as im prove d, the prop or tio n of ol de r deb t rema ins h igh an d owne r liq uidi ty ri sk c ontin ue s. Fac tors co nsi dere d in clu ded t he over all im provem ent i n ca sh co lle cti on, th e age ing o f rec eiva ble s, own ers k nown to b e in ina nci al dis tres s an d the ex pe cted m itig ating i mpa ct of p ayme nt pla ns . The C om mit tee c on clud ed i t agre ed w ith th e bas is of c alc ulat ion an d tha t the re late d disclosures w ere appr opriate. Impairment tes ting Impairment reviews require signiic ant judgement in estimat ing r ecover able valu es of a ss ets o r ca sh - gen era ting un its and t he C ommi tte e the refo re scr utini se s the met hodologies a pplied and the i nherent se nsi tivit ies i n dete rmini ng any p otent ial asse t impairment or impairment reversal and t he ad equ acy o f rela ted di sc los ures . The C om mit tee r eviewe d ma nag em ent re po rt s outl inin g the ap pro ach t aken o n imp airm ent tes ting a nd key as sum ptio ns an d sen sit iviti es s upp or ting t he co ncl usi on on t he vari ous as set c ate gor ies . The C om mit tee ex amin ed i n det ail wh eth er trig ge ring eve nts fo r impairment testing had o ccurred, including testing for impairment reversal s, and the as sum ption s ap plie d in e stim atin g the re cove rabl e valu es w ith a foc us o n the un der lyin g ca sh pro je ctio ns. I n co njun ctio n with s of t ware imp air ment t est ing, th e Co mmi tte e revie wed man ag eme nt 's co nc lusi on s in rel ation to c os ts p revio usl y incu rred to i mpl em ent cl ou d co mpu ting ar rang em ent s follo wing t he Inte rna tion al Fi nan cial R ep or ting I nterp ret ation Co mmit te e (IF RI C) guid anc e is sue d in M arch 2 02 1 in rel atio n to ac cou nting fo r co n igur ation or cust omisation costs in a cloud comput ing ar rangement. The Committee concluded that i t agre ed w ith th e dec isi on to de rec og nis e a net $ 12m of a ss ets w hic h are no l ong er co nsi dere d c apit ali sa ble . The C om mit tee a gree d wi th the oth er d eter mina tion s rea che d on im pair men t and th at the r elat ed di scl os ures we re ap prop riate . Litiga tion and contingencies From time to ti me, th e Gro up is s ubje ct to le gal p roc ee ding s with t he ult imate o utco me of ea ch b ein g subj ec t to many un ce rt aint ies . The C om mit tee r eview s and eva lua tes th e ne ed fo r provi sio ning a nd c ons ide rs th e adequacy of the disclosur e. At ea ch me etin g duri ng th e year, the Co mmit te e con si dere d rep or ts d eta ilin g all ma teri al litig atio n mat ter s inc lud ing c omm erci al dis pu tes . The C om mit tee d isc us se d and a gree d any prov isi onin g requ irem ent s, an d the a ss oci ated d isc lo sure s, wh ere re levan t, ba se d on underly ing fact ors. Exceptional items The G rou p exerci se s judg em ent in p res enti ng exce ptio nal ite ms . The C om mit tee re view s and c hal len ge s the cl as si ic atio n of ite ms as exc epti ona l bas ed o n the ir mate ria lit y or na ture. The C om mit tee r eviewe d pa pe rs by ma nag em ent an d co nsi de red th e con si sten cy of trea tme nt and n ature of i tem s cla ss i ied a s exce ptio nal. T he C om mit tee rev iewe d and cha lle nge d the s igni i ca nce, t imin g and n ature of t he exce ptio nal i tems (s ee p age s 16 5 to 16 7) whi ch co mpr ise $ 4m f air val ue lo ss re late d to an a ss oci ate, $2 5m exp ec ted s et tle men t of co mme rcia l dis pute s, an d $26 m exce ptio nal t ax cre dit o n the c han ge to th e UK c orp orate ta x rate. T he C ommi tte e co ncl ude d th at the di sc los ures a nd th e treat men t of the i tems shown as ex c eptiona l wer e appr opriat e. Going concern and viability Cov id-1 9 con tinu es to im pac t the pro it abi lit y and c as h gen era tion o f the Gro up and t he lev el of un ce rt aint y in planning scenarios. The Commit tee re views man ag eme nt ’s ina nci al mo de llin g to conclude on the a ppropria teness of the goi ng co nc ern an d via bili ty s tate me nt. The C om mit tee r eviewe d an d cha lle nge d the s ce nar ios c ons id ere d by man age me nt, th e det ail ed c as h low fo rec as ts an d the mi tiga ting a ctio ns avai lab le to ma nag em ent c ons ide red in it s goin g co nce rn as se ss me nt to Ju ne 20 23 an d the th ree ye ar via bili ty a ss es sm ent an d co ncl ude d the se we re ap prop riate . The C om mit tee a lso re viewe d an d cha lle nge d the rev ers e stre ss te st a ss umpti ons to c on ir m the vi abil it y of the G roup. T he C om mit tee rev iewe d goi ng co nce rn di scl osu res ( pag e 14 9) and th e via bilit y st ate men t (pa ge s 48 to 4 9) an d is s atis ie d these ar e appr opriat e. Climate ris k In p rep arin g the ina nci al st atem ent s, as sum ption s in re sp ect o f the ina nci al imp act o f clim ate rel ate d mat ter s have been made. The Committee consider ed the proportionate and consist ent considera tion of climat e-related mat ter s acro ss t he An nual R ep or t and in p ar tic ular t he p otenti al imp ac t on for wa rd- loo kin g as sum ption s in th e in anc ial s tate me nts th at sup po rt c on clu sio ns in are as s uch a s imp airm ent , defe rre d tax a ss et s, goi ng co nc ern a nd via bili ty a ss es sm ent s, an d the as so ci ated d isc los ure s. UK d efe rred ta x ass et Give n the s ize of t he Gro up’s UK d efer red t ax as set ($ 127m), the C om mit tee re viewe d an d cha lle nge d the key a ss umpti ons d eter mini ng the re cove rab ilit y of th e defe rre d tax a ss et and w heth er th is sh oul d be di sc los ed a s a signiic ant estimate. The C om mit tee r eviewe d pa pe rs by ma nag em ent wh ich c on irm ed t he es tim ates u se d to sup po rt th e rec over y of th e UK d efe rred t ax a ss et were c on sis tent w ith tho se u se d in the imp airm ent a nd go ing c onc ern a nd vi abil ity a ss es sm ent s. G iven th e rec over y to le vels o f pro it abi lit y as sum ed in th es e es tima tes, t he C ommi tte e co ncl ude d th at it ag ree d with th e rec ogn itio n of the d efe rred t ax a ss et, th at thi s was no t a sign i ica nt es tima te, as a m ateri al cha nge i n es timate i s not ex pe cte d in the n ext 1 2 mon ths, a nd th at the di sc los ures were appropr iate. 99 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Audit C omm itte e Rep or t R es pon sible Bus ines s C ommi t t e e Repor t I am pl ea se d to pre se nt th e Res po ns ibl e Bu sin es s Co mmit te e’ s r ep ort f or th e year , inc lu ding a n up date on th e Voice of t he Em ployee e ng age me nt pl an . The im pac t of Covi d-19, the retur n of corp orate e mploye es to the o ice a nd the intro ducti on of hybri d workin g were high on th e Co mmit tee’s agen da, al ongs ide th e launc h of the G roup’s Journey to T omo rrow resp ons ible b usin es s plan, the e stab lish ment o f TCFD rep or ting pro ce dures an d the inc orpo ration of c limate -re late d iss ues into th e broa der strate gic and ri sk pro ce sse s. The C omm itte e has c ontinu ed to sh ape a nd trac k the road map to supp or t the G roup’s 2030 re spo nsib le bu sine ss c ommi tment s, end ors ing the s trategic p rioriti es to be a ddres se d whic h unde rpin th e bol d, long -term a mbitio ns an d are des igne d to help s hap e the futu re of resp ons ible tr avel togeth er with th os e who s tay , wor k and pa rtn er with I HG. I would li ke to thank all tho se ac ross th e bus ine ss wh o have as siste d the C ommi tte e in ful illin g its role ove r the year, es pec ially th ose w ho have worked s o hard to drive th e Group’s environ ment al and s oci al age nda fo rwa rd as well as s upp or ting the well bein g of its e mploye es duri ng the pa nde mic. Jill McDo nald Cha ir of the Re spo nsi ble B usin es s Com mit tee 21 Feb ruar y 20 2 2 In ad dition to th e areas o utline d ab ove, the Co mmit tee’s key resp on sibiliti es an d focu s areas ove r the year h ave bee n: • mo nitoring th e prog ress a gain st the G roup’s 2030 re spo nsi ble business commit ments; • mo nitoring th e Grou p’ s carb on an d ene rgy redu ctio n strateg y and p lan; • review ing the G roup’s DE&I in itiative s and ob jec tives; • imp lem enting th e rec omme ndati ons of th e TCFD; • as se ssi ng the G roup’s respo nsib le pro curem ent ag enda; a nd • overs ee ing the G roup’s Human R ights p rogram me. Membership and attend ance a t meet ings The C omm itte e’s membe rshi p and at tend anc e at mee tings are s et out on p age 8 1. Th e Chai r of the B oard, C EO , Ge nera l Co unse l and Co mpany S ecret ar y , E xecu tive Vic e Pres ident , Glo bal C orp orate Aair s and th e Chief S ust aina bilit y O ic er at tend ed all m eetin gs hel d during th e year. Rep or ting to t he B oar d The C omm itte e Cha ir upd ates the B oard o n all key issu es rai se d at Co mmit tee me etin gs. Pa per s and min utes for e ach m eeti ng are als o circul ated to all B oard me mb ers, w ho are invite d to reque st fur the r inform ation wh ere ne ce ss ar y . Effe ct ivene s s of th e Com mit tee The C omm itte e’s eecti vene ss co ntinue s to be mo nitore d and as ses se d regu larly by the C omm itte e’s Chair an d the Ch air of the Bo ard. In 20 21, th e Co mmit tee wa s also revi ewed a s par t of the intern al Bo ard evaluati on proc es s, wh ere it was c onc lude d that the C ommit tee re main s ee ctive. Focu s are as a nd a ctivi tie s Responsible business commi tments In a year th at saw th e laun ch of the G roup’s Journ ey to T om orrow resp on sible b usi nes s pla n, the C ommit tee rev iewed th e 202 1 strate gic prio ritie s that sup por t the ove rall 20 30 res po nsib le bus ine ss co mmitm ents , and dis cus se d the ap proac h to hotel own er eng age ment o n the co mmitm ents an d impa ct of th e comm itment s on em ployee s. Th e Co mmit tee fur th er co nsid ere d how the com mitme nts alig n to the Grou p’ s purp ose to p rovide T rue H ospi talit y for Go od a nd how they c omp are to thos e of the G roup’s comp etitors, and endorsed t he appr oach t o the 2021 responsible business strategic p rioritie s. Furt her i nform atio n on ou r 10 -ye ar res po nsi ble b usi ne ss pl an c an be foun d on p age s 23 to 3 1. Carbon and energy reduction The C omm itte e reviewe d the Gro up’ s de carb onis atio n and en ergy redu ction s trategy a nd pathway , noting th e prop ose d acti ons a cros s three m ain are as: en ergy e ic iency in t he Grou p’ s existin g hotel est ate; so urcing re newabl e ene rgy; and deve lopin g zero - carb on new- buil d hotel s. The C om mitte e als o app roved the G roup’s upgr ade d scie nc e- ba sed t arget to re duc e carb on em iss ions to a lign with the m ost a mbitio us go als of th e Paris Agre em ent to keep gl obal warming within 1.5°C. Diversity , equity and inclusion As pa rt of i ts as se ssm ent of th e Group’s DE& I age nda, d uring the ye ar the C ommit tee e ndo rse d the roll - out of c ons ciou s incl usio n trainin g for all c orpo rate emp loyees w ith a co mmitme nt to improvin g DE &I dat a coll ecti on and m eas urem ent. As at 3 1 De ce mbe r 202 1, 38 % of our S enio r Lead ers we re wome n, in add ition to wom en co mpri sing 41% of the C omp any’s Boa rd. Key dutie s and r ole of t he C omm itte e K ey objectives and summary of r espons ibili ties The C omm itte e reviews an d adv ise s the B oard on th e Group’s responsible business objecti ves and stra tegy , including its i mpact on the e nvironm ent and c limate ch ang e; soc ial, co mmuni ty an d huma n rights i ssu es; it s appro ach to su sta inabl e devel opme nt and resp on sible p rocure ment ; and s takeh olde r eng age ment i n relatio n to the Gro up’ s app roach to re spo nsib le bu sine ss . The C omm itte e is als o res pon sibl e for as se ssin g the B oard ’ s eng age ment wi th the work force a nd the G roup’s DE&I a gend a. The C omm itte e’s r ole, re sp onsi bilitie s and au thorit y de leg ated to it by the B oard are s et out in it s T e rms of Re feren ce ( T o R), whic h are re viewed annually and approv ed by the Board. The ToR are ava ilab le at w ww.ihgplc. com/inv estors under Co rpo rate gover nanc e. Gove rn an c e 100 IHG | Annual R epo rt a nd Form 20 F 202 1 Human Rights progr amme The C omm itte e rec eived u pdate s on the G roup’s Human R ights progr amme, n oting the p rogre ss ma de in key workstre ams re lating to resp ons ible l abo ur prac tice s, ethic al rec ruitm ent and a nti-h uman tra icki ng. Th e Com mit tee als o reviewe d the 20 21 M ode rn Slav er y Stat ement. Looking f orward Duri ng 202 2, th e Co mmit tee wil l contin ue to focu s on em bed ding the 20 30 re spo nsib le bu sine ss c ommit ment s and TCFD re po rtin g. Our R es pon sib le B usi nes s Re por t i s availa ble a t www.ihgplc. com/ responsible-business TCF D The C omm itte e as ses se d key TCFD workstre ams , inclu ding an anal ysis of th e pote ntial imp act to the G roup of th e mos t materi al clim ate- relate d risks a nd op por tuniti es. I t als o con side red p lans to emb ed cli mate ris k con side ration s into its st rategic a nd risk management pr o cesses and the appropr iat e gov ernance framew ork to achieve thi s. Furth er info rmation o n TCFD is i nclu ded o n pag es 32 to 3 5. Responsib le pr ocuremen t The Committee consider ed reports from management on the Res pon sibl e Procu remen t progra mme, foc usin g on sup ply ch ain ris k, supp lier d ivers ity an d the s ele ction o f supp lier s that will s uppo rt th e Group’s plan s for c arbo n emis sio n and was te redu ction . For more inform ation on th e resp on sibl e procu remen t progra mme, s ee pa ge 3 9. V oice o f t he E mplo y e e Additi onall y , Jil l was brie fed by the G lob al HR L ead ers hip team on bro ade r cultural i nsigh ts and a n organi satio nal ‘puls e’ sur vey acro ss all e mploye e pop ulatio ns. Dis cus sio n topic s incl ude d IH G’s resp ons e to the pan demi c; emp loyee well bein g; fee dba ck on execu tive remun eratio n; lexi ble/remote work ing an d return to the o ic e; indu str y pro itab ilit y and th e comp etitive l ands cap e; le ade r com munic ation s; tal ent at tracti on; onb oardin g and rete ntion; pe rso nal an d care er deve lopm ent ; and agi le ways of work ing. Me eting s with em ployee s conti nued to b e vir tual in 2 02 1 due to the co ntinuatio n of the p ande mic. Ad dition al en gage ment and a ctiviti es und er taken by J ill during th e year in clud ed: • mo nitoring a nd review ing the c ontent an d fee dba ck from glob al ‘all empl oyee’ CEO c alls; an d • review ing emp loyee da shb oard s and sur vey res ults . Insights and learnings Jill provi ded re gula r fee dbac k to the Res po nsib le Bu sine ss Co mmit tee an d the B oard throu ghou t the year , with key Bo ard dis cus sion s tak ing pl ace aro und the in sight s and ac tion p lanni ng arising from emplo yee engagement survey r esults. Throug h this fee dba ck, th e Bo ard gain ed valu abl e insigh ts into emp loyee senti ment d uring the p and emic an d throug hout th e return to the o ice . Pla ns for 2 02 2 The B oard h as app roved the tra nsiti on of the Voice o f the Empl oyee resp on sibili ties to D uriya Farooqu i with ee ct fro m 1 Jan uar y 202 2 . It is antic ipate d that ad dition al NE Ds wil l contin ue to ass ist wi th and su ppo rt Voice o f the Emp loyee ac tivitie s. A sch edu le of dis cus sio ns and fe edb ack s es sio ns ha s bee n arrang ed fo r 202 2. T his will c ontinu e to enc ompa ss a wi de group of emp loyee s and le ade rs from a cros s all regi ons, i nclu ding ERG s and Le an In c ircle s, with fur the r incl usio n in 202 2 of h otel ma nage rs in add ition al loc ation s, to en sure a broa d rang e of insi ghts as we ll as co nce rns an d is sue s are conveyed to th e Boa rd. Additi onall y , the B oard inten ds to review th e func tionin g of the Voice of th e Empl oyee prog ramme to e nsure it m eet s be st pra ctic e and com plie s with ch ange s in regu lation . At the s tar t of 2 021 , Jill M cD ona ld wa s IHG ’ s de sig nate d Non-Executive Director (NED ) wi th responsibility f or w orkforce en gag em ent ( Voice of t he Em ployee), wit h ad ditio na l sup po rt provi de d by Duriya Faro oqu i, Da nie la B aron e So are s an d Jo H arlow. Jill h as al so b ee n su pp orte d by th e Gro up’ s Hu man Res our ce s (HR) tea m, wh ich a s sis ted wi th deve lop ing t he Bo ard ’ s work forc e en gag em ent p lan a nd p rovide d da ta on vario us me tric s rel atin g to em ployee s, s uc h as e mpl oyee engagement surve y results. Role and responsibilities Their role and responsibiliti es are t o: • sup por t th e des ign of the s tructu re and co ntent of B oard dis cus sion s on em ployee e ngag eme nt and c ulture; • evalu ate empl oyee eng age ment a pproa che s and th eir eectiv eness; • en sure em ployee fe edb ack a nd intere sts are f actore d into the B oard ’ s de cisi ons an d KPI s etti ng; • en sure that th e Bo ard, throug h the E xecuti ve Com mitte e, ha s ee ctive me thod s of rec eivin g fee dbac k from em ployee s and com munic ating B oard an d executive d eci sion s and p rioritie s throug hout the organisati on; • ensure al l signiican t business and budge t proposals i nclude a man age ment a sse ss men t of the imp act o n empl oyees; a nd • en sure E xecuti ves sh are emp loyee fe edb ack op enl y , trans pare ntly and in a b alan ce d way , inc luding rev iewing emplo yee engagement surve ys and o ther em plo yee r ep orts, including whis tleblowing. 2021 engagement In 20 21, th e team ac ted on th e rec omme ndati on to obt ain more direc t input a nd fee db ack from e mploye es in key markets o uts ide the U S and U K and from h otel- ba sed e mpl oyees . Acc ordingl y during th e year , Jill, with th e as sist anc e of Du riya, Dan iela a nd Jo, un der too k a progra mme of a ctiviti es to eng age with a cro ss -s ectio n of em ployee s and re ceive d det aile d fee dba ck both in p ers on an d through th e Grou p’ s emp loyee fee dba ck me chani sms . They at ten ded a nu mbe r of vir tual m eetin gs with emp loyee forum s, inc ludin g lea der gro ups (within U S and U K hotel s, res er vation s and co rpo rate pop ulatio ns) and Emp loyee Res ource G roup s (ERGs) in the U K , US, I ndia, Ph ilippi nes , Chin a and various EME AA countries. 101 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Responsible Business Committee R eport Nomina ti on C ommi ttee Repor t Key dutie s and r ole of t he C omm itte e K ey objectives and summary of r espons ibili ties The C omm itte e reviews th e com pos ition of th e Bo ard and it s Princ ipal C omm itte es, eval uating th e bal ance o f skill s, expe rien ce, independence , kno wledge a nd di versi ty requ iremen ts bef ore mak ing app ropria te reco mmen datio ns to the B oard as to any cha nges . It al so en sures p lan s are in pla ce for o rderly s ucc es sio n both for D irec tors an d other s enio r executi ves and i s resp ons ible for review ing the G roup’s senio r lea der ship ne ed s. The C omm itte e’s r ole, re sp onsi bilitie s and au thorit y de leg ated to it by the Bo ard, inc ludin g proc es ses i n relatio n to appo intment s, are set o ut in its Terms of Refe renc e (ToR), which a re reviewed a nnuall y and ap proved by the B oa rd. The ToR state tha t the Co mmit tee i s resp on sible fo r con sid ering p otentia l can didate s for app ointme nt to the Bo ard ba se d on me rit, co gnitive a nd pe rso nal stre ngth s with due re gard for th e ben e its of di versi ty , inclu ding g end er , a nd so cial, ethnic and geographic backgrounds. The ToR are ava ilab le at w ww.ihgplc. com/inv estors under Co rpo rate gover nanc e. The C omm itte e’s k ey resp onsi bilitie s and fo cus are as duri ng the yea r have be en : • as se ssi ng Bo ard and th e Princ ipal C ommi tte es’ c omp ositi on and succession planning, includi ng considerat ion of gender balance and ethnic and geographical diversit y , in accordanc e with t he T oR s and c ons istent w ith the G roup’s DE&I Po licy (detail s of whic h are on page 25 ); • enga ging with external search cons ultancies and making rec omme ndati ons o n appo intme nts to the B oard; • mo nitoring th e E xecutive C omm itte e tal ent and s ucc es sio n planning; and • overs ee ing the p er form ance eva luatio n of the B oard, the P rincip al Co mmit tee s and in dividu al No n- E xecuti ve Direc tors . Membership and attend ance a t meet ings The C omm itte e’s membe rshi p and at tend anc e at mee tings are availab le on pa ge 81 . All me mbe rs of the C omm itte e are No n- E xecutive D irecto rs. W hen th e Com mit tee co nsi ders m atte rs rel ating to my posi tion, the S eni or Ind ep ende nt No n- E xecuti ve Direc tor (SID), acts as Commi ttee Chair . Rep or ting to t he B oar d The C omm itte e makes re com men datio ns to the B oard for al l Boa rd app ointme nts. M inute s are circul ated to Bo ard me mbe rs and I re por t bac k to the Bo ard on the a ctivi ties of th e Co mmit tee foll owing eac h me eting. Effe ct ivene s s of th e Com mit tee a nd int erna l evalu atio n Duri ng the yea r , the e ec tivene ss o f the C ommit tee wa s reviewe d as par t of th e internal B oa rd evaluatio n proc es s. It wa s con clud ed th at the C ommit tee re main s ee ctive. Bo ard c omp os itio n and s uc ce ss ion h ave featu red pro min ent ly on th e Co mmi tte e’ s age nd a aga in in 2 021 , with the a pp oint me nt of two n ew No n- Exe cuti ve Dire cto rs in Ma rch 2 021 . The C om mitt ee al so over saw B oa rd su cce s sio n pl ans w ith th e rec om men dat ion s to ap poi nt Gra ha m Alla n as S eni or In de pe nde nt N on- E xecut ive Dire cto r an d Du riya Farooq ui a s the N on -E xecu tive Dir ec tor re sp ons ib le for th e Gr oup’s V o ice o f the E mpl oyee en gag em ent p lan . The C omm itte e’s o verrid ing co nce rn whe n reco mme nding new D irector s for ap pointm ent to the B oard h as be en to en sure that the B oa rd and its C om mitte es c ontinu e to inclu de the b est rang e of tal ent, s kills an d relevan t experi enc e availabl e as wel l as re le cting ou r sta kehold ers an d the c ommun ities in w hich we ope rate. We als o want to ens ure that the B oa rd’s com pos ition a ligns wi th our strate gy . We value dive rsit y and th e advan ce ment of d ivers ity o n the Bo ard and in th e Group’s lea der ship c ontinu es to be a g overning factor i n our a pproach t o succession. I am ple as ed to rep or t that, a t 31 De ce mbe r 202 1, our Bo ard com pos ition exce ed s the t arget for th e prop or tion of wome n on bo ards s et out in th e Ham pton- Alexan der Rev iew (which is sue d its inal re po rt in Feb ruar y 20 21) as we ll as the rec omme ndati on on eth nic diver sit y on b oards in th e Parker Review. Patr ick Cescau Cha ir of the N omin ation C ommit tee 21 Feb ruar y 20 2 2 Gove rn an c e 102 IHG | Annual R epo rt a nd Form 20 F 202 1 Focu s are as a nd a ctivi tie s Board and P rincipal Committ ee composition and succession planning The C omm itte e conti nue d to review the cu rrent and f uture com pos ition o f the Bo ard and it s Princ ipal C omm itte es . The C omm itte e con sid ered s hor t an d med ium term su cce ss ion pla nning in al l of its me etin gs durin g the year , re lec ting on th e skil ls and exp erie nc e that woul d ben e it the B oard ’s current and future c omp ositio n, whil e taki ng into ac count g end er , ethnici ty and br oader diversi ty considerations. The C omm itte e note d the Bo ard’s as ses sm ent that i t would b ene it from ad dition al expe r tise in th e techn olo gy and tr avel sec tors, with a foc us on ES G res pon sibili ties . It eng age d an ex ternal s earc h con sult ancy , Spe nc er Stu art , to ass ist wi th sea rche s for suit abl e Non - E xecutive D irec tors. S pen cer S tuar t ha s no othe r co nnec tion with the C om pany or in dividu al Dire ctor s. A can didate s ele ctio n, as ses sm ent an d inter view pro ce ss was conducted, i ncluding consideration of candida tes’ other comm itments. Followin g the co mple tion of s atisf actor y ba ckground an d refere nce che cks by Sp enc er Stu ar t, the C omm itte e reco mme nde d to the Bo ard the ap pointm ent of Ri chard A nde rson a nd Da niel a Baro ne So ares as N on -E xec utive Dire ctor s with ee ct fro m 1 March 2 02 1. The C omm itte e note d that, at th e time, D aniel a and J o Harl ow were both I nde pen dent N on -E xec utive Dire ctor s of Halm a plc (H alma), but th at Dani ela di d not inten d to stan d for re - ele ction a s a Dire ctor of Ha lma an d would retire fro m its bo ard from 2 2 Ju ly 202 1. Acc ordingl y , the C om mitte e’s recomm en dation to th e Boa rd to app oint Da niel a was ma de on th e bas is that it di d not co nsi der the in dep end enc e of eith er Da niel a or Jo to b e impai red by this cross -direc torship. Rich ard later to ok the d eci sion to s tep down fro m the Bo ard due to unanti cipate d pe rso nal mat ter s on 26 M ay 202 1. Dan iela’s biog raphy is inc lude d on p age 8 4 and d etail s of he r induc tion p lan c an be found o n pag e 93. The Committee also discussed and considered succession plann ing for the S ID rol e, in light of D ale M orris on’s tenure and retire ment at the en d of the ye ar . I t reco mme nde d to the B oard that G raha m Allan be ap pointe d to repl ace D ale a s the SI D, in light of his s igni ic ant strate gic expe r tise an d his ten ure and co ntribu tion sin ce his app ointme nt to the Bo ard in 20 20. In ad dition, th e Co mmit tee c ons idere d the rol e of No n- E xecutive Dire ctor res po nsib le for the Voice o f the Emp loyee en gage me nt pla n. It rec omm end ed to the B oard th at Duri ya Farooqui a ss ume resp on sibilit y for thi s role from 1 J anu ar y 202 2, in li ght of he r skill s and c apa bilitie s and p roximity to th e Group’s main U S corporat e oice. A sep arate Se arch C ommi tte e, led by D ale M orris on, was e st abli she d to lea d the pro ces s for th e sea rch and ap point ment re com men dation of a new C hair of th e Bo ard. A sum mar y of its a ctivi ties an d the proc es s it followe d is s et out o n pag e 93. The C omm itte e als o reviewed a nd dis cus se d the le ngth of te nure of No n- E xecuti ve Direc tors. A s Ian D yso n and Jil l Mc Don ald will reac h nine ye ars’ se r vice in 2 02 2 and J o Ha rlow will re ach nin e years ’ ser vi ce in 20 23, they we re subje ct to pa rti cular rev iew. The C omm itte e con sid ered th eir ap pointm ents i n the co ntext of the b roade r Bo ard com po sition a nd tenure a nd rec ent B oard app ointme nts. T he C ommit tee a lso to ok into ac count th eir tim e com mitme nts an d other ap poi ntment s, and c onc lude d that e ach of them c ontinu ed to b e able to d evote su icie nt time to the B oard an d their re sp ecti ve Com mit tees a nd that th ey remain ed in dep end ent. Nom inatio n Co mmit tee me mbe rs did n ot par tici pate in the dis cus sion in re latio n to their own tim e co mmitme nt and te nure. Exe cuti ve Com mit tee t ale nt an d su cce s sio n Duri ng the yea r , the C omm itte e als o conti nued to revi ew the ta lent and su cc es sion p lans fo r the E xecuti ve Com mit tee and s eni or man age ment p ositi ons in o rder to en sure the d evelo pme nt of a diverse pipeline f or succession. The Committee considered the organ isati on de sign in th e contex t of the G roup’s strategic p rioriti es and e ndor se d the app roac h to succ es sio n plan ning. Inform ation o n the ge nde r bala nce of s enio r man age ment a s well as the B oard i s inclu de d on pa ge 10 0. Performance e valua tions Followin g the ex ternal eval uation c arrie d out i n 201 9 and an inte rnal evaluati on in 20 20, during th e year the C om mitte e overs aw an intern al evaluati on of the B oard an d its Pri ncip al Co mmit tee s, det ails of wh ich are provi ded o n pag e 94. The C omm itte e reviewe d and di scus se d the ou tcom es of th e Bo ard and th e Princi pal C ommi tte es’ evalu ations , noting th e large ly favourab le fee dba ck and th e overall c onc lusio ns as to th e contin ued ee ctiven es s of the B oard an d the Prin cipa l Co mmit tee s. In ad dition, th e Co mmit tee revie wed an d end ors ed the a pproa ch to indiv idual D irec tor evaluati ons, i nvolving th e Chai r unde rt akin g indiv idua l fee dbac k ass es sme nts wi th Direc tors an d the SI D gath ering fee dba ck from Di rector s to ass es s the p er forman ce of th e Cha ir . Furthe r det ails are al so availab le on p age 9 4. Looking f orward In 20 22 , the C ommit tee w ill co ntinue to foc us on B oard refre shm ent pla ns, with p ar ticul ar focu s on suc ce ss ion pl anning i n resp ec t of Non - E xecutive D irec tors app roac hing a nin e-ye ar tenure. I w ill als o trans ition my res pon sibil ities a s Cha ir of the C ommi tte e to Deann a Oppenhe imer . 103 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Nominati on Committee Report D ire c tor s’ Re m un e ratio n Re p o r t Remu ner at ion C ommi ttee C hai r’ s stat eme n t “ As we ha v e cont inued t o na viga t e thr ough the p andem ic , man agemen t has k ept f ocus on the long t erm and posit ioned the busi ness wel l f or r e co v ery and to emer ge str onger . ” T ab le of contents 104 Directors ’ Remunerat ion Report 104 Remun eratio n Co mmit tee C hair ’s stateme nt 10 9 At a glanc e 110 Our a ppro ach to remu nerati on 115 Annual R eport on Directors ’ Remuner ation (subjec t to an adv isor y vote at th e 202 2 AGM) As Ch air of the R emun eratio n Com mit tee and o n be half of th e Bo ard, I am pl eas ed to pre se nt the Dire ctor s’ Remun eratio n Rep or t for the ye ar end ed 3 1 De cem ber 2 02 1. We continu ed to b e impa cted by th e pand emic th rough 20 21 but , whils t volatilit y rem ains, we h ave moved from c risi s to recover y and grow th. I n-year ina ncia l per form anc e was stron g and, in a dditio n, we have rema ined fo cus ed o n pos t-pand emic, l ong -term st rategy. Man age ment h as un der ta ken bol d step s, suc h as the revie w of the Hol iday Inn a nd Crown e Plaz a es tate an d digit al, bran d and loyalt y initiati ves to take ad vantag e of po st- Covid -19 trend s and opp or tunitie s for futu re growth . Fin ancia l per form anc e has re covere d strong ly from 20 20, with signi ic ant imp roveme nts in glo bal Rev P AR, fe e margi ns and c as h low, and a inal div ide nd of 8 5.9 ¢ is pro pos ed in re sp ect of 2 02 1. Our p eo ple have re spo nde d incre dibl y to the cha lleng es fa ce d and it i s enc oura ging to se e that the h eal th, safet y an d wellb eing supp or t at bot h hotel an d corp orate leve ls, in cludi ng the s hif t to hybrid wor king arr ange ment s for the l atter, has be en so we ll rec eived . Our ove rall emp loyee en gag eme nt sco re of 85% i s a signi ic ant achi eveme nt during a di ic ult pe riod a nd pl ace s IH G as a Ki nce ntric Glo bal B es t Empl oyer . In e arly 2 02 2, arou nd 2, 20 0 empl oyees be ne ited f rom the irst ve sting of m atchin g share s from our emp loyee sh are pla n and pa rti cipatio n co ntinue s to increa se, with 5 3% of el igibl e empl oyees e nrolle d for the 2 02 2 pla n. Our ow ners c hoo se to work w ith IH G bas ed o n the trus t they have in our b rands a nd our tr ack rec ord in de liveri ng returns . The revi ew of our H olid ay Inn and C rowne Pl az a est ate was the refore imp or tant to get right a nd it was ve ry p lea sing to s ee 8 3 hotel s com mit to improvem ents , protec ting qua lity a nd bra nd pe rcepti on. In a dditi on, we conti nue d to expand th e stren gth and d epth of o ur bran d por t folio with the l aunc h of Luxur y & Life st yle br and Vi gnet te Co llec tion an d this is a nothe r impo rt ant ste p in po sition ing the b usin es s for future grow th opp or tunitie s. The p rofound im pac t of Covi d-19 over th e pas t two yea rs ha s, however , pres ente d chall eng es not o nly for th e bus ines s but a lso for the C omm itte e in rec ogni sing an d rewarding p er forma nce, whils t als o con side ring s takeho lde r expe rienc e and th e alrea dy chal leng ing ta lent m anag eme nt contex t. Th is is p arti cularl y evide nt in res pec t of lon g-te rm inc entives , for whic h targe ts were s et in a ver y die rent co mme rcial an d market co ntext to the o ne in whi ch we found o urs elves . In co nsi derin g how to reward pe rfo rmanc e in the co ntext of th e pan demi c, the C ommit tee h as so ught to ta ke into acc ount th e expe rienc e of all of o ur st akehol ders a s well a s the resul ts that h ave bee n deli vered by m anag eme nt. Over vie w of 202 1 rem un erat ion o utco me s The key highl ights of E xec utive Dire ctor in centi ve plan award s for 202 1 are pre sen ted be low and a d etai led exp lan ation an d ration ale for the C omm itte e’s decis ions a re set out i n this rep or t: • Th e formul aic achi eveme nt on Ann ual Pe rfor manc e Plan (A PP) metric s (opera ting pro it from re por t able s egm ents , ope nings a nd signi ngs) was 187 .3% o f targe t, resu lting in award s for E xecutive Dire ctors w hich we re capp ed at th e max imum payout o f 200 % of salar y . • Formul aic ac hievem ent und er the 2 019/2 1 Long Term Ince ntive Plan (LTIP) was be low the payou t thresh old a cros s all me asure s. T a rgets we re set in Feb ruar y 20 19 and f ull year 2 019 p er forma nce in is olatio n was at 57 % of ma ximum (19 % if pro -r ated ac ross th e full cycle), rel ectin g strong p er form anc e on abs olute n et syste m size grow th (NS SG), cas h low a nd rela tive T ot al Sh areho lder R eturn (T SR), an d was initi ally fore ca st to improve fur the r over the cycl e as note d on the n ext p age . 2020 21 p er forman ce wa s signi ic antly ae cted by the s ubs equ ent unfore se en imp act o f Covid -19 on the busi ness. • Th e Co mmit tee ha s evaluate d the form ulaic o utcom es ag ains t the fac tors li sted un der i ts form al frame work for c onsi derin g the exercis e of disc retion (se e top of pa ge) and: – is s atis ie d that th e APP outc ome re le ct s both ma nag eme nt pe rfor manc e and th e expe rienc e of othe r key stakeho lde rs, incl uding s hareh old ers an d the wi der work forc e, as su mmari sed over the fol lowing p age s; but – ha s cho sen to ap ply di screti on to vest 2 0% of th e share s awarde d to Exe cutive Di rector s und er the 20 19/2 1 L TI P . Furth er de tail o n the ratio nale fo r the C ommit tee’s dec isio n is se t out over th e follow ing pages. • Th e total avera ge of sh or t- and long -term in ce ntive plan awa rds for the p erio d end ing 20 21 wa s therefo re 59.5% of m aximu m. This c omp ares to 15 .5% for 2 020 an d 68 .8% in 2 019. Fr amework for cons ideratio n of discretion In lin e with the U K Co rpor ate Govern anc e Co de, the C omm itte e has a dopte d a forma l framewo rk which i t will us e to determi ne wheth er to exercis e dis cretion . Som e of the key facto rs the Co mmit tee c onsi der a re shown b elow. Performance r elative to competitors Historic performance out comes Impact of adjustmen ts Wider Company inancial and strategic performance Consistency between APP a nd LTIP o utc om es Stakeholder e xperience: shareholders, em ploye es , own er s & gue st s Historic use of discret ion Possible use of discreti on Gove rn an c e 104 IHG | Annua l Repo rt a nd Form 20 F 202 1 20 19/21 L TIP aw ard On a form ulaic b asi s, in lin e with the c onc erns we n oted in l ast yea r’s repo rt , the pe rfo rman ce of the 2 019/2 1 cycle is b elow th e thres hol d for ves ting on e ach of i ts me asure s. Wh en the C om mitte e reviewe d pe rfo rmanc e towards the e nd of th e ir st year of t he pe rfo rmanc e pe riod, th e forec ast ve sting l evel was ~78%. H owever , th e three a bso lute targ ets (cas h low, T ot al Gros s Revenu e (TG R), NS SG) were se t pre - Cov id-19, and th e severe trave l indus tr y impa cts of th e pan demi c in the inal t wo year s of the cycle h ave rende red the se t arget s unac hievab le; and a n impo rt ant fac tor in the re lative TS R outc ome i s the stron g per form anc e of pe er grou p com panie s with an o per ating footpr int with a sig ni icantl y highe r weightin g to the fas ter -re coverin g US ec ono my market se gme nt. T a king th e framewo rk for dis cretio n factor s into acc ount , the C ommit tee’s view is th at the form ulaic o utcom e doe s not re le ct the p er forma nce of the b usin es s in the cri sis an d has exerci se d its dis cretio n to determi ne an overa ll vestin g level of 2 0% , bas ed o n cas h low p er form ance . The C omm itte e took a q ualit ative and qu antit ative view of ab so lute and re lative pe r forman ce an d mana gem ent ac tions to a ddres s the exceptio nal ci rcums tanc es re sultin g from the p ande mic as we ll as c onsi deri ng the exp erie nce of o ur key stakeh olde rs, in clud ing our p eo ple, sha rehol der s, owne rs and g ues ts. T he de taile d ratio nale of th e Co mmit tee i s as follow s: Com mittee de termin ation Measure a nd weighting Formulaic outcome Wei ght ed discretionary outcome Rationale Ca sh low (CF) (2 0 %) 0% 20% • T he C ommi tte e ha s revie wed p er form an ce on t his me as ure fro m a numb er o f die rent p er sp ect ives , par tic ula rly from a w ide r co mpa ny in anc ial an d stra tegi c pe rfo rma nce b as is. • F or 20 19 i n iso lati on, p er form an ce wa s stron g, be ing at m axi mum l evel on a p ro -ra ted b asi s as fol lows : Performance r ange $bn Actual $bn Component achiev ement Weight ed L TIP outcome For ful l cycle 1.87 2.49 1.7 8 0% 0% Pro -r ated fo r 20 19 onl y 0. 524 0.69 8 0.7 0 0 100 % 20 % Mat hem atic all y , o n a pro - rated b as is thi s 20 19 pe r form anc e con tribu tes 6 .67 % ves ting to t he wh ole cyc le. • F or 20 20 a nd 20 21, t he or igin al ta rget b ec ame i rrel evant , and i nste ad th e Co mmi tte e ha s loo ked at th e E xecu tive Dire cto rs’ p er form an ce in th e key area o f ca sh l ow and l iqui dit y ma nag em ent, b ala nci ng the n ee d to pro tect t he busine ss while continuing to invest in futur e growth including: • manag ing th roug h the im pac t of C ovid -19 wit hou t the ne e d to rais e new e qui ty; • secu ring in tere st cov er an d leve rage r atio c oven ant wai vers o n exis ting d ebt a gre eme nts ; • accessing incr eased liquidity t hrough: – £ 60 0 mill ion of C C FF draw n down , whic h was re pai d in Ma rch 20 2 1; – is su e of t wo new b on ds in O ctob er 2 020 a nd a te nde r on 20 2 2 bo nds , rais ing aro und n et £ 60 0 mill ion to provi de lo nge r ter m liqu idit y to the b us ine ss; • protec ting c as h low by p rud ent u se of c api tal a nd re duc ing c ost s by $1 50 mi llio n ($75 mi llio n of whi ch is su st aina ble f or fut ure yea rs); • strong p er form an ce on wo rki ng ca pit al, t arge ted ap pro ach es to c as h col lec tio ns an d man age me nt of expenditure; and • actio ns to mit igate p oten tial I HG ex po sure in c as h l ows an d man age c as h out lows , lea din g to stron g ca sh co nvers ion a nd a re duc tion i n net d ebt in b oth 2 020 a nd 20 21 . • As a resul t: • posi tive ad jus ted fre e c ash low a of $2 9 mill ion wa s ge ner ated in 2 02 0, with th e imp act o f Cov id-19 r elate d reven ue re duc tion s par tl y os et by c ost s avin g me asu res: – 20 2 1: $5 71 m illio n; and • closi ng 20 20 li quid ity o f $2. 9 bil lion (co mpr ise d of $ 1.3 5 bi llio n und rawn ba nk fa cili ties a nd $ 1.5 75 b illio n of cash/cash equivalents): – 2021: $2.7 billion. • The Co mmi tte e be lieve s that m an age me nt has d on e all it c oul d to pre ser ve I HG ’s resil ien ce an d str ategi c ca pab ilit y for s trong f uture g row th, ju stif yi ng ful l vest ing for t he se yea rs in th e ca sh low el em ent of t he L TI P cycle . a U se of N on - GA AP m ea sure s: I n add itio n to p er form an ce m eas ure s dir ect ly ob se rv abl e in th e Gro up Fi nan ci al St ate me nts (IF RS m ea sure s), ad diti on al i na nci al me as ure s (des cri be d as N on - GA AP) are p res en ted th at ar e use d in tern all y by man ag em ent as key m ea sure s to as se s s pe rfo rma nc e. N on -G AA P me as ure s are ei the r not d e in ed un de r IF RS or a re ad jus ted I FR S ig ure s. Furt he r expl an atio n in re lati on to th es e me as ure s can b e fo und o n pa ge 73 to 7 7 a nd re co nci liat ion s to IF RS igu res , whe re th ey have b ee n ad jus ted , are on p ag es 2 18 to 2 23 . Ne t syste m siz e grow th (N SS G) (2 0 %) 0% 0% • This ab so lute t arge t was s et pre - C ovid -19, at a tim e tha t we woul d have exp ec ted th e ind ust ry s upp ly grow th to co ntinu e at le ast a t the s ame p ac e as th e prec e ding th ree ye ars ; in fac t, th ere wa s a drop of 2 5% over 2 020 2 1 co mpa red to 20 1719, mak ing th e abs olu te ta rget un ac hievab le . • The Co mmi tte e revie wed N SS G pe rf orma nc e in det ail f rom a num be r of di ere nt pe rsp ec tive s and u ltim ately co ncl ude d that , ba se d on an alys is of t he dat a an d con text , it did n ot co ns ide r it ap prop riate to a dju st the form ulai c outc om e of this a bs olu te mea sur e. T otal Gross Reven ue ( TG R) (2 0 %) 0% 0% • This ab so lute t arge t was s et pre - pan dem ic an d rend ere d una chi evab le du e to the se vere m arket-wid e de clin e in Rev P AR an d oth er reve nue s. • Base d on a nal ysis o f the d ata a nd co ntex t, th e Co mmit tee d id no t con sid er it a pp ropri ate to ad jus t the for mula ic outc om e of thi s abs olu te me asu re. 105 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report Com mittee de termin ation Measure a nd weighting Formulaic outcome Wei ght ed discretionary outcome Rationale To t a l Shareholder Return (TS R) (4 0 %) 0% 0% • The IH G sh are pr ice h as re main ed re sil ien t throu gh the l at ter pa rt o f 202 0 and 2 02 1 af ter re cove ring f rom an in itia l red ucti on in th e i rst h alf o f 202 0. • IHG de live red 17.9% T SR fo r the cyc le; ah ea d of all E urop ean p ee rs in t he co mp arato r group. • Howeve r , th e sh are pr ice p er form an ce of s ome c om par ator gro up co mpa nie s ba se d prim aril y in the f ast-r ec overin g US m arket, w ith a we ighti ng toward s the e co nomy s egm ent , and w ith th eir s hare s lis ted o n US s tock m arket s whi ch have p er form ed b et ter th an th e FT SE ove r thi s per iod , has re sul ted in I H G bei ng be low th e thre sh old l evel for ve stin g on thi s rel ative m eas ure. • Base d on a nal ysis o f the d ata a nd co ntex t, th e Co mmit tee d id no t con sid er it a pp ropri ate to ad jus t the for mula ic outc om e of thi s mea sure . To t a l 0% 20% In sum mar y , th e Co mmit tee b elieve s a 20% o utcom e ack nowle dge s the stro ng pe rfo rman ce of 20 19 as we ll as the o uts tan ding pe r forman ce of man age ment d uring the C ovid -19 cris is. 202 1 APP awa rd Alon gsi de op erating p roi t from rep or tab le se gmen ts, the 2 02 1 strateg ic op ening s and si gnings m ea sures we re des igne d to provide in-ye ar focu s on roo ms grow th in a seve rely co nstra ine d market, to co mpl eme nt the lo nger te rm three -yea r L TI P focu s on overall n et system s ize grow th. Th e formul aic ach ieveme nt agai nst th e APP me asu res woul d resul t in an award of 187 .3 % of targ et, or 2 15. 4% of sal ar y . However, awards for Exe cutive D irector s und er the D irecto rs’ Rem unera tion Pol icy are ca ppe d at a max imum payou t of 20 0% of s alar y . The C omm itte e fee ls the c app ed m aximum A PP award is ju sti ied g iven it s view on th e strong p er form ance o f the bu sine ss in 2 02 1 on both an abs olu te and rela tive bas is: Measure a nd weighting Wei ght ed outcome Cons ideration of discret ion Op erating pro it fro m rep or tab le segments ( 70 %) 140 % • The t arg ets we re app rop riate ly se t, wit h a muc h wid er an d asym metr ic ran ge aro und th e ta rget o utco me th an in p revio us yea rs, res ultin g in si gni ic antl y great er stre tch re quire d on th e up sid e and re l ect ing th e con text at t he tim e; ju st as m ana ge men t had no vi sib ilit y to the o ns et of C ovid -19 in 2 020, th ere wa s lit tle v isib ilit y of th e sh ape a nd pa ce o f rec over y thro ugh 20 2 1 and, in pr acti ce, th ere we re vari atio ns in p er form anc e in re gio ns an d marke ts dri ven by di ere nt app roa che s to trave l res trict ion s and v accine r oll-outs. • Mana ge ment d eli vere d stro ng re sult s aga ins t the key inan cia l met rics w hic h con tribu te to op erat ing pro i t, in clud ing s ust ain abl e co st s aving s of $7 5 milli on (foll owin g on fro m 202 0 co st sav ing s of $1 50 mi llio n), whils t co ntinui ng to inve st in g rowt h opp or tun itie s, su ch a s the la unc h of the V ign et te Co lle ctio n, an d to focu s on th e qua lit y of grow th th roug h the rev iew of th e Ho liday I nn an d Crow ne Pl az a est ate. • The Co mmi tte e ha s review ed th e qua lit y of und erl ying p er fo rman ce, i ncl udin g whe the r adju stm ent s sho uld b e ma de to ta ke ac cou nt of thi s and c on clu ded t his wa s not n ec es sar y. • On this b asi s, th e Co mmit te e foun d no ba sis f or ap plyi ng ne gat ive dis cre tion . Signings (1 5%) 30% • T arget s were s et ap pro pria tely, rel ect ing th e ty pic al nat ure of th e pac e at wh ich th e drive rs of s igni ngs a nd op en ings re sp on d duri ng pe rio ds of re cove r y , a nd c ont ainin g sig ni ic ant str etch to ac hieve o utp er form an ce. • Abso lute p er form anc e rep res ente d an im pre ssi ve 23 % improve me nt on th e pri or yea r . • The Co mmi tte e als o as se ss ed p er for man ce ag ain st ou r larg es t com pet itors , with I H G maint ain ing it s sh are of si gnin gs throu gho ut th e pan dem ic. T he C ommi tte e is s atis ied th at p er form anc e rel ative to o ur pe er s was c omp etiti ve. • See un der ‘ Op enin gs’ b el ow reg ardin g the C omm it tee’s as se ss men t aga ins t Glo bal M etr ics p er for man ce. • On this b asi s, th e Co mmit te e foun d no ba sis f or ap plyi ng ne gat ive dis cre tion . Ope nings (1 5%) 1 7. 3 % • Pe rf orma nc e was ah ea d of ta rget o n this m ea sure a nd rep res ent s 5% of pr ior ye ar cl osi ng sys tem s ize on a ro llin g yea r - on -year b as is. • Des pite su ppl y cha in is su es an d othe r de lays du e to the p and emi c, whi ch ha s mad e op eni ngs ve ry c hal len ging , we de live red year- on-ye ar gro wt h and s equ ent iall y improve d thro ugh t he yea r . • The Co mmi tte e as se ss ed p er form an ce rel ative to c om peti tors a nd is s ati s ied t hat p er form anc e rel ative to o ur pe er s was co mpetiti ve. • The si gnin gs an d ope nin gs me as ures a re sub jec t to the C om mit tee a ss es sin g pe rfo rma nce a gai nst t he C omp any ’s Glob al M etric s. The m ajo rit y of me tric s, si x of 10, tra cked a bove t arge t or pr ior ye ar pe r form anc e. O f tho se wi th form al ta rget s, ive of s ix ex ceeded tar get . • On this b asi s, th e Co mmit te e foun d no ba sis f or ap plyi ng ne gat ive dis cre tion . Ove rall, h avin g als o con sid ere d bro ade r st akeh old er p ers pe cti ves (se e nex t pa ge), the C om mit tee fo und n o ba sis fo r app lyin g ne gati ve dis creti on to the f ormu laic o utc ome o f the 20 2 1 APP . To t a l 1 8 7. 3 % T ot al 2 021 va riab le in ce ntive ou tcom e In ad dition to revi ewing the i ndivi dual L TIP a nd APP c omp one nts a s outlin ed ab ove, and the w ider s takeh old er po sitio n as outli ned b elow, the C ommit tee to ok a ho listi c view of vari able in ce ntive outco mes a nd co nsi dere d the overall o utco me for 20 21 . In total, th e 202 1 APP and L TIP awa rds for E xecuti ve Direc tors rep res ent 59. 5% of the m aximum p otentia l value. T his is c ons istent w ith his toric overall rewa rd outc ome s, as ou tline d on pa ge 120 in re spe ct of th e CEO, which h ave varied b etwe en 5 6.6 % and 8 4. 2 % of maxi mum and aver age d 67 .1% in the prev ious 1 0 years exclu ding 20 20. Th e 201 9/21 L T IP cycl e is als o the irst un der w hich E xecu tive Dire ctors a re subje ct to a two -yea r po st-vesting h oldi ng pe riod. T he C ommit tee c ons ide rs the c ombi ned 2 02 1 L TI P and A PP awards ap prop riate in this c ontex t. Dir e ct ors’ Remu nera tion R epor t c onti nu e d Remu ner at ion C ommi ttee C hai r’ s stat eme n t c o ntin u e d Gove rn an c e 106 IHG | Annua l Repo rt a nd Form 20 F 202 1 Broader stak eholder perspecti ves In co nsi derin g the us e of dis cretion, t he Co mmit tee h as taken i nto acc ount the ex peri enc e and vie ws of wid er st akehol der s: Wider workfor ce • The APP m ea sure s of op er ating p ro it fro m rep or tab le s egm ent s, op eni ngs a nd si gnin gs ap ply to th e who le c orp orate e mp loyee p op ulati on, alo ng wi th a pe rso nal p er for man ce e lem ent b el ow the E xec utive C om mit tee (EC), w ith ta rget b on us am ount s dete rmin ed by g rade . The s tron g form ulai c pe rfo rma nce u nde r the c orp ora te mea sur es wil l app ly to an d be ne it th is wh ole p op ulati on. I n add itio n, in vi ew of th e stro ng pe r form anc e in 20 21, a n ext ra 20 % is be ing a dde d to th e amo unt bu dge ted fo r the p ers on al pe r form anc e ele me nt to inc rea se awa rds for th os e emp loyee s wh o per fo rme d the s trong es t duri ng 20 21 . • In the co ntex t of co ntinu ing rete ntio n and s uc ce ss ion c onc ern s be low B oard : • L TI P award -h old ers re ce ive d an ad diti ona l award in 2 02 1, top ping t he 20 18/2 0 cycle aw ard up to 4 0% , an d will re ce ive an awa rd in 20 22 on th e sam e ba sis i n res pe ct of th e 20 19/2 1 cycle i n rec ogn ition o f the s igni i cant a ddi tion al wo rk and e or t re quire d du ring th es e cycle s as a re sult o f the p and emi c imp act ; and • in addit ion, s ep arate o ne - o rete ntio n award s in the fo rm of c as h and d efer red s hare s were m ad e to core s kil l and s ucc es si on ta len t individuals across t he corpora te popula tion. • In contr ast , E xecu tive Di rec tors re ce ive d only t he for mula ic ou tcom e of th e 201 8/20 LTIP (30. 6% of m axi mum) and n o 202 0 APP aw ard. • In Janu ar y 20 22 , the irs t matc he d sha re ves ting to ok p lac e und er o ur em ploye e sha re pl an, as a re sul t of whi ch aro und 2 ,2 00 e mpl oyee s rec eive d fre e sh ares m atch ed o n a 1:1 basi s. • The overa ll em ploye e en gag eme nt sc ore o f 85% exc ee de d that o f exte rna l be nch mark s by 8% . • As expla ine d on p age 11 2, the e mp loyin g enti ties fo r a num be r of UK l ea se d hote ls are p ar t of th e IH G group . All rol es at a ll the se h otel s are pai d abo ve the li ving wa ge an d zero - hou r co ntrac ts h ave be en el imin ated a cro ss thi s es tate . From Apri l 202 2 , all em ploye es i n the se ho tels will b e pa id ab ove the re al liv ing wa ge. H oweve r , a s a res ult of c onti nue d trave l rest rict ion s and h otel c los ures d urin g 202 1, s ome U K gove rnm ent sup po rt wa s obt ain ed in r esp ec t of thi s work fo rce for t he be ne i t of the h otel ow ne r . T he C om mit tee h as ta ken into a cc ount th at, i n res pe ct of pay fo r the se e mpl oyee s, IH G do es n ot have d eci sio n right s an d mus t be se ns itive to th e co mme rcia l circ ums tan ce s of the se l ea se d hote ls, the ow ner a nd e quiti es a cros s the o wne r’s wid er b usi nes s, a nd the e mp loyee s of oth er ow ner s of IH G ho tels . • In resp ec t of the d irec tly- e mpl oyed co rp orate wo rk forc e, no U K gover nme nt sup po rt f or st a c ost s was o bta ine d in ei ther 2 02 0 or 20 21 a nd, foll owin g the reve rs al of th e acti ons t aken i n 202 0 outl ine d in la st ye ar ’s repor t, n o em ploye es a cros s the g lob al c orp orate p op ulati on we re furl oug he d in 20 21. • F urt her c on sid erat ion s inc lud ed un der ‘ Re mun erati on at I HG – th e wid er c ontex t ’ on p age 11 2. Owners • F avoura ble c red it term s prov ide d to as sis t with t he imp ac t of the p an dem ic. • Agreem ent w ith own er s to man age c as h lo w throu gh util is ation o f mai nten anc e res er ves . • Exp and ed ho tel pro cu reme nt so luti ons to c om bat s upp ly ch ain ch alle ng es an d ris ing c ost s. • Laun che d new h irin g tool s and s upp or t to re crui t and re tain t al ent. • Contin ue d revie w and evo luti on of b rand s ta nda rds to im prove op era tion al e ic ien cy. • Govern men t advo ca cy ca rrie d out o n be hal f of own ers . Guests • Flex ible c an ce llati on po licy o pe rate d, and w aive r of ca nce lla tion fe es . • Contin ue d execu tion o f IH G Way of Cl ean a nd I HG C le an Prom ise i n our h otel s. • IHG R ewar ds membership status pr otecti on pro vided. Shareholders • IH G sh are pr ice h as re main ed re si lien t, en ding 2 02 1 1. 9% up o n the e nd of 2 020 a nd 10 0% u p on th e lows o f Marc h 202 0. • The Bo ard is p rop osi ng a inal d ivi den d of 8 5.9 ¢ in re sp ec t of 20 21, a nd the re is c onti nue d mo ment um in fu ture grow th, w ith ou r glo bal pip eli ne e quiva len t to over 3 0% of th e cur rent sys tem s ize an d mor e than 4 0% u nde r co nst ruc tion . • Having l iste ne d to sha reh old er fe edb ac k at the ti me an d refra ine d from u sin g dis creti on fo r the 20 18/2 0 L T IP cyc le, we re ce ive d po sitiv e and c on stru ctiv e fee dba ck in c on sult atio ns wi th sh areh old er s on the p ote ntial u se of d isc retio n for th e 20 19/2 1 L T IP cyc le. 2020 /22 L TIP c ycl e The C omm itte e has c ontinu ed to c onsi der th e impa ct of the p and emic o n in- light L TI P awards and, w hilst t here is n o intentio n to adjus t inc entive pl an targ ets mid - cycle, a s noted in th e 202 0 Direc tors’ Re mune ration Re po rt in re sp ect of th e 202 0/22 L TIP , the C ommit te e: • co ntinue s to moni tor a sha dow ta rget for c ash low, agreed at i ts Oc tobe r 202 0 mee ting af ter the i nitial imp act o f the pa nde mic be cam e evide nt; an d • rem ains min de d not to redu ce the re lative N SS G vestin g outco me ba se d on the Retu rn on C apit al Empl oyed (ROC E) u nde rpin if thi s is not met for th is cycle s ole ly due to the i mpac t of the p ande mic on e arnin gs. The c as h low t arget for th e 2020/2 2 L TIP cycl e was se t and pro spe ctive ly dis clos ed in Fe brua ry 20 20, be fore the fun dame ntal g loba l impa ct of the pa nde mic ha d bec om e appa rent. W ithin mo nths, it wa s cle ar that it wa s ver y unlikely to b e achi evable fo r the thre e L TI P cycle s inclu ding 20 20 (20 18/20, 201 9/21 an d 2020/2 2). The s hadow t arget wa s bas ed o n as sumptio ns of a ful l recove ry over ti me and m ana gem ent foc us on ma intain ing sus tain able s aving s and dis cip line d cas h man age ment an d was inte nde d to provide a refe renc e poi nt to cons ide r at the time o f vestin g. The C omm itte e’s current view is t hat the s hadow t arget , as we lo ok at it in e arly 20 2 2 and give n the ran ge of unex pec ted d evelop ment s sinc e Oc tobe r 2020, rem ains a s tretching a nd app ropria te target . In the C omm itte e’s view , t he De lta var iant, th e 202 1 se con d-wave loc kdowns an d glob al travel res trictio ns, an d the sub se que nt impa ct of O micron h ave all add ed he adwi nds th at counte r the stro nge r than expe cted re cover y p ace in th e US . The C ommi tte e has th erefore c oncl ude d that thi s sha dow targ et will b e highly re levant wh en co nsid ering the ves ting of thi s cycle in e arly 20 23. Foll owing c onsu ltatio n with sh areho lde rs, the s had ow targ et is dis clo se d on pag e 124 of this re por t. In any event, th e Co mmit tee wil l contin ue to as ses s the ap prop riatene ss o f usin g disc retion to adj ust th e formula ic outco me s upwards or downwards b as ed on a ll relevant fa ctor s at the time o f vestin g of the award an d in line wi th its form al fram ework for c ons ider ing the exerci se of discr etion. 107 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report Imp le me ntati on of D ire ctor s’ Remu ne ratio n Poli cy (DR Pol icy) in 202 2 As cove red in mo re det ail on pa ges 1 24 to 125: • S alar y inc reas es for E xec utive Dire ctor s for 202 2 wi ll be in lin e with the b udg et for inc reas es for th e wide r UK a nd US c orp orate po pulati ons and are m ade fo llowing a n ass es sme nt of 20 21 p er forma nce. • Th e non - inan cial me as ures for th e 202 2 Ann ual Pe rfo rmanc e Pla n will rema in as op enin gs and s igning s, as in 2 02 1, align ed to our key strate gic obj ecti ves for rec over y and o ur future grow th pri oritie s. • L TIP 20 2 2/24 cycle m ea sures w ill als o remain a s relati ve TSR (30 %), relative NS SG (40 %) and abs olute c ash low (30%), with Total Gros s Revenu e having b ee n repla ce d by incre ase d weightin gs for c ash low an d relative N SS G. Retain ing the s ame b alan ce of m eas ures for the 20 2 2/24 cycle kee ps an ove rall relati ve per form anc e focu s, app ropriate in a c ontex t of som e conti nue d unce rt aint y . I t als o retain s the inc reas ed fo cus o n NS SG, which i s strate gica lly key and, be ing rel ative, facto rs in the e co nomic a nd ma rket contex t and any rel ated volatili ty th at occ urs . Retirem ent b ene it s for inc umbe nt UK E xec utive Dire ctors w ill align w ith the ma ximum c omp any contrib ution avail able to all o ther p ar ticipa nts in the U K pe nsio n plan at t he en d of this yea r . As s tate d in las t year ’s repor t, an d in line wi th our ap proved D R Policy , US retire ment b en e it arrang eme nts, i n which th e CEO, Ameri cas , par ticip ates, d ier in a n umbe r of res pe cts from U K pe nsi on arran gem ents , as expl aine d on pag e 112. Th ey are com pris ed of a 4 01 (k) pl an und er whi ch all c orpo rate emp loyees b en ei t from ma ximum em ployer c ontrib ution s of a con sis tent 6% o f sal ary, and a Defe rred C omp ens ation P lan for a round 10 0 eli gible s enio r emp loyees u nde r which a ll par ticip ants in clud ing the C EO , Ame rica s can re ce ive supp lem enta ry c ontrib ution s of up to 16 % of sal ar y . T hes e are co mmon reti reme nt ben e it pla ns in the U S market an d, given th e parit y of trea tment fo r all par tici pants i n eac h of the se pl ans, a s well as th e impo rt anc e of the C EO, Americ as rol e to the bu sine ss a nd the m arket com petitive ne ss co nce rns over E xec utive Dire ctor p ay , the C omm itte e intend s to maint ain the arr ange ment s as they re late to the C EO , Ame rica s. ESG considerations Our J ourn ey to T om orrow Res pon sibl e Bu sine ss p lan was re lea se d early i n the year , inc luding n ew and up date d com mitme nts rel ating to our c ommun ities , peo ple a nd pla net an d evolvin g the Co mpa ny’s strategy in t his area . The Re sp ons ible B usin es s Co mmit tee rep or t on p age 10 0 and the S trategi c Rep or t on pa ge 16 co ntain m ore inform ation o n our initi atives , repo rtin g com mitme nts and s cie nce - bas ed t argets . The C omm itte e takes a h olis tic app roach to revi ewing an d impl eme nting ne w remune ration t arget s, en suring th at they are ali gne d to Co mpany str ategy (se e page 11 0), and has c ontin ued to wor k clos ely w ith the Re spo nsib le Bu sine ss C om mitte e and C omp any man agem ent team o n a disc rete ESG me tric for E xecu tive Dire ctor remu nerati on. D uring th e year , t he Co mmit tee revi ewed op tions to ali gn a remun eratio n metric w ith the ne w and wid er J ourney to T omo rrow com mitme nts. On e nvironme ntal m etric s, we con tinue to imp rove our dat a integrit y and , in 202 1, laun che d an auto mated d ata c olle ctio n proje ct acro ss our ho tels glo ball y as par t of o ur ongo ing imp rovement s to IH G’s Gree n Enga ge, our o nline e nvironm enta l mana gem ent pl atfo rm. We have als o launc he d the Hote l Ene rgy Redu ction O pp or tunitie s (HE RO) tool, whic h will be key to he lping o ur hotel s targe t ene rgy , c arbo n and water red uctio ns. T his work to s uppo r t our hote ls to dec arb onis e and m eas ure our p er forma nce is i mpo rt ant as it w ill ena ble us to re ach the ta rgets we h ave set ac ross o ur franc hise p rope rti es (sco pe 3). On oth er po tential ES G metric s, in cludi ng thos e with a p eop le foc us, fur ther wo rk will b e unde rt aken in 20 2 2 to ass es s bas elin es an d per form anc e as initi atives re lating to new c omm itment s roll- o ut through out the bu sine ss . This a ppro ach is b eing t aken to he lp ens ure that trul y stretchin g but ac hievabl e targ ets, b ase d on rob ust sys tems an d dat a, can b e set fo r ince ntive pl an purp ose s. In the m eantim e, as ou tline d on pa ge 124, ES G criteri a, suc h as ann ual en ergy re ducti on, em ployee e ngag eme nt and gu es t satis facti on pe rfor manc e, will c ontinue to fo rm a key eleme nt of the C omm itte e’s ov erall a ss es sme nt of pe rfo rmanc e aga inst I HG ’s Glob al Metri cs in co nsid ering th e pote ntial app lic ation of di screti on to the form ulaic o utcom es of th e 202 2 AP P strateg ic me asure s. Wider wor kfor ce r emunera tion and emplo y ee engagemen t As outl ine d on pag e 112, the a pproa ch to remu nerati on is alig ned th rough out the o rganis ation a nd, durin g the yea r , the C omm itte e reviewe d a numb er of a spe cts o f the Co mpa ny’s wider wo rkfo rce remu nerati on po licy , i nclu ding the a ppro ach to fairn es s in reward, retentio n arrang eme nts, a nd arran gem ents fo r UK ho tel emp loyees . Concluding tho ughts The C omm itte e, incl uding mys elf as t he Co mmit tee C hair , are fully aware th at the us e of dis cretio n in relatio n to the 20 19/21 L TIP o utco me may not b e con side red to b e in line wi th bes t prac tice o r with the n orma l expe ctati ons of s ome inve stors a nd proxy a gen cie s. The C om mitte e has c ons ide red an d deb ated the se m atter s at len gth, with a s trong foc us on a chievin g an outc ome w hich is fa ir and e quit able fo r all of our key stakeho lde rs, as o utline d ab ove, which reward s man agem ent in re gards to p er forma nce in a n unfores ee n cris is, an d which re co gnise s the high ly co mpetiti ve glob al tal ent ma rket that we op erate in. Abo ut th is re po rt As always, we s trive to make this re por t as e asy to rea d as po ss ible . Following th is st ateme nt, the ‘A t a glan ce’ se ctio n provid es an ill ustratio n of 202 1 rem unera tion outc ome s and, ove r the follow ing pa ges , there i s a summa ry o f how executi ve remune ration a ligns to c ompa ny strategy; an over view of o ur app roved DR P olicy an d its ali gnme nt with the U K Co rpo rate Govern anc e Co de prin cipl es; a su mmar y of rem uner ation acro ss the w ider wo rk force; an d, on pa ges 11 3 to 114, fur ther b ackground o n the Re mune ration C ommi tte e. The A nnual R epo rt o n Dire ctors’ Remun eratio n on pa ge s 115 to 125 will b e put to an a dvis or y vote by share hol ders a t the May 20 2 2 Annua l Ge neral M ee ting. Jo H arlow Cha ir of the Re mune ration C omm itte e 21 Feb ruar y 20 2 2 Dir e ct ors’ Remu nera tion R epor t c onti nu e d Remu ner at ion C ommi ttee C hai r’ s stat eme n t c o ntin u e d Gove rn an c e 108 IHG | Annua l Repo rt a nd Form 20 F 202 1 A t a gl an ce Me as ure s use d for AP P a Me as ure s use d for L TI P a Bef ore dis cret ion Afte r disc ret ion 40% 15% 15% 70% 20% 20% 20% Ca sh flow ($bn ) Op era ting pro fit from rep or tab le se gme nts ($ m) Threshold 222. 0 Ta r g e t 29 6.0 Maximum 443. 0 Actua l 5 3 5 .1 Roo m signi ngs (k room s) Threshold 52.4 Ta r g e t 58.2 Maximum 64 .0 Actua l 68.9 Threshold 39.0 Ta r g e t 43.3 Maximum 4 7. 6 Actua l 4 4.0 Roo m open ing s (k rooms) Threshold 1.87 Actua l 1.7 8 Maximum 2.49 Threshold 20 Actua l 100 Maximum 100 Ca sh flow (vesting perc ent age) Op era ting pro it from rep or ta ble segments Room signings Room openings T ota l Share hol der Return T ota l Gros s Reven ue Ne t system siz e growth Ca sh lo w 2021 actu al 2020 actu al 2021 pote ntial Paul Edgeclie-Johnson, Ch ief Fina nc ial O ice r Value (£00 0) 3,316 1,0 6 7 2,325 0 1, 000 2 ,0 00 3,0 00 4 ,000 5,0 00 0 1, 000 2 ,0 00 3,0 00 4 ,000 5,0 00 Keith Bar r , Ch ief Exec utive O ic er Value (£00 0) 4 ,524 3 ,1 76 1,4 84 2021 actu al 2020 actu al 2021 pote ntial 2021 actu al 2020 actu al 2021 pote ntial 3, 251 1,0 0 5 2 ,24 9 Eli e Maal ouf, Ch ief Exec utive O ic er , Ameri cas Value (£00 0) 0 1, 000 2 ,0 00 3,0 00 4 ,000 5,0 00 Executive Dire ctor remune ration 2021 ac tual remun eration vs potentia l remune ration The c har ts b elow s how the 20 21 p otentia l remune ration o pp or tunit y and ac tual ac hievem ent co mpa red to the 20 20 ac tual ac hievem ent. The re levant igures fo r eac h of the e leme nts th at make up the s ingle tot al ig ure of remun eratio n, as s hown be low for th e Exe cutive Di rector s, can b e foun d in the ta ble o n page 11 5. Se e pa ge 110 for th e key t o indi vidua l ele ment s of actu al remu nerati on for 20 20 and 2 02 1. 202 0 sal aries we re redu ced fo r par t of the ye ar as exp lain ed in th e 2020 A nnual Re po rt . How w e per fo rmed in 2021 Very s trong pe rfo rman ce ag ainst t arget fo r ope rating p roit f rom repo rt abl e se gment s and si gning s, toge ther wi th strong o pen ing res ults, me ant that the fo rmulai c 202 1 APP a chieve ment wa s 187 . 3% of t arget , resulti ng in awards fo r Exe cutive Di rector s which we re cap pe d at the ma ximum p ayout of 20 0% of s alar y. Under th e L TI P , the i mpac t of Cov id-19 m eant th e formula ic outc ome s were be low thres hol d on all me asu res. O n the ba sis of th e excell ent st ar t to the cycle in 2 019 an d the su bse que nt exceptio nal p er forma nce o n the man age ment of ca sh l ow in the c ontext of th e pan demi c, as outl ine d on pag es 10 5 to 10 6, the C omm itte e exercis ed dis cretio n to vest 20 % of the maximum award. a Fur th er de ta ils of A PP a nd LTIP ou tco me s ca n be fo und o n pa ge s 116 to 11 7 . Key for po tent ial Mi nimu m = Fixe d pay Target = Fi xed pay a nd on -t arge t award fo r APP (115%) an d 50 % of ma ximu m L T IP ve stin g M axim um = Fi xed pay a nd ma ximu m award und er AP P and LTIP 109 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report Dir e ct ors’ Remu nera tion R epor t c onti nu e d Our a ppr oach t o r emu ner a ti on Element Measures Lin k to st rat egy Explanation Annual Perfor mance Plan (APP) Op era ting p roi t • The stre ngth a nd b read th of ou r po rt fol io, tai lore d se r vic es and s olu tion s, an d our te ch nol ogy a nd pl at form s drive co nsu mer p refe renc e, own er re turns a nd ro oms g row th; all c ontri buti ng to ou r revenu es a nd pro i t. • Open ing s and s igni ngs ar e two of o ur key dri vers o f syste m siz e and c entr al to our a mbi tion to d eli ver in dus try -le ad ing roo ms grow th. • Aligne d to ou r pe opl e, co mmun itie s and p lan et st rateg y , the Rem une ratio n Co mmi tte e will re view p er form an ce on G lo bal Me tric s, in clud ing key ES G me asu res (E mpl oyee en gag em ent , Gu est L ove, Re spo ns ibl e Bus ine ss) in c on sid erin g the p otent ial app lic atio n of dis cre tion to fo rmul aic o utco me s on AP P str ateg ic object iv e meas ures. Room signings Room openings Global Metrics Lon g T erm I nc ent ive Pla n (L T IP) Relative T otal Shareh older Return • Our amb itio n is to de live r high - qua lit y , indu str y- lea din g net roo ms grow th s o it is i mpo rt ant th at thi s form s a key ele me nt of ou r man age me nt tea m’s Long T erm I nc entiv e Plan . • Enhan cing o ur cu stom er a nd own er o er an d deve lop ing o ur bra nds at s c ale in h igh -valu e mar kets dri ves s ust ain ed gro wt h in c ash lows a nd pro i ts ove r the lo ng te rm, whi ch c an be reinve ste d in ou r bus ine ss a nd retu rne d to sh areh old er s. Rel ative n et sys tem si ze grow th Ca sh low Over th e followi ng pag es of th e repo rt , we give an over vie w of how our re mune ration ar range ment s are align ed to our p urpo se, am bitio n and s trategic p rioriti es. We have in clud ed a sum mar y of ou r approve d DR Po licy on p age 111, tog ether w ith a remin der of h ow the C ommit tee has a ddre sse d Provis ion 4 0 of the 20 18 U K Cor porate G overna nce C od e in res pec t of remun eratio n po licy and p racti ce. Ali gnme nt of pay struc tures th rougho ut the org anis ation a nd the imp lem ent ation of re mune ration p olicy a cros s the wid er work forc e is covere d on p age 112. Pag es 113 to 114 cont ain a su mmar y of C ommi tte e actio ns durin g the yea r . T ab le of contents 110 Our a ppr oac h to re mun erat ion 110 Link to s trategy 111 Su mmar y of ou r approve d Direc tors’ Re mune ration Po licy 112 Remu nerati on at IH G – the wi der c ontext 113 Remu nerati on Co mmit tee d etail s Ali gni ng va riab le elements of r emunerat ion t o strat e gy Variable e lem ents o f remune ration a re linked to our s trategy th rough ou r four strate gic pri oritie s, our p urpo se an d ambiti on. How to u se th is re po rt Withi n the Dire ctor s’ Remun eratio n Rep or t we have use d co lour c odin g to denot e di eren t elemen ts of remun eratio n. Th e colo urs us ed a nd the co rres pon ding rem unera tion elements a re: Salar y Beneits Pension bene it An nua l Per for man ce Pl an (AP P) 50 % ca sh an d 50% d efe rred s har es Long Term In ce ntive Pl an (LTIP) Sharehol ding Our purpose T ru e Ho spitalit y fo r Good Our ambition T o deliv er indust ry-leading ne t ro o ms gro w th Our strate gic priorities Bu ild love d and trust ed brands Cus tomer centri c in all we do Create digital adva ntag e C are for ou r pe ople, com munitie s andp lan et Audite d info rmatio n Co ntent co ntain ed wit hin a tinted pan el high lighted w ith an ‘ Audite d’ tab in dic ates that a ll the inform ation within th e pan el is au dited . AUD ITE D Gove rn an c e 110 I HG | Annua l Repo rt a nd Form 20 F 202 1 Summary of appro ved Di rectors’ Remunerati on Polic y Element 2022 2023 2024 2025 2026 Fr amework Purpo se Fi xed Ba se s ala ry Inc rea se s gen era lly in l ine wi th the r ange app lyi ng to the c orp ora te pop ula tion . Revi ewed a nnu ally a nd ixed fo r 12 mo nths from 1 A pril . T o rec ogn ise t he val ue an d imp act of the ro le an d the i ndiv idu al ’s skill s, performance and e xperience. Beneits Rel evant b en e its a re alig ned to t he ty pic al le vel for t he rol e/lo ca tion . T o be c omp etiti ve and c on sis tent w ith role /lo cat ion; to h elp re cru it an d reta in. Pension/ Reti rement bene it A De i ne d Co ntrib utio n or c ash i n lieu amo unt fo r UK D irec tors . Emp loye e co ntrib utio ns wi th matc hing c omp any co ntrib utio ns. S al ar y is the o nly p ar t of pay th at is p en sio nab le. S ee f ur the r det ail s reg ardin g UK an d US p en sio n be ne it o n pa ge 112 . T o be c omp etiti ve and c on sis tent w ith role /lo cat ion; to h elp re cru it an d reta in. V ariable Annual Performance Pl a n (c as h) Ma ximu m opp or tun ity i s 20 0% of s al ar y; 70% b ase d on o pe ratin g pro it m ea sure and 3 0% o n key strate gic o bje cti ves; 50 % of the aw ard is d efer red into s ha res for th ree ye ars . T o reward th e ac hieve men t of stre tchin g tar get s that s upp or t the C om pany ’s annual inancial and strategic goals. For 20 2 2, the key s trate gic obj ecti ves are : • r oom signings (15% weighting); and • r oom ope nings (15% weighting ). Annual Performance Plan ( deferred sh a re s) L o n g Te r m Incentive Plan ( LT I P ) The m axi mum p otent ial LTIP qu antum is 3 50 % of sa lar y for t he C EO and 27 5% of s alar y fo r othe r E xecu tive Di rec tors; a two -ye ar po st-ve st ho ldi ng period applies. A foc us on i ndu str y-l ea ding n et ro oms grow th is a t the he ar t of o ur str ategy, bal anc ed by a R eturn o n Ca pit al Emp loyed ( ROC E) u nde rpi n to re lec t our co mmitm ent to d eli ver qu alit y grow th whilst maintaining returns. T ogether with TS R and c as h low, the re is a s trong alig nme nt be twe en E xe cuti ve Dire cto r remuner atio n and shareholder interests. The C omm itte e has c ons ide red the re mune ration p olicy a nd pra ctice s in the c ontex t of Provisi on 40 o f the UK C orp orate G overna nce C od e, as fo llows : Principle IHG’ s approa ch Cla rity We always s ee k to set a nd re por t o ur pe rfo rma nc e- rel ated m ea sure s, t arge ts an d outc om es in a c lea r , trans pa rent an d ba lan ce d way , with re leva nt and ti mel y co mmun ica tion w ith all o f our s take hol der s. O ur rewa rd pol ici es dri ve eng ag eme nt thro ugh out th e work fo rce wi th an ali gne d app roa ch to pe r form anc e -re late d reward . Thro ugh th e com bin atio n of sh or t- and lo ng -term i nce ntive pla n me asu res, t he D R Poli cy is st ruc ture d to sup por t ina nci al obj ec tive s and th e stra tegi c prio riti es of th e bu sin es s whic h de liver sh areh old er ret urns a nd lo ng -term v alue c reat ion . Furth er ali gnm ent wi th sh areh old er in tere sts i s drive n by the s igni i can t prop or tio n of sh are -b as ed i nce ntive s an d Exe cuti ve Dire cto r sh areh old ing re quire me nts . Simplicity Our remu neration structu re compr ises strai ghtforward , con ventiona l and well-understood components. The purpose, structu re and s trate gic a lignm ent o f ea ch el eme nt is c le arly l aid o ut in th e remun era tion p oli cy sum mar y t abl e: • ixed p ay: bas e sa lar y , pe nsi on an d be ne it s that a re co nsi ste nt with ro le an d lo cati on; • shor t-ter m inc entiv e: ann ual p er for man ce -re late d bo nus w hic h inc enti vis es an d reward s the d eli ver y of inan cia l and n on - ina ncia l strategic objectives; • long -term i nc entive : a sh are -b ase d awar d whic h inc enti vis es p er form anc e over a t hree -ye ar p erio d an d is ba se d on me as ure s whi ch driv e lon g-te rm su st aina ble g row th. Predic tabilit y The r ang e of po ss ibl e valu es of re wards fo r E xecu tive Di rec tors i s cle arl y dis clo se d in gra phi cal fo rm bo th at the t ime of a pprov ing the p oli cy and i n the an nua l impl em ent atio n rep or t. Risk Our D R Po licy c ont ain s a numb er of e le men ts to en sure t hat it d rive s the rig ht be havi our s to inc enti vis e the E xec utive D ire ctor s to de liver l ong -te rm su sta ina ble g rowt h and s hare ho lde r return s an d to reward th em ap pro pria tely: • the max imum s hor t- and l ong -te rm inc ent ive award s are c app ed a s a % of sa lar y; • the Co mmit te e has c le ar dis cret ion p oli cie s, lin ked to sp ec i ic me as ures w here n ec es sa ry, to overri de for mula ic outc om es; • Exec utive D irec tor s agre e to cle ar a nd co mpre he nsi ve mal us an d claw ba ck prov isi ons; a nd • signi ic ant s hare hol din g requ irem ent s app ly for E xe cuti ve Dire cto rs. Proportionality Ind ivi dual re wards a re alig ne d to the d elive r y of str ategi c bu sine s s obje cti ves . The C om mit tee s et s robu st an d stre tchin g targ ets to en sure th at the re is a c lea r link b et wee n the p er for man ce of th e Gro up an d the awa rds ma de to E xec utive D ire ctor s and o ther s. Ali gnm en t to cu ltur e IH G ha s a cle ar pu rpo se a nd wel l- es ta blis he d valu es a nd be hav iour s. T he ali gnme nt b etw ee n remun era tion i nce ntive s an d our stra tegy fo r hig h- qu alit y grow th, a nd th e KPI s whi ch un der pin th e del iver y of o ur str ateg y , i s out line d on p age 1 10. O ther e le men ts of rewa rd, suc h as s ala ry re view s and, a cro ss th e wid er wor kfo rce, t he sh or t-term i nce ntive p lan a nd ou r glob al re co gnit ion sc hem e, rewa rd emp loyee s for p er for man ce an d ac tion s whic h de mon stra te our va lue s and b eh aviou rs. Cash Defe rral Performance Deferral 111 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report Dir e ct ors’ Remu nera tion R epor t c onti nu e d Our a ppr oach t o r emu ner a ti on co nti nu e d Remu nerat ion at IHG – the wider con te x t How o ur rewar d pra ctic es a re ali gne d ac ros s al l level s of th e org ani sati on Our a pproa ch to fairn es s in reward is an im por ta nt asp ec t of our overa ll reward philo so phy (see be low) and is d esig ned to at trac t and retain th e be st ta lent , with a focu s on ch ampi oning a di vers e and inc lusi ve culture wh ere emp loyee s can th rive. The rewa rd philo sop hy is sup por te d by a robus t governa nce ap proa ch aim ed at havi ng fair an d con sis tent reward and re co gnitio n prac tice s acros s our e mploye e pop ulatio n, reg ardles s of ge nde r and oth er as pe cts of d ivers ity , and th at there i s an alignm ent b etwe en th e wide r direc t work force an d executive re mune ration . We regularl y review our a pproa ch ex ternall y , e nsurin g we me et the ne ed s of emp loyee s by oerin g market-dri ven rew ard packages. Exa mp les o f alig nm ent an d im ple me ntat ion of w ide r work forc e reward s trat egy i n 202 1 Elements of reward Participants Comme ntary Fi xed Salar y All In the 20 2 1 bas e sa lar y rev iew pro ce ss , we co ntinu ed to b uild o n our s imp li ie d pe rfo rma nce m ana ge men t proc es s to inc lud e the u se of m ana ger d isc retio n to ma ke one - o ad jus tme nts wi thin th e overa ll me rit bu dg et in ord er to a ddre ss eq uit y and t ale nt rec og niti on, p ar ticul arl y in the c ontex t of th e pay ac tio ns ta ken in 20 20 in re sp on se to th e imp act o f Cov id-1 9 on th e bus ine ss . Thi s allo wed th e me rit bu dge t to be t arge ted o n area s whe re it wo uld h ave the mo st im pa ct. Beneits All For 20 21 , we alig ne d the le vels o f hea lthc are c over o ere d in th e UK a cros s all U K co rpo rate e mpl oyee s. G lob ally, we co ntinu ed to ro ll- ou t our we lln es s oe r to sup por t o ur emp loye es’ h eal th an d wellb ei ng an d to ada pt to a cha ngi ng and lexi ble w orki ng env ironm ent , inc ludi ng an e nha nce d pa rent al le ave po licy i n the U S for c orp orate e mpl oyee s. Pension bene it All Pe nsi on an d retire me nt be ne it s are pro vide d in th e UK a nd U S in lin e with m arket pr act ice . UK: the c ontri buti on rate fo r co rpo rate an d eli gibl e hote l emp loye es in th e IH G U K pen sio n pl an is al ign ed wi th a 2:1 matc hing r atio up to a m axi mum of 6 % of s ala ry f rom em ploye es a nd 12 % from t he C omp any . Du ring 20 2 1, foll owin g a revie w by the pl an tru ste e and c on sul tati on wit h an em ploye e me mbe r foru m, the i nvest ment o ptio ns fo r par ti cip ants we re up date d to inc lud e fun ds wit h an ES G focu s. US : US re tirem ent s avin g pla ns are m ad e up of a 4 01 (k) p lan w hich h as a 1:1 matc hing c ont ribu tion r atio up to a max imum o f 6% of s al ar y for e ligib le c orp orate e mpl oyee s and a D efe rre d Co mpe ns atio n Pla n (DC P) whic h prov ide s for su ppl em ent ar y co mpa ny cont ribu tion s of up to 1 6% p rovide d at s eni or leve ls (a his tori c gran dfath ere d rate o f 20 % app lie s for a sm all nu mbe r of e mpl oyee s who we re alre ady re ce ivi ng thi s rate wh en it wa s rem oved f rom 1 Jan uar y 20 17 ). V ariable Annual Performance Pl an ( AP P) All All c or por ate emp loye es s hare c omm on c orp orate p er for man ce m etric s wit h the E xec utive C om mit tee a nd E xecu tive Di rec tors . For se nio r man ag eme nt (g ene rall y at E xecu tive C omm itte e leve l an d thei r dire ct re por t s), a prop or tio n of b onu s is de ferre d into s hare s for a th ree -ye ar pe rio d. In 2 02 1, we ali gne d the we ight ings o f metr ics for al l cor por ate em ploye es b elo w Exe cuti ve Co mmi tte e leve l and i ncre as ed th e foc us on re wardin g pe rfo rma nc e by reb ala ncin g the A PP me as ures s o that a g reate r po rt ion of a n award c an b e achi eved t hrou gh an em ploye e’s individual per formance and contribution. Lo ng Term Inc enti ve Plan ( L TIP) All Se nio r/ m id -ma nag em ent an d ce rt ain s pe cia lis t role s are e ligib le fo r a Lon g T e rm In ce ntive Pl an (LTIP). Per fo rman ce - bas ed LTIP l arge ly ap plie s at th e leve l of E xecu tive C omm itte e an d the ir dire ct re por t s; RS Us t ypi cal ly app ly for e lig ible e mp loyee s be low th is leve l (see b el ow). Res tric ted Sto ck Units (RSUs ) Excludes E xec uti ve Directors In lin e wit h typ ic al ma rket pra ctic e, p ar ticul arly i n the U S, an d due to li ne - of-s ight ove r pe rfo rma nce m ea sure s, a gra dual ly gre ater p rop or tion o f the LTIP award i s ma de as R SU s (which a re not s ubje ct to p er form an ce co ndi tion s but s till a lign e mpl oyee inte res ts wi th tho se of s har eho lde rs) for e ligi ble ro les f rom th e Exe cuti ve Co mmi tte e dow n. Colleague Share P lan Wider workfor ce only IH G matc he s the nu mbe r of sh are s purc has ed o n a 1- for-1 basi s. O ur em ploye e sh are pl an is avai lab le to aro und 9 8% of ou r cor por ate em ploye es b elo w the s enio r/ mid -ma nag em ent l evel (who re ce ive LTIP an d RSU aw ards). Par tic ipa tion i ncre as ed fro m 49 % in 20 20 to 5 0% in 2 02 1 and to 5 3% i n 202 2 ; matc hing s hare s fro m the 20 20 pl an ves ted in J anu ar y 20 22 . Our rew ard philosoph y Our rewa rd arrange me nts are co mpe titive, drive cre ation of va lue for st akehol der s and m ake us think an d act a s one tea m. Learning and support T o a ssi st em ployee s and m anag ers in i mple menti ng the dis cretion ar y per form anc e -rela ted el eme nts of me rit an d APP , we introdu ce d a divers it y , e quit y & inclu sion s tate ment o n makin g fair reward d ecis ion s con siste nt with ou r Co de of C ondu ct, wh ich man age rs were fam iliaris ed w ith as pa rt of th e proc es s. Furth erm ore, during 2 02 1, cor porate e mploye es co mpl eted mo re than 10,0 00 hours of conscious inclusion t raining . UK hot el emplo y ees Followin g the ac quis ition of a nu mbe r of UK h otels in 2 019, emp loying e ntities fo r the es tate’s hotels we re transfe rred to I HG. Empl oyment te rms, in cludi ng remun eratio n and b ene i ts, have large ly rem aine d in pla ce on th eir pre - acq uisiti on ba sis to date. In co mmo n with the m ode l for man age d hotel s gen erall y , IH G provid es hote l mana gem ent su ppo rt to th e owner o f thes e UK leased hotels. This i nclu des m aking re co mmen datio ns to the U K lea se d est ate owne r on mat ters i nclu ding pay. Such rec omme nda tions a re made in line w ith the co rres pon ding pro ce ss for oth er dire ctly- em ployed emp loyees , bas ed o n market ins ight and ex peri enc e. De cis ions o n impl eme nting ch ange s to pay are ultim ately de termin ed by the h otel est ate owne r in the c ontext o f their ow n comm ercia l pos ition a nd equ ities a cros s their w ider p or t folio. All rol es at all h otels are p aid above th e living wa ge and ze ro -ho ur contr acts a re not utili sed i n any par t of th e UK le as ed e state. Employ e e engagement on pa y The 2 02 1 empl oyee eng age ment s co res for p arti cipati ng hotel a nd rese r vations e mpl oyees an d gen eral m anag ers o n the que stio ns relatin g to reward and re cog nition exce ed ed ou r sur vey provide r’s top qua rtil e ben chm ark. S ee pa ge 114 for de tails . Gove rn an c e 112 IHG | Annua l Repo rt a nd Form 20 F 202 1 K ey objectives and summary of r espons ibili ties The Re mune ration C om mitte e agre es, o n beh alf of th e Boa rd, all as pe cts of re mune ration of th e E xecutive D irecto rs and th e E xecutive C ommi tte e, and ag ree s the strate gy , d irecti on and p olicy for the re mune ration of th e sen ior execu tives wh o have a signi ic ant inl uen ce over th e Group’s abilit y to me et its s trategic o bje ctives . Additi onall y , the C om mitte e reviews w ider wo rk force pay p olic ies and p ractic e to ens ure alignm ent with s trateg y , valu es an d be haviour s and t akes this into a cco unt whe n set ting E xec utive Dire ctor rem unera tion. T he Co mmit tee’s role an d resp ons ibilitie s are set o ut in its Terms of Refe renc e (ToR) which a re reviewed a nnuall y and ap proved by the B oa rd. The ToR are ava ilab le o n IH G’s web site at w ww.ihgplc.com /inv estors under Corporat e go vernance. Membership and attend ance a t meet ings Det ails o f the Co mmit tee m emb ers hip and at ten danc e at me eting s are set o ut on p age 81 . Duri ng 202 1, the C omm itte e was su ppo rte d intern ally by the Co mpany C hair , the Gro up’ s CEO and C FO, and the h ead s of Hum an Res ource s and Re ward as ne ce ss ar y . Al l atten d by invitati on to provide f urth er b ackground in formatio n and c ontext to a ssi st the Co mmit tee in it s dutie s. Th ey are not pre sen t for any disc uss ion s that rel ate direc tly to their ow n remune ration o r whe re their atte ndan ce wou ld not b e appro priate. Rep or ting to t he B oar d The C omm itte e Cha ir upd ates the B oard o n all key issu es rai se d at Co mmit tee me etin gs. Pa per s and min utes for e ach m eeti ng are als o circul ated to all B oard me mb ers for revi ew and c omm ent. Non-Executive Directors ’ letters of appointment and not ice per iods Non - E xecutive D irec tors have let ter s of app ointme nt, whi ch are availab le upo n requ est fro m the C ompa ny Secre tar y ’s oice . Patric k Ce sca u, Non - E xecutive C hair , is sub jec t to 12 months ’ notic e and is i n com plian ce with P rovisio n 19 of the U K Co rpo rate Gover nanc e Co de. N o othe r Non - Exe cutive Di rector s are subj ect to notic e per iods ; all No n- E xecutive D irec tors are sub jec t to an annu al re- e lec tion by sh areho lde rs at the AG M. Ee ctive ne ss of t he C omm itte e The e ec tivene ss o f the Co mmit tee i s monito red an d ass es se d regul arly by the C hair of th e Co mmit tee an d the Ch air of the B oa rd. Remune ration advis ers In 20 19, the C ommi tte e unde rto ok a co mpe titive tend er pro ces s and I HG ap pointe d De loit te LL P to act as in dep en dent a dvis er to the Co mmit tee an d they co mme nce d work in O ctob er 20 19. De loit te is a mem ber o f the Rem unera tion C onsu ltant s Group a nd, as s uch, ope rates un der th e co de of c ondu ct in rel ation to execu tive remun eratio n con sultin g in the U K. T he Co mmit tee i s satis i ed that the ad vice re ce ived is o bje ctive and i nde pen dent . Fees of £ 14 3,8 50 were pa id to Del oit te in resp ec t of advi ce provi ded to th e Co mmit tee Remuner at ion Committee detai ls in 202 1. T his was in th e form of an a gree d fee for s upp or t in prep aratio n of pap ers an d atte nda nce at m eetin gs, wi th work on addi tiona l items c harge d at hou rly rates . The te rms of en gag eme nt for De loit te are availab le from th e Co mpany Se cret ar y’s o ice upo n requ est . Sep arately, other par ts o f De loit te LLP al so ad vise d the C omp any in relatio n to corp oratio n tax , mob ilit y and con sultin g ser vi ces . Board changes Duri ng the yea r , Ann e Bu sque t stepp ed d own from th e Boa rd and D anie la Ba rone So ares wa s app ointed to th e Bo ard as a Non - E xecutive D irec tor ; Ri chard An der son wa s als o app ointed to the Bo ard as a N on -E xec utive Dire ctor , however , he ha d to step down a few m onths la ter . D ale M orri son retire d from the B oa rd from 31 D ec emb er 20 21 a nd Gra ham All an was ap poin ted as S enio r Non - E xecutive D irec tor from 1 Ja nuar y 20 22 . The re mune ration arrang eme nts in re spe ct of a ll chan ges we re in line w ith the app roved DR Po licy an d are covere d on pa ge 123 . Approach to target setting T a rgets are s et by the C ommi tte e and se nior m ana gem ent, t aking into acc ount I HG ’s growth amb ition s and lo ng- rang e busi nes s pla n, market exp ect ation s and th e circum stan ce s and rel ative pe rfo rmanc e at the tim e, with the ai m of set ting s tretching a chievem ent t argets for se nior exec utives w hich wil l rel ect s ucc es sful o utcom es for th e bus ine ss ba se d on its s trategi c and inan cial ob jec tives for th e pe riod. Abs olute t arget s may be s et relative to b udge t and/or by referenc e to prior re sult s, ge neral ly cont ainin g a per form anc e range w ith addi tiona l stretch to inc entiv ise o utpe rfor manc e as wel l as minim um pe rfor manc e level s for payout . Relative t arget s are set a gain st an app ropriate c omp arator group o f com panie s for the re levant m eas ure, for examp le, rel ative NS SG in th e L TI P was se t again st ou r six larg est com petito rs with over 5 00 k room s to rel ect o ur indu str y-le adin g grow th ambiti on. Sharehol der engag ement The C omm itte e rec ogni ses th at there exi sts a ra nge of v iews ac ross the sh areho lde r bas e in rela tion to the p ay of Exe cutive Di rector s and theref ore engages in r egular shar eholder consultat ion. W e consult ed with sh areho lde rs an d proxy ag enc ies in e arly 20 21 a nd prio r to the AGM on th e impl eme ntatio n of remun eratio n pol icie s for the yea r ahe ad an d mat ters rel ating to in -lig ht L TI Ps . At the 202 1 AGM , we were pl eas ed to re ceive a vote of 9 2.4 3 % in favour of the 2 020 Directors ’ Remu neration Report. Sha rehol der exp erie nc e and the v iews of sh areh olde rs are fund ame ntal as pe cts o f the Co mmit tee’s framewo rk for the con sid eratio n of the us e of dis cretion i n relatio n to ince ntive pla n outc ome s. As s uch, we c arrie d out c onsu ltatio ns with l ead ing sha rehol der s and a prox y age ncy ag ain in ea rly 202 2 . We discu ss ed the p er forman ce of m anag eme nt whic h, in the C ommi tte e’ s view, had d elive red stro ng resu lts and a m ore res ilient c omp any comi ng out of th e pan demi c. This p er form ance i s sus tain able a nd ha s not be en at the ex pen se of s takeho lde rs, as o utline d on p age 107 . 202 1 foc us a rea s • Revie w and ap proval of 20 20 remun eratio n outco me s and 20 21 s tructu res and t arget s • In -year p er forman ce an d relative p er form ance tr acki ng • Wider workfor ce remuner ation matters • ES G in ince ntives a nd Gre en En gage p rogre ss • C ons idera tion of di scretio n relati ng to 202 1 remun eratio n outc ome s • 20 22 + struc tures an d targe ts 113 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report However, forecas t resu lts sh owed tha t the formul aic ou tcome s of L T IP ta rgets wo uld likely n ot rel ect th is extr aordin ar y eor t an d, if lef t una ddre ss ed, woul d risk f urth er ag gravation to exis ting retenti on and talent challeng es. Valuabl e and co nstr uctive fe edb ack wa s provide d by sha reho lder s and a p roxy age ncy an d, overall, sh areho lde rs were g ene rally rec eptive to the p otential u se of di screti on to incre as e the L T IP outc ome, s o long a s there wa s su icie nt and rob ust j usti ic ation. The C omm itte e’s decis ion an d deta iled r ationa le is ou tline d on pag es 10 5 to 107 . The m ost re cent ro und of c ons ultati ons al so cove red mat ter s relatin g to in- light L TI Ps and p rogre ss on th e incl usio n of ESG in executive re mune ration . Views ex pres se d by share hold ers w ill als o be t aken into con sid eratio n as the Re mune ration C omm itte e reviews the D R Policy in 2 02 2 ahe ad of p utti ng the p olicy to sh areho lde r vote in 202 3. We will en gage i n fur ther c ons ultati on as th e DR Policy dev elops. Wider wor kfor ce r emunera tion and emplo y ee engagemen t As outl ine d on pag e 112, I HG op erate s an align ed ap proa ch to remun eratio n through out th e organi satio n. Du ring the ye ar , th e Co mmit tee revie wed as pe cts of th e Co mpany ’s wider wor kfo rce remun eratio n appro ach a s par t of the ir regul ar me eting a gen da, incl uding th e appro ach to fai rnes s in reward, reten tion arrang eme nts, a nd arran gem ents fo r UK ho tel emp loyees . The C omp any eng age d with the wo rkfo rce throu gh its e mploye e eng age ment s urvey wh ich cove rs a numb er of a reas, i nclu ding pay and b ene it s co mpeti tivene ss, a nd was up date d for 202 1 to provid e greate r insig hts on are as su ch as we llne ss an d inclu sion . As pa rt of 2 02 1 Bo ard eng age ment wi th the work forc e, the Co mmit tee C hair me t with rep rese ntative e mploye e groups fro m our U S and Phil ippin es p opul ation s to discu ss E xecu tive Dire ctor remun eratio n and how I HG ’s remuner ation pri ncip les ap ply to emp loyees th rougho ut the o rganis ation . Ne ither g roup sha red any con cern s with E xecu tive Dire ctor remu nerati on. Voting at th e Co mpa ny’s AGMs The c urrent D R Policy wa s subj ect to a vote at the 2 020 AG M. Th e outco me of th e votes in res pe ct of the D R Pol icy and Re por t for 2 019 to 20 21 are sh own be low: Directors’ Remuneration Policy (binding vot e) Directors’ Remunera tion R eport (adv isory vot e) AGM Votes for Vot es against Abstentions Votes for Votes against Abstent ions 2021 – – – 137 ,628, 120 (92.43% ) 11,277,368 (7 .57% ) 106,27 1 2020 112 ,09 8, 2 13 ( 7 7. 1 4 % ) 33,2 10,269 (2 2 . 8 6%) 3,308,4 99 1 4 3 , 2 79 ,76 1 (9 6 .4 9 %) 5,2 12,375 (3 .5 1%) 124, 84 4 2019 – – – 120 ,939 ,401 (8 3 .9 5 %) 23, 116,948 (1 6. 0 5%) 3 , 8 6 7, 2 8 7 Jo H arlow Cha ir of the Re mune ration C omm itte e 21 Feb ruar y 20 2 2 In the P hilippi nes , empl oyees g ave feedb ack o n pay and b ene i ts com petiti vene ss an d rece nt devel opm ents in th e con text of hom e workin g. Dis cus sio ns on E xec utive Dire ctor rem uner ation with the U S empl oyee group le d to co nstru ctive fe edb ack on d evelo pme nt and c aree r progre ss ion op por tuni ties an d asp ec ts of dive rsit y and inclusion. As note d on pa ge 112, p erce ption s of reward and re co gnitio n gain ed stro ng resu lts ac ross o ur hotel, re se rvati ons an d gen eral manager populat ions: Paid fairly 80% 73% 79% 64% Be ne it plan me et nee ds 83% 76% 82% 68% Appro priate reco gnition 85% 80% 88% 71% Per form anc e impa cts pay 82% 81% 83% 64% H otel s Re ser vation s GMs T op qua rti le sco res Th e Co mp any’s ap proa ch to wi de r work forc e en gag eme nt un der t he UK C or por ate Gove rna nc e Co de is s et ou t on p age 112 . Dir e ct ors’ Remu nera tion R epor t c onti nu e d Our a ppr oach t o r emu ner a ti on co nti nu e d Gove rn an c e 114 I HG | Annua l Repo rt a nd Form 20 F 202 1 Ann ual Repor t on Dir ect ors’ R emuner a t ion Sin gle tot al igu re of rem un erat ion – E xecu tive Di rec tors Fixe d p ay Var iable pa y Executive Dire ctors Ye a r Salary £000 Beneits £000 Pension beneit £000 Subtotal £000 APP £000 LT I P £000 a Subtotal £000 To t a l £000 Kei th B a rr 2021 8 57 41 214 1,1 1 2 1,72 7 337 2,0 6 4 3 ,1 76 2020 712 45 178 935 0 549 549 1,48 4 Paul E dgeclie- Johnson 2021 630 19 158 807 1, 270 24 8 1,518 2,325 2020 524 21 13 1 676 0 391 391 1,06 7 Elie Maalouf b 2021 606 53 11 8 777 1,22 1 2 51 1,4 72 2 ,249 2020 5 31 30 65 626 0 379 379 1,00 5 a LTIP igu res f or 20 20 re lat e to the 2 018 /20 LTIP cy cle a nd ha ve be en re st ate d usi ng a ctu al sh are p ric e on da te of ve sti ng. F igu res fo r 20 21 re la te to the v alu e of sh are s for th e 2019/21 c ycle. b E lie M aa lou f is p aid i n US D and t he ste rli ng e qui vale nt is c al cul ate d usi ng an e xcha nge r ate of $ 1 = £0.73 i n 20 21 a nd $ 1 = £0.78 in 2 02 0 (p age 1 58). The Annual Report on Direct ors’ R emuneration explains how the D ire cto rs’ Rem une rati on Pol icy (DR Po licy) was im ple me nte d in 20 21 an d th e res ult ing p aymen ts ea ch of t he E xecu tive Direc tors rece ived. This re por t is s ubje ct to an ad viso ry vote by s hareh olde rs at th e 202 2 AGM . Th e notes to th e singl e igu re tabl e provid e fur ther d etail, whe re relevant , for eac h of the e lem ents th at make up the tot al singl e ig ure of remun eratio n for ea ch of the E xec utive Dire ctor s. Note s to si ngl e ig ure ta bl e Fi xed pay Sa la r y: sal ar y paid fo r the year. Salar y inc reas es in 20 2 1 were in line wi th the bu dget fo r the wid er U K and US c orp orate work forc e. 202 0 sal aries we re redu ced fo r par t of the ye ar as exp lain ed in the 20 20 Annu al Rep or t. Beneits: for E xec utive Dire ctor s, this in clud es, b ut is not limite d to, taxab le be ne its s uch a s comp any car o r allowan ce and h ealth care. U nde r HM Reve nue an d Cus tom rule s, the 2 02 1 ig ure for the no n- U K bas ed D irec tor , Eli e Maa louf, inclu des som e travel and fo od exp ens es th at were not p reviou sly rep or te d. P ension beneit : for current E xec utive Dire ctors , in line wi th DR Po licy , the value o f IH G contrib ution s and a ny cash allowan ce s paid in l ieu of p ens ion co ntribu tions . Keith Ba rr and Pa ul Edge cli e-John son di d not pa rtic ipate in any IH G pe nsio n plan i n 202 1 and in stea d rece ived c as h allowan ces o f 25% of b ase s alar y; this wil l reduc e to the ma ximum l evel availab le to all othe r par ticip ants in th e UK p en sion p lan at the e nd of 20 2 2. Life as sura nce c over is p rovide d for both Keith a nd Paul at fo ur time s bas e sal ar y . Elie M aalo uf par tic ipate d in the US 4 01 (k) P lan an d the US De ferred C omp en satio n Plan (D CP). Th e US 40 1( k) Pla n is a tax- quali ie d pl an providin g ben e its o n a de ine d co ntributio n bas is, wi th the me mbe r and c ompa ny both co ntributin g. Co ntributi ons m ade by , a nd in res pe ct of Eli e Maa louf in th es e pla ns for the ye ar en ded 3 1 De ce mbe r 202 1 were: £ a Dire cto r’s co ntrib utio ns to U S De ferre d Compensation Plan 168,917 Dire cto r’s co ntrib utio ns to U S 40 1( k) Pl an 18,980 Co mpa ny con tribu tio ns to US D efe rre d Compensation Plan 109, 82 9 Co mpa ny con tribu tio ns to US 4 01 (k ) Pla n 8,468 Age of D ire ctor a t 31 D ec emb er 2 02 1 57 a S terl ing v alu es ha ve be en c alc ula ted u sin g an exc han ge ra te of $ 1 = £0.73 . As outl ine d in las t year ’s r ep or t, Elie’s retireme nt be ne it is in li ne with othe r se nior U S emp loyees a nd co mpris es a 6 % of sa lar y match ed c ontribu tion (subje ct to IR S limits i n resp ec t of 40 1(k ) contr ibutio ns) and a 16 % of sa lar y supp lem ent al emp loyer DC P co ntributio n. V ariable pa y APP (cash an d defe rred sh ares) Ope ration Award levels a re determi ned b as ed on s alar y at 3 1 De cem ber 2 02 1 and are b ase d on a chievem ent vs t arget un der e ach m ea sure. For op erating p roi t from rep or tabl e se gment s, the 2 02 1 award was se t on the b asi s of a payout ran ge of +/- 10% of t arget p ayout for pe rfo rman ce of +/-$25 m of targ et pe rfo rmanc e. O utsi de of this rang e, payout woul d be on a s traight-lin e bas is bet ween thresho ld and - $2 5m and b et ween + $25 m and ma ximum . For ro om ope ning s and roo m signi ngs, th e award was se t on a strai ght-line bas is be twe en thre sho ld and t arget , and t arget an d maxim um: • threshold is the mini mum level th at mus t be ac hieved fo r there to be an award in re lation to th at me asure; s ubje ct to Co mmit tee dis cretion, n o award is ma de for a chievem ent b elow thre sho ld. • targe t is the ta rget level o f achieve ment a nd res ults in a t arget award for that m ea sure. • maximum is th e level of a chievem ent at wh ich a ma ximum award for that m ea sure is re ceive d (capp ed at 20 0% o f sal ar y) . The C omm itte e forma lly reviews p er form ance a gain st IH G’s Glo bal M etric s as pa rt o f the APP s tructu re in con side ring wh ethe r to appl y disc retion to ad just o utcom es on th e strate gic me asure s. AUD ITE D 115 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report AUD ITE D Dir e ct ors’ Remu nera tion R epor t c onti nu e d Ann ual Repor t on Dir ect ors’ R emuner a t ion c o ntin u e d APP ou tco me for 2 02 1 The p er form ance m ea sures fo r the 202 1 AP P were dete rmine d in ac corda nce w ith the D R Policy a nd were: • op eratin g pro it from rep or tab le se gme nts ( 70%); • roo m signin gs (15%); and • room openings (15% ). T a rget award was 11 5% of sal ar y and ma ximum wa s up to 20 0% of targ et for e ach me asu re, subje ct to an overa ll cap o n the award of 20 0% of s ala ry. The tab les b elow s how thre shol d, targ et and m aximum o ppo r tunit y , as we ll as wei ghting an d actu al 2021 achievement. 0 50 100 150 20 0 35 7. 5 7. 5 70 140 30 17. 3 15 15 Actual Maximum 140 30 30 Ta r g e t Threshold Op era ting pro it from repo rt ab le segm ent s Room signings Room openings APP mea sure s – % of total award 50 10 0 1 8 7. 3 20 0 APP Perfor mance Achiev ement Weighting Wei ght ed achiev ement Op er atin g pro it f rom re po rt ab le s egm en ts: p er fo rma nc e rel ative to t ar get Threshold $222m 50% 70% 140.0 % Ta r g e t $29 6m 100 % Maximum $443m 20 0% Actua l $535. 1m 20 0% Roo m sig nin gs ( k roo ms) Threshold 52.4 50 % 15% 30.0% Ta r g e t 58.2 100% Maximum 6 4.0 200 % Actua l 68.9 200% Room openings (k r ooms) Threshold 39.0 50 % 15% 1 7. 3 % Ta r g e t 4 3.3 100 % Actua l 4 4.0 139. 2% Maximum 4 7. 6 20 0% Op eratin g pro it from rep or tab le se gme nts is a N on- GAA P mea sure and exclu des c er tai n items fro m ope rating p roit . Additio nall y , in deter mining o pera ting pro it from re por ta ble s egm ents fo r APP purp ose s, bu dgete d exchan ge rates fo r the year a re use d to ens ure like- for -like co mpar ison w ith the AP P targe t set at th e sta rt of the ye ar . Op era ting p roi t from re po rt abl e se gme nts (at actu al exch ang e rate s) ( se e pa ge 15 8) $533.6m Di ere nce d ue to exch ang e rate s $1.5m Op era ting p roi t from re po rt abl e se gme nts (at 202 1 bu dge t excha nge r ates) $535. 1m L TI P 201 9/21 (gran ted in 2 01 9) Awar ds are made annually and eligible ex ecutives will receive sha res at the e nd of th at cycle, sub jec t to achieve ment of th e pe rfor manc e co nditio ns. C ond ition s and wei ghting are de sc ribe d on pa ge 117 . TSR m ea sures th e return to sh areho lder s by investin g in IH G relati ve to a comp arator grou p cont aining th e followi ng majo r glob ally br ande d co mpeti tors: Ac cor S . A., C hoic e Hote ls Intern ation al Inc., H ilton Worldw ide H oldin gs In c., Hyatt H otel s Co rpor ation, M arriot t Intern ation al Inc., M eli a Hotel s Intern ationa l S. A ., NH H otels G roup, and W yndh am Hote ls & Re sor ts I nc., as pe r dat a provide d by our c orpo rate ban kers so urced f rom Thomson Reut ers Datastr eam. Followin g the ac quis ition an d deli sting of M ille nnium & C optho rne Hote ls PLC by Cit y Devel opm ents L imited i n Octo ber 2 019, a Sing apo re- bas ed re al es tate co mpa ny , it was re moved from the co mpa rator group fo r the 20 19/21 cycl e. The s hare pri ce in re spe ct of th e 2018/2 0 L TI P cycle h as be en rest ated u sing th e volume we ighted ave rage pr ice of 5,072p fo r Keith Ba rr and Eli e Maa louf an d 5,1 4 3p for Pa ul Edge cli e - J ohn son on the d ate of actu al ves ting on 24 Feb ruar y 202 1. T here is a s light die renc e in the sh are pric e at the da te of vestin g for Keith B arr and Eli e Maa louf a s our sh are admi nistrati on po rt al ho lds s hares for pa rtic ipant s who are U S citize ns in a s epa rate entit y to non -U S par tici pants . Fin al vesti ng trans ac tions a re therefo re carrie d out sep aratel y , re sulting i n a slight s hare pri ce variati on ba se d on the timing th at the t wo trans acti ons t ake plac e. Th e corre spo ndin g value s show n in the 20 20 rep or t (pri or to the ac tual ves ting) were an es timate c alcul ated us ing an avera ge sh are pric e over the inal quar ter o f 2020 of 4 ,4 60 p. L TI P outc ome fo r 20 19/21 cycle The p er form ance m ea sures fo r the 20 19/21 thre e -year L T IP cycl e were dete rmine d in ac cord anc e with the D R Polic y and were: • T otal S hareh old er Return (40 %); • T otal G ros s Revenue ( 20%); • ne t system si ze grow th (20 %); and • c ash low (20 %). The fo llowing t abl es sh ow thres hold a nd ma ximum op por tuni ty , as well a s weighti ng and a ctual a chievem ent, b as ed on th e formul aic outc ome s aga inst th e three -year t arget s set in 2 019, and fol lowing th e appl icatio n of C ommit tee di screti on, for e ach pe rfo rma nc e me asu re. 0 20 40 60 80 10 0 Maximum 40 20 20 20 20 8 4 4 4 Actua l Threshold T ota l Sh areh old er Return Total Gros s Revenu e Ne t syst em size grow th Cas h l ow L TIP mea sure s – % of max imum opp or tuni ty 20 20 10 0 Gove rn an c e 116 I HG | Annua l Repo rt a nd Form 20 F 202 1 Performance measure and w eighting Performance tar gets Resu lt Formulaic achievement Discretionar y outcome Ta r g e t % V esting T ot al Shareh olde r Return: Thre e -yea r grow th rel ative to ave rag e of competi tors 40% Maximum 83 .4% Maximum 100% Outc om e 1 7. 9 % Below thr eshold 0% Threshold 26.0 % Threshold 20% T ota l Gro ss R even ue: ba se d on IH G ’s per form anc e ag ains t an ab so lute Total G ros s Reven ue ta rget 20% Maximum $5.6 3bn Maximum 100% Outc om e $ -7. 9 2 b n Below thr eshold 0% Threshold $3.94bn Threshold 20% Ne t syste m siz e grow th : ba se d on IH G ’s per form anc e ag ains t an absolute NSSG target 20% Maximum 159.0k rooms Maximum 100% Outc om e 84.6k r ooms Below thr eshold 0% Threshold 111.3 k room s Threshold 20% Cash lo w: ba se d on IH G ’s per form anc e ag ains t an ab so lute c ash low t arge t 20% Maximum 2.49bn USD Maximum 100% Rep or ted O utc ome 1.4 9 bn US D Below thr eshold 20% Threshold 1.87bn USD Threshold 20% Adjust ed Outcome 1.7 8 bn US D LT I P As outl ine d in the Ch air ’ s St ateme nt on pa ges 1 04 to 108 , the Rem uner ation C ommi tte e has exerci sed i ts dis cretio n to adjus t the formul aic outc ome of t he 20 19/21 L TIP . Thi s cycle will ve st on 2 3 Februa ry 2 02 2 and i s the i rst un der wh ich E xecuti ve Direc tors are subj ect to a t wo -year po st-vest ho ldin g peri od. T he indi vidua l outco me s for this cycl e are shown b elow. The s hare pri ce of 4, 85 8p us ed to c alcul ate the 20 19/21 L TI P cycle valu e shown in th e sing le ig ure tab le is th e average over th e in al quar ter o f 202 1. Executive Directo r Awar d cycl e Maximum oppor tunity at grant (num be r of s ha res) % of m axim um opportunity ves ted Outcome (num be r of s ha res awa rde d at ve st) T otal value of award £000 Valu e of awa rd attributable to share price apprecia tion Kei th B a rr LT I P 2 0 1 9 / 2 1 34,693 20% 6,938 337 -7 Paul E dgeclie- Johnson LT I P 2 0 1 9 / 2 1 25,50 9 20% 5 ,1 0 1 24 8 -5 Elie Maalouf LT I P 2 0 1 9 / 2 1 25,802 20 % 5 ,1 6 0 2 51 -5 Adju st me nts to c as h low ou tco me Over th e pe rfo rmanc e pe riod of th e 201 9/21 L TIP award th ere have be en event s that have imp acte d IH G’s cas h low th at were unqu anti ied o r unfore see n whe n the orig inal t arget s were set . In lin e with the a djustm ents re por te d in the 20 19 an d 2020 A nnual Rep or ts, the t abl e bel ow show s the rec onci liation b et ween repo rte d ca sh l ow and th e outco me for the 2 019/2 1 L T IP . Reconciliation Cash l ow $bn Rep or te d cas h l ow from o pe ratio ns 2 .06 Ne t cas h from i nves ting a ctiv itie s (0. 57 ) Reported out come per deinit ion 1.49 Six Senses acquisiti on 0.2 9 Adju sted outc ome 1.7 8 Adju st me nt to net sys tem s ize grow t h outc ome The fo rmulai c NS SG L T IP ou tcom e above inc lude s the s ame adju stme nt repo rte d for the 2 018/20 cycl e las t year to exclud e the rem oval from IH G bra nds of ro oms a ss ociate d with th e SVC por t folio toward s the en d of 202 0 due to the SVC man age ment agre eme nt termin ation. T he formu laic ou tcom e also i nclu des a n adju stme nt to exclude ro om removal s incre ment al to our n ormal level du e to the Ho liday In n and Crow ne Pla za e state revi ew in 202 1. The se event s were not b udg eted for at t he time of s et ting the 201 9/21 ta rgets an d the C ommi tte e, in its ju dge ment, c on side red it was ap prop riate to adjus t for the m on the b asi s of its vi ew that L T IP pa rtic ipant s sho uld not h ave bee n disi nce ntivis ed from mak ing the se de cis ions i n the lon g-te rm interes t of sh areho lde rs. AUD ITE D 117 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report AUD ITE D Dir e ct ors’ Remu nera tion R epor t c onti nu e d Ann ual Repor t on Dir ect ors’ R emuner a t ion c o ntin u e d Other outstanding awar ds Sc he me inte re sts awa rde d du ring 2 020 a nd 20 21 Duri ng 202 0 and 20 21, award s were grante d und er the L TI P cycle and m ade to e ach E xecu tive Dire ctor over s hare s with a max imum value of 2 05% of s ala ry in 2 020 an d a max imum valu e of 35 0% in 20 21 fo r the C EO and 27 5% for all othe r E xecutive D irecto rs us ing an average o f the clo sing m id- market sh are pric e for the ive days p rior to grant , as in the t abl e bel ow . The se are in th e form of c ondi tiona l awards over C omp any share s and d o not ca rry t he right to div iden ds or di vide nd e quivale nts dur ing the ve sting p erio d. The ve sting d ate for the 20 20/2 2 L TI P award is the d ay afte r the ann ounc eme nt of our ina ncia l year 20 22 P relimin ar y Resu lts in Febru ar y 2023 . The se award s will ves t to the exte nt per form anc e targe ts are me t and will th en b e held i n a nomin ee a cco unt for a fur ther t wo year s, tran sferrin g to the award- hol der in Fe bruar y 20 25. The ve sting d ate for the 20 21/23 LTIP award is the d ay afte r the ann ounc eme nt of our ina ncial ye ar 20 23 Prelim inar y Res ults in Febru ar y 2024. T hes e awards wi ll vest to the ex tent p er forma nce t arget s are met an d will the n be h eld in a n omin ee ac cou nt for a fur ther t wo year s, tran sferrin g to the award- hol der in Fe bruar y 20 26. Altho ugh the a pproved D R Poli cy per mitte d award level s of 35 0% an d 27 5% of sal ar y resp ec tively for th e CEO and o ther E xecu tive Dire ctors fo r the 20 20/22 cycl e, the ac tual award s granted fo r this cycle we re mad e at the previ ous m aximum awa rd level of 20 5% for all E xecu tive Dire ctors . Prior to m aking th e awards, th e Co mmit tee note d the vi ews of so me inves tors in rel ation to the s ize of sh are awards wh ere the s hare pri ce ha d falle n subs tanti ally rel ative to the prio r year ’s grant and the p otentia l windfa ll gain s which c ould o cc ur if and w hen s hare pri ces re covere d. Th e grant pri ce for th e 2020/2 2 cycle wa s £3 4. 96 , repre sentin g a redu ction of ~29 % from the g rant pric e for the 20 19/2 1 cycle awards . The u se of lowe r maxi mum opp or tunit y leve ls resu lted in fewe r sha res be ing awarde d to the E xecutive D irecto rs than wo uld have b een th e ca se if award s were grante d at the leve ls pe rmit ted un der th e DR Pol icy (~41% fewer sha res in the c as e of the C EO and ~25% fewer for th e other E xec utive Dire ctor s ). The C omm itte e will c onsi der wh ethe r it is ap propri ate to adjus t the form ulaic o utcom e at the tim e of vesti ng, inc luding t aki ng into acc ount th e moveme nt in sh are pric e bet wee n grant an d vesti ng dates , in the c ontext of a ny potentia l windf all gain s. Executive Directo r Award date Maximum shares aw arded Market price per share at grant £ Fac e valu e of award at grant £000 Nu mb er of s ha re s re cei ved i f min im um performance achieved 2021/ 23 c ycle Kei th B a rr 10 M ay 202 1 59, 38 5 50.8 8 3,0 2 2 11, 87 7 Paul E dgeclie- Johnson 10 M ay 202 1 34,310 5 0.88 1 ,74 6 6,862 Elie Maalouf 10 M ay 202 1 3 2, 525 50.8 8 1,6 55 6,505 2020/ 22 cy cle Kei th B a rr 1 2 May 20 20 4 9 ,1 5 3 34.9 6 1 ,7 18 9,8 30 Paul E dgeclie- Johnson 12 May 20 20 36, 140 34.96 1,26 3 7, 2 2 8 Elie Maalouf 12 May 2 020 38,4 63 3 4.96 1,3 45 7, 6 9 2 Performance measures and considerat ion of discretion The p er form ance m ea sures fo r the 202 0/22 cycl e are as agre ed i n the 20 20 DR Po licy: Relati ve TSR , T o tal G ross Reve nue ( TGR), net sys tem size g rowth a nd ca sh l ow for the thre e year s endi ng 31 D ec emb er 20 22 . NS SG is a re lative me asu re and is m eas ured to 30 S eptemb er rath er tha n 31 D ece mbe r due to the ti ming of p ublic ation o f comp etitor d ata. M inimum p er form anc e is eq ual to 20% of the m aximum awa rd. As note d in the 20 20 Di rector s’ Remu nerati on Rep or t, TGR wa s removed f rom the L TIP m eas ures for th e 202 1/23 cycle, w hich c overs the thre e years e ndin g 31 D ece mbe r 202 3, and th e weightin gs for rel ative NS SG an d abs olute c ash low were b oth incre ase d, ma intaini ng a simil ar bal anc e bet wee n abs olute an d relative m eas ures a s for the prev ious cycl e. TGR is h eavily i mpac ted by the p ace a nd sh ape of market Rev P AR rec over y , whi ch is ou tsid e of man age ment ’s control a nd rem aine d ver y unpre dict abl e at the time o f set ting t argets . Relati ve NS SG for b oth cycle s is subj ect to th e achieve ment o f a ROC E und erpin o f 20% , be low whic h the C ommit te e has th e disc retion to reduc e the o utcom e for the m eas ure. Th e unde rpin was i ntroduc ed to e nsure I HG ’ s high retur ns on c apit al were pri oritis ed in s trategi c dec isio n- mak ing (e.g. M& A activ ity) as o ppo se d to simpl y rel ectin g tradin g per form anc e. As note d in la st year ’s repor t an d the Ch air’s let ter to this ye ar’s repo rt , the C ommit tee i s mind ed not to re duc e the N SSG ve sting o utcom e for the 2 020/2 2 cycle if th e unde rpin is not me t by reas on only o f the imp act o n earni ngs of th e pand emic . As note d in the C hair ’s Statem ent on p age s 104 to 10 8, the C omm itte e is trac king a s had ow cas h low t arget in re sp ect o f the 20 20/22 L T IP cycle a nd ha s indic ated th at this sh adow t arget wi ll be high ly releva nt when c ons ide ring the ve sting o f this cycle in e arly 2 023 . The s had ow targe t is dis clos ed o n pag e 124 of this rep or t. Any use of d isc retion, in cludi ng the fa ctors in lu enci ng the de cis ion, wil l be cl early c omm unica ted in the D irec tors’ Re mune ration Rep or t for the yea r in whic h the de cisi on is m ade. Gove rn an c e 118 IHG | Annua l Repo rt a nd Form 20 F 202 1 Executiv e Direct ors’ shareholdings and share i nterests The C omm itte e be lieves th at share ow ner ship by E xecuti ve Dire ctors a nd se nior exec utives s trength ens th e link b etwe en the in dividu als’ p ers onal i nteres ts and th ose o f share hol der s. Guid eline E xecutive Direc tor share holdin g require ment E xecutive D irecto rs are req uired to ho ld sh ares e qual to 50 0 % of sa lar y for the C hief E xec utive O ic er an d 30 0% for any oth er E xecutive D irecto r . E xec utive Dire ctors a re expe cted to ho ld all net s hares e arne d until th e previou s guid eline s hare hold ing requi reme nt is ach ieved (30 0% fo r the CEO an d 200 % for oth er E xecutive D irecto rs) and at le ast 5 0% of all s ubs equ ent net s hare s earn ed unti l the curre nt guide line s hareh oldi ng is me t. The n umbe r of sh ares he ld ou tright inc lude s all Dire ctor s’ be ne icia l interes ts and th ose h eld by the ir sp ous es an d other c onn ecte d pe rso ns. It als o inc lude s the ne t value of unve sted s hare s that are not subj ect to any fur the r pe rfo rmanc e co nditio ns. Perc enta ges a re calc ulate d using th e 31 D ec emb er 20 21 s hare pric e of 4,781p. The full guidelin e minimum shareholdin g requirement continue s for six m onths af ter c es sati on of em ploym ent and 5 0% of th e requi reme nt contin ues fo r an add itiona l six mo nths. A s a par t of this re quirem ent, s ince 2 019, s hares h ave bee n grante d and all unves ted awards h eld in a n omin ee ac cou nt with E xecuti ve Dire ctors re quire d to ele ctronic ally s ign an ag reem ent to the terms o f the grant , inclu ding th e pos t-emp loyme nt shareho lding requirement. 0 200 400 600 800 1 ,00 0 1, 20 0 1,4 00 1 ,60 0 Sha res hel d outr ight and net valu e of share s sub jec t to ho ldin g/defer ral perio d T ota l numb er of sha res and awards as a % of salar y Sh are s and award s held by Execu tive Dire ctor s at 31 Dec emb er 20 21: % of sa lar y 519 532 1,30 9 1,49 6 1,39 4 669 K eith Bar r Paul Edgeclie- Johnso n Elie Maa lou f Guidelin e s hareholding Per ce nta ge s have b ee n ca lcu late d us ing a c om bin ed t ax an d so cia l se cur it y rate of 47 % for Ke ith B arr a nd Pa ul Ed ge cli e -John so n and a r ate of 4 5.1% fo r Eli e Ma alo uf. Curr ent Direct ors ’ shar eholdi ngs The A PP defe rred s hare awards are n ot subj ect to p er forma nce c ondi tions . Det ails o n the pe r forman ce co nditi ons to whi ch the unves ted L T IP awards a re still sub ject c an b e found o n pag e 118. Th ere have be en n o chan ges in th e sha rehol ding inte rest s of any of the D irecto rs sinc e the e nd of the ina ncial ye ar up to the p ublic ation of t his rep or t. Sh are s and aw ard s hel d by Exec utive D ire ctor s at 31 D ec emb er 2 02 1: num be r of sh are s Nu mb er of s ha re s he ld ou tri ght A PP de fer red s ha re awa rd s L TI P sh ar e awar ds (unve st ed ) T ot al nu mb er of shares and a wards held 2021 2020 2021 2020 2021 2020 2021 2020 Kei th B a rr 81,830 70, 279 26 ,69 6 3 7, 7 0 5 143,231 119, 2 27 2 51 ,7 57 2 2 7, 2 1 1 Paul E dgeclie- Johnson 5 8,7 2 3 53 ,376 1 9,1 3 7 26 ,7 51 95,95 9 86 ,479 173,819 166 ,60 6 Elie Maalouf 74 , 6 9 8 67 ,428 19,6 25 25,41 7 96, 790 88, 691 1 9 1 ,1 1 3 181,5 36 Othe r information relati ng to Directors’ remun eration Con siderati on of discretio n The C omm itte e’s consi derati on of dis cretio n in resp ec t of 202 1 remun eratio n outco me s is covere d in det ail on p age s 104 to 107 . Duri ng the yea r , the C omm itte e als o conti nued to tra ck the fo reca st vesti ng outc ome for th e 202 0/22 L TIP cycl e. No d eci sion s will b e mad e until the e nd of the cyc le’s per forman ce p erio d, however , the Co mmit tee’s approa ch for th e cas h low t arget a nd RO CE un derp in for the 2 020/2 2 cycle is d esc ribe d on p age s 124 and 125 . Dividends paid t o Ex e cuti ve Direct ors No div ide nds we re paid ou t by IH G in 202 1. AUD ITE D 119 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report Dir e ct ors’ Remu nera tion R epor t c onti nu e d Ann ual Repor t on Dir ect ors’ R emuner a t ion c o ntin u e d Relative per formance gra ph Inter Co ntinent al H otels G roup PLC is a me mbe r of the F TS E 10 0 sha re index , and th e graph b elow s hows the C om pany ’ s T ot al Sh areho lde r Return ( TS R) pe rfor manc e from 31 D ec emb er 20 11 to 31 D ece mb er 202 1, as sum ing divi den ds are reinves ted, c omp ared wi th the TS R pe rfor manc e achi eved by the F TS E 10 0. 0 100 200 300 400 500 600 IH G PLC FT SE 10 0 Index 2011 2 012 20 13 2014 20 15 2016 20 17 2018 2019 2020 2021 Chief Executive Oic er’ s remuneration The t abl e bel ow shows th e Chie f Exe cutive O i cer ’s single igure of tot al remu nerati on for the 1 0 years to 3 1 De cem ber 2 02 1. Single igur e CEO 2012 2 013 20 14 2015 2016 2017 2018 2019 2020 2021 Single igure of remuneration (£ 000) Kei th B a rr 2, 161 3,1 4 3 a 3, 376 1,48 4 3 ,17 6 Richard Solomons 4,881 3 ,1 3 1 6,611 b 3,1 9 7 3 ,662 2, 207 c Annual incentive rec eive d (% of ma ximu m) Kei th B a rr 6 9.7 8 4 .1 58.7 0 20 0.0 Richard Solomons 6 8.0 74 . 0 74 . 0 75 .0 63.9 66.8 Sha res re ceive d und er th e L T IP (%ofma ximu m) Kei th B a rr 4 6 .1 45.4 78.9 30.6 20.0 Richard Solomons 100.0 5 9.0 56.1 5 0.0 4 9.4 4 6 .1 a For Kei th Ba rr, the 20 18 igu re inc lud es a o ne - o c as h paym en t for re lo cat ion c os ts in l ieu o f be ne it s rec ei ved w hil st on i nte rnat ion al a ssi gnm ent p rio r to C EO pos iti on, f ully e xpl ain ed in th e 20 17 rep or t. b Fo r Ri cha rd So lo mon s, th e 20 14 i gure i ncl ud es a on e -o ca sh p aym ent in r es pe ct of p en sio n ent itl eme nt s whic h was f ull y expl ain ed i n the 2 014 re po r t. c In re sp ec t of p eri od 1 J anu ar y to 30 J un e 201 7 . Grow th o f com pa ny vs grow th of C EO pay As an ad ditio nal po int of refere nce, th e cha rt b elow s hows C EO single igure t able re mune ration ove r the pa st 10 yea rs as di scl ose d above, excludin g the 20 14 one - o c ash p ayment to Ri chard S olo mons i n resp ect o f pen sio n entitle ment s, and th e Co mpany ’s net system s ize grow th, a key metric in ou r Long T erm In ce ntive Plan, a nd in our A nnual P er forma nce Pl an in rec ent yea rs, an d aligne d to our am bitio n. Subj ect to pe rfor manc e achi eveme nts, in crea sed LTIP grant leve ls ma de sin ce 20 21 u nder th e app roved 202 0 Dire ctors’ Re mune ration P olicy s hould in due c ours e co ntribute towards b ridgi ng the ga p bet wee n the grow th in pay of th e CEO and th e grow th of the C omp any . -80 -60 -40 -20 0 20 40 NSSG C EO 2011 2 0 12 2013 20 14 201 5 20 16 20 17 20 18 20 19 2020 2021 Gove rn an c e 120 I HG | Annua l Repo rt a nd Form 20 F 202 1 CEO pay ratio As we have note d in previ ous An nual Re por ts , pay ratios w ill die r signi ic antly b et ween c omp anie s, even with in the s ame in dustr y , depending on demogr aphics and business models. The Group ’s UK e mploye e dem ograp hic, whic h prim arily co nsi sted o f large ly profes sio nal, m anag eme nt and s enio r corp orate rol es, c hang ed in 201 9 with the a dditio n of a numb er of h otel em ploying e ntitie s which incl ude a la rge prop or tion of p ar t-time and lexibl e -worki ng supp or t and s er vic e roles . As p er las t year ’s repor t, we s how be low the ratio both in clud ing and exclu ding th e new U K empl oying enti ties . On a like -for-like pop ulatio n bas is with ou r origin al dis clo sure in the 20 18 Ann ual Rep or t, th e medi an ratio h as inc reas ed from 2 6:1 in 202 0 to 42: 1 in 20 21 bu t is down o n the pre - pand emic ye ars of 2 018 and 20 19. 20 20 was im pac ted by acti ons t aken on p ay as outlin ed in the 20 20 Ann ual Rep or t and l ower varia ble in centi ve pay . I n 202 1, the stro ng pe rfo rmanc e in the A PP has b en e ited b oth the C EO and the wid er c orpo rate pop ulatio n. L TIP award s bel ow the E xecuti ve Co mmit tee in th e form of res tricte d stoc k and top - up awards b elow the B oard me ant that th e 20 19/21 L TIP award va lues we re lower a s a pe rcent age of m aximu m for the C EO than othe r eligi ble em ployee s. On thi s bas is, the C om pany be lieves th e med ian pay ratio fo r the relevant ina ncia l year is c ons istent w ith the p ay , reward and progre ss ion p olici es for th e Com pany ’s UK empl oyees t aken as a wh ole, an d as outl ine d on pag e 112. Ful l population Population ex cluding hotel employing entities Ye a r Method 25th Median 75th 25th Median 75th Financia l yea r end ed 31 December 2021 Option C 16 3:1 65 :1 41:1 57:1 42 :1 2 8:1 Financia l yea r end ed 31 December 2020 Optio n C 8 9 :1 4 4:1 25:1 3 5 :1 26 :1 1 8 :1 Financia l yea r end ed 31 December 2019 Optio n C 1 8 0 :1 12 2 :1 5 9 :1 7 1 :1 4 9 :1 32 :1 Financia l yea r end ed 31 December 2018 Optio n C – – – 7 2 :1 4 8 :1 2 9 :1 Th e 201 8, 2 019 a nd 2 020 ig ure s have b ee n res tat ed to re l ec t the va lue o f the C EO’s LTIP awar ds on t he da te of ac tua l ves tin g rath er th an th e es tim ate d ves ting l eve ls us ed i n the respective years’ Annual Reports. Wha t drives t he di ffe ren ce i n pay bet wee n ou r CEO an d othe r em ployee s? Pay ratios re le ct how re mune ration a rrange ment s die r as resp on sibilit y inc reas es fo r more se nior ro les w ithin the o rganis ation, for exa mpl e: • a gre ater prop or tion of p er form ance - relate d variab le pay an d sha re- bas ed in ce ntives ap ply for th e more s enio r executive s, incl uding E xec utive Dire ctors , who wil l have a greater d egre e of in luen ce over p er forma nce o utcom es; • role - sp eci ic s pe ciali st pl ans ap ply in c er tain are as su ch as cor porate re ser vatio ns, s ale s, hotel d evelo pme nt and G ene ral Man age rs of I HG ma nag ed, own ed, le as ed an d man age d lea se hotel s. Th e targe t and ma ximum am ount s that ca n be e arne d unde r the se pl ans are t ypi cally a h ighe r perc enta ge of b ase s alar y for mo re seni or emp loyee s, whic h in turn ae ct the p ay ratio; and • inc entive p lans fo r other c orp orate em ployee s are ty pic ally ba se d on a co mbin ation of in divid ual p er forman ce an d the G roup’s ope rating p roit f rom repo r tabl e se gment s. Calculation methodology and supporting inf ormation Optio n C has b ee n sel ec ted for th e identi ic atio n of the pe rcenti le emp loyees . IH G prefe r to use thi s metho d as we are ab le to prod uce the mo st ac curate tot al remun eratio n igu re for all U K empl oyees on a ba sis c omp arabl e with the s tatutor y rep or ting fo r Exe cutive Dire ctors u sing th e mos t availabl e data a t the time of p rodu cing the Annual Repor t. Speci ically , this involves: • co mpili ng all mo nthly payrol l data fo r all UK e mpl oyees from 1 Jan uar y to 31 D ece mbe r 202 1 det ailin g comp lete vari able a nd ixe d remun eratio n, inclu ding p ens ion an d taxa ble b ene it s suc h as company car or allowance and healthcare; and • valui ng APP fo r the co rpora te work force ba se d on ac tual 20 21 company per formance metrics and budgeted t arget personal pe rfor manc e so th at it rel ect s the s ame in put as fo r the C EO data. Optio n C requ ires thre e UK e mployee s to be id enti ie d as the equ ivalen t of the 25th, 5 0th a nd 75th p erce ntile. H aving i denti ie d the se emp loyee s, the 20 21 re mune ration i s cal culate d on the s ame bas is as th e CEO sin gle total igure o f remune ration . The 2 02 1 sal ary a nd tota l pay for the in divid uals i denti ie d at the lower , me dian an d upp er qua rtil es are s et out b elow. Ye a r 25th percenti le pay ratio Median pay ratio 75th percenti le pay ratio Fin anc ial ye ar en de d 31 December 2021 – F ull population Sal ar y £ 18,28 5 4 4,28 1 59,597 To t a l remuner atio n £ 1 9,5 40 4 9,0 20 7 7, 8 3 2 Fin anc ial ye ar en de d 31 December 2021 – E xclud ing ho tel empl oying entiti es Sal ar y £ 4 4 ,02 7 6 1 ,1 2 5 81, 239 To t a l remuner atio n £ 5 5 ,73 2 7 5,0 5 5 115, 37 7 Rel ative im por ta nc e of sp en d on pay The c har t be low set s out th e actua l expe nditure of th e Group i n 202 1 and 2 020, sh owing th e diere nce s bet we en tho se year s. Furthe r inform ation, in cludi ng whe re 2020 igure s have be en res tate d, can b e foun d in the Gro up Fin ancia l State ment s st arti ng on pa ge 128 and th e acc omp anying note s. 0 500 1, 000 1,50 0 0 0 0.0% 143 .8% $m 6.3% 1,3 58 1, 444 2020 2021 2020 2021 20 20 2021 Rep or ta ble se gme nts op erati ng prof it Div ide nd s pa id to shar eholders St a cos ts 534 219 121 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report AUD ITE D Dir e ct ors’ Remu nera tion R epor t c onti nu e d Ann ual Repor t on Dir ect ors’ R emuner a t ion c o ntin u e d Annual percentage change in remuneration of Dir ectors compared t o emplo yees The t abl e bel ow shows th e perc ent age ch ange i n all Dire ctors ’ remune ration c omp ared to th at of an averag e emp loyee be twe en the ina ncial years e nde d 31 D ec emb er 20 19 to 31 D ec emb er 20 21 . The re mune ration igure s for the D irecto rs were t aken from the d ata us ed to c ompil e the sin gle igure ta ble s of remun eratio n show n on pag es 115 a nd 123 exclu ding any roun ding up o r down. N o emp loyees a re directl y emp loyed by the G roup’s Parent Co mpany , so the aver age emp loyee dat a for this ye ar ’ s repo rt i s bas ed o n the sa me U K corp orate e mployee p op ulation a s that on w hich th e CEO pay ratio i s calc ulate d. Sal aries we re redu ce d for par t of th e year in 20 20, acc ountin g for the ye ar -o n-yea r variatio ns for b oth 2020 v s 201 9 and 20 21 v s 2020. Elie M aalo uf ’s salar y is p aid in U SD b ut repo rte d in the s ingle igure t abl e in GB P and, a s suc h, his yea r - o n-year c hang e is als o imp acte d by chan ges in exch ange r ates be twe en yea rs. No b onus wa s pai d to Exec utive Dire ctor s or othe r corp orate e mployee s for 20 20, which i s rel ec ted in the b onu s perc ent age ch ange s for both 20 19 20 and 20 20 21. No n- E xecuti ve Direc tors are no t eligib le for a b onus . T a xabl e ben e its for N on -E xec utive Dire ctor s are large ly co nstitu ted of travel exp en ses , which we re signi ic antly im pac ted by travel res trictio ns during 2 020 an d 202 1, wh erea s Exe cutive D irecto r and averag e emp loyee ta xabl e ben e its t ypic ally c omp rise e lem ents of th eir reward pac kage s uch a s com pany car o r allowan ce an d hea lthc are ben e its . Y e ar-on- year change 2021 vs 2020 Y ear-on-y ear change 2020 vs 2019 Salary Bonus T axable beneit Salar y B onus Ta x a b l e b e n e i t Executive Dire ctors Kei th B a rr 20% 10 0% -9% -14% -10 0 % 2 5% Paul E dgeclie- Johnson 20% 10 0% - 8% -1 3% -1 00 % -14% Elie Maalouf 14% 100% 79% -15 % -1 0 0% -1 0 % Non-Executive D irectors Patrick Ce sc au 18% N /A -80% -13% N/A -53% Graham Allan – N /A – – N /A – Daniela Barone Soares – N /A – – – – Ar thur d e Ha ast 18% N /A -1% – N /A – Ian D ys on 18% N /A -1 00 % -13 % N /A -90% Duriya F arooqui – N /A – – N /A – Jo H arl ow 18% N /A 100% -13 % N /A - 94% Jill McDonald 18% N /A -1% -13 % N /A - 87% Sharon Rothst ein – N /A – – N /A – Av e rage employ ee 3% 10 0% -11 % -6% -10 0 % -9% No d ata ha s be en rep or ted for G raha m Allan, D uriya Faroo qui an d Sharon R othstei n as they jo ined t he Bo ard in 20 20 there fore only p ar t-y ear dat a is availab le whic h doe s not en abl e a com paris on with 2 02 1. Simil arly , Dani ela B aron e Soare s join ed th e Boa rd during 20 21 s o the re will be no f ull year d ata co mpa riso ns for he r in 20 21 an d 202 2. As st ated in th e notes to th e singl e igu re tabl e on pa ge 115, un der H M Revenu e and C ustom r ules , the 20 21 t axabl e be ne its ig ure fo r th e non - UK b ase d E xecutive D irec tor , Eli e Maa louf, inclu des s ome trave l and foo d expe ns es that we re not previ ousl y repo rte d, ac counti ng for the yea r - o n-year c hang e ig ure for ta xable b en e its in 20 21 v s 2020. I an Dys on di d not inc ur any expen se s in 202 1 bu t incurre d expe nse s of £2 29. 55 i n 2020 re lating to at tend ing the Feb ruar y 20 20 Bo ard me eting, h enc e the pe rce ntag e chan ge for 20 21 vs 2 020 i s -100 %. J o Ha rlow incu rred exp ens es of £ 128.6 5 in 20 20, als o relatin g to the Febru ar y 2020 B oa rd meeti ng, and £ 257.21 i n 202 1 relati ng to the De ce mbe r 202 1 Bo ard dinne r , h enc e the pe rcen tag e chan ge for 20 21 vs 2 020 i s 100 % . The se exp ens es fo r Ian an d Jo are b elow £ 50 0 so rou nd down to £ni l for the re spe ctive ye ars in th e singl e igu re tabl e on pa ge 123 . Payme nts fo r los s of o ic e The re were no p ayment s for los s of o ic e in 202 1. Pension entitlemen ts No E xecu tive Dire ctor is e ntitle d to any De ine d Be ne it p ens ion or rel ated be ne it fro m IH G. Payme nts to p as t Dire cto rs – b ene it s Sir I an Pro ss er Sir I an Pros ser, who retired as D irec tor on 31 D ec emb er 20 0 3, had a n ongo ing he althc are be ne it of £ 1,4 08. 90 d uring the ye ar . Gove rn an c e 122 I HG | Annua l Repo rt a nd Form 20 F 202 1 Sin gle tot al igu re of rem un erat ion: N on -E xecu tive Di rec tors Com mittee appoint ments Dat e of original appoint ment Fee s £000 T axable beneits £000 To t a l £000 Non-Executive Director 202 1 2020 2021 2020 2021 2020 Patrick Ce sc au N 01/0 1/ 13 444 37 7 1 7 445 384 Graham Allan A R 01/0 9/2 0 78 24 0 0 78 24 Richard Anderson A R 01/0 3/2 1 20 – 0 – 20 – Daniela Barone Soares R RB 01/0 3/2 1 65 – 0 – 65 – Anne Busquet A RB 01/0 3/ 15 28 66 1 1 29 67 Ar thur d e Ha ast R RB 01/0 1/2 0 78 66 0 0 78 66 Ian D ys on A N R 01/0 9/ 13 104 88 0 0 104 88 Duriya F arooqui A RB 07/ 1 2 / 2 0 78 5 0 0 78 5 Jo H arl ow N R 01/0 9/ 14 104 88 0 0 104 88 Jill McDonald A RB N 01/0 6/ 13 92 78 0 0 92 78 Dale Morrison A N R 01/0 6/ 11 112 95 1 2 113 97 Sharon Rothst ein A RB 01/0 6/ 20 78 38 0 0 78 38 S ee p age 8 1 for B oard a nd C omm itte e me mb ers hip key an d at tend anc e. Fee s : Fee s are pai d in line wi th the DR P olicy. Anne Bu sque t stepp ed d own from the B oa rd on 7 May 20 21, R icha rd Ande rso n stepp ed down on 2 6 May 20 21 an d Dal e Morri son s tepp ed d own on 31 D ec emb er 20 21 s o all fe es and t axab le be ne it s for the se Di rector s ce ase d on tho se d ates. Beneits: For Non - Exe cutive Di rector s, be ne its i nclu de ta xable tr avel and ac co mmod ation exp en ses to at ten d Boa rd mee tings away from the d esi gnated h ome l oc ation. U nde r con ce ssi onar y H M Revenue a nd Cu stom rul es, n on- U K ba sed N on - Exe cutive Di rector s are not sub jec t to tax on t ravel expe nse s for the irs t ive ye ars; this i s rel ec ted in the t axab le be ne it s for Anne B us quet , Duriya Faroo qui, Dal e Morr ison a nd Sh aron Roths tein. D ue to glo bal re stricti ons o n travel during 2 020 an d 202 1 as a re sult of th e pan demi c, only th e Febru ar y 2020 B oard m eetin g was he ld in p ers on so t axab le travel an d acc ommo datio n expe nse s are lowe r again thi s year. Oth er: Non - E xecutive D irec tors are not e ligib le for any inc entive award s or for any pe nsi on co ntributi ons or b en e it. Sh are s he ld by Non - Exec utive D ire ctor s at 31 D ec emb er 2 02 1: The N on -E xec utive Dire ctor s who he ld sh ares are li sted i n the tab le b elow: Non-Executive Director 2021 2020 Patrick Ce sc au 1 1 ,13 5 1 1,1 3 5 Daniela Barone Soares 316 – Ian D ys on 1,500 1, 500 Ar thur d e Ha ast 1, 000 1,000 Jo H arl ow a 950 950 a S hare s he ld i n the fo rm of A mer ic an De po si tar y Re ce ipt s. The re have be en no c hang es in the s hare hold ing intere sts of a ny of the Dire ctor s sinc e the en d of the inan cial yea r up to the pub lic ation of this re por t. Fees: Non-Executiv e Directors The fe es for N on - Exe cutive Di rector s are reviewe d and ag ree d annua lly in line w ith the D R Policy; 20 22 i ncre ase s are in line w ith the bud get for th e wide r UK an d US c orpo rate work force a nd an in creas e was wai ved in 20 21 . Grah am Alla n was app ointe d as Se nior Non - E xecutive D irec tor from 1 Ja nuar y 20 22 . The fe e level s for 20 22 w ill be as fo llows: Non-Executive Director Rol e 2022 £000 2021 £000 Patrick Ce sc au C hai r of the B oa rd 461 444 Graham Allan Senior Independent Di rector 116 78 Daniela Barone Soares N on -E xe cuti ve Dire cto r 81 78 Ar thur d e Ha ast N on -E xe cuti ve Dire cto r 81 78 Ian D ys on Chair of Audit Committe e 108 104 Duriya F arooqui N on - E xecu tive Di rec tor 81 78 Jo H arl ow Chair of Remuneration Commit tee 108 104 Jill McDonald Cha ir of Re sp ons ibl e Bu sin es s Co mmit te e 95 92 Sharon Rothst ein N on -E xe cuti ve Dire cto r 81 78 AUD ITE D 123 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report Dir e ct ors’ Remu nera tion R epor t c onti nu e d Ann ual Repor t on Dir ect ors’ R emuner a t ion c o ntin u e d Imple ment ation of Directors’ Remun eration Policy in 202 2 This s ec tion expl ains h ow the DR P olicy wil l be app lie d in 202 2. Salary: Ex ecutive Directors Directors’ salaries are agreed annually in line with the DR Policy . The fo llowing s ala ries wil l appl y from 1 April 2 02 2. Executive Directo r Increase % 2022 £ 2022 $ 2021 £ 2021 $ Kei th B a rr 4 897 ,900 863, 300 Paul E dgeclie- Johnson 4 66 0, 20 0 634,8 00 Elie Maalouf a 4 8 70 ,1 0 0 836,600 a El ie M aal ouf i s pa id in U SD a nd hi s ann ual b as e sa lar y fo r 202 0 an d 202 1 is s how n in U SD. T he st erli ng e qui vale nt va lue s ca lcu late d us ing a n exch ang e rate o f $1 = £ 0.78 in 20 2 1 and $ 1 = £0 .73 in 20 2 2 are: 2 02 1 – £6 52, 54 8 an d 20 2 2 – £6 35 ,173. The in crea se s above are in lin e with the b udg et for the w ider U K an d US co rpor ate work force. 202 0/22 L T IP cycle c as h low t arg et As expl aine d on pa ge 118, th e Co mmit tee ha s dete rmine d that the s had ow cas h low t arget i t set as a p oint of re ferenc e in Oc tobe r 202 0 will be hig hly releva nt whe n con side ring the ve stin g of this cycle i n early 2 023 . Followin g con sult ation with s hare hold ers , the sh adow t arget is disclosed below. Measure Dei nition Weigh ting Original performance objectiv e Shadow performance objecti ve Absolut e ca sh low Cumulative annual cash gen erati on over th ree -year performance period 20 Thres ho ld – US 1 .9 1bn ( 20% o f cas h l ow element v ests ); Ma ximu m – US 2. 5 4bn (1 00 % of c as h low element v ests ); a nd Vesti ng will b e on a s traig ht-lin e ba sis in be twe en t he t wo poi nts ab ove. Thre sh old – U S 0.8 2bn ( 20% o f ca sh l ow element v ests ); Ma ximu m – US 1.0 9 bn (10 0% o f ca sh l ow element v ests ); a nd Vesti ng will b e on a s traig ht-lin e ba sis in be twe en t he t wo poi nts ab ove. Me as ure s for 20 22 A PP The 2 02 2 APP s tructu re is in line w ith the ap proved D R Policy a nd will b e bas ed o n a 70% weighti ng for a me asu re of ope rating p roit fro m repo rt abl e se gment s and a 3 0% wei ghting for oth er key strateg ic me asure s that are revie wed ann ually an d set in l ine with b usin es s prior ities . Op eratin g pro it from rep or tab le se gme nts is a fo cal m eas ure of bus ine ss p er forma nce for o ur sh areho lde rs and i s a func tion of oth er critic al me asu res, su ch as Rev P AR, p roi t margin a nd fee reven ues . The C om mitte e has d etermi ned th at for 20 22 , it rema ins imp or tant to the C omp any’s strategi c obje ctive s to focus o n new roo m ope ning s and ne w room si gning s in the APP . N ew room o peni ngs are c ritica l to driving b oth sh or t- and long -term p roi tabl e grow th and are a re cog nise d key per form ance m ea sure acro ss th e indus tr y , whi le new ro om signi ngs provi de the b est g auge o f future grow th as th ey create the p ath for op enin gs in futu re years , which wi ll in turn drive p roit a nd revenue g rowth . The t wo strate gic me asure s will b e equ ally weig hted, with e ach wo rth 1 5% of the overa ll APP . The t arget s are com merci ally sen sitive an d will b e disc los ed in th e 202 2 Ann ual Re por t. Measure Deiniti on Wei ght ing (%) Performance objecti ve Op era ting p roi t from reportable segmen ts A me asu re of IH G ’s oper ating p ro it from reportable segmen ts for th e year 70 Achieveme nt against target Room signings Abso lute n umb er of n ew roo m sign ing s 15 Achievement agains t target Room openings Abs ol ute num be r of new ro om o pen ing s 15 Achievement against target As pa rt of th e APP s tructure, th e Co mmit tee c ons ider s wheth er to app ly dis cretio n to adjus t outco mes o n the str ategic m eas ures foll owing a review of p er forma nce a gains t IH G’s Glo bal M etric s. Th ese a re bas ed on a ra nge of K PIs i nclu ding seve ral ES G mea sures s uch a s ene rgy redu ction , empl oyee eng age ment a nd gue st s atisfa ction . As pe r the 20 21 p lan, 20 2 2 pe rfor manc e agai nst th e Glo bal M etric s, toge ther wi th dat a on relati ve per form anc e again st pe er s, will b e tracked a nd us ed by the C omm itte e as refe rence p oint s in con sid ering w hethe r to use dis cretion to a djust th e formul aic outc ome o f the strate gic me asu res. 202 2 /24 L TI P cycle p er form anc e me as ure s an d targ et s For 202 2 /24, we prop os e to retain th e sam e mea sure s and weig htings a s the 20 21/23 cycl e, again exclu ding Total Gros s Revenu e (TG R). TGR is dri ven main ly by RevPAR and NS SG bu t als o inclu des oth er form s of revenu e, such a s foo d and b everage a nd sp as. S et ting a TGR targ et remai ns cha llen ging in th e contex t of limite d vis ibilit y over the s hor t-to- me dium term, g iven fac tors in cludi ng: • the p otentia l volatilit y c ause d by future n ew variant s of Covi d-19; • the p er form ance vo latilit y res ulting in c ountrie s follow ing a zero C ovid -19 strateg y; • unp redic tab ilit y around th e traje ctor y of intern ation al travel rec over y; and • whil e lei sure travel de man d is stron g, conti nuing un cer t ainty a round th e shap e of inter nation al bu sine ss travel re - em erge nce. Gove rn an c e 124 I HG | Annua l Repo rt a nd Form 20 F 202 1 The m eas ures for th e 202 2 /24 L TI P cycle are a s follows : Measure D einition We ig hti ng (%) Performance objectiv e Relative T otal Shareholder R eturn (TS R) IH G’s pe r form anc e aga ins t a com par ator gro up of glo bal h otel c omp ani es: A cc or S. A ., Ch oic e Ho tels Interna tional Inc. , Hilt on W orldwide Holdings Inc., Hyatt Hote ls Corp oration, Marriot t Internationa l Inc ., Me lia H otel s Inte rnati ona l S. A ., NH H ote ls Gro up, and W yn dham H ote ls & Re sor t s Inc. T SR i s the a ggre gate o f sha re pric e grow th a nd div ide nd s pai d, as sum ing re inves tme nt of div ide nd s in the Company’s shares during the thr ee -year performance period. 30 T hre sho ld – m edi an of c omp arato r grou p (20 % of TS R element v ests ); Ma ximu m – upp er qu ar tile o f co mpa rator gro up (10 0% of T SR e le men t vest s); and Vesti ng will b e on a s traig ht-lin e ba sis in b et we en the t wo po ints a bove . Rel ative n et sys tem siz e grow th with ROCE unde rpin IH G’s ag greg ated c om pou nd an nua l grow th rate (CA G R) agai nst our six lar gest competit ors wit h over 5 00 k roo ms: M arri ott I nter nati ona l, Inc ., Hil ton Worl dwi de Ho ldi ngs I nc., Ac co r S. A ., Jin Jiang Int ernational Holdings Company Li mited, Wyn dha m Hote ls & Re so rt s In c., Ch oic e Hote ls Inte rnati on al Inc . T arge ts wil l be s et ba se d on inc rea se d room c ou nt that i s co nsi sten t with th e rel evant c omp any ’s busin es s pl an ob jec tive s and pra ctic e as at t he st ar t of th e L T IP cyc le. 40 Th res hol d – Four th ra nked c omp etito r exclu ding I HG (20 % of N SS G ele me nt ves ts); Ma ximu m – Fir st ran ked c omp etito r exclu ding I HG (10 0% of N S SG el em ent ve sts); a nd Vesti ng will b e on a s traig ht-lin e ba sis in b et we en the t wo po ints a bove . Thi s me asu re is su bje ct to th e achi evem ent of a R eturn o n Ca pit al Emp loye d und erpi n. Se e b elow fo r fur th er de tai ls. Abs ol ute ca sh low C umul ative a nnu al ca sh ge ne ratio n over th ree -ye ar performance period. 30 T hre sho ld – U S 1.5 8b n (20 % of c ash low e le ment v est s); Ma ximu m – US 2.11b n (10 0% of c as h lo w ele me nt vests ); a nd Vesti ng will b e on a s traig ht-lin e ba sis in b et we en the two p oin ts ab ove. Op era tion of R eturn o n Cap ita l Emp loyed (RO CE) u nde rpin The C omm itte e has th e dis cretion to re duc e the amo unt of the award ve sting u nde r the net sys tem si ze growth m ea sure by any amou nt, incl uding to ze ro, in the event that a Re turn on C apit al Emp loyed (RO CE ) falls b elow a p redete rmine d level ove r the pe riod o f an L T IP cycle . The ex tent of re duc tion woul d be de termine d ta king into c ons ider ation cri teria inc ludin g: • the re aso n the RO CE un der pin ha s not be en m et; • the im pac t on othe r metric s, in cludi ng ca sh l ow and T otal G ros s Revenue ; and • the m aterial ity of th e circum sta nce s und er whic h the un derp in has n ot be en met . ROC E is d e ined a s op erating p roi t from rep or tab le se gme nts divi ded by C apit al Emp loyed. For C apit al Emp loyed, we exp ect to d e ine this as T otal A sse ts le ss C urrent Li abiliti es, a djuste d for de ferred reve nue an d deferre d ta x ass ets/ liabil ities . At the en d of ea ch cycle, th e Com mit tee will agre e the ap prop riate cap ital b as e of the C omp any takin g into acc ount any sh or t-term impa cts th at are not p ar t of the lo ng-te rm cap ital of t he business. For the 20 2 2/24 L T IP cycl e, the und erpi n will rema in at the 20 % level s et for the p reviou s two cycl es. U nde r norm al circum st ance s, the Co mmit tee c onsi der s this an ap prop riate level to prote ct sh areho lde r intere sts wit hout di sinc entivi sing th e purs uit of lo ng- term strate gic ally advant age ous re turn- en hanc ing op por tuni ties, w hich c ould h ave a shor t-term imp act on R OC E. H owever , i t shou ld be n oted that , as ou tline d on pa ge 107 , th e Co mmit tee is m inde d not to red uce th e NS SG ou tcome i f the RO CE un derp in is not m et for th e 2020/2 2 cycle s ole ly due to the imp act o n earn ings of th e pan demi c. Per form ance a nd ves ting outc ome s and a ny use of dis cretio n will be f ully dis clo se d and exp laine d in the rel evant Dire ctor s’ Remun eratio n Rep or t. 125 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Remu neration Report Sta t e ment o f compliance Our s tatem ent of c ompl ianc e summ aris es how th e Group h as app lied th e princ iple s of the 2 018 U K Co rpor ate Govern anc e Co de (available at w ww. frc. org.uk/ directors under UK Corporat e Gover nanc e Co de) as pub lish ed in J uly 20 18 (the Co de) and com ment s on co mpli ance w ith the C ode’s provis ions . This s houl d be re ad in co njunc tion with th e Strate gic Rep or t on p age s 2 to 7 7 , an d Govern anc e, inclu ding th e Direc tors’ Re mune ration Rep or t, on p age s 80 to 125, a s a who le. The B oard c ons ide rs that th e Group h as co mplie d in all materi al res pec ts with th e Co de’s provisio ns for th e year en de d 31 D ec emb er 202 1, s ave as noted b el ow in resp ec t of provis ion 3 8. 1. B oa rd Le ade rs hip a nd C om pany Pu rpo se A . The r ole o f the B oa rd The B oa rd cont inue s to le ad the G roup’s strate gic di recti on an d lon g-te rm obj ec tives . Furth er res po nsi biliti es of th e Bo ard are s et out o n pag e 88 . The B oa rd met e ight tim es du ring 20 21 a nd all D irec tors c onti nue to act i n what th ey co nsid er to b e in the b es t intere sts o f the C omp any , co nsi stent w ith the ir st atutor y du ties . Furth er de tail s of 20 21 B oard me eting s, inc lud ing info rmati on on m atte rs di scu ss ed an d de cisi ons take n by the Bo ard are s et ou t on pa ges 8 9 to 9 1, atte nda nce infor matio n is on p age 8 1, sk ills an d expe rie nce a nd bi ogra phic al infor matio n is on p age s 82 to 8 4. A de scri ption o f IH G’s bus ine ss mo de l is se t out o n pag es 10 to 1 3. An as se ss me nt of the p rinci pal ri sks fa cing th e Gro up is in clu ded on pa ge s 40 to 47 . Potent ial co n lict s of intere st a re reviewe d ann ually a nd po wers o f auth oris atio n are exerci se d in ac cord anc e with th e Co mpa nies A ct and th e Co mpa ny’s Ar ticl es of A ss oci ation . Dur ing the ye ar , if any Di recto r has u nres olve d co nce rns a bou t the op eratio n of the B oa rd or the m ana gem ent o f the C omp any , th es e woul d be re cord ed in th e minu tes of th e me eting . B. The C om pany ’s purp ose , valu es a nd st rate gy Our p urp ose i s to provid e T rue H osp ita lit y for Go od . A des crip tion of how I HG d oe s bus ine ss, i nclu ding a n over view o f our cu lture an d valu es, i s incl ude d on p age s 36 to 3 8. C ulture an d pe opl e were par tic ular ly prom ine nt on the B oa rd’s age nda a s the G roup re covere d from th e pan dem ic. A su mmar y of th e Bo ard ’s activiti es in re latio n to the Voice o f the Em ploye e is inc lud ed on p ag e 101 . An outl ine of th e Grou p’s approa ch to reward ing it s work forc e is co ntai ne d on pa ges 24 to 25, 10 8 and 11 2. C. Resources The B oa rd del ega tes over sigh t of the al loc atio n of day-to - day res ourc es to man age men t (pri ncip ally th rough t he E xecu tive Co mmit te e). Info rmatio n on th e Grou p’ s key per for man ce ind ica tors, i nclu ding the m eas ures u se d to mon itor the m, is in clu de d on pa ges 5 0 to 53 . A summ ar y of th e proc ed ures fo r ide ntif ying a nd dis cu ssi ng em ergin g risks i s set o ut on p age 4 0. D. Shareholders and stak eholders The Board engaged actively throug hout 2021 wit h shareholders a nd othe r st akeho lde rs. T he Ch air h eld a nu mbe r of me etin gs wit h majo r ins titutio nal s hare hol der s to dis cus s the ro le of th e Bo ard and ot her gen era l govern anc e is sue s, foll owin g which t he Ch air en sure d that the ir view s were co mmun ica ted to the B oa rd as a wh ole. Fur the r det ails a re on pa ge 9 2. Info rmatio n on th e Bo ard’s co nsid erat ion of a nd en gag eme nt with other stak eho lders, incl uding emplo yees, suppl iers, hot el owners and g ues ts, i s incl ude d on p age s 20 to 28, 3 9, 9 0 and 9 1, 10 1, 107 , 10 8, 112 an d 114. E . Work for ce p oli cie s an d pra cti ce s The B oa rd has ove rarch ing res po nsib ilit y for th e Grou p’s workfo rce po licie s an d prac tice s an d del ega tes day-to - day re sp ons ibili ty to th e CEO an d Chi ef Hum an Re sou rce s O ic er to en sure th at they are co nsi stent w ith the C omp any ’s values a nd su ppo rt i ts lo ng- term su cc es s. Emp loyee s are abl e to rep or t mat ters o f con ce rn co ni den tially t hroug h our C on id enti al Dis cl osure C han nel . The B oa rd routin ely rev iews rep or ts ge ne rated fro m the di scl osu res an d ens ures t hat arr ange me nts are in pl ac e for inves tigat ion an d follo w-u p actio n as ap prop riate . 2 . D ivis ion o f Res po ns ibi liti es F . The Ch air Patri ck Ce sc au le ad s the op era tion an d gover nan ce of th e Bo ard and i ts C ommi tte es . The C hair h as b ee n in po st for ni ne yea rs an d was in dep en den t on app ointm ent . Provis ion 1 9 of the C od e sta tes that a c hair s hou ld not re main i n pos t beyo nd nin e year s from the d ate of the ir i rst ap po intme nt to the B oard b ut this p eri od ca n be ex tend ed fo r a limite d time to f acili tate e ec tive succe ssion planning. In Ja nua ry 2 02 2, th e Co mpany a nnou nce d that P atric k will reti re from th e Bo ard ee cti ve 31 Aug ust 20 2 2, to be s uc ce ede d by De ann a Opp en heim er. The dura tion of P atrick ’s tenu re beyon d nine ye ars i s co nsid ere d app ropri ate to fac ilita te an orde rly transition to Deanna . G. Board composition The s ize an d co mpo sitio n of the B oa rd and it s Co mmit te es are kep t und er revi ew by the N omin ation C om mit tee to en sure th e app ropri ate co mbin ation o f Exe cutive a nd N on- E xec utive D irec tors . Det ail s of the c omp osi tion of t he Bo ard an d Co mmit tee s are avail abl e on pag es 8 1 to 84 . At lea st h alf of th e Bo ard, exclu ding th e Ch air , are Ind ep end ent No n- E xecu tive Dire cto rs. P rovisi on 10 of th e Co de c ons ide rs the ind epe nd enc e of No n- E xec utive Di recto rs an d circu mst anc es th at might impair their indepe ndenc e, including holding o ice for over nine ye ars a nd cro ss - direc tors hip s. Da le Mo rris on s er ved o n the Bo ard for ove r 10 yea rs and w as the S eni or In dep en dent D irec tor until hi s retire ment o n 31 D ec emb er 20 2 1. In thi s role, h e acte d as the le ad o n the re cruit ment o f a new C hair. The app ointm ent o f a new C hair wa s a key prio rity d uring 2 02 1, ac cord ingl y the B oard jud ged i t app ropri ate for D ale to rem ain as a D ire ctor wh ile th e proc es s co ntinu ed. I n light o f his ex tend ed te nure, th e Bo ard carefully considered Dale’s commitments and contribution and co nclu de d that h e had re main ed an I nd epe nde nt No n- E xec utive Dire cto r durin g his te nure. Dan iel a Baro ne S oare s was ap poi nted to th e Boa rd from 1 March 202 1 and at t hat tim e both s he an d Jo H arlow we re Ind ep end ent N on -E xec utive D irec tors o f Halm a plc . As Da niel a did n ot sta nd for re - el ec tion a s a Dire ctor o f Halm a plc a nd reti red from it s Bo ard on 2 2 J uly 20 21, th e Bo ard did n ot co nsi der e ithe r of the ir ind ep end enc e as N on -E xe cutive D irec tors o f the C omp any to be impaired. Reg ardin g the Ch air su cc es sio n referre d to ab ove, whil e Patri ck Ce sc au wa s not pa rt o f the Se arch C om mit tee th at le d the se arch pro ce ss , it was n oted th at Patri ck an d De anna O pp enh eim er hel d a cros s -d irec tors hip at T es co PLC fro m Marc h 201 2 to April 2 01 5. As the c ros s- dire cto rshi p was over s ix yea rs pri or to De ann a’s app ointm ent to th e Bo ard, the B oa rd did not c on sid er eit her of the ir ind epe nd enc e as N on- E xec utive D irec tors of t he Co mp any to be impaired. H. Non -Execu tiv es No n- E xecu tive Dire cto r terms o f app ointm ent ou tline I HG ’s time c omm itme nt expe ct atio ns req uire d to ful il the ir rol e. The c omm itme nts of e ac h Dire ctor are i nclu de d in the D irec tors’ bio grap hic al det ails o n pa ges 8 2 to 84 . De tail s of No n- E xecu tive Dire ctor a pp ointme nt term s are se t out o n pag e 11 3. The C hai r annu ally revi ews th e time e ach N on -E xe cutive D irec tor de dic ates to I HG as p ar t of th e intern al pe rfo rma nce eva luati on of Dire ctor s (see p age 9 4) and is s atis i ed th at the ir othe r dutie s an d time c omm itme nts do n ot co nl ict wi th thos e as D irec tors . Gove rn an c e 126 I HG | Annua l Repo rt a nd Form 20 F 202 1 Dale Morrison was Seni or Independent Non-Executive Direct or (SI D) from 31 M ay 2014 to 3 1 De cem be r 202 1 an d was su cc ee de d by Gra ham All an fro m 1 Janu ar y 202 2 . The S ID p rovide s a so undi ng bo ard for th e Cha ir and s er ves a s an inte rme diar y for t he oth er Dire ctor s and s hare hol der s. G raha m als o led t he ann ual p er form anc e review o f the Ch air (se e pag e 94). Af ter ea ch B oard m eeti ng, N on- E xec utive D irec tors an d the C hair me et with out E xec utive D irec tors b ein g pres ent (se e pa ge 88). I. Polici es, processes, i nfor mati on and resour ces The C hai r and C omp any Se cret ar y ens ure tha t the B oard an d its Co mmit tee s have th e nec es s ar y poli cie s and p roc es se s in pla ce an d that th ey rec eive tim ely, accur ate and c lea r inform atio n. Th e Bo ard and i ts C ommi tte es al so have a cc es s to the C omp any Se cret ar y , ind epe nd ent ad vic e and oth er n ece s sar y re sourc es , at the C omp any ’s expe ns e. Th ey rece ive ad minis trative a nd lo gis tica l sup por t of a full -tim e executi ve as sis tant . Se e pag e 88 fo r more d etai ls. 3. C omposition, Succession and E valuat ion J. Appointme nts App ointm ent s to the B oard are l ed by th e Nom inati on C ommi tte e in ac cord anc e with i ts T erm s of Refe renc e (availabl e on ou r web site at www.ihgplc. com/inv e stors under C or por ate gove rnan ce). The N omi natio n Co mmit te e also s upp or ts th e Bo ard in su cc es sio n pla nnin g for the B oa rd and s enio r man age men t. Furth er d etai ls of the ro le of th e Nom inati on C ommi tte e and w hat it di d in 20 21 are in th e Nom inati on C ommi tte e Rep or t on pa ge s 102 to 1 03. The ove rall p roce s s of app ointm ent an d rem oval of Di recto rs is over se en by the B oa rd as a wh ole. All of th e Dire ctor s retire an d se ek e lec tion o r re -e le ctio n at eac h AGM . K. Skills De tail s of the s kill s, exp erie nce a nd bi ogra phic al info rmati on of th e Bo ard are s et out o n pag es 8 2 to 84 . The C hai r and C omp any Se cret ar y ens ure tha t new Di rec tors re cei ve a full in duc tion a nd tha t all Dire cto rs co ntinu ally up date th eir s kill s and h ave the re quis ite know le dge an d fami liari ty wi th the G roup to ful il th eir rol e (see p age 9 3). The l eng th of se r vice o f Non - E xecut ive Dire ctor s is revi ewed re gul arly , det ails o f the revi ew in 20 21 are i nclu de d on pa ge 10 3. L . An nua l evalu atio n The B oa rd und er take s eith er an inte rnal o r exte rna l annu al Bo ard ee ctive ne ss eva luati on. T he la st ex terna l evalu ation wa s car ried out in 2 01 9, so in 20 21 a n intern al B oard eval uatio n was c ond ucte d. A summ ar y of th e evaluat ion is s et ou t on pa ge 94 . Per for manc e evalu atio ns of D irec tors, i nclu ding th e Ch air , are als o carried out on an annual basis. Directors’ biographies are set out on pa ge s 82 to 84 a nd de tail s of pe r forma nce e valuati ons c arri ed out in 2 02 1 are on p age 9 4. 4. Aud it, R isk a nd I ntern al C ont rol M. Audi t func tio ns The Au dit C omm itte e is c omp ris ed en tirely o f Ind epe nd ent No n- E xecu tive Dire cto rs (see p age 8 1 for m emb ers hip d etai ls). Ian D yso n, the C hai r of the C omm itte e, ha s rec ent an d rel evant in anc ial exp eri enc e and th e Co mmit te e as a wh ole h as co mpe tenc e relev ant to the s ecto r in whi ch we op erate . Det ail s of the C omm itte e’s role, re sp ons ibil itie s and ac tivi ties a re set o ut on p age s 95 to 9 9. The Au dit C omm itte e revie wed th e ee ctive ne ss of th e Gro up’s intern al au dit fun ctio n and a lso a ss es se d Pric ewaterh ous e Co ope rs LLP ’s per form anc e durin g 202 1, in clud ing it s inde pe nde nc e, ee ctive ne ss an d obj ec tivit y . De tail s of the se revi ews are s et ou t in the Au dit C omm itte e Rep or t on p age s 9 5 to 99. N. As se ss me nt of t he C omp any ’ s po sit ion a nd p ros pe ct s The S tate me nt of Dire cto rs’ Re spo nsi bilit ies (i nclu ding th e Bo ard ’s st ateme nt co n irmin g that it c ons ide rs th at the An nual R epo rt a nd Form 20 F , t aken as a w hol e, is fai r , b alan ce d and u nde rst and abl e and p rovide s the i nform ation n ec es sar y fo r sha reho lde rs to as se ss the G roup’s pos itio n, pe rfo rman ce, b usi nes s mo del a nd str ategy) is se t out o n pag e 130. The s tatu s of IH G as a g oing c onc ern i s set o ut in th e Dire ctor s’ Rep or t on p age 2 30. An exp lan atio n of the G roup’s per for man ce, bus ine ss m ode l, str ategy a nd the ri sks an d unc er ta intie s relat ing to IH G’s pros pe cts , inc ludin g the vi abil ity o f the G roup, is s et out i n the Strate gic Re po rt o n pa ges 2 to 7 7. O. Risk managemen t The B oa rd dete rmine s the n ature an d exte nt of the p rinc ipal r isks the o rgani sati on is wi lling to t ake to achi eve its s trateg ic obj ect ives . An as se ss me nt of the p rinci pal a nd em ergin g risk s faci ng the G roup was c arrie d ou t during t he yea r , in clu ding th ose r isks th at woul d thre aten the G roup’s bu sine ss m od el, fut ure pe rfo rman ce, s olve ncy or liq uidi ty an d rep utati on (se e pag es 4 0 to 47 for fur the r det ails of the p rinc ipal r isks). Th e Boa rd and Au dit C ommi tte e mo nitor th e Grou p’s risk man ag eme nt and i nterna l co ntrols sy stem s and c ond uct an ann ual rev iew of th eir e ec tiven es s. Th rough out th e year, the Bo ard ha s direc tly , and th rough d el egate d aut hori ty to th e Exe cutive Co mmit tee a nd th e Audit C om mit tee, ove rse en an d review ed all materi al cont rols, including inancial , operat ional and compliance co ntrols . Se e pag es 4 0 to 47 , an d 95 to 9 9. 5. Rem uneration P . Remune ration polici es and prac tices The R emun erati on C ommi tte e is re spo nsi ble fo r devel opi ng po licy on executiv e remuneration and det ermining remuneration packages of Di recto rs an d sen ior m anag em ent. T he Di rec tors’ Re mun eratio n Rep or t is s et out o n pag es 1 04 to 125 . Det ail s of the Re mun eratio n Co mmit tee ’ s foc us are as dur ing 20 21 a re set o ut on p age 113 a nd it s me mbe rsh ip det ails a re on pa ge 81 . Provis ion 3 8 of th e Co de st ates th at pe nsi on c ontrib utio n rates fo r execu tive Dire cto rs sh ould b e alig ne d with tho se avai labl e to the work forc e. As ex plai ned i n the An nual R epo rt a nd 20 F 201 9, this i s alre ady th e ca se for n ew UK a ppo intme nts a nd will b e the c as e for exis ting U K E xecuti ve Dire ctor s from J anua ry 2 023 . US ret ireme nt be ne it ar rang eme nts di er in a n umb er of ways fro m the U K and inc lude a D efe rred C om pen sat ion Pl an for s enio r emp loyee s. Give n the im por t anc e of the C EO, Ameri ca s’ role to th e bus ine ss a nd the m arket co mpe titive nes s co nce rns ove r E xecuti ve Dire ctor p ay , the ar rang eme nts a s they rel ate to the C EO, Americ as a re to be main tain ed . Furthe r det ails c an b e foun d on pa ge 10 8. Q. Pro ce dure f or deve lo pin g pol icy on exe cut ive rem un erat ion De tail s of how th e Dire ctor s’ Rem une ration P olicy (D R Po licy) was im ple men ted in 20 2 1 and th e impl em enta tion of th e DR P olicy in 20 22 , are se t out o n pag es 115 to 1 25. Dur ing 20 21, n o indi vidu al Di recto r was invo lved in d ec iding h is or he r own re mune ratio n outc ome . R. Independent judgemen t and discretion The R emun erati on C ommi tte e ha s forma l dis cretio ns in p lac e in rela tion to ou tcom es un de r the AP P and LTIP , an d the se are d isc los ed as p art o f the D R Poli cy , w hich i s set o ut on p age s 110 to 117 of th e Co mpa ny’s Annu al Rep or t an d Form 20 F 2 01 9. Whe n dete rminin g outc ome s und er th es e plan s, th e Co mmit tee c ons ide rs wh ethe r it is appr opriat e t o adjust outcomes u nder these d iscreti ons, taking ac coun t of the G roup’s per fo rman ce, re lative p er form anc e aga inst co mpet itors , and oth er re levant fa ctor s. In forma tion o n the Remu ner ation C om mit tee’s con sid erati on of th e use o f disc retio n durin g 202 1 is s et ou t on pa ge s 104 to 10 8. 127 Gov ernance IHG | Annua l Repo rt a nd Form 20 F 202 1 Statem ent o f compl iance G r oup Fina n cia l Sta t em en ts 130 Statement of Dir ectors’ Responsibilities 131 I nd ep end ent A udito r’s UK Rep or t 138 Independent Audi tors ’ US R eports a 142 Group F inancial Sta tements 149 Account ing polici es 158 No tes to t he G roup F ina nci al St atem en ts a Independent Auditors ’ Reports comprise reports fr om Price waterhouseCoopers LL P (PC AOB I D: 876 ) and E rns t & Young LL P (P CAOB I D: 1 43 8) 128 IH G | Annua l Repo rt a nd Form 20 F 202 1 129 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Financial Statements Group Finan cial Statemen ts Di scl os ure of in form atio n to Audi tor The D irec tors who h eld o ic e as at th e date of app roval of this repo rt c on irm th at they have taken s teps to m ake thems elve s aware of releva nt audit in formatio n (as de ine d by Sec tion 418 (3) of the Co mpan ies Ac t 200 6). No ne of the D irec tors are aware of a ny relevant a udit info rmatio n which h as not b ee n disc los ed to the Co mpany ’s and Group’s Auditor. Ma nag em ent ’s repo rt o n inte rnal c ont rol over ina nci al re por tin g Mana gement is res ponsib le for estab lishing and maintainin g ade quate inte rnal c ontrol over ina ncial re por tin g for the G roup, as de ine d in Rul e 13a –15(f ) and 1 5d –15(f ) un der th e Sec uritie s Exch ange Act of 1 93 4 as a proc es s de signe d to provid e reas ona ble as sur ance rega rding the re liabil ity of ina ncia l repo rtin g and the p repa ration of in anci al st ateme nts for ex terna l purp ose s in ac corda nce w ith IFR Ss. The G roup’s internal c ontrol over ina ncial re por tin g inclu des policies and proc edures that: • Pe rt ain to the ma intena nce of re cord s that, in re as onab le det ail, acc urately a nd fairly re le ct th e Group’s trans actio ns an d disp os ition s of ass ets; • Are desig ned to pro vide r easonable assura nce that tra nsactions are rec orde d as ne ce ss ar y to permi t the pre paratio n of the Co nso lidate d Fin ancia l State ment s in ac cord ance w ith UK-ado pted intern ationa l acc ounting s tan dards a nd IF RSs a s iss ued by th e IASB , and th at rec eipts a nd expe nditu re are bein g mad e only in acc orda nce wi th autho risati on of ma nag eme nt and the D irec tors of the C omp any; and • Provid e reas ona ble a ssur ance re gardin g preventio n or time ly dete ction of u nauth oris ed ac quis ition, u se or d isp ositi on of the Group’s as sets th at co uld have a mate rial e ect o n the Financi al Sta temen ts. Any interna l contro l framewo rk has in here nt limit ations a nd intern al contro l over in anc ial rep or ting may not p revent or d etect mis state ment s. Al so, proje ctio ns of any evalu ation of e ec tivene ss to future pe riod s are sub ject to th e risk th at contro ls may be co me inad equ ate be cau se of ch ange s in co nditi ons or t he de gree of com plian ce wi th the po licie s or pro ce dures m ay deterio rate. Man age ment h as un der ta ken an as ses sm ent of the e ec tiven ess of the G roup’s internal c ontrol over inan cial re por ting at 31 D ec emb er 202 1 b ase d on crite ria es tab lish ed in th e Intern al Control-Int egrat ed F ramew ork issued b y the Committee of Sponsori ng Orga niz ations o f the T re adway C ommi ssi on (20 13 Framework ). Ba se d on this a sse ss ment , man age ment h as co nclu ded th at as at 31 D ec emb er 20 21 th e Group’s internal c ontrol ove r in ancia l repo rti ng was e ecti ve. Duri ng the p erio d covere d by this do cume nt there we re no cha nge s in the G roup’s internal c ontrol over inan cial re por ting th at have materi ally ae cte d or are rea son ably li kely to materi ally ae ct the ee ctiven es s of the inte rnal c ontrols ove r in anci al repo rti ng. The G roup’s internal c ontrol over ina ncial re por tin g at 31 D ece mb er 202 1, tog ethe r with the G roup’s Cons olid ated F inan cial St ateme nts, were a udite d by Pricewate rhou se Co ope rs LL P , an inde pe nde nt regis tered p ublic a cc ounting irm. T heir a uditor ’s repo rt c an b e found o n pag e 138 . For and o n beh alf of th e Boa rd K eith Barr Paul Edgeclie- J ohnson Chief Executive O icer C hief Financial O icer 21 Feb ruar y 20 2 2 2 1 Febru ar y 202 2 Financial Sta tements and accounting records The D irec tors are re quired to p repare th e Annua l Rep or t and Form 20 F an d the Fi nanc ial St ateme nts for th e Co mpany an d the Gro up at the en d of ea ch inanc ial yea r in acc ordan ce wit h appli cab le law and re gulatio ns. U nde r com pany law dire ctor s must n ot app rove the Fin ancia l State ment s unle ss th ey are satis i ed th at they give a true and fai r view of th e state of a airs o f the C ompa ny and the G roup and th e pro it or lo ss of th e Group fo r that pe riod . The D irec tors have prep ared th e Co nso lidate d Fina ncia l State ment s in ac corda nce with U K -ad opted i nternatio nal a cco unting s tand ards an d the Co mpany Fi nanc ial St ateme nts in a cco rdanc e with U K acc ountin g sta ndard s, co mpris ing FRS 1 01 ‘ Red uce d Dis clo sure Framework ’ , and applicable law . In prepar ing t he Consolidat e d Financ ial Stat ements, the Di rector s have als o ele cted to c omp ly with Inte rnatio nal Fin anci al Rep or ting St and ards (‘I FRS s’) i ssu ed by the I nternatio nal Ac co unting Standards Bo ard (‘IASB’). In pre parin g thes e Fin ancia l State ment s, IH G Dire ctor s are requi red to: • Se le ct suit abl e acc ounting p oli cies a nd app ly the m con siste ntly; • M ake judge ment s and a cco unting e stimate s that are re aso nab le; • State whe ther t he Consolidat ed Financi al Stat ements ha ve be en pre pare d in acc orda nce wi th UK-ado pted inte rnation al accoun ti ng sta ndar ds; • State f or the Company Financia l Stat ements whet her appl icable UK a cco unting s tand ards, c omp risin g FRS 10 1, have be en followe d; and • Prep are the F inan cial S tatem ents o n the goi ng co nce rn bas is unle ss it i s inap propri ate to presu me that th e Co mpany an d the Group w ill co ntinue in b usin es s. The D irec tors have res pon sibi lity fo r ens uring tha t the Co mpa ny and th e Group kee p ade quate a cc ounting re cord s su icie nt to show a nd expl ain the C omp any’s and the G roup’s trans actio ns and whic h disc los e with rea son able a ccur acy the inan cial p osi tion of th e Co mpany an d the Gro up to enab le the m to ens ure that the F inan cial St ateme nts and th e Dire ctors’ R emun eratio n Repo rt c omp ly with th e Co mpan ies Ac t 200 6. The D irec tors are al so res pon sibl e for the sys tem of inter nal co ntrol, for sa fegua rding the a ss ets of th e Com pany and th e Grou p, and tak ing rea son able s teps to p revent and d etect f raud an d other irregularities. Disclosure Guidance and T ransp arency Rules The B oard c on irms th at to the be st of i ts know led ge: • Th e Co nso lidate d Fina ncia l State ment s have be en pre pare d in acc orda nce wi th UK-ado pted inter nation al ac counti ng st anda rds, and I FRS s as is sue d by the IAS B, an d give a true an d fair vie w of the as sets , liabil ities , in ancia l pos ition a nd pro it or l oss o f the Gro up taken a s a whol e; • Th e Co mpany Fin anci al St ateme nts have b een p repa red in acc orda nce wi th UK ac co unting st and ards, c ompr ising F RS 10 1, and gi ve a true and f air view of th e as sets , liabil ities a nd i nanc ial po sition o f the C ompa ny ; and • Th e Annu al Rep or t, inc luding th e Strate gic Rep or t, in clud es a fair review of th e develo pme nt and p er forma nce of th e bus ine ss an d the p ositio n of the C omp any and the G roup t aken as a wh ole, toget her wi th a des criptio n of the pr incip al risk s and unc er tai nties that it fa ce s. UK C orp orate G overna nc e Co de Havin g taken a dvic e from the Aud it Co mmit tee, the B oa rd con side rs that thi s Annua l Repo rt a nd Form 20 F , ta ken as a who le, is fa ir , bal ance d and u nde rst anda ble an d that it p rovide s the inform ation ne ces sa ry fo r share hol der s to ass es s the C ompa ny’s and the Group’s po sition a nd pe rfo rman ce, bu sine ss m ode l and s trategy. 130 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Statement of Dir ectors’ R esponsibilitie s Independen t aud it ors ’ report t o the members of Int erC ontinental Hotels Group PL C Report on the aud it of t he Financ ial Stat ements Opinion In our o pinio n: • Inte rC ontine ntal H otels G roup PLC ’s Group Fin anci al St ateme nts and Parent Company Financial Statements (the ‘Financial St ateme nts’) gi ve a true an d fair view of t he st ate of the Gro up’s and of th e Parent C om pany ’ s aai rs at 31D ec emb er20 21 an d of the G roup’s proit a nd ca sh l ows for the ye ar the n end ed; • the G roup Fi nanc ial St ateme nts have b ee n prope rly pre pare d in acc orda nce wi th UK-ado pted inter nation al ac counti ng st anda rds; • the P arent C omp any Finan cial S tatem ents h ave bee n prop erly prep ared in a cc ordan ce with U nited K ingd om G ene rally Ac cepte d Acc ounting P racti ce (Uni ted Ki ngdo m Acc ounting S tan dards , com pris ing FRS 1 01 ‘ Redu ce d Dis clo sure Framework ’ , a nd applicabl e law ); and • the F inan cial S tatem ents h ave bee n prep ared in a cc ordan ce with the re quire ment s of the C omp anie s Act 20 06 . We have audite d the Fin anci al St ateme nts, in clud ed with in the Annu al Rep or t and Form 20 F (the ‘ A nnual R epo rt ’ ), which c omp rise: the G roup and P arent C omp any statem ent s of in anci al po sition a t 31D ec emb er202 1; the G roup in com e state ment , Group s tatem ent of co mpreh ens ive inc ome, G roup st ateme nt of ca sh l ows and G roup and Pa rent C ompa ny statem ents o f chan ges in e quit y for th e year then e nde d; the Ac cou nting po licie s; and th e notes to th e Financi al Sta temen ts. Our o pinio n is co nsis tent with o ur rep or ting to the Aud it Co mmit tee. Se par ate op inio n in re latio n to IFR Ss as i ss ue d by the I ASB As expl aine d in the Ac cou nting po licie s, the G roup, in ad dition to applying UK - adopt ed int ernat ional accoun tin g standar ds, has a lso app lied inte rnatio nal inan cial re por ting s tan dards (‘ IFR Ss’ ) as is sue d by the Inter nation al Acc ountin g Sta ndard s Bo ard (‘IAS B’ ). In our o pinio n, the G roup Fin anci al St ateme nts have be en p rope rly prep ared in a cc ordan ce with I FRS s as is sue d by the IAS B. Basis for opini on We cond ucte d our au dit in ac cord anc e with Intern ation al St anda rds on Audi ting (U K) (‘ ISAs ( UK )’ ) and ap plic able l aw . Our re spo nsib ilitie s unde r ISA s (UK ) are fur the r des crib ed in th e Auditor s’ res pon sibili ties for th e audi t of the Fin anci al St ateme nts se ction o f our rep or t. We bel ieve that the a udit evi den ce we have obt aine d is su ic ient an d appro priate to provid e a bas is for our opinion. Independence We remain ed in dep end ent of th e Group in a cc ordan ce with th e ethic al requ ireme nts that a re relevant to ou r audit of th e Fin anci al St ateme nts in the U K , which i nclu des th e FRC ’s Ethical St and ard, as app lica ble to lis ted pu blic inte rest e ntities a nd we have ful ill ed our other e thic al resp ons ibiliti es in ac co rdanc e with the se re quirem ents . T o th e be st of our k nowl edg e and b elief, we dec lare that n on- aud it ser vi ces p rohibi ted by the FR C’s Ethica l Sta ndard we re not provid ed. Oth er tha n thos e disc los ed in n ote 5 to the Grou p Finan cial St ateme nts, we have provi ded n o non -au dit se r vice s to the Pare nt Co mpany or i ts co ntrolle d unde r taki ngs in th e peri od und er au dit. Our audi t appr oach Co ntex t 202 1 is o ur ir st year a s inde pe nde nt audito rs of the G roup. As p ar t of our au dit tran sitio n, we carri ed ou t proc edure s over op enin g bal ance s at 1 Ja nuar y 20 21 by sh adowi ng the pr ior year a udit unde r taken by the p rede ce ss or aud itor , revi ewing th e pred ece ss or audito r’s workin g pap ers in th e UK , US a nd Ind ia and re - evalu ating the pr edeces sor audi tor’ s conclusions in r espect of k ey j udgements incl ude d in the op enin g Group s tate ment of ina ncial p os ition. Ove r vie w Audit s cop e • P wC c omp one nt audit te ams we re enga ge d to per form a ful l sc ope au dit in the U S and s pe ci ied p roce dure s over trans ac tions proc es se d at the G roup’s Globa l Bus ine ss Se r vice C entre in I ndia . The G roup au dit team c arrie d out a udit pro ce dures ove r the con sol idatio n and ma terial b alan ces a nd tran sac tions p roc ess ed ce ntrally . The te rritorie s whe re we con ducte d audit p roc edure s, toget her wi th work pe rfo rme d at corp orate fun ctio ns and at th e Group l evel, ac cou nted for ap proximate ly: 91% of th e Group’s revenue ; 88% o f the Grou p’ s sta tutor y pro it befo re tax ; and 8 2% of the G roup’s adjuste d pro it be fore tax , excepti onal i tems an d the Sy stem F und. • Th e Group a udit te am per for med s ubst antive pro ce dures ove r all of the m aterial b alan ce s and tran sac tion s of the Pare nt Co mpany . Key audi t mat te rs • Bre akag e as sumpti on us ed to es timate I HG Reward s loyalt y progr amme d eferre d revenue (Gro up) • All oca tion of exp ens es to the S ystem Fund (Gro up) • E xpe cte d credi t los se s (Group an d Parent C omp any) • Re cog nition of th e UK d eferre d tax a ss et (Group) Materi ality • Ove rall G roup mater ialit y: $25.0 mill ion ba se d on app roximately 5% of four-y ear ave rage a djuste d pro it be fore tax , excepti onal items a nd the S ystem Fund. • Ove rall Pare nt Co mpany ma terialit y: £13 .3 mi llion b ase d on appro ximately 1 % of net assets. • Pe rfor manc e materi alit y: $18.7 milli on (Group) and £ 9.9 milli on (Parent C om pany). The s co pe of o ur au dit As pa rt of d esi gning o ur audit , we determ ine d materia lit y and as se ss ed the ris ks of mate rial mis st ateme nt in the Fi nanc ial St ateme nts . 131 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Financial Statements Independent Audi tor’ s UK Report Independent A uditor’ s UK R eport K ey audit matt ers Key audit mat ter s are thos e mat ters th at, in the a uditor s’ profes sio nal ju dgem ent, we re of mo st sign ii can ce in the a udit of th e Fina ncia l St ateme nts of the c urrent p erio d and inc lude t he mos t signi i cant a sse ss ed ri sks of ma terial mi sst atem ent (whethe r or not d ue to fraud ) ide ntii ed by the a uditor s, incl uding th ose w hich ha d the gre atest e ec t on: the ove rall aud it strate gy; the allo catio n of res ource s in the au dit; and dire ctin g the eo rt s of the e ngag eme nt team . The se mat ter s, and any c omme nts we m ake on the res ults of o ur proc ed ures the reon, were ad dres se d in the co ntext of o ur audi t of the Fin anci al St ateme nts as a w hole a nd in form ing our o pinio n there on and we d o not provi de a sep arate op inion o n thes e mat ters . We cons ide red the key aud it mat ters in clud ed in th e prior ye ar aud it repo rt . Defe rred reven ue rela ting to the I HG Reward s loyalt y progra mme and all oc ation of exp en ses to th e Syste m Fund remain key audi t mat ters in th e current ye ar . E xp ec ted cre dit lo ss es an d reco gnitio n of the UK d eferre d tax a ss et are new key audit m atte rs for 20 2 1 given the l evel of e stimati on unc er tain ty as so ciate d with exp ecte d cre dit los se s and th e level of ju dge ment invol ved in fore ca sting th e recove rabilit y of th e UK de ferred t ax as set . Imp airme nt of non - current a ss ets wa s a key audit mat ter in th e prio r year . Durin g 202 1, the re has b ee n a gen eral imp roveme nt in ec onom ic con ditio ns and in t he market exp ec tatio n of the C ovid -19 recover y p erio d. As su ch, we did n ot ide ntif y signi ic ant ris k of fur the r impai rment s. We als o con side red th e pos sib ility of sign ii cant rever sal o f any previou s impai rment s, but we d id not id entif y an e nhan ced l evel of ris k in this re gard. A s a result , impa irment of non - curre nt ass ets wa s not co nsid ere d to be a key audit m atter fo r 202 1. This i s not a co mpl ete list of a ll risks i denti ie d by our au dit. K ey audit matter How o ur au dit a dd re ss ed t he key au dit m at ter Br eak age a s sum pti on u se d to es tim ate I HG Rewa rd s deferred revenu e ( Group) At 31 D ec emb er 2 02 1, the d efe rred re venu e bal anc e rel ating to t he IH G Rewar ds loyal ty p rogr amm e was $ 1,2 92 m (20 20: $ 1, 24 5m). The h otel l oyalt y pro gram me, I HG R eward s, en abl es m emb er s to ear n poi nts, fun de d throu gh hote l as se ss me nts, d urin g eac h qua lif yin g st ay at an IH G bra nde d hote l an d to con sum e po ints at a l ater d ate in exch ang e for ac com mo datio n or ot her b en e its . Th e Grou p rec ogn ise s de ferre d reven ue in an am oun t that re l ect s the G rou p’s unsati s ie d pe rfo rma nce o bli gati ons , valu ed at t he st and -a lon e se llin g pric e of th e futu re ben e it to th e me mbe r . The a mou nt of reve nue re co gni se d and d efer red i s imp acte d by the e sti mate of bre aka ge wh ich i s the e stim ate of th e num ber o f poi nts th at will n ever be c ons ume d. T he G roup e nga ge s an ext erna l act uar y wh o use s st atis tic al form ula e to as sis t in dete rmi ning th is bre aka ge e stim ate. Sig ni ic ant es tim ation u nc er tai nty ex ist s in pro jec tin g mem be rs’ fu ture co nsu mptio n ac tivit y an d how th is may b e imp acte d by C ovid -19. A sm all cha nge i n the b reak age a ss umpti on wo uld re sult i n a mate rial d ie renc e in th e defe rre d reven ue ba lan ce at 3 1 De ce mbe r 20 21 a nd the refo re in the re venu e rec ogn ise d in th e yea r . Refe r to the E stim ate s se ctio n of the A cc ounti ng po lic ies a nd to no te 3 to the Group Financia l Stat ements f or ma nagement’ s disclosu res. We evalu ated a nd te ste d the de si gn and o pe ratio n of key co ntrol s in pl ac e over m ana gem ent ’s dete rmin atio n of the b rea kag e as sum ption . We tes ted a s amp le of d ata u se d by man age me nt ’s actua ry i n deri vin g the bre aka ge as sum ptio n to und erl ying re co rds . We ass es se d the c om pete nc e and o bje cti vit y of ma nag em ent ’s actu ar y . We dep loye d our ow n actu aria l exp er ts to as se s s the re aso na ble ne ss of th e me tho ds an d ass ump tion s us ed by man ag eme nt ’s actua ry i n dete rmin ing b reak age . Our a ctu aria l expe r ts ca lcul ate d an ind ep end ent ex pe ct atio n of a rea so nab ly po ss ibl e rang e for deferr ed rev enue based on independently determi ned breakage assumptions. We com pare d th e defe rre d revenu e bal anc e, wh ich re l ecte d ma nag em ent ’s as sum ption s ab out th e ong oin g imp act o f Cov id-19 o n fut ure ac tivit y of progra mme members, with our independent ly calcu lated range. We as se ss ed th e app ropr iaten es s of th e rela ted di sc los ures i ncl udin g se nsi tivit y an aly sis in t he Es tim ates s ec tion o f the Ac co untin g pol ici es an d in not e 3 to the G roup F inan cia l St atem ent s. Ba se d on th e proc e dure s per fo rme d, we no ted no m ate rial i ssu es a risi ng from o ur wor k. All oc atio n of exp en se s to th e Sys te m Fund (Gr oup) The G rou p ope rate s a Sys tem Fund to c oll ec t and a dmin iste r ca sh a ss es sme nts from h otel ow ner s. E xp en se s inc urre d are all oc ated to th e Sys tem Fun d in ac cord anc e wit h the pr inci ple s ag ree d with th e IH G Ow ner s As so ciat ion . For th e year e nde d 31 D e cem be r 202 1, th e Gro up rec ord ed S yste m Fund exp ens es o f $9 39 m (20 20: $ 8 67m). Sys tem Fund ex pe nse s are exc lud ed fro m the G roup re sul t to dete rmin e op erati ng pro i t from re por t abl e se gme nts , a key metri c use d by the G rou p. The re is ju dg eme nt invol ved i n deve lop ing th e inter nal p oli cie s that th e Gro up ha s put in p la ce in o rder to a ppl y the p rinc ipl es s et out i n the I HG O wne rs As so ciati on le tte r to exp ens es i ncur red a nd the re is c omp lexi ty i n sub se que ntly evalu atin g whe ther e xpe ns es are a ppro pri atel y allo cate d to th e Sys tem Fund in lin e with t hes e inte rnal p ol icie s. Refe r to the Ac co untin g po lici es an d to note 3 3 to th e Grou p Fin anc ial Statemen ts for management’s d isclosur es. We evalu ated a nd te ste d the de si gn and o pe ratio n of key co ntrol s over th e allo c ation o f expe ns es to th e Sys tem Fund . We und ers too d and a ss es se d the i ntern al po lic ies a nd gove rna nc e stru cture that t he Gro up ha s put i n pla ce i n orde r to app ly th e prin cip les s et ou t in the IH G Ow ner s As so ciati on le tte r to exp ens es i ncur red . We teste d a sa mpl e of exp ens es th at ha d be en a lloc ate d to the S yste m Fund to as se ss w heth er th ey were i n com pli anc e with th es e po lici es an d co nsi ste nt with h isto ric al pr acti ce. We che cke d whet her t here we re any m anua l jou rnal e ntrie s tha t tran sfe rred exp ens es to o r from th e Sys tem Fund to e valua te whe the r the re was an app rop riate ra tion ale fo r any su ch jou rna ls an d we as se ss ed wh eth er th e res ultin g cla ss i ic ation o f expe ns es wa s in lin e with t he pri nci ple s agre e d with the I HG O wne rs A ss oci atio n. Ba se d on th e proc e dure s per fo rme d, we no ted no m ate rial i ssu es a risi ng from o ur wor k. 132 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Indepe ndent A udit or’ s U K Repor t c o nti nu e d K ey audit matter How o ur au dit a dd re ss ed t he key au dit m at ter Ex pe cte d cr edi t lo ss es (G rou p and P are nt C omp any) At 31 D ec emb er 2 02 1, the G rou p rec orde d a prov isi on for ex pe cte d cre dit los se s of $ 13 3m (2 020 : $78 m) again st a gro ss t rad e rec eiva ble s ba lan ce of $5 32m ( 202 0: $ 38 7m). In the Par ent C omp any Fi nan cial S ta teme nts , amo unts due f rom Gro up un der t aki ngs of £ 9 12m we re rec orde d (2 020 : £9 26 m) with no exp ec ted c red it lo ss es (2 020 : £ni l) re co gnis ed o n the se b ala nce s. A provi sio n for im pai rme nt is ma de fo r lifet ime exp ec ted c red it lo ss es . Ma nag em ent ha s es tab lis he d a provi sio n matr ix for th e Gro up’s trad e rec eiva ble s th at is ba se d on hi sto ric al cre dit l os s expe rie nce by re gio n and n umb er of d ays pa st du e. Wh ere hi stor ica l exp erie nc e is not r elev ant to de in ed ow ne r group s, fo r examp le own er s with p ayme nt pl ans , the exp ecte d lif etim e los se s are c alc ulate d by refe ren ce to oth er s ourc es of d ata . The c al cul ation o f expe cte d cre dit l os se s is su bje ct to e stim atio n unc er tai nty, whi ch is in cre as ed du e to co ntinu ed un ce rt aint y ab out t he pa ce a nd sc al e of ma rket rec over y fro m Cov id-1 9 and th e rel ated r isk o f owne r liqu idit y. Refe r to the E stim ate s se ctio n of the A cc ounti ng po lic ies , to note 18 to t he Gro up Fin anc ial S tate me nts an d to note 4 to t he Pa rent C omp any Fi nan cia l Statemen ts for management’s d isclosur es. We evalu ated a nd te ste d the de si gn and o pe ratio n of key co ntrol s in pl ac e over m ana gem ent ’s exp ecte d cre dit l os s ca lcul atio ns . We obt aine d ma nag em ent ’s expe cte d cre dit l os s mod el fo r the G roup at 31 D ec emb er 2 02 1 and w e teste d it s math em atic al inte grit y. We agree d a sa mpl e of the h isto ric al ag ed re ce ivab les a nal ysi s and c oll ect ion s expe rie nc e und erp inni ng the m od el to un der lyin g rec ord s. We ch alle nge d ma nag em ent to de mon stra te that th e as sum ptio ns us ed i n the mo de l were c on sis tent wi th rec ent h isto ric al exp eri enc e of re gion al c olle cti ons . Wh ere in co nsi sten cie s were identiied, we checked whether management had made appr opriat e upd ate s to histo ric al as su mptio ns to re l ect t he mo st re ce nt co lle ctio ns exp erie nc e, inc lud ing in re sp ons e to C ovid -19. We sep ara tely c hall en ged t he ap prop riate ne ss of e xpe cte d life time l os se s for th os e owne r grou ps wh ere m ana gem ent d eter mine d hi stori ca l expe rie nce not to b e rel evant . We obta ine d evi den ce to d eterm ine w heth er th es e provi sio ns we re req uire d to sta te trad e rec eiva bl es at th eir n et rea lis abl e valu e. We rea d inte rnal m ana ge men t rep or ting to i den tif y any contradi ctory evidence. For th e Pare nt Co mpa ny amo unts d ue fro m Grou p und er ta king s, we und er stoo d the p ayme nt ter ms as so ci ated w ith the o nly m ateri al re cei vabl e to dete rmin e wh ethe r a provi sio n for exp ec ted c red it lo ss es wa s requ ire d at 31 D ec emb er 2 02 1, id entif y ing th at the re ce ivab le wa s repaya ble w ithi n one mon th of yea r-en d. We evalu ate d whe ther t he co unte rpa rt y ha d the ab ilit y to set tl e the am ount d ue at 3 1 De ce mbe r 20 21 . For bo th the G roup a nd th e Pare nt Co mp any , w e evalu ated w heth er th e overa ll prov isio ns re co rde d were s upp or ta ble a nd in c omp lian ce w ith the req uirem ent s of I FRS 9. We as se ss ed th e app ropr iaten es s of th e rela ted di sc los ures i n the E stim ate s se ctio n of th e Acc ount ing p olic ie s, in no te 18 to the G roup F ina nci al St atem ent s and in n ote 4 to th e Pare nt Co mpa ny Fin anc ial S tate men ts. Ba se d on th e proc e dure s per fo rme d, we no ted no m ate rial i ssu es a risi ng from o ur wor k. Rec og nit ion of t he U K def erre d ta x as se t (Gro up) At 31 D ec emb er 2 02 1, the G rou p rec ogni se d a de ferre d ta x as set of $ 12 7m (20 20 : $10 3m) rel ate d to the U K tax g roup. T he a ss et larg el y repre se nts brou ght fo rwa rd reven ue ta x lo ss es an d futu re tax d ed ucti on s for am or tis atio n. Ju dge me nt is us ed w hen a ss es si ng the ex ten t to whic h def erre d ta x ass et s, par ti cula rly in re sp ec t of ta x los se s, s hou ld be r eco gni se d. D efer red t ax as se ts are th erefo re rec og nis ed to th e exte nt tha t it is re gard ed a s pro bab le tha t the re will b e su ic ien t and s uit abl e tax abl e pro it s in the re leva nt le gal e ntit y or t ax grou p aga ins t whic h su ch as se ts ca n be u tilis ed i n the fu ture. Fo r this pur pos e, for ec ast s of fu ture ta xab le pro it s are c ons ide red by a ss es sin g the G roup’s fore ca st reve nue a nd pro i t mod el s, ta kin g into ac co unt fu ture grow th pre di ctio ns an d op erati ng co st a ss umpti ons . Th e rec overa bili ty of the U K de ferre d ta x as set h as b ee n ass es se d by st ar ting w ith m ana gem ent ’s fore ca sts , overl aying t ax p rinc ipl es to th ose f orec as ts an d foll owin g the met hod olo gy re quir ed by IA S 12. Th is ha s de mon stra ted th at the U K de ferre d ta x ass et s hou ld rever se ove r a seve n- to te n-ye ar p erio d. U nde r UK l aw, tax los se s do n ot exp ire but t hey c an onl y be o s et ag ains t 50 % of ann ual U K taxable pr oits. We focu se d on th is are a give n the s ize of th e as set , the l eng th of th e per iod over w hich i t is fore ca st to b e rec overe d and t he in here nt jud ge men t in man ag eme nt ’s forec as ts of fu ture pro i tab ilit y wi thin th e UK t ax gro up. Furth er U K ta x los se s inc urre d in 20 21 p res ent a n add itio nal ri sk th at the a ss et rec ogn ise d may n ot be re cove rab le. I n add itio n, the a ss et in cre ase d by $ 30 m duri ng the ye ar a s a resu lt of c hang es to th e U K rate of c orp orate i nco me t ax ee cti ve from 1 A pril 2 023 . Refe r to note 8 to th e Gro up Fi nan cial S tat eme nts fo r man ag eme nt ’s disc los ures . We evalu ated a nd te ste d the de si gn and o pe ratio n of key co ntrol s in pl ac e over th e rec ogn itio n of de ferre d ta x as set s and ove r the G rou p’s for ecasti ng process. We com pare d for ec ast U K c ash lows to B oa rd app roved fo rec as ts an d we as se ss ed th e his toric al a ccu racy o f man age me nt ’s forec asti ng. We eva luate d the appr opriateness of the assump tions relected i n the UK for ecasts, includin g assessing the reasonableness of gro wth pro jections com pared to his toric al ex pe rien ce an d ind ust ry d ata . As p ar t of this a ss es sm ent , we benchmark e d manag ement’s estima te of t he Covid- 19 forecast recov ery pe rio d to third -p ar ty s ourc es . We dep loye d tax s pe cia lis ts to as se ss t he ap prop riate ne ss of t ax ove rlay adj ustm ent s app lie d to the fo rec as ts by ref eren ce to th e req uire ment s of t ax prin cip le s, inc lud ing th e res tric tion o f los se s to 50 % of ann ual U K ta xab le pro it s, an d to dete rmin e whe the r the U K def erre d tax a ss et m et the rec ogn itio n crite ria o f IAS 12 . We cha lle nge d the a ppro pri aten es s of the re cove r y pe riod o f seve n to ten ye ars . Wit h inpu t from o ur ta x sp eci ali sts , we vali date d that t here i s no exp ir y pe rio d app lic abl e to bro ught fo rw ard UK l os se s. We pe r form ed in de pe nde nt sensitivi ty analysis to understand t he impact of r easonably possible changes to key ass ump tion s on thi s fore ca st re cove ry p eri od. We as se ss ed th e app ropr iaten es s of th e rela ted di sc los ures i n note 8 to th e Group Financia l Stat ements. Ba se d on th e proc e dure s per fo rme d, we no ted no m ate rial i ssu es a risi ng from o ur wor k. 133 IH G | Annua l Repo rt a nd Form 20 F 202 1 Independent Audi tor’ s UK Report Group Financial Statements Group Financial Stat ements Parent Com pany Financial St atements Over all mater iali ty $25.0 million £ 13.3 million How we d ete rmi ne d it App roxim ately 5 % of four-year ave rag e adj uste d pro it b efo re ta x, exc epti ona l item s and t he Sys tem Fun d Appro ximat ely 1 % of net assets Rational e for benchmark applied The G rou p’s princ ipal m ea sure o f pe rfo rma nce i s op erati ng pro i t from re por t abl e se gme nts , whic h exclu des e xcep tion al ite ms an d the S yste m Fund res ult , in ord er to pre se nt res ults f rom op era ting a ctiv itie s on a c ons iste nt ba si s and to exc lud e the imp act o f the S yste m Fund, whi ch is n ot ma nag ed to g ene rate a p ro it or l os s for the Gro up over th e lo nge r term . We took th is me as ure into a cc ount i n dete rmin ing ou r mate rial it y as it i s the me tric a gain st wh ich th e pe rf orm anc e of the G roup i s mo st co mmo nly a ss es se d by man age me nt and re po rt ed to sh are hol der s. From o per ating pro it fro m rep or ta ble s eg men ts, we d ed ucte d ne t in anc e co st s and fa ir valu e gai ns on c ontin ge nt purc has e co nsi de ratio n to arriv e at adj uste d pro it b efo re ta x. Give n the vo lati lit y in pro i tab ilit y in 20 20 an d 20 21 a s a resu lt of C ovid -19, we b ase d our m ateri alit y c alc ulati on on a f our-year ave rage o f the G roup’s adj uste d pro i t befo re tax . Inte rC onti nen tal H otel s Gro up PLC is the ul tima te pare nt co mp any whic h hol ds th e Gro up’s invest ment s an d bon ds . The s tren gth of t he ba lan ce s hee t is th e key mea sure o f i nan cial h ea lth tha t is imp or ta nt to sh areh old ers s inc e the prim ar y co nc ern fo r the Pa rent C om pany is th e paym ent of d ivi den ds. We th ere fore co nsi dere d ne t as set s to be an appropriate benchmark. How we ta ilo red t he au dit s co pe We tailo red the s cop e of ou r audit to en sure tha t we per form ed eno ugh work to b e able to gi ve an opin ion on th e Fina ncial S tate ment s as a wh ole, t aking i nto acc ount the s tructu re of the Gro up and th e Parent C om pany , th e acc ountin g proc es ses a nd co ntrols an d the in dustr y in wh ich they o perate . The G roup Fi nanc ial St ateme nts are a c ons olid ation of ap proximate ly 60 0 rep or ting unit s. Th e Group o pe rates a G loba l Bus ine ss Se r vice Ce ntre (‘B SC ’) in I ndia w hich pro ce ss es tran sac tion s for the ma jorit y of rep or ting unit s. We ide nti ied o ne agg regatio n of co mpo nent s in the U S which re quire d a full sc ope a udit du e to its si ze and b eca use this ag greg ated co mpo nent h old s the IH G Rewards l oyalty p rogram me and S ystem Fund. We en gage d a P wC c omp one nt audit te am in the U S to carr y out thi s audi t. We also in stru cted o ur US c omp onen t team to un der ta ke spec i ied p roce dures ove r cer t ain bal anc es and tra nsa ction s in ce rt ain othe r US re por ting u nits. We e ngag ed a se con d Pw C co mpo nent au dit tea m in Indi a to unde rt ake testin g of trans ac tions p roce ss ed by th e BSC e nco mpa ss ing all rep or ting units w ithin the B SC ’s sco pe. Whe re work was p er forme d by co mpon ent au ditors , we determi ned the ap propri ate level of invol veme nt we nee de d to have in that au dit work to en sure that we c ould c onc lude th at su ici ent ap propri ate audit ev ide nce h ad be en o btain ed for th e Group F inan cial S tatem ents as a wh ole. I n additi on to ins tructin g and revie wing the re por tin g from our c omp one nt audi t teams , we con ducte d i le reviews a nd par tici pated i n key meeting s with lo cal m ana gem ent. D ue to Cov id-19, mos t of the se me eting s took p lac e remote ly but we we re able to make on e site vis it to the US in p er son . We also ha d regul ar dial ogu e with co mpo nent te ams th rougho ut the yea r . The G roup c ons olida tion, inan cial s tatem ent dis clo sures a nd ce rt ain bal ance s and tr ans actio ns pro ces se d ce ntrally by ma nage me nt in the U K, i nclu ding ce r tain Pa rent Co mpa ny balan ces a nd tran sac tions that were i nclu ded in G roup au dit sc op e, were audi ted by the G roup audit te am. T his inc lude d ta xation, tre asur y , impa irment rev iews and expe cted c redit l os ses o n trade re ce ivable s. Tak en tog ethe r , the audit p roc edure s carr ied ou t by the Grou p and c omp onen t audit team s provide d cove rage of 9 1% of the G roup’s revenue, 8 8% of the G roup’s statutor y pro it b efore ta x and 82 % of the G roup’s adju sted p roit b efore t ax, exc eption al item s and th e Syste m Fund. This p rovide d the evid enc e we ne ede d for o ur opini on on th e Group Fin ancia l State ment s taken a s a whol e. Thi s was be fore co nsid ering the co ntribu tion to our au dit evid enc e from p er forming a udit work at the G roup level, i nclu ding dis agg regate d anal yti cal revi ew proc edu res, wh ich cove red ce rt ain of th e Group’s smal ler an d lower ri sk co mpo nent s that were n ot direc tly incl ude d in our Group a udit s cop e. Our au dit of th e Parent C omp any Fina ncial S tate ment s was unde r taken by the G roup au dit team a nd inc lude d sub sta ntive procedures over all material balances and transaction s. The G roup ha s set o ut a targ et to redu ce emi ss ions fro m its own ed, lea se d, man age d and fra nchi sed h otels by 4 6% by 20 30 from a 2 019 bas elin e. Ma nag eme nt con side rs tha t the imp act of c limate ch ange doe s not gi ve rise to a mate rial imp act o n the Fi nanc ial St ateme nts. However, manage me nt’s clima te chang e initiati ves and c omm itment s will imp act th e Group i n a variet y of ways. D isc losu re of the imp act of clim ate chan ge ris k is inc orp orated i n the T ask Forc e on clim ate- relate d in anci al dis clo sures (‘ TCF D’) s ecti on of the A nnual Re po rt . As pa rt of o ur audi t, we ma de en quirie s of man age ment to unde rst and th e exte nt of the po tential im pac t of clim ate chan ge on the G roup’s busine ss a nd Fin anci al St ateme nts, inc ludin g reviewin g ma n ag e me n t ’s c li m ate ch ange ri sk as se ssm ent wh ich was p repare d with support fr om an exter nal ex pert. We use d our kn owle dge of th e Group a nd we en gage d with o ur clim ate chan ge expe r ts to evaluate the ris k as ses sm ent pe r forme d by mana gem ent. We as se ss ed tha t the key areas i n the Fin anci al St ateme nts whic h are more li kely to be m ateriall y impa cted by cli mate cha nge are th ose a reas th at are bas ed o n future c ash lows. A s a resul t, we par tic ularly c ons ide red how clim ate cha nge ris ks and the impact of climat e commit ments mad e by the Gro up would im pac t th e a s sum pti on s ma de in the forec ast s prep ared by m anag eme nt that are u sed i n the C ompa ny’s impa irment a nalys is, for g oing c onc ern pu rpos es an d for as se ssi ng the rec ogn ition of d eferre d tax a ss ets. O ur pro ce dures di d not ide ntif y any materia l impa ct on ou r key audit mat ters fo r the year end ed 3 1 De cem ber 2 02 1. We also c hec ked the c onsi sten cy of the dis clos ures in th e TCFD se ctio n of the An nual Re por t with t he releva nt in anci al st ateme nt disc los ures, in cludi ng note s 8 and 13 an d the Goi ng co nce rn se ction of th e Acc ountin g poli cies , and with o ur understanding of t he business. Mater iality The s cop e of our a udit wa s inlu enc ed by ou r appl icatio n of materi alit y . We se t cer t ain qua ntitative thre sho lds fo r materia lit y . The se, to gethe r with qu alitati ve con side ration s, he lpe d us to deter mine the s co pe of ou r audit a nd the na ture, timing an d exte nt of our au dit pro ce dures o n the indi vidu al in anci al st ateme nt line items a nd dis clo sures a nd in evalu ating the e ec t of mis st ateme nts, both in divid ually an d in agg regate o n the Fin anci al St ateme nts as a whole. Ba se d on our p rofes sion al judg eme nt, we de termine d mate rialit y for the F inan cial S tatem ents a s a whol e as foll ows: 134 I HG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Indepe ndent A udit or’ s U K Repor t c o nti nu e d For ea ch co mpon ent in th e sco pe of o ur Grou p audit , we alloc ated a materi alit y that is l es s than ou r overall G roup mate rialit y . The ran ge of mate rialit y allo cate d acro ss co mpo nent s was $ 11.0 million to $22. 5 mi llion. We use p er forman ce m ateriali ty to red uce to an a pprop riately low level t he prob abilit y tha t the agg regate of un cor recte d and undetected miss tatements exceeds overall materiality . Spe ciically , we use p er form ance m ateria lity i n determ ining the s co pe of ou r audit and th e nature an d extent of o ur tes ting of ac co unt bal ance s, cl ass es of trans ac tions a nd dis clo sures , for examp le in dete rmining s amp le size s. O ur per for manc e materi alit y was 7 5% of overall m ateriali ty , amou nting to $1 8.7 million for th e Grou p Fina ncial S tate ment s and £9.9 m illion fo r the Pare nt Co mpany Fin anci al St ateme nts. In dete rminin g the pe rfo rman ce mate rialit y , we c ons ide red a numb er of fa ctors , inclu ding th e histor y of mi ss tatem ents, r isk as ses sm ent and a ggre gation ri sk an d the ee ctive nes s of co ntrols, and we c onc lude d that an a mount at th e upp er en d of our no rmal range was appr opriate. We agree d with the Au dit C ommit tee th at we woul d repo rt to them m iss tatem ents i denti ie d durin g our au dit above $ 1. 2 millio n (Group au dit) and £ 0.6 million (P arent C omp any audit) as we ll as mis state ment s be low thos e amo unts tha t, in our v iew , warrante d repo rti ng for qu alitati ve reas ons . Conclusions rela ting t o goi ng concern Our eval uation o f the dire ctors’ a ss es sme nt of the G roup’s and the Parent C om pany ’ s abili ty to co ntinue to a dopt th e going c onc ern basis of account ing included: • Evaluatio n and tes ting of key co ntrols over th e Group’s budg eting proc es s and th e ass es sme nt of goi ng co nce rn; • Evaluatio n of man age ment ’s Bas e Ca se, Dow nsid e Ca se and Severe D owns ide C ase s ce nario s and rever se stre ss te sting cal culati ons, un der sta nding a nd evalu ating the key as sumpti ons, incl uding a ssu mption s relate d to the C ovid-19 re cover y pe riod; • Validatio n that the c as h low fo reca sts u se d to supp or t man age ment ’s impairm ent, d eferre d tax a ss et rec overabili ty , goin g con cern a nd viab ilit y as ses sm ents we re con siste nt and in line w ith the G roup’s Board ap proved pl an; • Asses sment o f the hist orical accu racy and r easonableness of man age ment ’s forec astin g; • Id enti ic ation of Rev P AR as th e key assum ption inh erent i n man age ment ’s cas h low fore ca sts an d valida tion of thi s as sumptio n to indu str y sourc es; • C ons ide ration of th e Grou p’ s availabl e in ancin g and d ebt matu rity pro ile an d evaluatio n of the re aso nabl ene ss o f mana gem ent ’s as sumptio n that b ank fac ilitie s will rem ain undraw n over the pe riod of th e going c onc ern a ss es sme nt; • T esti ng of the m athem atica l integrit y of m anag eme nt ’ s mod els and li quidit y he adro om, cove nant c ompli anc e, sen sitivi ty an d revers e stres s testi ng ca lculati ons; • Asses sment o f the reasonableness of management’ s planned or po tential mi tigating a ction s; • C ons idera tion wh ether c limate ch ang e is expe cte d to have any signi ic ant imp act d uring th e peri od of the g oing c onc ern assessment; and • Revie w of the rel ated dis clo sure s in the Ann ual Rep or t. Ba se d on the work we h ave per form ed, we h ave not ide ntii ed any materi al unc er tainti es rel ating to event s or co nditio ns that , indiv idual ly or co lle ctively, may cast s igni ic ant doub t on the G roup’s and the Parent C om pany ’ s abili ty to co ntinue a s a going c onc ern fo r a peri od of at le ast t welve m onths fro m when th e Fin anci al Sta temen ts are authorised f or issue. In aud iting the F inan cial S tatem ents , we have con clud ed th at the dire ctors ’ use of th e goin g con cern b asi s of acc ountin g in the pre parati on of the F inan cial S tatem ents i s appro priate. However, beca use n ot all future eve nts or c ondi tions c an b e pred icte d, this co nclu sion i s not a gu arantee a s to the Gro up’ s and th e Parent C omp any’s abilit y to co ntinue a s a going c onc ern . In rel ation to the di rector s’ repo rti ng on how th ey have appl ied th e UK C orp orate G overnan ce C ode, we h ave nothing m aterial to a dd or draw at tentio n to in relatio n to the dire ctors’ s tatem ent in th e Fin ancia l State ment s abo ut whe ther th e direc tors co nsi dere d it app ropriate to ad opt the g oing c onc ern ba sis of a cc ounting . Our re spo nsib ilitie s and th e resp ons ibilitie s of the d irecto rs with resp ec t to going c onc ern are d esc ribe d in the re levant se ctio ns of this re por t. Reporting on other inf ormation The oth er info rmation c omp rise s all of th e informati on in the A nnual Rep or t other th an the F inan cial S tatem ents an d our au ditors’ re por t there on. T he dire ctors a re resp onsi ble for th e othe r informati on, whic h inclu des re por ting b as ed on th e T a sk Force o n Clim ate- relate d Fin ancia l Dis clo sures ( TCFD) rec omm end ation s. Ou r opini on on the F inan cial S tatem ents d oe s not cove r the othe r informa tion and, a cco rdingly, we do not expres s an au dit opin ion or, e xcept to the exte nt othe rwi se exp licitly s tate d in this rep or t, any form of assurance t hereon. In co nne ction w ith our au dit of the F inan cial S tatem ents , our resp on sibilit y is to re ad the oth er infor mation a nd, in do ing so, to con sid er whe ther th e other i nformati on is mate rially i nco nsis tent with the F inan cial S tatem ents o r our kn owle dge o btain ed in th e audit o r othe rwi se ap pea rs to be m ateriall y mis state d. If we i dentif y an app arent m aterial in con sis tency o r materia l mis state ment , we are requ ired to pe rfo rm proc ed ures to co nclu de whe ther th ere is a materi al mis sta teme nt of the Fin anci al St ateme nts or a m aterial mis state ment o f the othe r inform ation. I f , bas ed o n the work we h ave pe rfor med, we c onc lude th at the re is a materi al mis st ateme nt of this other i nformati on, we are req uired to rep or t that fa ct. We have nothin g to repor t b ase d on the se re spo nsib ilitie s. With re spe ct to the S trategi c Rep or t and Di rector s’ Rep or t, we als o con sid ered w hethe r the dis clo sure s require d by the U K Com pani es Act 20 0 6 have be en inc lude d. Ba se d on our wo rk unde rt aken in the c our se of the a udit, t he Co mpan ies Ac t 200 6 re quires u s also to re por t ce r tain o pinio ns and mat ters a s des crib ed b elow. Strategic Report and Dir ectors’ Report In our o pinio n, bas ed o n the work u nder t aken in the c ours e of the audit , the info rmation g iven in the S trateg ic Rep or t and Di rector s’ Rep or t for the yea r end ed 3 1De cemb er2 02 1 is co nsis tent with th e Fin ancia l State ment s and h as be en p repare d in ac cord ance w ith applicabl e legal requirements. In light o f the know led ge and u nde rst andin g of the G roup and Parent C om pany and th eir envi ronme nt obta ine d in the co urse o f the audit , we did not i dentif y any m aterial mi ss tatem ents in th e Strate gic Report and Direct ors’ R eport. Directors ’ Remunerat ion In our o pinio n, the p art o f the Dire ctor s’ Remun eratio n Rep or t to be au dited h as be en p rope rly prep ared i n acc ordan ce with th e Co mpan ies Ac t 200 6. 135 IHG | Annua l Repo rt a nd Form 20 F 202 1 Independent Audi tor’ s UK Report Group Financial Statements Corpo rate gov ernan ce statem ent The L istin g Rules re quire us to revi ew the dire ctors ’ state ment s in relati on to going c onc ern, l ong er -term vi abilit y an d that pa rt of th e cor porate g overnan ce st ateme nt relati ng to the Pare nt Co mpany ’s com plian ce wi th the provis ions o f the U K Cor porate G overna nce Co de sp ec ii ed for o ur review. Our ad dition al res pon sibili ties wi th resp ec t to the co rpora te governan ce st atem ent as oth er infor mation are de scrib ed in t he Rep or ting on oth er info rmatio n sec tion of this r eport. Ba se d on the work u nde rt aken as p ar t of our au dit, we have con clud ed th at eac h of the foll owing e lem ents of th e cor porate govern ance s tatem ent in clud ed with in the St atem ent of co mpli anc e is mate rially c ons iste nt with the F inanc ial St atem ents an d our knowl ed ge obt aine d during th e audi t and we have noth ing mate rial to add o r draw atte ntion to in rel ation to: • Th e direc tors’ c on irmatio n that they h ave carrie d out a ro bust as ses sm ent of the e me rging and p rinci pal ris ks; • Th e disc los ures in th e Annua l Repo rt t hat de scrib e tho se prin cipa l risks , what pro ce dures a re in pla ce to ide ntif y eme rging ris ks and an expl anatio n of how the se are b eing m ana ged o r mitigate d; • Th e direc tors’ st ateme nt in the F inan cial S tatem ents a bout w hethe r they co nsi dere d it app ropriate to ad opt the g oing c onc ern ba sis of ac counti ng in pre paring th em an d their i denti ic ation o f any materi al unc er tainti es to the G roup’s and Parent C om pany ’ s abili ty to contin ue to do so ove r a peri od of at l eas t twe lve month s from the date of a pproval of th e Fina ncia l State ment s; • Th e direc tors’ exp lanati on as to the ir as ses sm ent of th e Group’s and Pa rent C ompa ny’s prosp ect s, the p erio d this a sse ss ment cover s and why the p erio d is ap propri ate; and • The dir ectors’ statemen t as t o whe ther t hey ha ve a reasonable expe cta tion that th e Parent C om pany will b e able to c ontinu e in ope ration a nd me et its l iabili ties a s they fall du e over the p erio d of its a sse ss ment , incl uding a ny related di scl osure s drawing at tenti on to any nec es sar y qu ali icati ons o r ass umptio ns. Our revi ew of the dire ctor s’ state ment re gardin g the lo nger-term viab ilit y of the Gro up was su bst antially l es s in sc ope th an an au dit and o nly co nsis ted of m akin g inquiri es an d con side ring th e direc tors’ pro ce ss su ppo rti ng thei r state ment ; che ckin g that the sta tement i s in align ment w ith the rel evant provis ions o f the UK Co rpor ate Govern ance C o de; and c ons ide ring wh ether th e sta tement i s con sis tent with th e Fina ncia l State ment s and ou r knowl ed ge and un der sta nding o f the Gro up and Pa rent C ompa ny and th eir enviro nme nt obtai ned i n the co urse o f the audi t. In ad dition, b as ed on th e work un der taken a s par t of o ur audit , we have con clud ed th at eac h of the foll owing e lem ents of th e co rporate govern ance s tatem ent is m ateria lly co nsis tent with th e Fina ncia l St ateme nts and o ur know led ge obt aine d durin g the audi t: • Th e direc tors’ st ateme nt that th ey con side r the Ann ual Re por t, taken a s a whol e, is fair, balanc ed an d unde rst and able a nd provid es the in formatio n nec es sa ry fo r the me mbe rs to as ses s the G roup’s and Parent C omp any’s pos ition, p er form anc e, business model and stra tegy ; • Th e sec tion of th e Annu al Rep or t that de sc ribe s the review of ee ctive nes s of ris k man age ment an d intern al contro l system s; and • Th e sec tion of th e Annu al Rep or t des crib ing the wor k of the Audit Commit tee. We have nothing to rep or t in res pe ct of ou r resp ons ibilit y to rep or t whe n the dire ctors’ s tatem ent rel ating to the P arent C omp any’s com plian ce wi th the Co de do es n ot prop erly di scl ose a d epa rture from a rel evant provis ion of th e Co de sp eci ie d und er the L istin g Rule s for review by the a uditor s. Res po ns ibil itie s for th e Fin anc ial S tate me nts a nd th e au dit Res po ns ibil itie s of th e dire cto rs for t he Fin an cia l Sta tem ent s As expl aine d more fu lly in the S tatem ent of D irecto rs’ Re spo nsib ilitie s, the dire ctors a re resp ons ible fo r the prep aratio n of the Fi nanc ial St ateme nts in ac cord anc e with the ap plic abl e framewo rk and for bei ng sati s ied th at they give a tru e and fai r view. The direc tors are als o resp ons ible fo r such i nternal c ontrol a s they dete rmine i s ne ces sa ry to e nabl e the pre paratio n of Fin anci al St ateme nts that are free fro m materi al mis state ment , wheth er du e to fraud or e rror . In pre parin g the Fin anci al St ateme nts, the d irecto rs are res pon sibl e for as se ssi ng the G roup’s and the Pare nt Co mpany ’s ability to conti nue as a g oing c onc ern, di sclo sing , as app lica ble, m atte rs relate d to going c onc ern an d usin g the goi ng co nce rn bas is of acc ountin g unle ss th e direc tors eith er inten d to liqui date the G roup or the P arent C omp any or to cea se op erati ons o r have no real istic altern ative but to do s o. Aud itors’ re s pon sib ilit ies fo r th e aud it of th e Fina nc ial S tate me nts Our o bjec tives a re to obtain re aso nab le as suran ce ab out wh ethe r the Fi nanc ial St ateme nts as a w hole a re free from m ateria l mis state ment , wheth er du e to fraud or e rror , a nd to is sue an audit ors’ r eport that incl udes our opi nion. R easonable assurance is a high l evel of as sura nce, b ut is no t a guarante e that an a udit con duc ted in ac co rdanc e with ISA s (UK ) will a lways detec t a materi al mis state ment w hen it ex ists . Mis st ateme nts c an aris e from frau d or error a nd are co nsid ere d materia l if , indi vidua lly or in th e aggre gate, they co uld rea son ably b e expe cte d to inlu enc e the e con omic dec isio ns of u ser s taken on th e bas is of th ese F inan cial S tatem ents . Irreg ulariti es, in cludi ng fraud , are inst anc es of n on- c ompl ianc e with laws a nd reg ulation s. We de sign p roce dures i n line with o ur resp on sibiliti es, o utline d above, to de tect m aterial m iss tatem ents in res pec t of irreg ulariti es, in clud ing frau d. The ex tent to whi ch our proc edu res are c apab le of de tectin g irregul aritie s, inc ludin g fraud, is det aile d be low. Ba se d on our un der sta nding o f the Grou p and in dustr y in wh ich it ope rates , we identi ie d that th e princ ipal ri sks of no n- c ompli anc e with laws a nd reg ulation s relate d to the fail ure to comp ly with th e Lis ting Rule s, U K and over sea s tax l egi slatio n, emp loyme nt laws and re gulatio ns an d heal th and s afet y legi slatio n, and we c ons ide red the ex tent to whic h non -c omp lianc e might h ave a material e ec t on the F inan cial S tatem ents . We also c ons ide red tho se laws a nd regul ation s that have a dire ct imp act o n the Fin anci al St ateme nts suc h as the C omp anie s Act 20 0 6. We evaluate d man age ment ’s inc entives a nd op por tuniti es for fr audul ent man ipula tion of the Fin ancia l State ment s (inc luding th e risk o f override o f control s) and we d etermin ed tha t the prin cipa l risks we re related to p osti ng inap propr iate journ al entrie s and m ana gem ent bia s in allo catin g expe nse s to the Sys tem Fund and in a cc ounting fo r key estimate s, incl uding I HG Rewa rds defe rred reven ue. Th e Group a udit te am sha red this ri sk as se ss ment w ith the co mpo nent a uditor s so that they co uld inc lude a pprop riate aud it proc edu res in res po nse to su ch risks i n their wo rk. Audi t proc edure s pe rfo rmed by th e Group a udit team and / or component audit ors included: • In quirie s of man age ment , interna l audit a nd the G roup’s legal cou nse l, inclu ding c ons ider ations o f known o r sus pec ted in sta nce s of non - co mplia nce wi th laws an d regula tions a nd fraud; • Review of corr espondence received f rom r egulat ors and con sid eratio n of the imp act , if any , on o ur audi t and the d isc losu res made in the inanc ial stat ements; • Evaluatio n and tes ting of th e ee ctiven es s of man age ment ’s contro ls de sign ed to prevent a nd dete ct irre gulari ties; • As se ss ment of m atte rs rep or ted on th e Group’s whis tleb lowing help line a nd the re sults o f mana gem ent ’s investigatio n of such matters; 136 I HG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Indepe ndent A udit or’ s U K Repor t c o nti nu e d • Ide ntiication and testing of signiicant manual journal entries, in particular any journal entries posted with unusual account com binati ons wh ich res ulted in a n impa ct on reven ue or th e System F und; and • Ch alle nging a ssu mption s and ju dge ment s mad e by mana gem ent in mak ing sig ni icant a cc ounting e stim ates, in p ar ticula r in relati on to IH G Rewards loyalt y pro gramm e defe rred revenu e and exp ecte d credi t losses. The re are inhe rent limit ation s in the au dit pro ce dures d esc ribe d above. We are les s likely to be co me aware of in sta nce s of non - co mplia nce with laws a nd reg ulation s that are n ot clo sely re lated to eve nts and trans acti ons re le cted i n the Fin anci al St ateme nts. A lso, the ri sk of not de tectin g a materi al mis state ment d ue to fraud i s highe r than th e risk o f not dete cting o ne res ulting fro m error , as frau d may involve deli bera te conc ea lment by , for examp le, forge ry o r intentio nal misrepresentat ions or th rough col lusion. Our au dit tes ting mig ht inclu de tes ting co mpl ete pop ulatio ns of ce rt ain tran sac tion s and ba lanc es, p os sib ly usin g data a uditin g tech nique s. H owever , i t typ ical ly involves s ele ctin g a limited n umbe r of item s for tes ting, rathe r than te sting c omp lete po pula tions . We will of ten se ek to ta rget pa rti cular i tems for te sting b ase d on their s ize or ri sk ch aracte risti cs. I n other c as es, we wi ll use a udit sam pling to e nabl e us to draw a co nclu sio n abou t the po pula tion from whi ch the s ampl e is se lec ted. A fur ther d es criptio n of our re spo nsib ilitie s for the au dit of the Fi nanc ial St ateme nts is l oc ated on th e FRC ’s website at: ww w .fr c.org. uk/ auditorsresponsibilities . This de sc ription for ms par t of ou r auditor s’ rep or t. Us e of thi s rep or t This re por t, i nclu ding the o pinio ns, ha s be en pre pare d for and o nly for the P arent C ompa ny’s memb ers a s a bo dy in ac cord anc e with Cha pter 3 of Pa rt 1 6 of the C omp anies A ct 20 06 a nd for no oth er purp ose . We do not, in g iving th ese o pinio ns, a cce pt or as sum e resp on sibilit y for a ny other pur pos e or to any othe r per son to wh om this rep or t is sh own or into wh os e hand s it may co me save wh ere expre ssl y agree d by our pri or co nse nt in writin g. O the r re qui red re po r ti ng Co mpa nie s Act 2 00 6 excep tion r ep ort ing Und er the C omp anie s Act 20 0 6, we are req uired to rep or t to you if, in our opinion: • We have not ob tain ed all th e informa tion and ex plan ation s we requi re for our au dit; o r • Ade quate a cco unting re cord s have not be en kept by th e Parent Co mpany , or return s ade quate for o ur audit h ave not be en rec eived f rom bran che s not vis ited by us; o r • C er tain d iscl osure s of dire ctors’ re mune ration s pe ci ied by law are not m ade; o r • Th e Parent C omp any Fina ncia l State ment s and th e par t of the Dire ctors’ R emun eratio n Repo rt to b e audite d are not in a gree ment with the a cc ounting re cord s and return s. We have no exceptio ns to rep or t arisi ng from thi s resp ons ibilit y . Appoi ntment Followin g the rec omm end ation of th e Audit C ommi tte e, we were app ointe d by the me mbe rs at the An nual G en eral M eetin g on 7 M ay 202 1 to audit the F inan cial S tatem ent s for the yea r end ed 31D ec emb er202 1 an d subs equ ent inan cial p erio ds. T his is there fore our irst ye ar of uninte rrupte d enga gem ent. Other matt ers In due c our se, as re quire d by the Fin anci al Co nduc t Author ity Dis clo sure Gu idan ce and Transp arency Rul e 4.1. 14R , thes e i nanc ial statements will form part of the ESEF-prepared annual inan cial report il ed on th e Nati onal S torag e Me chani sm of th e Finan cial C on duct Autho rity in a cc ordan ce with th e ESE F Regul ator y T e chnic al St anda rd (‘ES EF RTS ’). Thi s audito rs’ rep or t provid es no a ssu ranc e over whe ther th e annua l in anci al repo rt w ill be p repare d usi ng the singl e ele ctroni c format s pe ci ied in t he ESE F RTS. Giles Hannam ( Senior Statut ory Audit or ) for and o n be half of P ricewate rhou se Co ope rs LL P Cha rte red Ac count ants a nd St atutor y Audito rs London 21Feb ruar y20 2 2 137 IHG | Annua l Repo rt a nd Form 20 F 202 1 Independent Audi tor’ s UK Report Group Financial Statements Report of Inde pende nt Registered Public Accounting Firm T o th e bo ard of direc tors an d share hol der s of Inter Co ntinent al Hote ls Grou p PLC Op inio ns o n the Fi nan ci al St atem ent s an d Inte rnal C ont rol over Fin anc ia l Rep ort ing We have audite d the ac com panying G roup s tatem ent of inan cial po sition o f Inter Conti nent al Hote ls Gro up PLC and it s subs idiar ies (the ‘Group’ ) as of 3 1 De cem ber 2 02 1 and the re lated G roup inc ome s tatem ent and G roup s tatem ents of c omp rehe nsive in com e, cha nges i n equi ty an d ca sh l ows for the ye ar then e nde d, the Acc ounting p olic ies a nd the rel ated n otes (colle ctive ly referre d to as the ‘G roup Fi nanc ial St ateme nts’ ). We also have au dited th e Group’s interna l contro l over in anci al rep or ting as of 3 1 De ce mbe r 202 1, ba se d on crite ria es tab lish ed in In ternal C ontrol — I ntegrate d Framework (2 013) is sue d by the C ommit tee o f Spo nso ring Orga niz ations o f the T re adway C ommi ssi on (COS O). In our o pinio n, the G roup Fin anci al St ateme nts referre d to above pres ent fai rly , in a ll materi al resp ec ts, th e in ancia l pos ition of t he Group a s of 31 D ec emb er 20 21 a nd the re sults o f its op eratio ns and it s ca sh l ows for the ye ar then e nde d in ac cord anc e with (i) Intern ation al Fin anci al Rep or ting St and ards as i ssu ed by the Intern ation al Acc ounting S tan dards B oa rd and (ii) U K -ad opte d Intern ation al Acc ounting S tan dards . Als o in our o pinion , the Gro up maint aine d, in all m aterial re spe ct s, ee ctive inte rnal c ontrol over in anci al rep or ting as of 3 1 De ce mbe r 202 1, ba sed o n criteri a est abl ishe d in Inte rnal C ontrol — I ntegrate d Framework (20 13) is sue d by the CO SO. Basis for Opinions The G roup’s manag eme nt is res po nsib le for the G roup F inanc ial St ateme nts, for m aintai ning e ecti ve internal c ontrol ove r in ancia l repo rti ng and fo r its as se ss ment of th e ee ctive nes s of intern al contro l over i nanc ial rep or ting, in clud ed in M ana gem ent ’s repo rt o n intern al contro l over i nanc ial rep or ting on p age 13 0. Our re spo nsib ilit y is to expre ss op inion s on the G roup Fi nanc ial St ateme nts and o n the Gro up’s internal co ntrol over inan cial repo rti ng ba sed o n our au dit. We are a pub lic ac cou nting irm regis tered w ith the Pu blic C omp any Acco unting O vers ight Bo ard (Unite d St ates) (PCAOB) an d are requi red to be in dep en dent wi th resp ec t to the Grou p in acc orda nce wi th the US fe de ral se curitie s laws an d the app lic able ru les a nd regu lation s of the S ecuri ties an d E xchang e Com mis sion a nd the P CAOB. We cond ucte d our au dit in ac cord anc e with the s tand ards of th e PCAO B. Th ose s tan dards re quire that we p lan an d pe rfor m the audi t to obta in reas ona ble as sura nce a bout w heth er the G roup Fin anci al St ateme nts are fre e of materi al mis state ment , wheth er du e to error or frau d, and wh ethe r ee ctive intern al co ntrol over inan cial repo rti ng was m aintain ed in a ll materi al resp ec ts. Our au dit of th e Group F inan cial S tatem ents in clud ed p er formin g proc edu res to as se ss the ri sks of m aterial mi ss tatem ent of the G roup Fin ancia l State ment s, whe ther d ue to error o r fraud, an d pe rfo rming proc edu res that re sp ond to tho se ris ks. Su ch pro ce dures in clud ed examinin g, on a tes t bas is, evi den ce reg arding th e amoun ts and dis clos ures in th e Group F inan cial S tatem ents . Our a udit al so incl ude d evaluatin g the ac cou nting prin cipl es us ed an d signi i cant esti mates m ade by m anag eme nt, as we ll as evalu ating the ove rall pres ent ation of th e Group F inan cial S tatem ents . Our a udit of inte rnal control over inanci al repor ting included o btaining an under standing of intern al co ntrol over inanc ial rep or ting, a sse ss ing the ri sk that a materi al weak ne ss exis ts an d testin g and evalu ating the d esi gn and ope rating e ec tivene ss o f internal c ontrol b as ed on th e as ses se d risk . Our a udit al so inc lude d pe rfo rming su ch othe r proc ed ures as we con sid ered n ec es sar y in the c ircums tan ces . We beli eve that our audit p rovide s a reas ona ble b asis fo r our op inion s. Dei nition and Limitatio ns of Internal Cont rol over Fin anc ia l Rep ort ing A com pany ’s internal co ntrol over inan cial rep or ting i s a proc es s des igne d to provid e reas onab le as sura nce re gardin g the relia bilit y of i nanc ial rep or ting an d the prep aratio n of i nanc ial st ateme nts for ex ternal p urpo se s in acc ordan ce wi th gen erally a cc epted acc ountin g princ iple s. A c ompa ny’s internal c ontrol ove r in ancia l repo rti ng inc lude s thos e po licie s and pro ce dures th at (i) pe rt ain to the mai ntenan ce of re cords th at, in re aso nabl e det ail, ac curately and fai rly re lec t the tran sac tions a nd dis po sition s of the a sse ts of the compan y; (i i) pr ov ide reasonable assurance that transact ions ar e rec orde d as ne ce ss ary to p ermi t prepa ration of ina ncia l state ment s in ac corda nce w ith gen erall y acc epte d acc ounting p rinci ple s and that rec eipt s and exp en ditures of th e co mpany are b eing m ade on ly in ac corda nce w ith autho riz ations o f mana gem ent an d directo rs of the c omp any; and (iii) provid e reas ona ble as sura nce re gardin g preventio n or time ly dete ctio n of unau thoriz ed ac quis ition, u se or disp os ition of th e com pany ’ s as set s that co uld have a mate rial e ec t on the inancial statemen ts. Be cau se of it s inhe rent limi tatio ns, intern al co ntrol over inan cial repo rti ng may not p revent or de tect mi sst atem ents . Als o, projec tions of any evaluati on of e ecti vene ss to future p erio ds are su bjec t to the risk th at co ntrols may b eco me in ade quate b ec ause o f chan ges in con ditio ns or tha t the de gree of c omp lianc e with th e poli cies o r procedures may deteriorate. Crit ical Audi t Ma tters The c ritica l audit m atte rs co mmuni cated b el ow are mat ters ari sing from the c urrent p erio d audit of th e Grou p Fina ncial S tate ment s that were co mmuni cate d or requ ired to be c omm unic ated to the au dit com mit tee and th at (i) rel ate to acco unts o r disc los ures that a re materia l to the Gro up Fina ncia l State ment s and (ii) i nvolved ou r esp ec ially chal leng ing, sub jec tive, or co mpl ex judgm ents . The c ommu nicati on of criti cal au dit mat ters d oe s not alte r in any way our opin ion on th e Group F inan cial S tatem ent s, taken a s a whol e, and we are n ot, by com munic ating th e critic al audi t mat ters b elow, providing s epa rate opin ions o n the criti cal au dit mat ter s or on th e acc ounts o r dis clos ures to whi ch they rel ate. Bre aka ge a ss ump tion u se d to e stim ate IH G Reward s loyalt y progra mme defe rred revenue As de scri be d in the Es timate s sec tion of th e Acc ountin g poli cies and in n ote 3 to the Grou p Fina ncial S tate ment s, defe rred revenu e relatin g to the IH G Rewards l oyalty p rogram me was $ 1,2 92m a s of 31 D ec emb er 20 21. T he hote l loyalt y progra mme, I HG Rewa rds, ena ble s mem ber s to earn p oints , funde d throu gh hotel a ss es sme nts, during e ach q ualif yin g stay at an I HG b rand ed hote l and to c onsu me point s at a later d ate in exchan ge for ac co mmod ation o r other b ene i ts. The G roup rec ogn ise s defe rred revenu e in an am ount that re le cts the G roup’s unsatis i ed pe r forman ce ob ligatio ns, val ued at th e sta nd- alo ne se lling p rice of th e future b ene it to th e memb er. The a mount of reve nue rec ogn ise d and d eferre d is imp acte d by the esti mate of bre akag e which i s the e stimate of th e numb er of p oints that will n ever b e con sume d. Th e Group e nga ges a n extern al ac tuar y who u ses s tatis tica l formula e to as sist in d etermi ning this b reak age esti mate. Si gni ica nt estim ation un ce rt aint y exist s in proje cting mem ber s’ future c ons umption a ctivi ty an d how this m ay be imp ac ted by C ovi d-19. 138 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Independent A uditor’ s US R eport The p rincip al co nsi derati on for our d etermi nation th at pe rfo rming proc edu res rel ating to the bre akag e as sumpti on us ed to es timate IH G Rewards l oyalty p rogramm e defe rred revenu e is a cri tical a udit mat ter is th at there i s signi ic ant es timatio n unc er taint y in proj ecti ng mem ber s’ future c ons umption a ctivi ty an d how this m ay be impa cted by C ovid -19. This in tur n led to a hig h degre e of au ditor judg ment , subje ctivi ty an d eo rt in p er formin g proc edu res to evaluate th e break age a ssu mption an d the rel ated au dit evid enc e. The au dit e or t involved th e use of p rofes sion als wi th spe cial ise d skill and knowledge. Addre ssi ng the ma tter i nvolved p er forming p roce dure s and evalu ating audit ev ide nce in c onn ecti on with form ing our ove rall opi nion o n the Group F inan cial S tatem ent s. The se p roce dure s inclu de d testin g the ee ctiven es s of co ntrols rel ating to ma nage ment ’s determ inatio n of the bre akag e as sumptio n. Th ese p roc edure s als o inclu ded , amon g other s, (i) tes ting a s ampl e of dat a use d by mana gem ent ’s actuar y in deri ving the b reak age as sum ption to und erly ing rec ords; (ii) a ss es sing the co mpe tenc e and ob jec tivit y of man age ment ’s exper t ; (iii) as se ssin g the rea son abl ene ss of th e meth ods an d as sumptio ns us ed by man age ment ’s actuar y in d etermini ng bre akage ; (iv) develo ping an inde pe nde nt expe ctati on of a rea son ably p os sibl e rang e for defe rred revenue b ase d on in dep en dently d etermin ed b reaka ge as sumpti ons; (v ) com parin g the defe rred reven ue bal anc e, which re le cte d man age ment ’s assu mption s abo ut the on goin g impac t of C ovid-19 on futu re activi ty of p rogram me me mbe rs, with o ur ind epe nde ntly cal culate d rang e; and (vi) as se ssi ng the ap propri atene ss of th e relate d disclosures incl uding sensitiv ity analysis i n the Gr oup Financial St ateme nts. Profe ss iona ls with s pe ciali sed s kill an d knowl ed ge were use d to as sist i n the evalu ation of th e break age a ssum ption. Allo ca tion o f expe ns es to th e Sys tem Fund As de scri be d in the Sys tem Fund and oth er c o- bran d revenue s se ction of the Ac cou nting po licie s and in n ote 33 to the G roup F inanc ial St ateme nts, the G roup re corde d Sys tem Fund expe nse s of $ 939 m for the ye ar end ed 3 1 De cem ber 2 02 1. The G roup o perate s a Sys tem Fund to coll ect an d admi niste r cas h as ses sm ents fro m hotel own ers . E xpe nse s incur red are all oca ted to the Sy stem Fund in ac co rdanc e with the p rinci ple s agree d with th e IH G Own ers As so ciatio n. The p rincip al co nsi derati on for our d etermi nation th at pe rfo rming proc edu res rel ating to the all oc ation of exp ens es to th e Syste m Fund is a critic al au dit mat ter is th at the re is judg eme nt involved in devel opin g the intern al po licie s in orde r to appl y the prin cipl es agre ed with th e IH G Own ers A sso ciati on to expe nse s inc urred an d there i s com plexit y in su bse que ntly evaluati ng whe ther exp ens es are app ropriate ly allo cate d to the Sys tem Fund in line w ith the se intern al pol icie s. Thi s in turn le d to a high de gree of a uditor judg ment , subje ctivi ty an d eo rt in p er formin g proc edu res to evaluate ma nag eme nt’s cla ssi ic atio n of expe nse s. Addre ssi ng the ma tter i nvolved p er forming p roce dure s and evaluati ng audit ev ide nce in c onn ecti on with for ming our ove rall opin ion on th e Group F inan cial S tatem ents . The se p roce dure s incl ude d testin g the e ective ne ss of c ontrols re lating to al loc ation of expe ns es to the Sy stem Fund. Th es e proc edu res als o incl ude d, amo ng othe rs, (i) un der stan ding an d as ses sin g the intern al po licie s that the G roup h as put i n plac e in orde r to appl y the prin cipl es agre ed with th e IH G Own ers A sso ciati on to expe nse s inc urred; (ii) tes ting a sa mple o f expe nse s that ha d be en all oca ted to the Syste m Fund to ass es s wheth er they we re in com plian ce with th es e pol icie s and c onsi stent wi th histo rical p racti ce; an d (iii) ch eck ing wheth er the re were any man ual jo urnal e ntries th at trans ferred expe nse s to or from th e Syste m Fund to evaluate whe ther th ere was an ap prop riate ration ale for a ny such jo urnal s and to dete rmine wheth er the re sultin g cla ssi ic ation o f the exp ens es was i n line with the pri ncipl es a gree d with the I HG O wne rs As soc iation . Ex pe cte d cre dit lo s se s on tra de re ce ivabl es As de scri be d in the Es timate s sec tion of th e Acc ountin g poli cies and in n ote 18 to the Gro up Fin ancia l State ment s, the G roup rec orde d a provisi on for exp ecte d cre dit los se s of $1 33m a s of 31 D ec emb er 202 1 ag ains t a gross t rade re ceiva ble s bal ance of $5 32m . A provisi on for imp airme nt is ma de for li fetime exp ecte d cred it los se s. M anag eme nt has e st ablis he d a provisi on matri x that is ba se d on his toric al cred it los s expe rien ce by regi on and nu mbe r of days pa st du e. Whe re the his toric al expe rien ce is no t relevant to de ine d owne r group s, for examp le owne rs with p ayme nt plan s, the exp ecte d lifetim e los se s are cal culate d by referen ce to othe r sou rces of d ata. A lthou gh ca sh co lle ction fro m owner s has improve d sinc e 2020, th e prop or tion of ol der d ebt is h ighe r than in pe riods p rior to th e pand emic . There a lso re mains a ri sk of re duc ed owne r liquid ity. Thes e factor s, ta ken togeth er with th e conti nue d unc er tainti es ab out the p ac e and sc ale o f market rec over y , re sult in expe cte d credi t los se s contin uing to be a s igni ic ant es timate. The p rincip al co nsi derati on for our d etermi nation th at pe rfo rming proc edu res rel ating to expe cte d credi t los ses o n trad e rece ivabl es is a criti cal au dit mat ter i s the sign ii cant e stim ation un cer ta inty involved i n determi ning the l evel of exp ecte d cre dit los se s. Th is in turn le d to a high de gree of a uditor ju dgm ent, su bjec tivit y and e or t in pe rfo rming pro ce dures to eval uate man age ment ’s estim ates. Addre ssi ng the ma tter i nvolved p er forming p roce dure s and evaluati ng audit ev ide nce in c onn ecti on with for ming our ove rall opin ion on th e Group F inan cial S tatem ents . The se p roce dure s incl ude d testin g the e ective ne ss of c ontrols re lating to exp ec ted cred it los se s. Th ese p roc edure s als o inclu de d, amon g other s, (i) tes ting the m athem atica l integrit y of m anag eme nt ’ s expe cted cred it los s matrix ; (ii) te sting a s ampl e of the hi storic al ag ed receivables analys is and collections experien ce underpinning the mod el to und erly ing rec ords; (ii i) ass es sing a ssu mption s use d in the mod el ag ains t rece nt histo rica l experi enc e of regi onal c olle ctio ns; (iv) ass es sing th e appro priate nes s of exp ecte d lifetim e los se s for those owner gro ups wher e management deter mined hist orical expe rien ce not to b e relevant a nd obt aining ev iden ce to dete rmine wheth er the se p rovisio ns were re quired to s tate trad e rec eivab les at their n et rea lisa ble valu e; (v ) evaluati ng whe ther th e overall provi sion rec orde d is sup por ta ble an d in co mplia nce wi th the req uireme nts of IFR S 9; (vi) reviewing i nternal m ana gem ent rep or ting to ide ntif y any contrad ictory e vidence; a nd ( vii ) assessing the appropr iat eness of the rel ated dis clo sure s in the Gro up Fin ancia l Sta tement s. 139 IH G | Annua l Repo rt a nd Form 20 F 202 1 Independent Audi tor’ s US R eport Group Financial Statements Rec ogn itio n of th e UK de ferre d tax a s set As de scri be d in the T axes se ctio n of the Ac cou nting po licie s and in n ote 8 to the Grou p Fina ncial S tate ment s, a defe rred t ax as set of $ 127m was re cog nise d relate d to the U K tax gro up as of 31 D ec emb er 202 1. J udg eme nt is us ed wh en as se ssi ng the ex tent to which d eferre d tax a ss ets, p ar ticula rly in res pe ct of ta x los se s, sho uld be re co gnis ed. D efer red ta x ass ets a re therefo re reco gnis ed to the exte nt that it i s regard ed as p roba ble tha t there will b e su ici ent and s uita ble t axabl e pro its in th e relevant l ega l entit y or ta x group ag ains t which s uch a sse ts ca n be utili se d in the futu re. For this p urpo se, fore cas ts of fu ture taxa ble pro it s are con sid ered by ass es sing th e Grou p’ s forec ast reve nue an d pro it mod els , tak ing into ac cou nt future grow th pre dictio ns an d ope rating c ost as sumptio ns. T he rec overab ilit y of the U K deferre d ta x ass et ha s be en as se ss ed by st ar ting with th e man agem ent ’s foreca sts , overlayin g tax p rincip les to th ose fo reca sts a nd follow ing the meth odo logy re quire d by IAS 12. Th is ha s dem onstr ated that th e UK defe rred ta x as set sh ould reve rse over a s even - to ten-yea r peri od. Und er U K law, tax los se s do not exp ire but th ey can on ly be o set agai nst 50 % of ann ual U K taxa ble pro it s. The p rincip al co nsi derati on for our d etermi nation th at pe rfo rming proc edu res rel ating to rec ogniti on of the U K de ferred t ax as set i s a critic al au dit mat ter is th e signi ic ant e stimati on unc er taint y involve d in dete rmining th e future t axabl e pro its of th e UK t ax group. T his in turn le d to a high de gree of a uditor ju dgm ent, su bjec tivit y and e or t in evalua ting audi t evide nce a nd in dete rminin g the rea son able ne ss of the fore ca st seve n- to ten -year p erio d to recover th is as set. In ad dition, th e audi t eor t involve d the us e of profe ssi onal s with sp ecia lized s kill an d know led ge. Addre ssi ng the ma tter i nvolved p er forming p roce dure s and evaluati ng audit ev ide nce in c onn ecti on with for ming our ove rall opin ion on th e Group F inan cial S tatem ents . The se p roce dure s incl ude d testin g the e ective ne ss of c ontrols re lating to th e rec ogniti on of de ferred t ax as set s and th e Group’s forec astin g process. These procedures a lso included, among ot hers, (i) pe rfo rming a retro spe ctive c ompa riso n of UK fo rec ast t axabl e pro its to ac tual p ast p er forma nce to de termine th e his torica l acc uracy of m ana gem ent ’s f orec as ting; (ii) eval uating th e appropr iat eness of the assumpt ions r elected in t he UK f orecasts, includi ng assessing t he reasonableness of gr owth pr edictions compared to historical experience and indus try data and be nchm arkin g mana gem ent ’s estimate to third -p ar ty s ource s; (iii ) assessing t he appr opriat eness of tax ov erla y adjust ments a pplied to the fore cas ts by refere nce to the re quire ment s of tax p rinci ple s, incl uding th e restri ction o f los se s to 50% of an nual U K tax able pro its, a nd dete rmining w hethe r the U K defe rred t ax as set m eet s the rec ogn ition cr iteria of I AS 12; (iv) as se ssin g the ap propri atene ss of the fore ca st rec over y per iod of s even to ten yea rs; and (v ) ass es sing t he app ropriate nes s of the re late d disc losu res in the Group Financial Stateme nts. Professionals with specialis ed skills and k nowle dge we re use d to as sist i n the evaluati on of rec ogn ition of the U K defe rred t ax as set. /s/Pricewaterh ous eC oop er s LLP London, E ngland 21 Feb ruar y 20 2 2 We have ser ved a s the C omp any’s auditor s inc e 202 1. 140 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Indepe ndent A udit or’ s US Repor t c o ntin u e d Report of Inde pende nt Registered Public Accounting Firm T o th e Share hol der s and the B oa rd of Direc tors of I nterC ontin ent al Hote ls Grou p PLC Op inio n on th e Fin anc ial S tate me nts We have audite d the ac com panying G roup s tatem ent of inan cial po sition o f Inter Conti nent al Hote ls Gro up PLC (the ‘Group’ ) as of 31 D ec emb er 20 20, the rela ted Gro up sta temen ts of inc ome, com preh ens ive inco me, ch ange s in e quit y and c ash lows for e ach of the t wo year s in the pe riod e nde d 31 D ec emb er 20 20, and the relate d notes (col lec tively refe rred to as th e ‘Grou p Fina ncial St ateme nts’). I n our opi nion, th e Group F inan cial S tatem ents pres ent fai rly , in a ll materi al resp ec ts, th e in ancia l pos ition of t he Group a t 31 De ce mbe r 202 0, and the res ults o f its op eratio ns and it s ca sh l ows for ea ch of the t wo year s in the p erio d end ed 31 D ec emb er 202 0, in confo rmit y with Inter nation al Fin anci al Rep or ting St and ards as i ssu ed by the I nternati onal Ac co unting St anda rds Bo ard, ado pted pu rsua nt to Regul ation (EC) No. 16 06/20 02 a s it app lies in th e Europ ean U nion. Basis for Opinion The se G roup Fin anci al St ateme nts are the re sp onsi bilit y of the Group’s man agem ent. O ur res po nsibi lity i s to expres s an op inion on the G roup’s Finan cial S tatem ents b ase d on o ur audit s. We are a pub lic acc ountin g irm re gis tered wi th the PCAO B and are re quire d to be ind ep end ent with re spe ct to the G roup in a cco rdanc e with th e U.S. fe der al se curitie s laws an d the ap plic able r ules a nd regu lation s of the S ecuri ties an d E xchang e Co mmis sion a nd the P CAOB . We cond ucte d our au dits in a cco rdanc e with th e stan dards o f the PCAO B. Th ose s tan dards re quire that we p lan an d pe rfor m the audi t to obta in reas ona ble as sura nce a bout w heth er the G roup Fin anci al St ateme nts are fre e of materi al mis state ment , wheth er du e to error or frau d. Our a udit s inclu ded p er formi ng proc ed ures to as se ss the risks o f materia l mis state ment of t he Grou p Fina ncial S tate ment s, wheth er du e to error or fr aud, an d per form ing pro ced ures tha t resp ond to th ose ri sks. S uch p roce dure s inclu de d examining , on a test b asi s, evid enc e regard ing the am ounts a nd dis clo sures i n the Group F inan cial S tatem ent s. Our a udit s also i nclu ded eval uating the ac cou nting prin cipl es us ed a nd sign ii cant e stim ates ma de by man age ment , as well a s evaluatin g the overall p res entati on of the Group F inan cial S tatem ent s. We bel ieve that our a udits p rovide a reas ona ble b asis fo r our op inion . /s/ Ernst & Young LLP We ser ved a s audito rs from th e Group’s listin g in 200 3 to 202 1 and of th e Group’s pred ec es sor b usin es ses f rom 19 88. London, E ngland 2 2 Februa ry 2 02 1 Note th at the rep or t set ou t above is i nclu ded fo r the purp os es of Inter Co ntinent al H otels G roup PLC ’ s Annu al Rep or t on Form 20 F for 20 21 on ly and d oes n ot form p art o f Inter Conti nent al Hote ls Group P LC’s Annua l Repo rt a nd Acc ount s for 20 21. 141 IHG | Annua l Repo rt a nd Form 20 F 202 1 Independent Audi tor’ s US R eport Group Financial Statements 2020 Independent A uditor ’ s US Report For t he ye ar en de d 31 D ec em be r 20 21 Note 2021 $m 2020 $m 2019 $m Reven ue fro m fee b usi ne ss 3 1,153 823 1,510 Reven ue fro m owne d, l eas ed a nd ma na ged l ea se ho tels 3 237 169 573 System Fu nd re venues 928 765 1,373 Reimbursement of costs 589 637 1,171 T ot al revenue 2 2,907 2,394 4,627 Co st of s al es (486) (354) (782) Sys tem Fund ex pe nse s (939) (867) (1,422) Reimbursed costs (589) (637) (1,171) Admin istra tive exp ens es (300) (267) (385) Sha re of lo ss es o f ass oc iate s and j oint ve nture s 2 (8) (14) (3) Other opera ting income 11 16 21 Depreciation and amortisat ion 2 (98) (110) (116) Imp airm ent l os s on ina nci al as set s – (88) (8) Other imp airment charges 6 (4) (226) (131) Ope rating proit/(los s) 2 494 (153) 630 Op era ting p roi t/(l os s) anal yse d as: Op era ting p roi t be fore Sy stem Fun d and exc epti ona l item s 534 219 865 System Fu nd (11) (102) (49) Operati ng ex ceptional it ems 6 (29) (270) (186) 494 (153) 630 Financia l income 7 8 4 6 Financial expense s 7 (147) (144) (121) Fai r val ue gains on cont ingent pu rchase considera tion 25 6 13 27 Proit/(los s) before tax 361 (280) 542 Ta x 8 (96) 20 (156) Pro it /(los s) for t he ye ar fro m co ntin ui ng op er atio ns 265 (260) 386 Attr ibu tab le to: Equi ty h old er s of the p aren t 266 (260) 385 Non- contr olling int erest (1) – 1 265 (260) 386 Earnings/(los s) per ordinar y share: 10 Basic 145.4¢ (142.9)¢ 210.4¢ Dil uted 144.6¢ (142.9)¢ 209.2¢ N otes o n pag es 14 9 to 20 5 for m an inte gral p ar t of th es e Grou p Fin anc ial S tate men ts. 142 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Gr oup F inancial Statements Gr oup income stat e ment Gr oup st a tem en t o f com pr ehensi v e inco me For t he ye ar en de d 31 D ec em be r 20 21 2021 $m 2020 $m 2019 $m Pro it /(los s) for t he ye ar 265 (260) 386 Other comprehensiv e income Ite ms tha t may be s ubs eq ue ntly re cla ss i ied to p ro it or l os s: Los se s on c as h low h ed ge s, inc lud ing re late d ta x cha rge of $7m ( 2020: $ 4m cre dit , 2019: $ nil ) (69) 3 (34) Co st s of he dgi ng 2 (6) (6) He dgi ng lo ss es/(g ain s) recla ss i ie d to in anc ial ex pe nse s 96 (13) 38 E xchan ge ga ins /(los se s) on retr ans lati on of fo reign o pe ratio ns, n et of re late d ta x cha rge of $ 4m (2020: $4 m cre dit, 2 019: $ 3m cre dit) 18 (85) (39) 47 (101) (41) Ite ms tha t will n ot be re cl as si ie d to pro it o r los s: Gai ns/(l os se s) on eq uit y ins trum ent s cla ss i ied a s fair v alue t hroug h othe r co mpre he nsi ve inc ome , net o f rela ted t ax ch arge o f $1m ( 2020: $ 4m cr edi t, 20 19: $ 2m ch arge) 14 (43) 10 Re -m ea sure men t gain s/(lo ss es) on d e ine d be ne i t pla ns, i nclu din g rela ted t ax cre dit o f $nil (2020 : $1m c redi t, 20 19 : $1m cr edi t) 7 (7) (6) T ax rel ate d to pen sio n co ntrib utio ns 1 1 – 22 (49) 4 T otal other comprehensive income/(loss ) f or the year 69 (150) (37) T otal comprehensiv e income / (loss) for the y ear 334 (410) 349 Attr ibu tab le to: Equi ty h old er s of the p aren t 335 (410) 348 Non- contr olling int erest (1) – 1 334 (410) 349 N otes o n pag es 14 9 to 20 5 for m an inte gral p ar t of th es e Grou p Fin anc ial S tate men ts. 143 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Finan cial Statemen ts Group Financial Statements Equity share capital $m Capital redemption reserv e $m Share s he ld by em pl oyee share trusts $m Other reserv es $m Fair value reserv e $m Cash l ow hedge reserv es $m Curr ency translation reserv e $m Retained earnings $m IHG shar e- holders’ equity $m Non- controlling interest $m To t a l equity $m At 1 Ja nua ry 2021 156 10 (1) (2,875) 11 (24) 298 568 (1,857) 8 (1,849) Pro it fo r th e year – – – – – – – 266 266 (1) 265 Other comprehensiv e income Ite ms tha t may be s ubs eq ue ntly rec las si i ed to pro i t or lo ss : Los se s on c as h low h ed ge s – – – – – (69) – – (69) – (69) Co st s of he dgi ng – – – – – 2 – – 2 – 2 Hedgi ng losses rec lassi ied to i nan cial ex pe ns es – – – – – 96 – – 96 – 96 Exchange gai ns on r etransla tion of f oreign operations – – – – – – 18 – 18 – 18 – – – – – 29 18 – 47 – 47 Ite ms tha t will n ot be re cl as si ie d to pro it o r los s: Gains on equit y instruments cla ss i ie d as fai r valu e throu gh other comprehensiv e income – – – – 14 – – – 14 – 14 Re-measurement gains on deined beneit pla ns – – – – – – – 7 7 – 7 T ax rel ate d to pen sio n contrib utions – – – – – – – 1 1 – 1 – – – – 14 – – 8 22 – 22 T otal other comprehensive inc om e for t he ye ar – – – – 14 29 18 8 69 – 69 T otal comprehensiv e income for t he yea r – – – – 14 29 18 274 335 (1) 334 T rans fer o f trea sur y sh are s to emp loye e sha re trus ts – – (34) – – – – 34 – – – Rel ea se of ow n sha resby employ ee shar e trus ts – – 13 – – – – (13) – – – Equi ty-settled share-based cos t – – – – – – – 39 39 – 39 T ax rel ate d to sha re sch em es – – – – – – – 2 2 – 2 Exchange adj ustments (2) – – 2 – – – – – – – At 31 D ec em be r 202 1 154 10 (22) (2,873) 25 5 316 904 (1,481) 7 (1,474) All item s within tot al co mpreh ens ive inc ome are s hown ne t of tax . Note s on p ag es 14 9 to 20 5 form an i nteg ral pa r t of the se G roup F ina nci al St atem ent s. 144 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Gr oup F ina nc ia l St a t emen ts c o ntin u e d Gr oup st a tem en t o f ch an ges in equ ity Equity share capital $m Capital redemption rese rve $m Share s he ld by employee share trusts $m Othe r rese rve s $m Fair value rese rve $m Cash low hedge rese rve s $m Curre ncy translat ion rese rve $m Retained earnings $m IHG share- holders’ equity $m Non- controllin g intere st $m To t a l equity $m At 1 Ja nua ry 2 020 151 10 (5) (2,870) 57 (6) 381 809 (1,473) 8 (1,465) Lo ss fo r the ye ar – – – – – – – (260) (260) – (260) Other comprehensiv e income Ite ms tha t may be s ubs eq ue ntly rec las si i ed to pro i t or lo ss : Los se s on c as h low h ed ge s – – – – – 3 – – 3 – 3 Co st s of he dgi ng – – – – – (6) – – (6) – (6) Hed ging gains reclass iied to i nan cial ex pe ns es – – – – – (13) – – (13) – (13) Exchange losses on retr anslation of f oreign operations – – – – – (2) (83) – (85) – (85) – – – – – (18) (83) – (101) – (101) Ite ms tha t will n ot be re cl as si ie d to pro it o r los s: Los se s on e qui ty in str ume nts cla ss i ie d as fai r valu e throu gh other comprehensiv e income – – – – (43) – – – (43) – (43) Gains on equit y instruments tran sfe rred to re tai ne d earn ing s on di sp os al – – – – (3) – – 3 – – – Re-measurement losses on deined beneit pla ns – – – – – – – (7) (7) – (7) T ax rel ate d to pen sio n contrib utions – – – – – – – 1 1 – 1 – – – – (46) – – (3) (49) – (49) T otal other comprehensive lo ss for t he yea r – – – – (46) (18) (83) (3) (150) – (150) T otal comprehensiv e loss for t he yea r – – – – (46) (18) (83) (263) (410) – (410) T rans fer o f trea sur y sh are s to emp loye e sha re trus ts – – (14) – – – – 14 – – – Rel ea se of ow n sha resby employ ee shar e trus ts – – 18 – – – – (18) – – – Equi ty-settled share-based cos t, net o f $3 m rec las si ic ati on to cash-sett led aw ar ds – – – – – – – 27 27 – 27 T ax rel ate d to sha re sch em es – – – – – – – (1) (1) – (1) Exchange adj ustments 5 – – (5) – – – – – – – At 31 December 2020 156 10 (1) (2,875) 11 (24) 298 568 (1,857) 8 (1,849) All item s within tot al co mpreh ens ive los s are sh own net of t ax. Note s on p ag es 14 9 to 20 5 form an i nteg ral pa r t of the se G roup F ina nci al St atem ent s. 145 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Finan cial Statemen ts Group Financial Statements Equity share capital $m Capital redemption rese rve $m Share s he ld by employee share trusts $m Othe r rese rve s $m Fair value rese rve $m Cash low hedge rese rve s $m Curre ncy translat ion rese rve $m Retained earnings $m IHG share- holders’ equity $m Non- controllin g intere st $m To t a l equity $m At 1 January 2019 146 10 (4) (2,865) 47 (4) 420 1,111 (1,139) 8 (1,131) Pro it fo r th e year – – – – – – – 385 385 1 386 Other comprehensiv e income Ite ms tha t may be s ubs eq ue ntly rec las si i ed to pro i t or lo ss : Los se s on c as h low h ed ge s – – – – – (34) – – (34) – (34) Co st s of he dgi ng – – – – – (6) – – (6) – (6) Hedgi ng losses rec lassi ied to i nan cial ex pe ns es – – – – – 38 – – 38 – 38 Exchange losses on retr anslation of f oreign operations – – – – – – (39) – (39) – (39) – – – – – (2) (39) – (41) – (41) Ite ms tha t will n ot be re cl as si ie d to pro it o r los s: Gains on equit y instruments cla ss i ie d as fai r valu e throu gh other comprehensiv e income – – – – 10 – – – 10 – 10 Re-measurement losses on deined beneit plans – – – – – – – (6) (6) – (6) – – – – 10 – – (6) 4 – 4 T otal other comprehensive inc om e/(lo ss) fo r the ye ar – – – – 10 (2) (39) (6) (37) – (37) T otal comprehensiv e income for t he yea r – – – – 10 (2) (39) 379 348 1 349 T rans fer o f trea sur y sh are s to emp loye e sha re trus ts – – (19) – – – – 19 – – – Purc has e of own s ha resby employ ee shar e trus ts – – (5) – – – – – (5) – (5) Rel ea se of ow n sha resby employ ee shar e trus ts – – 23 – – – – (23) – – – Equi ty-settled share-based cos t – – – – – – – 41 41 – 41 T ax rel ate d to sha re sch em es – – – – – – – 4 4 – 4 Equity divide nds paid – – – – – – – (721) (721) (1) (722) T ransaction costs rela ting to sh areh old er ret urns – – – – – – – (1) (1) – (1) Exchange adj ustments 5 – – (5) – – – – – – – At 31 D ec em be r 201 9 151 10 (5) (2,870) 57 (6) 381 809 (1,473) 8 (1,465) All item s within tot al co mpreh ens ive inc ome are s hown ne t of tax . Note s on p ag es 14 9 to 20 5 form an i nteg ral pa r t of the se G roup F ina nci al St atem ent s. 146 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Gr oup F ina nc ia l St a t emen ts c o ntin u e d Gr oup st a tem en t o f ch an ges in equ ity c o ntin u e d 31 December 2021 Note 2021 $m 2020 $m ASSETS Goodwill a nd other intan gible assets 13 1,195 1,293 Prop er t y , p la nt and e qui pme nt 14 137 201 Right-of-use assets 15 274 303 Inve stme nt in a ss oci ates a nd jo int ven tures 16 77 81 Reti rement beneit assets 27 2 – Other inancia l assets 17 173 168 Derivative inanci al instruments 24 – 5 Deferred compensation plan inv estments 256 236 No n- cu rrent t ax re ce ivab le 1 15 De ferre d ta x as set s 8 147 113 Contr act co sts 3 72 70 Contract assets 3 316 311 T otal non-current assets 2,650 2,796 Inve nto rie s 4 5 T rade and o ther r eceivables 18 574 514 Cur rent t ax re cei vabl e 1 18 Other inancia l assets 17 2 1 Cash and cash equival ents 19 1,450 1,675 Contr act co sts 3 5 5 Contract assets 3 30 25 T ota l cur rent a s set s 2,066 2,243 T otal assets 4,716 5,039 LIABI LITIES Loa ns an d othe r bo rrowin gs 22 (292) (869) Leas e liabilities 15 (35) (34) T rade and o ther pa yables 20 (579) (466) De ferre d revenu e 3 (617) (452) Provisions 21 (49) (16) Cur rent t ax paya ble (52) (30) T ot al current liabi lities (1,624) (1,867) Loa ns an d othe r bo rrowin gs 22 (2,553) (2,898) Leas e liabilities 15 (384) (416) Derivative inanci al instruments 24 (62) (18) Reti rement beneit obli gatio ns 27 (92) (103) De ferre d co mp ens atio n pl an lia bili ties (256) (236) T rade and o ther pa yables 20 (89) (94) De ferre d revenu e 3 (996) (1,117) Provisions 21 (41) (44) Deferre d tax liabilities 8 (93) (95) T ot al non- current liab ilities (4,566) (5,021) T otal liabilitie s (6,190) (6,888) Net liabilities (1,474) (1,849) EQUIT Y IHG shareholders’ equity (1,481) (1,857) Non- contr olling int erest 7 8 T ot al equity (1,474) (1,849) Sign ed on b eh alf of the B oard, Paul Edgeclie- J ohnson 21 Feb ruar y 20 22 N otes o n pag es 14 9 to 20 5 for m an inte gral p ar t of th es e Grou p Fin anc ial S tate men ts. 147 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Finan cial Statemen ts Group Financial Statements Gr oup st a tem en t o f i na nc ia l posi t io n For t he ye ar en de d 31 D ec em be r 20 21 Note 2021 $m 2020 $m 2019 $m Pro it /(los s) for t he ye ar 265 (260) 386 Adju stm ent s rec onc ilin g pro it /(lo ss) for th e yea r to cas h l ow from o pe ratio ns 26 583 568 521 Cash lo w from operat ions 848 308 907 Inte res t pai d (134) (132) (110) Intere st re cei ved 8 2 3 Contingent purchase consideration paid – – (6) Ta x p a i d 8 (86) (41) (141) Net cas h from operating activitie s 636 137 653 Ca sh low fro m inve sti ng ac tiv itie s Purc has e of pro pe r ty, plant an d eq uip ment (17) (26) (75) Purchase of i ntangible assets (35) (50) (104) Inv estment in a ssociat es – (2) (10) Inve stme nt in ot her in anci al as se ts (5) (5) (9) Acq uis itio n of bu sin es se s, net o f ca sh ac qui red 11 – – (292) De ferre d an d con ting ent pu rcha se c on sid erati on p aid 25 (13) – (2) Ca pit alis ed i ntere st p aid 7 – (1) (5) Di strib utio ns fro m as so ciat es an d join t ventu res – 5 – Di spo sa l of hote l as se ts, n et of c ost s and c as h dis po se d 12 44 1 – Repaymen ts of other inancial assets 14 13 4 Dispo sal of equity sec urities – 4 – Ne t ca sh fro m inve sti ng ac tiv itie s (12) (61) (493) Ca sh low fro m i nan ci ng ac tiv itie s Purc has e of own s ha res by e mploye e sh are tru st s – – (5) Dividends paid to shareholders 9 – – (721) Div ide nd p aid to n on- c ontro llin g inter est – – (1) T rans ac tio n cos ts re lati ng to sh areh old er re turns – – (1) Is su e of lon g- term b ond s, in clu ding e e ct of cu rren cy swap s 23 – 1,093 – (Repa yment )/issue of com mercial p aper 23 (828) 738 – Repay ment o f long-t erm bonds 23 – (290) – Princi pal elemen t of lease pa yments 23 (32) (65) (59) (Decr ease )/ incr ease i n o ther borrow ings 23 – (125) 127 Proc e eds f rom cu rren cy swap s 23 – 3 – Ne t ca sh fro m i nan ci ng ac tiv itie s (860) 1,354 (660) Ne t movem en t in ca sh a nd c as h eq uiva le nts i n the ye ar (236) 1,430 (500) Ca sh an d ca sh e quiv ale nts at b egi nnin g of the ye ar 19 1,624 108 600 Exchange r ate eects 3 86 8 Ca sh a nd c as h eq uiva len ts at e nd o f the ye ar 19 1,391 1,624 108 N otes o n pag es 14 9 to 20 5 for m an inte gral p ar t of th es e Grou p Fin anc ial S tate men ts. 148 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Gr oup F ina nc ia l St a t emen ts c o ntin u e d Gr oup st a tem en t o f cash lo ws A ccounting policies Gen eral information This d ocum ent c ons titutes th e Annua l Rep or t and Fi nanc ial St ateme nts in ac cord anc e with UK L istin g Rule s require ment s and th e Annua l Repo r t on Form 20 F i n acc ordan ce with th e US S ecuri ties E xcha nge Act o f 193 4. The C on soli dated F inan cial S tatem ents o f Inter Conti nent al Hote ls Group P LC ( the ‘G roup’ or ‘ IH G’ ) for the yea r end ed 31 December 20 21 were auth oris ed for i ssu e in ac cord ance w ith a res olutio n of the Dire ctors o n 21 Feb ruar y 20 2 2. InterContinental Hotels Group PLC (the ‘Co mpany ’) is i nco rpor ated and re gis tered in E nglan d and Wale s. Bas is of preparati on The C on soli dated F inan cial S tatem ents o f IH G have be en prep ared on a goi ng co nce rn bas is (see b elow) and un der th e his torica l cos t conven tion, exce pt for as set s and lia bilitie s me asure d at fair val ue unde r releva nt acc ountin g stan dards . The C on soli dated F inan cial St ateme nts have be en p repare d in ac cord ance w ith UK-ado pted international accounting standards and with applicable law and regulations and with Int ernational Financial Repo rting Stand ards (‘I FRS s’) as i ssu ed by the I ASB . On 31 D ec emb er 20 20, IF RSs as ado pted by the Euro pe an Unio n at that date we re broug ht into UK law and b ec ame U K-adopte d intern ation al acc ountin g sta ndard s, with future ch ange s be ing sub ject to e ndo rse ment by th e UK Endo rse men t Boa rd. The G roup tran sitio ned to U K -a dopte d intern ationa l acc ounting s tan dards i n its co nso lidate d i nanc ial sta tement s on 1 J anuar y 20 21 . The re was no imp act o r chan ge in acc ountin g pol icie s from the tran sitio n. U K - ad opted inte rnatio nal acc ountin g sta ndard s dier i n cer t ain resp ec ts from I FRS s as is sue d by the IAS B. H owever , th e die renc es have no im pac t on the Co nso lidate d Fin ancia l State ment s for the ye ars pre se nted. Going concern The re silie nce o f the Gro up’ s fee -b as ed mo del, w ide ge og raphic spread and str ong cash manag ement means t hat t he Gr oup has be en ab le to gen erate $ 63 6m of n et ca sh from op erati ng acti vitie s in a year w hen tra ding ha s still b ee n subs tanti ally imp acte d by the glob al pa ndem ic. T rading h as rec overed s igni ic antly duri ng 202 1, with RevPAR up 46 % on 2 020 an d returning to 70 % of 201 9’s pre - pan dem ic leve ls . As at 31 D ec emb er 20 21 th e Grou p had tot al liqui dity o f $2,6 55 m, com pris ing $1, 35 0m of un drawn ba nk fac ilities a nd $1, 30 5m of cash and cash equ ivalen ts ( net of o verd rafts and restri cted cash ). In M arch 202 1 the G roup us ed c as h rese rve s to repay £6 0 0m com merci al pap er un der th e UK’s Covi d Cor porate F inan cing Facility (‘CC FF’). In 20 20, the Gro up agre ed am endm ents o f existin g coven ants on i ts syndi cate d and bil ateral revol ving cre dit fac ilitie s (the ‘bank fa cilitie s’) until D ece mbe r 202 2 a s set ou t in note 24. A pe riod of 1 8 months h as b een u se d, from 1 Ja nuar y 20 22 to 30 J une 20 23, to co mple te the goin g con cern a ss es sme nt. Th ere are a wide r ange of p os sibl e plan ning s cen arios ove r the goi ng con ce rn pe riod. I n ado pting the g oing c onc ern ba sis for p repa ring the se inancial statements the Directo rs ha ve consider ed a scenar io ( the ‘B as e Cas e’) wh ich is b ase d on c ontinu ed imp rovement i n dem and as travel re stricti ons are re duc ed, wi th RevPAR assu med to re ach greate r than 9 0% of 2 019 l evels in 20 23. T he on ly debt m aturit y in the p erio d unde r con side ration i s the £ 173m 3. 875% N ovemb er 20 22 bon d whic h is as sume d to be re paid wi th cas h on matu rity. Und er this s ce nario, the b ank fa cilitie s rema in undraw n. The p rincip al ris ks and un cer t ainties w hich c ould b e app lica ble have be en co nsi dere d and are ab le to be a bso rbe d within th e $4 00 m liqui dity c ovena nt and am end ed c ovenant re quirem ents . A large numb er of th e Group’s princi pal ris ks, for exam ple m acro ex ternal facto rs or p referred b rand s and loyalt y , would re sult in an i mpac t on RevPAR whic h is one o f the se nsiti vitie s ass es se d again st the headroom a vailable i n the Base Case. Clim ate risks a re not co nsid ered to h ave a signi ic ant impa ct over the 18 - month p erio d of as se ssm ent. O the r princ ipal ri sks that c ould resul t in a large o ne - o inc iden t that ha s a materi al impa ct on c ash low h ave also b ee n con side red, for exa mple a cy ber se curit y event. The assumpt ions a pplied in the Base Case scenar io ar e consist ent with tho se us ed fo r Group p lanni ng purp os es, for i mpairm ent te sting and for a ss es sing re covera bilit y of defe rred t ax as set s. The D irec tors have als o reviewe d a ‘D owns ide C ase’ w hich is b as ed on curre nt exte rnal ma rket downs ide fore ca sts wi th RevPAR growth redu ce d by 8% in 202 2 in c omp aris on to the B ase C as e followe d by simil ar grow th rates to the B as e Ca se in 20 23. T he Dire ctor s have als o reviewed a ‘ Seve re Downs ide C as e’ which i s bas ed on a s evere but p laus ible s cen ario. Th is as sume s that th e per form anc e during 202 2 c ontinu es with out fur the r rec over y on 202 1 leve ls with Rev P AR remai ning at 70% o f 201 9 levels , and the n with rec over y in 20 23. The a ssu mption s use d in the g oing c onc ern as se ss ment are con sis tent with th ose u se d in the via bilit y as ses sm ent. U nde r the Down sid e Cas e and S evere Dow nsid e Ca se, the b ank fac ilitie s remain undrawn. Und er the S evere Dow nsid e sc enari o, there is li mited h ead room to the cove nants at 3 0 Jun e 202 3 to abso rb add itiona l risks . However, base d on expe rien ce in 20 20, the D irecto rs reviewe d a numb er of ac tion s, suc h as red uctio ns in b onus es an d other dis cretion ar y spe nd, cre ating su bst antial a dditio nal he adro om. Afte r the se ac tions a re taken, the p rinci pal ris ks and un ce rt aintie s whic h coul d be ap plic able c an b e abs orbe d within th e ame nde d cov enant requ iremen ts. In the S evere Dow nsid e Ca se, the G roup ha s sub stanti al level s of existi ng ca sh res er ves availa ble (approxim ately $ 1bn at 30 J une 2 023) and i s not expe cte d to draw on the b ank fac ilitie s. Th ese c as h rese r ves would in crea se af ter th e additi onal a ctio ns are ta ken as de scrib ed above. T he Di rector s reviewe d a reverse s tres s test s cen ario to deter mine how m uch ad ditio nal RevPAR downs ide c ould b e abs orbe d be fore utilis atio n of the ba nk facil ities wo uld be re quire d. The D irec tors co nclu de d that the o utcom e of this rever se stre ss te st showe d that it wa s ver y unlikely th e ban k facili ties wou ld ne ed to be dr awn. The l everag e and intere st c over coven ant tes ts at 30 J une 20 22, 31 D ece mb er 202 2 a nd 30 J une 20 23 (the las t day of the a ss es sme nt pe riod ), have be en co nsid ered a s par t of th e Bas e Ca se, D ownsi de Ca se and S evere D ownsi de Ca se sc en arios . However, as the bank facil ities a re unlikely to be d rawn even in a s cen ario si gni ica ntly wors e than th e Severe D ownsi de sc ena rio, the Gro up doe s not ne ed to rely o n the ad dition al liqui dit y provide d by the b ank fac ilities to remain a g oing c onc ern. I n the event th at a fur ther c ovena nt ame ndme nt was re quired, th e Dire ctors b eli eve it is rea son able to expe ct that s uch an a men dme nt coul d be ob taine d ba se d on prio r expe rien ce in ne gotiati ng the 20 20 ame ndm ents , however the goin g con cern c onc lusi on is not d ep end ent on thi s expe ctati on. The b ank fa cilitie s mature in S eptem ber 2 023, o utsi de the p erio d con sid ered by th e going c onc ern a sse ss ment a nd it ha s be en as sume d that th ese b ank fa cilitie s are rene wed as th ey mature. However, as explain ed ab ove, the goi ng con ce rn con clus ion is n ot dep en dent on t he ban k facili ties . The G roup als o has a lternati ve optio ns to man age thi s risk in clud ing rais ing ad dition al fun ding in the capital markets. Havin g reviewed th es e sce nari os, the D irec tors have a re aso nabl e expe cta tion that th e Grou p has su i cient re sou rces to c ontinue ope rating unti l at lea st 30 J une 2 023 an d there are n o materi al unc er tainti es that m ay cas t doubt o n the G roup’s going co nce rn sta tus. Ac cordi ngly , they co ntinue to ad opt the g oing c onc ern ba sis in pr eparing t he Fina ncial Stat ements. 149 IHG | Annua l Repo rt a nd Form 20 F 202 1 Acc ounting p olic ies Group Financial Statements Prese ntationa l currency The C on soli dated F inan cial S tatem ents a re pres ented in m illion s of US d ollar s rel ecti ng the pro il e of the Gro up’s r evenu e and ope rating p roit w hich are p rimaril y gen erate d in US do llar s or US d olla r -linked c urrenc ies . In the C on soli dated F inan cial S tatem ents , equi ty sh are ca pita l, the c apit al rede mptio n rese rve a nd sh ares he ld by emp loyee s hare trust s are tran slate d into US do llars at th e releva nt rate of exchang e on the l ast d ay of the pe riod; th e resul tant excha nge di eren ces are re cord ed i n othe r res er ve s. The f unctio nal cu rrency of th e Parent C om pany is ste rling si nce this is a n on -tradin g hold ing co mpany lo cate d in the U nited K ingd om that ha s sterli ng de nomin ated sh are ca pita l and wh ose p rimar y activ ity i s the paym ent an d rece ipt of ste rling div ide nds an d of interes t on ste rling de nom inated ex tern al bo rrowings a nd intercompany balances. Crit ica l acc ou ntin g pol icie s an d th e use o f jud ge men ts, estim ates and as sumpti ons In dete rminin g and ap plyin g the Gro up’ s acc ountin g pol icie s, man age ment are re quire d to make judg eme nts, e stimate s and as sumptio ns. A n acc ountin g poli cy is co nsid ere d to be criti cal if its s ele ctio n or app lic ation co uld m ateriall y aec t the rep or ted amou nts of as se ts and li abiliti es at the d ate of the C ons olid ated Fin ancia l State ment s, or th e repo rte d amo unts of reven ues an d expe nse s durin g the rep or ting pe riod, o r cou ld do s o within the nex t inanc ial yea r . Judgements System F und The G roup op erate s a Syste m Fund (the ‘Fund’ ) to coll ec t and admin ister c as h ass es sme nts from h otel own ers for t he sp eci ic purp ose o f use in m arketing, th e Gue st Re ser vatio n Syste m and hotel l oyalty p rogramm e. As se ss ment s are gen erall y levie d as a pe rcent age of h otel revenu es. The Fund is n ot man age d to gen erate a pro it or l os s for IH G over the lon ger term , but is m ana ged fo r the be ne it of th e IH G Syste m with the ob jec tive of drivin g revenue s for the h otels in th e Syste m. In rel ation to mar keting and re ser vatio n ser vic es , the Grou p’ s pe rfor manc e obli gation u nde r IFRS 1 5 ‘Reve nue fro m Contr acts with Cu stom ers’ i s determ ined to b e the c ontinuo us pe r forman ce of the se r vice s rathe r than th e spe nding o f the as se ss ment s rece ived. Acc ordingl y , as se ss ment fe es a re reco gnis ed as h otel revenu es oc cur , Fund exp en ses a re charge d to the G roup inc ome s tatem ent as inc urred a nd no c onstr uctive o bliga tion is d eem ed to exi st und er IAS 37 ‘ Provisi ons, C ontin gent L iabili ties an d Co ntinge nt Ass ets’ . Acc ordingl y , no l iabili ty is re co gnis ed rel ating to the b alan ce of unspe nt funds. No oth er criti cal ju dge ment s have be en ma de in ap plyin g the Group’s acc ountin g poli cie s. Estim ates Man age ment c ons ide r that sig ni icant e stim ates an d ass umptio ns are us ed in the a reas d es cribe d be low. Estimate s and a ssu mption s are evaluate d by man age ment u sing hi storic al exp erien ce an d other facto rs be lieved to b e reas ona ble b ase d on cu rrent circum st ance s. In pri or year s, impa irmen t of non - current a ss ets was d iscl ose d as a signi ic ant e stimate . In the cu rrent year n o esti mates we re appli ed whic h are con side red to res ult in si gni ica nt risk of a m aterial adju stme nt to the ca rry ing amo unts of th ose a ss ets in th e next inancial year . Loya lt y prog ram me The h otel loyalt y prog ramme, I HG R ewards, e nabl es me mb ers to ea rn point s, fun ded th rough h otel as se ssm ents , during e ach q ualif yin g stay at an I HG b rand ed ho tel and c ons ume p oints at a l ater date for free o r redu ce d acc omm odati on or oth er be ne its . The G roup rec ogni ses d eferre d revenue in a n amou nt that re lec ts I HG ’ s uns atis ie d pe rfor manc e obli gation s, valu ed at the s tan d- alon e sel ling pri ce of the f uture be ne it to the m emb er . The am ount of revenue re co gnis ed an d deferre d is im pacte d by ‘brea kage’ . On an annu al bas is the G roup en gag es an ex terna l actu ary w ho us es sta tistic al formu lae to as sis t in the e stimate o f the numb er of p oints that will n ever b e con sume d (‘bre akage’ ). Signi ic ant e stimati on unc er tain ty exis ts in p rojec ting me mbe rs’ future c onsu mption a ctivi ty an d how this m ay be imp acte d by Covi d-19. Th e Group h as ex tende d its p olic ies fo r point s expiratio n and e lite sta tus in res pon se to C ovid-19 wh ich is exp ec ted to limit brea kage in crea se s in the sh or t term. M ana gem ent ’s expect ation is that m emb er b ehavio ur will return to p re- pan dem ic level s over the lo nge r term. In 2 02 1, the bre akag e estim ate was form ed u sing pre - Cov id be haviou r pat terns a s a bas e, but giv ing so me wei ght to activ ity du ring the p and emic an d inc orpo rating th e impa ct of pla nne d progra mme ch ange s. H owever , i f mem ber b ehavi our deviate s sign ii cantly f rom expe cta tions d uring the re cover y pe riod, fu ture brea kage e stim ates co uld inc reas e or de crea se. At 31 De ce mbe r 202 1, de ferred reve nue rel ating to the loyalt y progr amme wa s $1, 29 2m (20 20: $ 1,24 5m, 2 019 : $1, 233 m). Bas ed on the co nditi ons exi sting at th e bala nce s he et date, a on e perc enta ge point d ec reas e/incre as e in the bre akag e esti mate relati ng to earn ed point s would i ncre ase/reduc e this li abilit y by $5 5m . Actua rial gai ns and l os ses wo uld co rres pon dingly a djus t the amo unt of Sys tem Fund revenue s rec ogni se d and de ferred reve nue in the Group s tate ment of ina ncial p os ition. Expect ed c red it losses Altho ugh c ash c olle ctio n from owne rs ha s improve d sinc e 2020, the pro por tio n of old er de bt is high er tha n in peri ods p rior to the pan demi c. The re also re main s a risk of re duc ed own er liq uidit y . The se fa ctors , taken tog ethe r with the c ontinu ed un cer ta inties o n the pa ce an d sc ale of m arket recove ry , resu lt in expe cte d credi t los se s conti nuing to b e a signi ic ant es timate. The p rovisio n equ ates to 25% of gro ss d ebt, wi th eac h one pe rcent age p oint ch ange re sultin g in a $5 m chan ge to the provi sion . If his toric al evid enc e was app lie d to all owne r groups (rathe r than by referen ce to othe r sourc es of d ata, s ee p age 15 5), the provi sion would re duc e by $16 m; altern atively a 1 0% co lle ction ra te of amou nts over 2 70 days would re duc e the provis ion by $9 m. Signiicant acco unting policies Bas is of cons olidation The Consolidat ed Financ ial Stat ements compr ise the inancial sta tement s of the P arent C ompa ny and entiti es co ntrolle d by the G roup. Co ntrol exis ts whe n the G roup ha s: • Power ove r an investe e (i.e. exi sting rig hts that gi ve it the curre nt abilit y to dire ct the re levant ac tivitie s of the inves tee); • E xpo sure, or r ights, to vari able retu rns from it s involvem ent with the i nv estee; and • Th e abilit y to us e its powe r over the inve stee to a ect it s returns . All intra - group ba lanc es an d trans acti ons are e limin ated on consolidation. The a ss ets, li abiliti es and re sult s of tho se bu sine ss es ac quire d or disp os ed of a re cons olid ated for t he pe riod du ring whi ch they were unde r the G roup’s control. Ac c o unti ng p o li c i e s c o nti nu e d 150 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Foreign curre ncie s Withi n the Gro up’ s sub sidia ries, tr ans actio ns in fore ign curre ncie s are trans lated to th e subs idiar y ’s functio nal cu rrency at th e exchang e rates rul ing on th e dates of th e trans ac tions . Mon eta ry a ss ets an d liabi lities d eno minate d in foreig n curren cies a re retrans lated to th e sub sidia ry ’s functio nal cu rrency at th e relevant r ates of excha nge ruling o n the la st day of th e peri od. O n con sol idatio n: • Th e ass ets a nd liab ilitie s of foreign o pe ration s, incl uding g ood will, of the G roup’s subsid iarie s with a fun ction al curre ncy othe r than US do llar s are trans lated into U S doll ars at th e relevant rate s of exchang e ruling o n the la st day of th e peri od. Th e revenue s and expe nse s of forei gn ope ration s are trans late d into US do llars at average r ates of excha nge for th e per iod. T he exchan ge die renc es ari sing on re transl ation are t aken to the cu rrency trans lation re se rve; a nd • E xchan ge die renc es ari sing fro m the tran slatio n of bo rrowings that are d esig nated a s a hed ge ag ains t a net inves tment in a foreign o pe ration are t aken to the cur rency tran slati on res er ve. The G roup trea ts sp eci ic i ntercom pany loa n bal ance s, whi ch are not inten de d to be rep aid in the fo rese ea ble futu re, as par t of it s net inves tme nt. On di spo sa l of a foreign o per ation, th e cumul ative amou nt reco gnis ed in th e curre ncy trans latio n rese rve re lating to that p arti cular fo reign op erati on is re cycled a gain st the g ain or los s on di spo sal . Revenue reco gnition Revenu e is rec ogni sed a t an amou nt that re le cts th e con side ration to which th e Group ex pec ts to be e ntitle d in exchan ge for trans ferring g oo ds or s er vice s to a cus tome r . Fee bu sine ss reve nue Und er fran chis e agre eme nts, th e Group’s per form anc e oblig ation is to provid e a lice nce to u se IH G’s trade marks a nd othe r intelle ctu al prop er ty. F ra nchi se royalt y fees a re typ ica lly cha rged a s a perc enta ge of hotel g ross ro oms reve nues a nd are trea ted as vari able con sid eratio n, reco gnis ed a s the und erly ing hotel reve nue s occ ur . Under man agement agreemen ts, t he Gr oup ’ s perfor mance obli gation i s to provide h otel man age ment s er vic es an d a lice nce to use I HG ’s tradema rks and oth er intel lec tual pro per t y . B as e and inc entive ma nage me nt fees a re typ ical ly cha rged. B as e man age ment fee s are ty pic ally a pe rcent age o f total hote l revenue s and in cen tive man age ment fe es are g ene rally ba se d on the h otel’s pro ita bilit y or ca sh l ows. B oth are treate d as varia ble c onsi dera tion. L ike franchi se fee s, ba se man age ment fe es a re reco gnis ed a s the und erlyi ng hotel revenue s oc cur . Inc entive ma nag eme nt fee s are reco gnis ed ove r time wh en it is c on side red hig hly prob abl e that the re lated pe rfor manc e crite ria for ea ch ann ual pe riod w ill be m et, provi ded there i s no expe ct ation of a s ubs eque nt revers al of th e revenue. App licati on and re - lice nsin g fee s are not co nsi dere d to be dis tinct from the fr anchi se p er forman ce ob ligati on and are re co gnis ed over the life of th e relate d co ntract . Franchis e and m anag eme nt agre eme nts als o co ntain a p romis e to provide te chno log y supp or t and n etwo rk se rvi ce s to hotels . A month ly tech nolo gy fee, b as ed on e ithe r gross ro oms reve nue s or the n umbe r of room s in the h otel, is ch arge d and rec ogn ise d over time a s thes e se rv ice s are deli vered . T e chno log y fee inc om e is inc lude d in C entral reven ue. T e chni cal s er vic e fees a re rece ived in re lation to d esig n and engi nee ring su ppo rt p rovide d prio r to open ing of c er tain h otel prop er ties . The se s er vice s are a dis tinct p er form anc e oblig ation and th e fee s are reco gnis ed a s revenue over th e pre - ope ning p erio d in line w ith the G roup’s asse ss ment of th e st age of c ompl etion o f the proje ct, b ase d on th e lates t expe ctati on of hote l ope ning d ate and its k nowle dge a nd expe rien ce of th e pat tern of work p er form ed on comparable projects. IH G’s glob al insu ranc e progra mme provi des c overag e to man age d hotel s for risks s uch a s US worker s’ com pen sati on, emp loyee and g ene ral lia bilit y . P remium s are payabl e by the hotel s to the third -pa rt y ins uranc e provid er . As som e of the ri sk is rei nsure d by the Gro up’ s cap tive insu rance c omp any (the ‘Capti ve’), SC H Ins uranc e Co mpany , premiu ms pai d from the thi rd-p ar ty in suran ce provid er to the C aptive are rec ogn ise d within C entra l revenue a s earn ed. T his in suran ce revenu e is out sid e the sc ope o f IFRS 1 5. De ferre d reven ue De ferred reve nue is re cog nise d whe n paym ent is re ceive d be fore the rel ated p er forman ce ob ligati on is s atis ie d. Contract assets Amo unts pa id to hotel own ers to s ecure m ana gem ent and f ranchi se agre eme nts (‘key money ’ ) are treated a s co nsid eratio n payable to a cus tomer. A contrac t ass et is re cord ed whi ch is re cog nise d as a de ducti on to revenue over t he initia l term of the c ontra ct. Wh ere lo ans are provid ed to an own er the di eren ce, if a ny , bet wee n the fa ce and market valu e of the lo an on in cep tion is re co gnis ed as a c ontrac t as set. T yp ica lly , c ontrac t as sets a re not i nanc ial as set s as they re pres ent amou nts pa id by the Gro up at the b eginn ing of a co ntract , and s o are teste d for imp airm ent ba se d on value i n use rath er tha n with referen ce to exp ecte d cred it los se s. C ontrac t as sets a re reviewed for imp airme nt whe n events o r chan ges in c ircums tan ces i ndic ate that the c arr yin g value may n ot be rec overab le. If c arr ying va lue s excee d the re coverab le am ount, d etermin ed by refere nce to esti mated f uture ca sh l ows dis counte d to thei r pres ent valu e usin g a pre -ta x disc ount rate, th e contr act as se ts are writ ten d own to the recover able amount. In limite d ca se s, the G roup may provi de pe rfo rmanc e gua rantee s to third- par t y hotel own ers to s ecure m anag eme nt agre eme nts. The exp ec ted valu e of paym ents un der p er form ance g uarante es redu ce s the overall tra nsa ctio n pric e and is re co gnise d as a de ducti on to revenue ove r the term of th e contra ct. Contract costs Ce rt ain c ost s incurre d to sec ure man age ment an d franc his e agreements, t ypically developer co mmissions, are capitali sed and amo rti sed a s an expe ns e over the initi al term of th e relate d contr act. The se c ost s are pres ente d as co ntract c ost s in the G roup st ateme nt of i nanc ial po sitio n. Co ntract c ost s are reviewe d for imp airme nt whe n events o r cha nges i n circum stan ce s indic ate that th e carr yin g value m ay not be re coverab le. I f carr yin g value s excee d the re coverab le amo unt deter mine d by referenc e to es timated f uture ca sh l ows dis cou nted to their p rese nt value u sing a p re- tax di sco unt rate, the c ontrac t co sts are wr itte n down to the re coverab le amo unt. Revenu e from owne d, le ase d and m anag ed l eas e hotel s At its own ed, le as ed an d mana ge d lea se hote ls, the G roup’s pe rfor manc e obli gation i s to provide a cc ommo datio n and oth er goo ds an d ser vi ces to gu es ts. Reve nue inc lude s roo ms revenu e and foo d and beve rage s ale s, whi ch are rec ogni se d when th e room s are oc cupie d and fo od an d bever age s are sol d. Gu est d epo sit s rece ived in adva nce of h otel st ays are rec orde d as defe rred reven ue on the bal ance s he et. Th ey are reco gnis ed a s revenue al ong wi th any bal ancin g payme nt from the g ues t when th e as soc iated s tay oc curs , or are return ed to the c ustom er in th e event of a c ance llatio n. Cost reimbu rsements In a ma nage d prop er t y , the G roup t ypic ally a cts a s emp loyer of the g ene ral man age r and, in s ome c as es, oth er em ployee s at the hote l and i s entitle d to reimb urse ment o f thes e co sts . The p er form ance o blig ation is s atis ie d over tim e as the e mployee s pe rfor m their du ties , con siste nt with wh en reimb urs eme nt is rec eived . Reimb urse me nts for the se s er vic es are sh own as reven ue with an e qual m atching e mpl oyee co st, with n o pro it imp act. 151 IHG | Annua l Repo rt a nd Form 20 F 202 1 Acc ounting p olic ies Group Financial Statements Ac c o unti ng p o li c i e s c o nti nu e d Ce rt ain othe r co sts re lating to b oth man age d and fran chis ed hotel s are als o contra ctual ly reimb urs able to I HG an d, whe re IH G is de em ed to be a cting a s princ ipal in th e provis ion of th e relate d ser vi ces , the revenu e and c ost are s hown on a g ross b asi s. Syste m Fund and othe r co - brand reve nue s The G roup op erate s a Syste m Fund (the ‘Fund’ ) to coll ec t and admin ister c as h ass es sme nts from h otel own ers for t he sp eci ic purp ose o f use in m arketing, th e Gue st Re ser vatio n Syste m and hotel l oyalty p rogramm e. Th e Fund also b ene i ts from p roce ed s from the s ale of l oyalty p oints u nde r third- par t y co -b randin g arrang eme nts . The Fund is n ot man age d to gene rate a pro it or l oss for IH G over the l ong er term, b ut is ma nag ed for th e ben e it of the IH G Syste m with the o bje ctive of driv ing revenu es for th e hotel s in the Syst em. Und er bo th franc hise an d man age ment a gree ment s, the G roup is requi red to provid e marketing a nd res er vation s ser vi ces , as well a s other c entra lly man age d prog ramme s. Th es e ser vi ces a re provide d by the Fund and are f unde d by as ses sm ent fee s. C os ts are inc urred and all oc ated to the Fund in a cco rdanc e with th e princ iple s agre ed with the I HG O wne rs As so ciatio n. The G roup ac ts as p rinci pal in th e provis ion of th e ser vic es a s the rela ted exp ens es pri marily c omp rise payroll a nd marketin g expen se s unde r co ntract s entere d into by the Group. T he as se ss ment fe es fro m hotel own ers are g ene rally l evied as a pe rce ntag e of hotel reven ues a nd are rec ogn ise d as tho se hote l revenu es o cc ur . Ce rt ain travel a genc y comm iss ion revenu es wi thin the Fund are rec ogni sed o n a net b asis , whe re it has b ee n determ ined th at IH G is ac ting as a gent . In res pe ct of the l oyalty p rogram me, IH G Rewards , the rel ated pe rfor manc e obli gation i s to arrang e for the p rovisio n of future be ne its to m emb ers on c on sumptio n of previo usl y earn ed reward point s. M emb ers h ave a choic e of be ne its : reward nights at a n IH G hotel o r other g oo ds or s er vice s provid ed by third p ar ties . Und er its franc hise a nd man age ment a gree ment s, IH G rec eive s ass es sme nt fee s bas ed o n total qu alif ying h otel revenu e from IH G Rewards members’ hot el sta ys. The G roup’s per forma nce o blig ation is n ot sati si ed in fu ll until the mem ber h as c onsu med th e poi nts at a par tic ipatin g hotel or s ele cte d a reward from a third -p art y . Acc ording ly , loyalt y as se ss ment s are defe rred in an a mount th at rel ect s the st and -a lone s ellin g pric e of the fu ture ben e it to the me mbe r . R evenue i s impa cted by a ‘brea kage’ e stim ate of the num ber o f point s that will n ever be con sum ed. O n an annu al ba sis, th e Group e nga ges a n extern al actu ar y who us es s tatis tical fo rmula e to ass ist in fo rmulatin g this esti mate, whic h is adj uste d to rele ct a ctual exp erie nc e up to the repo rti ng date. As mate rially al l of the po ints will b e eith er c onsu med at I HG man age d or fran chis ed ho tels own ed by third p arti es, o r exchang ed for awards p rovide d by third par tie s, IH G is de em ed to be a cting a s age nt on co nsum ption an d there fore rec ogni ses th e relate d revenue net of th e cos t of reimb urs ing the h otel or third -p art y tha t is pro viding the beneit. Per form ance o blig ations u nde r the Gro up’ s co - brand c redit c ard agreements compris e: a) Arran ging for th e provis ion of fu ture ben e its to me mbe rs wh o have earn ed p oints o r free nig ht cer ti ic ates; b) M arket ing ser vices; and c) P roviding th e co -b rand p ar tner wi th the right to ac ce ss th e loyalty programme. Revenu e from a) and b) are repor ted w ithin Sys tem Fund revenu es. Prior to 1 J anua ry 2 020, revenu e from co - brand c redit c ard agre eme nts rel ating to the right to a cce ss th e loyalt y progr amme was rec orde d within th e Fund. From 1 Janua ry 2 020, this reve nue is rec orde d within fe e bu sine ss reven ue (see no te 3). Fees f rom the se agre eme nts c ompri se ixed am ounts n ormal ly payabl e at the be ginni ng of the c ontrac t, and va riabl e amou nts paid o n a month ly bas is. Variab le amo unts are t ypi call y bas ed on the num ber o f point s and fre e night c er tii cate s iss ued to m emb ers and th e marketing s er vic es p er forme d by the Gro up. T ot al fee s are allo cate d to the pe rfo rmanc e obl igatio ns ba se d on thei r estim ated sta nd- alo ne se lling p rice s. Reven ue allo cate d to marketing an d lice nsi ng obli gation s is rec ogn ise d on a mo nthly ba sis a s the obli gation i s sati s ied. Reve nue rel ating to po ints an d free nig ht ce rti ic ates is re co gnis ed wh en the m emb er ha s con sum ed the point s or c er tii cate s at a par ticip ating h otel or h as se lec ted a reward from a third p art y , net of th e cos t of reimb ursi ng the hote l or third par t y that is p roviding th e ben e it. Jud gem ent is re quire d in es timating th e sta nd- alo ne se lling p rice s whic h are bas ed up on ge ner ally ac cep ted valu ation me thod olo gies rega rding the val ue of the li cen ce provi ded a nd the nu mbe r of poi nts and c er ti icate s expe cted to b e is sue d. Howeve r , the va lue of revenu e rec ogni sed a nd the d eferre d revenue b alan ce at the e nd of th e year is not m aterial ly sen sitive to ch ange s in the se a ssum ption s. Government grant s Gover nment g rants are re co gnise d whe re there i s reas ona ble as suran ce that th e grant will b e rec eive d and all at ta che d co nditio ns will b e comp lie d with. G overnme nt grant s relatin g to cos ts are rec ogni sed o n a system atic ba sis wi thin the G roup inc ome sta tement a s an o set to th e cos ts whic h the grant s are inten ded to com pen sate. G overnm ent grant s whic h are unrel ated to co sts are pre sente d within oth er op eratin g inco me. Fin anc ial i nco me a nd exp en se s Fin ancia l inco me an d expen se s com pris e inco me an d charg es on the G roup’s ina ncial a ss ets an d liabi lities a nd relate d hedgin g instruments . Fin ance c harge s relati ng to bank a nd othe r bor rowings, i nclu ding trans acti on co sts a nd any dis count o r premi um on is sue, a re rec ogni sed i n the Grou p inco me st ateme nt usi ng the e ecti ve inte rest rate me tho d. In the s tatem ent of c ash lows, i nterest p aid an d rec eived i s pres ente d within c ash fro m ope rating a ctiviti es, in cludi ng any fee s and di sco unts o n iss uanc e or se ttl eme nt of bor rowings . Bo rrowing co sts at trib utab le to the ac quis ition o r devel opme nt of as sets th at ne ce ss arily ta ke a subst antial p erio d of time to p repare for the ir intend ed u se are c apit alise d as p ar t of the as se t cos t. Cap ital ise d interes t pai d is pres ente d within inve sting ac tivitie s in the G roup st ateme nt of ca sh l ows. Excep tiona l it ems The G roup di sclo se s cer t ain in anc ial inform ation b oth incl uding and exclu ding exce ptiona l items . The p rese ntatio n of inform ation excludin g exceptio nal ite ms allow s a bet ter und ers tan ding of th e unde rlyin g tradin g per form anc e of the G roup and p rovide s con sis tency wi th the Gro up’ s intern al man agem ent rep or ting. E xceptio nal ite ms are id enti ied by vi rtu e of thei r size, natu re, or inci den ce so a s to facili tate co mpari son w ith prio r peri ods a nd to as ses s und erlyi ng trend s in the inan cial p er forma nce o f the Grou p and it s repo rt abl e seg ment s; the t ax ee ct of exce ption al items i s als o pres ented a s exceptio nal. I n deter mining wh ethe r an event or trans acti on is exce ption al, man age ment c ons ider s quanti tative as well as q ualit ative fac tors. A ll exceptio nal ite ms are su bjec t to review by the Audit C om mitte e. 152 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements E xampl es of exce ption al items t hat me et this d e inition a nd which have be en pre se nted as exce ption al item s in prio r years in clud e, b ut are not re stricte d to, gains a nd los se s on the d isp os al of as set s, impa irment c harge s and reve rsa ls, the c ost s of ind ividu ally sig ni icant leg al ca se s or co mme rcial dis pute s and re organi satio n cos ts. Earni ngs per share Ba sic e arning s or los s pe r ordin ar y share i s calc ulate d by dividin g the pro it o r los s for the ye ar availabl e for IH G eq uit y hold ers by th e weighte d average n umbe r of ordin ar y sha res, exclud ing inves tment in own sh ares, i n iss ue durin g the year. Dilu ted ea rnings o r los s pe r ordina ry s hare is c alc ulated by a djus ting bas ic ea rnings o r los s pe r ordina ry s hare to re lec t the noti onal exercis e of the weig hted averag e numb er of dil utive ordin ar y share awards ou tst andin g during th e year . Bus ines s combinatio ns and goodwill On th e acqu isitio n of a bu sine ss, i denti ia ble as se ts ac quired and li abilitie s as sum ed are m eas ured at th eir fair val ue. C onting ent liabi lities a ss ume d are mea sure d at fair valu e unle ss thi s can not be m eas ured rel iably, in which ca se they a re not rec ogni se d but are dis clos ed i n the sa me man ner a s other c onting ent lia bilitie s. The m eas ureme nt of de ferred t ax as set s and li abiliti es aris ing on acq uisiti on is a s des crib ed in th e gene ral pri ncip les d etail ed wit hin the ‘ T axes’ ac cou nting po licy note o n pag e 156 wit h the excepti on that no d eferre d tax i s provid ed on t axab le temp orar y di eren ces in co nne ction w ith the initi al rec ogniti on of go odw ill. The c ost o f an acq uisiti on is m eas ured a s the agg regate of th e fair valu e of the c ons idera tion tran sferre d. C onting ent purc has e con sid eratio n is me asure d at fair val ue on the d ate of ac quisi tion an d is re -m eas ured at fai r value at e ach re por ting d ate with ch ange s in fair valu e reco gnis ed o n the fac e of the G roup in com e state ment be low ope rating p roi t. De ferred p urcha se co nsi derati on is me asure d at amo rti sed c os t and the e ec t of unwind ing the dis count i s reco rded i n in anci al expe nse s. Payme nts of c ontinge nt and d eferre d purch ase c ons ide ration re duc e the res pe ctive ba lanc e she et lia bilit y . In resp ec t of co ntinge nt purch ase con sid eratio n, the po rti on of e ach paym ent rel ating to its o rigin al esti mate of fair va lue on a cqui sitio n is rep or ted withi n cas h low fro m investin g activ ities i n the Grou p state ment o f cas h low s and the p or tion of ea ch paym ent rel ating to the in creas e or de cre ase in th e liab ility sinc e the ac quis ition d ate is rep or ted with in cas h low f rom ope rating activ ities . In res pe ct of de ferre d purcha se c onsi dera tion, the c as h paid in exces s of the i nitial fai r value is re por te d within inte rest p aid, an d the rem aind er is rep or ted w ithin ca sh l ows from inves ting ac tivitie s. Go odw ill is rec orde d at co st, b eing th e die rence b et wee n the fair value of th e co nsid eratio n and the f air value o f net as set s ac quired . Followin g initial re co gnitio n, goo dwill i s mea sure d at cos t les s any acc umulate d imp airme nt los se s and is n ot amo rti sed . T ra nsa ctio n cos ts are exp ens ed an d are not in clud ed in th e cos t of acquisit ion. Intangible assets Brand s E xtern ally ac quire d bran ds are initi ally rec orde d at co st if sep aratel y acq uired or f air value i f acqu ired as p ar t of a bu sine ss com binati on, provid ed th e bran ds are co ntrolle d throug h contra ctual or othe r le gal right s, or are s epa rable f rom the res t of the b usin es s. Bran ds are te sted for i mpair ment at l eas t annu ally if de termine d to have inde in ite lives . The c ost s of devel opin g interna lly gen erate d bran ds are exp ens ed as in curre d. Management agr eements Man age ment a gree ment s acq uired a s par t of a bu sine ss c omb ination are initia lly rec orde d at the fair va lue at tribute d to thos e contr act s on acquisiti on. The val ue of ma nag eme nt agree men ts is am or tise d on a str aight-line bas is over th e contra ct live s, incl uding a ny extens ion p erio ds at the Group’s optio n. Sof t ware Acqu ired an d interna lly devel ope d sof t ware are ca pita lise d on th e bas is of the c os ts inc urred to ac quire an d bring to us e the s pec i ic sof t ware. Followi ng initia l reco gnitio n, the a sse t is ca rried at c os t les s any ac cumul ated am or tisati on and a ccum ulate d impair ment los se s. C ost s are gen erall y amor tis ed over e stim ated us eful li ves of three to ive year s on a stra ight-line b asi s with the exce ption of the G ues t Res er vation S ystem wh ich is am or tise d over ei ght to 10 year s (see pa ge 176). Intern ally ge nera ted deve lopm ent c ost s are cap itali se d and am or tise d over the e stima ted us eful life o f the as set wh en all o f the follow ing can be demonstra ted: • Th e abilit y an d intention to c omp lete the p rojec t; • Th at the co mpl eted s oft ware will g ene rate prob abl e future econ omic bene its; • Th e availabil ity of a de quate tec hnic al, in anci al and oth er re sourc es to complete the pr oject; and • Th e abilit y to me asure th e expe nditure. Substantially all soft ware is in ternally generated; amounts capitalis ed incl ude inte rnal an d third- par t y lab our and c ons ulta ncy co sts . Co sts in curre d in the res earc h pha se be fore the ab ove criteri a are met are expensed. Co ni guratio n and cu stomis ation c os ts rela ting to clo ud co mputin g arrang eme nts th at do not re sult in re cog nition o f an intan gibl e ass et are exp en se d. Property , plant and equipment Prop er ty , pla nt and e quipm ent are st ated at c ost l es s dep reci ation and any impairment. Rep airs an d mainten anc e cos ts are exp ens ed a s incur red. La nd is no t depre ciate d. All oth er pro per t y , p lant and e quip ment are dep reci ated to a res idual va lue over th eir es timate d use ful lives, namely: • Bu ilding s – over a ma ximum of 5 0 years; a nd • Fix ture s, i tting s and e quip ment – thre e to 25 yea rs. All de prec iation i s charg ed on a s traight-lin e bas is. Re sidu al valu e is reasse sse d annually . Lease s On in cepti on of a c ontrac t, the G roup as se ss es wh ether i t cont ains a lea se. A c ontra ct co ntain s a lea se wh en it co nveys the right to contro l the us e of an id enti ied a ss et for a p erio d of time in exch ange for co nsi deratio n. Th e right to us e the as set an d the ob ligati on und er the le as e to make payme nts are rec ogn ise d in the G roup st ateme nt of i nanc ial po sitio n as a right- of-use a ss et and a l eas e liab ilit y . Lea se co ntrac ts may co ntain b oth le ase a nd non -l eas e co mpon ent s. The G roup all oc ates paym ents in th e co ntract to the l ea se and non-lease components based on their r elative sta nd-alone prices and ap plie s the le as e acc ounting m od el onl y to leas e co mpo nent s. The ri ght-of-us e as set re cog nise d at le ase c omm enc eme nt incl ude s the am ount of le as e liabil ity re co gnise d, initi al direc t co sts in curred and l eas e payme nts ma de at or b efore th e comm enc em ent date, l es s any lea se inc entive s rec eive d. Right- of-use a ss ets are de pre ciated to a resi dual val ue over the s hor ter of th e as set ’s estima ted us eful life and th e lea se term . Right-o f-use a ss ets are al so adj uste d for any re- me asure ment o f lea se lia bilitie s and are s ubje ct to imp airme nt testing. Residual value is reasse ssed annually . 153 IHG | Annua l Repo rt a nd Form 20 F 202 1 Acc ounting p olic ies Group Financial Statements Ac c o unti ng p o li c i e s c o nti nu e d The l eas e liab ility i s initia lly me asure d at the pre se nt value of th e lea se p ayment s to be ma de over the l eas e term. T he le as e payme nts include ixed payments (includin g ‘in-su bstanc e ixed ’ payments) and vari able l ea se paym ents th at dep end o n an ind ex or a rate (initia lly me asure d usi ng the in dex or rate at c omme nce me nt), les s any lea se inc entive s rec eivab le. ‘ In- sub sta nce ixed ’ paym ents are payme nts tha t may , in fo rm, cont ain vari abilit y but th at, in su bst anc e, are unavoid able . In ca lcul ating the p rese nt value of l ea se paym ents , the G roup us es its i ncrem ent al bor rowing rate at the l eas e com men cem ent da te if the intere st rate imp licit in th e le ase i s not readily determinable. The l eas e term in clud es pe riod s subj ect to ex tens ion op tions w hich the G roup is rea son ably c er ta in to exercise a nd exclud es the e ec t of ea rly termin ation op tions w here th e Group i s reas onab ly ce rt ain that it wi ll not exercis e the opti on. M inimum l eas e payme nts in clud e the co st of a p urcha se opti on if the G roup is re aso nab ly ce rt ain it will pu rchas e the un derly ing as set af ter th e le ase te rm. Afte r the c omme nce men t date, the am ount of l eas e liabi lities i s incre ase d to re lec t the ac cretion o f interes t and re duc ed for l eas e payme nts ma de. I n additi on, the c arr ying a mount o f lea se liab ilitie s is re -m eas ured if th ere is a mo di ic ation, a ch ang e in the le ase te rm, a cha nge in th e ‘in- sub sta nce ixed ’ le ase p ayment s or as a re sult of a rent revie w or cha nge in th e relevant in dex or rate . Variable l eas e paym ents th at do not d epe nd on a n index or a r ate are rec ogni se d as an exp ens e in the p erio d over whic h the event or co nditi on that trig ger s the paym ent oc cur s. The G roup ha s opte d not to app ly the le as e acc ounting m od el to intan gible a ss ets, l eas es of l ow-value a ss ets o r lea ses w hich have a term of l ess t han 12 mo nths. C os ts as so ciate d with the se lea se s are rec ogni sed a s an expe ns e on a strai ght-line ba sis ove r the le as e term. Lea se paym ents a re pres ented a s follows i n the Gro up state ment of ca sh l ows: • Sh or t-term lea se paym ents , payme nts for l eas es of l ow-value as sets a nd varia ble le as e payme nts that a re not inc lude d in the me asure ment of th e lea se li abilitie s are pre sente d within c as h low s from op erating a ctivi ties; • Paym ents for t he intere st el eme nt of rec ogni sed l ea se liab ilitie s are incl ude d in intere st pai d within c ash lows fro m ope rating activ ities ; and • Paym ents for t he prin cipal e lem ent of re co gnis ed le ase l iabili ties are pre sente d within c ash lows fro m in ancin g activ ities . Subl ea ses o f the Gro up’ s as sets a re clas si ie d as op eratin g lea se s whe n the ris ks and reward s of owne rship a re not sub sta ntially trans ferred to th e sub -l es se e. Rent al inc ome ari sing i s acc ounte d for on a s traight-line b asi s in the G roup inc ome s tatem ent. A ll of the Group’s subl eas e arran gem ents a re clas si ie d as op eratin g lea ses . As soc iate s an d joi nt ventu res An as so ciate is an e ntit y over whic h the Gro up has s igni ic ant inl uen ce. Si gni ica nt inlu enc e is the p ower to p arti cipate in th e in anci al and o per ating po licy de cis ions of th e entit y , b ut is n ot contro l or joint c ontrol ove r thos e poli cie s. A joint ve nture exist s whe n two or m ore pa rtie s have joint c ontrol ove r , an d rights to the net a sse ts of, the venture. J oint co ntrol is the c ontra ctuall y agree d sha ring of c ontrol whi ch only ex ists w hen d eci sion s abo ut the relevant a ctivi ties re quire the un anim ous c ons ent of the p ar ties shar ing contro l. In dete rminin g the exte nt of powe r or sign ii cant in lu enc e, con sid eratio n is given to oth er agre em ents b etwe en th e Group, the inves tee enti ty , and th e investing p ar tner s, inc ludin g any related man age ment o r franch ise a greem ent s and the exi sten ce of any per formance guarantees. As soc iates an d joint ven tures are ac co unted for u sing th e equi ty meth od unl es s the as so ciate or jo int venture is c las si ie d as he ld for sal e. Un der th e equi ty me thod, th e Grou p’ s investm ent is re cord ed at co st adju ste d by the Group’s share o f pos t-acqu isitio n pro its an d los se s, and oth er move ment s in the inves tee’s rese rve s, app lying con sis tent ac counti ng po licie s. Wh en the G roup’s share of lo ss es excee ds it s interes t in an as so ciate or j oint venture, th e Group’s carr yi ng amo unt is red uce d to $nil an d rec ogniti on of fur the r los se s is dis co ntinue d except to the ex tent th at the Gro up has i ncurre d leg al or c ons tructi ve oblig ations o r mad e payme nts on b eh alf of an as so ciate or jo int venture. If the re is obj ecti ve evide nce th at an as so ciate or jo int venture is impa ired, an im pairm ent ch arge is re co gnis ed if th e carr yin g amount of the inves tme nt excee ds its re covera ble am ount. Up on los s of sig ni ican t inlu enc e over an as so ciate o r joint co ntrol of a joint ve nture, any retain ed inves tme nt is me asure d at fair val ue with any die renc e to carr yi ng value re co gnis ed in the G roup income statement. Impairment of non- inancial assets Non - ina ncial a ss ets are te sted fo r impai rment w hen event s or cha nges i n circum stan ce s indic ate that th e carr yin g value m ay not b e recover able a nd, in the c as e of goo dwill a nd bran ds with inde i nite lives , at lea st ann ually. Asset s that do n ot gen erate inde pe nde nt cas h low s are allo cate d to the ca sh- g ene rating uni t (‘CG U ’), or gro up of CG Us, to w hich they b elo ng. If c arr ying va lue s excee d thei r esti mated re covera ble am ount, th e as sets o r CG Us are writ ten down to th e recove rable a mount . Rec overabl e amou nt is the greate r of fair valu e les s co sts o f disp os al and val ue in us e. Value in use i s as ses se d ba sed o n esti mated f uture ca sh l ows dis counte d to their p res ent valu e using a p re -tax d isc ount rate that re le ct s current market as se ss ment s of the tim e value of m oney an d the ris ks sp eci ic to the a ss et. Im pairm ent lo sse s, an d any subs equ ent revers als, a re reco gnis ed in th e Group in com e st ateme nt. With th e exceptio n of go odwill, a n ass es sm ent is m ade at e ach repo rti ng date to dete rmine w hethe r there i s an indi catio n that previo usly re co gnis ed imp airme nt los se s no lo nger ex ist or h ave dec reas ed . A previou sly re cog nise d imp airme nt los s is rever sed only i f there ha s be en a sig ni ican t chan ge in the a ssu mption s use d to determ ine the a ss et ’ s rec overabl e amount s inc e the imp airme nt los s was re cog nise d. Th e revers al is limi ted so th at the c arr ying amou nt of the as se t doe s not exce ed it s recove rable a mount , nor excee d the c arr ying am ount th at would h ave bee n determ ined , net of d epre ciatio n or amo r tisati on, ha d no imp airme nt los s be en rec ogni sed fo r the as set in p rior ye ars. Financial as sets On ini tial rec ogni tion, th e Group c las si ies i ts inanc ial as set s as bei ng sub se quentl y mea sure d at amor tis ed c ost , fair valu e through other c omp rehe nsive in com e (‘F VO CI ’) or f air value th rough pro it or lo ss (‘ F V TPL ’). Fin ancia l ass ets w hich are h eld to co lle ct co ntractu al ca sh l ows and gi ve rise to c ash lows that a re sole ly paym ents o f princ ipal an d interes t are sub se quentl y mea sure d at amor tis ed c ost . Intere st on the se as set s is ca lcula ted us ing the e ec tive interes t rate meth od and i s reco gnis ed in th e Group i nco me st ateme nt as inanc ial inc ome. T he Gro up rec ogni ses a p rovisio n for expe cte d cred it los se s for inanc ial as set s hel d at amo rti sed c os t. Whe re there h as not b ee n a signi ic ant in crea se in cre dit ris k sinc e initia l reco gnitio n, provis ion is ma de for de fault s that are p oss ible w ithin the n ext 12 m onths . Whe re there h as be en a si gni ica nt incre ase in c redit ri sk sin ce ini tial rec ogniti on, provi sion i s made fo r cred it los se s expe cted ove r the remai ning life of th e as set. 154 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements The G roup ha s ele cte d to irrevoca bly de sign ate equi ty inve stme nts as F VOC I as they m ainly c ompr ise st rategic inve stme nts in enti ties that own h otels wh ich the G roup ma nag es. C han ges in th e value of equ ity inve stme nts cl ass ii ed as F VO CI are re co gnise d withi n gains or lo ss es on e quit y ins trume nts cl ass ii ed a s fair value t hrough oth er comprehensiv e income in t he Grou p stat ement of comprehensiv e inc ome an d are never re cycle d to the Grou p inco me st ateme nt. On di spo sal o f equi ty inves tment s, any relate d bal anc e within th e fair valu e rese r ve is recl as si ied to ret aine d earn ings . Divi den ds from equ ity inve stme nts cl ass ii ed as F VO CI are re co gnise d in the G roup inc ome s tatem ent as oth er op eratin g inco me wh en the di vide nd ha s be en de cla red, wh en rec eipt of th e fund s is prob abl e and wh en the divid end i s not a return of i nvested c api tal. Eq uity i nstru ment s cla ssi ie d as F VOC I are not s ubje ct to imp airme nt ass es sme nt. Fin ancia l ass ets m eas ured at F V T PL inc lude m oney ma rket funds a nd other ina ncia l ass ets w hich do n ot have a ixe d date of rep ayment . T rad e receivab les A trade re ce ivable i s rec orde d when th e Grou p has an u nco nditio nal right to rec eive paym ent. I n resp ec t of franc his e fees , bas e and inc entive ma nage me nt fees , Ce ntral revenu e and revenu es from owne d, le ase d and m anag ed le as e hotel s, the invoic e is t ypic ally is sue d as the re lated p er forma nce o bliga tions a re satis ie d, as des crib ed o n pag e 151. T rade re ceiva ble s are non -inte rest-b earin g and are g ene rally on p ayme nt terms of u p to 30 days. T ra de rec eivab le s are reco gnis ed in itially at f air value a nd sub se quentl y me asure d at amo rti sed c os t. A provis ion for im pairm ent is m ade fo r lifetim e expe cted c redit l oss es . The G roup ha s est abli she d a provis ion matrix th at is ba se d on its h istoric al cre dit lo ss exp erie nce by re gion and nu mbe r of days pa st due . Whe re the histo rica l exper ienc e is not relevant to d e ine d owner g roups, fo r exampl e thos e with paym ent pla ns, the exp ec ted lifeti me lo sse s are c alcul ated by refere nce to other s ourc es of d ata. T ra de rec eivab le s are writ ten o on ce de termin ed to be un col lec tab le. Cash and cash equ iv alents Cash comprises cash i n hand and demand deposits. Ca sh and c as h equi valent s com pris e sho rt-term d epo sits , mon ey market fun ds an d repurch ase a gree ment s that are re adily c onver tibl e to a known a mount of c as h and are su bjec t to an ins igni ic ant risk o f cha nges i n value. T hey ge nera lly have an orig inal m aturit y of three months or less. Ca sh and c as h equi valent s may incl ude am ounts w hich are s ubje ct to regul ator y or othe r contra ctual re stric tion s and not avail able fo r gen eral u se by the G roup. Ca sh bal anc es are cl as si ied a s othe r in ancia l ass ets w hen su bjec t to a spe ci ic ch arge or c ontrac tuall y ring- fenc ed for a s pe ci ic purp ose , such th at the G roup do es not c ontrol th e circum sta nce s or timin g of its re lea se. Mo ney ma rket fund s Mo ney market fun ds are he ld at F V TP L, wi th distri butio ns rec ogni se d in inanc ial income . Bank and other borrow ings Ban k and oth er bo rrowings a re initiall y reco gnis ed at th e fair valu e of the c ons ider ation rec eive d les s dire ctly at tribut abl e trans acti on co sts . They are su bse que ntly me asure d at amo rti se d cos t. Bo rrowings a re clas si ie d as no n- curre nt when t he repaym ent da te is mo re than 12 mo nths from th e pe riod -e nd da te or whe re they are drawn on a f acilit y with m ore than 12 m onths to exp ir y . De rivative i nan ci al in stru me nts an d he dgi ng De rivatives a re initiall y reco gnis ed an d sub seq uently m ea sured at fair valu e. Th e subs equ ent ac cou nting treatm ent de pe nds o n wheth er the de rivative is d esig nated a s a he dging in strum ent, a nd if so, th e nature of th e item b eing he dg ed. Cha nge s in the fair va lue of d erivative s which h ave eithe r not be en de sign ated as h ed ging ins trume nts or re late to the in ee ctive por tio n of he dge s are rec ogni sed i mme diately w ithin inan cial inc ome or ex pen se s in the G roup inc ome s tatem ent. Do cume ntatio n outlin ing the m eas ureme nt and e ec tivene ss of any hed ging arr ange ment i s maint aine d through out th e life of the hedge relat ionship . Intere st aris ing from c urrency d erivative s and inte rest r ate swaps is rec orde d in eith er inan cial in com e or expe ns es over th e term of the ag reem ent, u nles s the a cco unting tre atment fo r the he dgin g relati onsh ip requi res the inte rest to b e taken to res er ves . Intere st pai d as pre sente d within th e Grou p state ment of c as h lows incl ude s interes t paid o n the G roup’s bonds a nd the re lated derivative inancial instruments. Ca sh l ow hed ges Financial instr uments a re desi gnat ed as cash lo w hedges when they he dge exp os ure to variabil ity in c as h lows th at are at tribut able to eithe r a highly p roba ble fore ca st trans ac tion or a p ar ticul ar risk as soc iated w ith a reco gnis ed a ss et or lia bilit y . Cha nge s in the fair va lue are re corde d in oth er co mpreh ens ive inc ome an d ca sh low h ed ge res er ves to the ex tent th at the he dge s are ee ctive. W hen th e he dge d item is re co gnise d, the c umulati ve gain s and lo ss es on th e relate d he dging in strum ent are re clas si ie d to the Gro up inc ome st atem ent, wi thin in anci al expe ns es. Net i nvestme nt he dge s Financial instr uments a re desi gnat ed as net inv e stment hedges whe n they he dge th e Group’s net inves tment in fo reign op erati ons . Cha nge s in the fair va lue are re corde d in oth er co mpreh ens ive inc ome an d the curre ncy tran slati on res er ve to the exte nt that the he dge s are ee ctive. T he cumu lative gai ns and l os ses re main in equ ity unti l the releva nt foreign o per ation is s old, at w hich p oint they are recl as si ied to th e Group in com e st ateme nt as pa rt of th e gain or lo ss on d isp os al. Deferred compens ation plan The G roup op erate s a defe rred co mpe ns ation pl an in the U S whic h allows c er tai n empl oyees to ma ke additio nal provi sion fo r retirem ent through t he defe rral of s alar y with m atching c omp any contri butio ns within a d edic ated tr ust. T he rel ated as set s and li abiliti es are rec ogni sed o n the ba lanc e she et. T he Gro up’ s obl igatio n to emp loyees u nde r the pl an is limite d to the fair va lue of a sse ts he ld by the pl an and s o the as set s and lia bilitie s are valu ed at the s am e amou nt, with n o net imp act o n pro it or lo ss . F air val ue measuremen t The G roup me as ures ea ch of th e followin g at fair valu e on a recur ring ba sis: • Fin anc ial as set s and lia bilitie s at F V TPL ; • Fin anc ial as set s mea sure d at F VOCI ; and • De rivativ e inancial instruments. Oth er as set s are me asure d at fair val ue whe n impa ired or re - mea sure d on cl ass i icatio n as he ld for s ale by refe renc e to fair value l es s cos ts of dispos al. Fair value is th e pric e that woul d be re ceive d to se ll an as set or paid to tra nsfe r a liabil ity in a n orderl y trans acti on bet we en mar ket par tici pants . Fair value i s mea sure d by referenc e to the prin cipa l market for th e as set or li abilit y as sumi ng that m arket par ticip ants act in th eir e con omic b es t interes ts. The fa ir value of a n on -i nanc ial as set a ssu mes th e as set is u se d in its hi ghe st and b es t use, e ither th rough c ontinuin g owne rship or by se lling it . 155 IHG | Annua l Repo rt a nd Form 20 F 202 1 Acc ounting p olic ies Group Financial Statements The G roup us es val uation te chni ques t hat max imis e the us e of relevant o bs er vable i nput s using t he follow ing valua tion hie rarchy: Level 1: Q uote d (unadjus ted) p rice s in ac tive markets fo r identi cal as sets o r liab ilities . Level 2: O ther te chniq ues fo r which a ll input s whic h have a signi ic ant e ect o n the rec orde d fair val ue are ob ser vab le, eith er dire ctly or in direc tly . Level 3: Techniq ues w hich us e inpu ts whic h have a signi ic ant e ect on the re cord ed fai r value tha t are not ba se d on ob ser vab le market data. For as set s and lia bilitie s me asure d at fair valu e on a rec urring b asi s, the G roup dete rmine s wheth er tran sfer s have oc curred b et ween level s in the hie rarchy by reas se ssi ng cate gori satio n (ba se d on the lowes t level in put tha t is signi ic ant to the f air value m eas urem ent as a wh ole) at the en d of ea ch rep or ting pe riod . Furthe r disc los ures on th e par tic ular valu ation te chniq ues u se d by the G roup are provid ed in n ote 25. Whe re signi ic ant as set s (such as p rope rt y) are value d by referen ce to fair valu e les s co sts of d isp osa l, an exte rnal valu ation wi ll norm ally be ob tain ed us ing profe ss iona l valuer s who h ave approp riate market knowledge, reputa tion and independence. O se ttin g of i nan cia l as se ts an d in anc ial l iab iliti es Financial as sets and inancial liabilities are oset and the net amount is rep or ted in th e Group s tatem ent of inan cial p osi tion if th ere is a currentl y enforc eab le le gal right to o se t the rec ogni se d amount s and th ere is an inte ntion to se ttle o n a net b asi s or to reali se the as sets a nd se ttle th e liabi lities s imult ane ous ly . To meet th ese c riteria, the right o f set-o must n ot be c onting ent on a fu ture event an d mus t be le gally e nforce abl e in all of the fo llowin g circums tan ce s: the no rmal c ours e of bu sine ss; th e event of de fault ; and the eve nt of ins olven cy or ban kruptcy of th e Grou p and all of th e cou nterpa rtie s. Ta x e s Cur rent t ax Curre nt inco me t ax as sets a nd lia bilitie s for the c urrent an d prior pe riods a re mea sure d at the amo unt expe cte d to be rec overed fro m, or pa id to, the tax a uthori ties . The t ax rates a nd tax l aws us ed to com pute the a mount a re thos e that are en acte d or sub st antively ena cted at t he en d of the rep or ting p erio d. Deferred tax De ferred t ax as set s and li abilitie s are rec ogn ise d in res pec t of temp orar y die renc es b etwe en th e tax b ase a nd ca rry ing valu e of as set s and lia bilitie s incl uding p rope rt y , plant a nd eq uipme nt, intan gibl e ass ets, a ppli catio n fee s, contr act c ost s, unrel ieved tax l os ses , ass oci ates, g ains roll ed over i nto repla cem ent as set s, defer red com pensatio n and other shor t -t erm t empora ry dier ences. Jud gem ent is u se d when a ss es sing th e extent to w hich de ferred t ax as sets , par ticul arly in re spe ct of t ax lo ss es, s hould b e rec ogni se d. De ferred t ax as set s are the refore rec ogni sed to th e exten t that it is reg arde d as prob abl e that the re will be s u icie nt and sui tab le taxa ble p roit s (inc luding th e future rel ea se of de ferred t ax lia bilitie s) in the rel evant le gal en tity o r tax gro up agai nst whi ch su ch as set s can b e utili sed i n the future . For this pur pos e, forec as ts of futu re taxa ble p roit s are co nsid ered by a ss es sing the G roup’s forec ast revenue a nd pro it mo del s, ta king into ac co unt future grow th pred ictio ns and o pe rating co st as sum ptions . De ferred t ax is c alcu lated at th e tax rate s that are exp ec ted to app ly in the p erio ds in whi ch the a sse t or liab ilit y will be s et tled, b ase d on rate s enac ted o r subs tantive ly en acte d at the en d of the report ing peri od. Whe re defer red ta x ass ets a nd liab ilitie s arise i n the sa me entit y , or group of e ntities , and th ere would b e a le gal right to o se t the as set s and li abilitie s were th ey to reverse, th e ass ets an d liab ilitie s are also os et on th e Group s tatem ent of ina ncial p os ition. O the rw ise, th e as sets a nd liab ilitie s are not o set . Ret iremen t benei ts Deined contri bution plans Payme nts to de in ed co ntribu tion sc hem es are ch arge d to the Group i nco me st ateme nt as they fa ll due. Deined beneit plans Plan a ss ets are m eas ured at fai r value an d plan l iabili ties are m eas ured on an ac tuari al bas is us ing the p rojec ted unit c redit m etho d, dis counte d at an intere st rate e quival ent to the cu rrent rate of return on a high - qual ity c orp orate bo nd of e quivale nt curre ncy and te rm to the pl an liabi lities . The d iere nce b etwe en th e value of p lan a sse ts and li abilitie s at the p erio d- en d date is th e amou nt of surp lus or de ici t reco rded in t he Grou p state ment o f in ancia l pos ition a s an as set or l iabili ty . An as set i s reco gnis ed w hen th e empl oyer has a n unc onditi onal ri ght to use th e surpl us at so me po int during t he life of the p lan or o n its win d- up. The s er vic e cos t of provid ing pe nsio n be ne its to e mployee s, toget her wi th the net in terest ex pen se or in co me for the ye ar , i s cha rged to the G roup in com e state ment w ithin adm inistr ative expe nse s. N et intere st is c alcul ated by ap plyin g the dis cou nt rate to the net d e ine d ben e it as set o r liabil ity , af ter any as set re stricti on. Pas t ser vic e co sts an d gain s, whic h are the ch ange i n the pre sent value of th e de in ed be ne it o bligati on for e mployee s er vic e in prio r pe riods re sulti ng from pl an ame ndm ents, a re reco gnis ed imme diate ly whe n the pl an ame ndme nt oc curs . Set tle ment g ains and lo ss es, b ein g the die renc e bet wee n the s ettl eme nt cos t and the pre sen t value of th e de ine d be ne it ob ligatio ns b eing s ettl ed, are rec ogni se d when th e set tle ment o ccur s. Re -me asu reme nts co mpris e actu arial g ains an d los se s, the retu rn on pl an as set s and ch ange s in the am ount of a ny asse t restri ction s. Actua rial gai ns and l os ses m ay result f rom die renc es be twe en the actu arial a ssu mption s unde rlyin g the pla n liabil ities a nd actu al expe rien ce durin g the year o r cha nge s in the ac tuaria l ass umptio ns use d in the va luatio n of the pl an liab ilitie s. Re -m eas ureme nt gain s and los se s, and t axatio n there on, are re cog nise d in othe r co mpreh ens ive inc ome an d are not re clas si ie d to pro it or lo ss in s ubse que nt pe riod s. Actua rial valu ation s are carri ed ou t on a regu lar ba sis an d are upd ated for m aterial tr ans actio ns and o ther m aterial c hang es in circum sta nce s (inc luding c hang es in m arket pric es an d interes t rates) up to the en d of the rep or ting p erio d. Prov is io ns Provisi ons are re co gnise d wh en the G roup ha s a pres ent ob ligatio n as a resul t of a pas t event, i t is prob able th at a paym ent will b e mad e and a reliab le e stimate of th e amo unt payabl e can b e mad e. If th e ee ct of the tim e value of m oney is m aterial, th e provis ion is di sc ounted u sing a current p re -tax d isc ount rate that re le ct s the ris ks spe ci ic to the li abilit y . In res pe ct of litig ation, a p rovisio n is ma de whe n man age ment con sid er it pro babl e that p ayment m ay occu r and the a mount c an be rel iably e stim ated even th ough th e defe nce of th e relate d cla im may still b e ong oing throu gh the c our t proc es s. As set s and l iab iliti es h eld f or sa le As sets a nd liab ilitie s are cla ssi ie d as h eld for s ale w hen th eir carr yi ng amo unt will b e recovere d prin cipa lly throug h a sal e trans acti on rathe r than c ontinui ng us e and a s ale is hi ghly prob abl e and exp ec ted to co mple te within on e year . For a sal e to be high ly prob able, m ana gem ent ne ed to b e com mitte d to a plan to s ell the as set an d the as set m ust b e active ly markete d for sa le at a pric e that is rea son able i n relatio n to its curre nt fair valu e. As sets d esi gnated a s he ld for s ale are he ld at the l ower of c arr ying amou nt at des ignati on and f air value l es s cos ts of di spo sal . De prec iation an d amo rti satio n is not c harge d agai nst a sse ts cla ssi ie d as h eld for s ale . Ac c o unti ng p o li c i e s c o nti nu e d 156 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Disposal o f non-cur ren t assets The G roup rec ogn ise s sal es pro ce ed s and any rela ted gai n or los s on disp os al on c omp letion o f the sa les p roce ss . In dete rminin g wheth er the gai n or lo ss sh ould b e rec orde d, the Gro up con sid ers wh ethe r it: • H as a co ntinuing m ana geria l involveme nt to the de gree a ss oci ated with as set ow ner ship; • H as trans ferre d the sign ii cant ri sks an d rewards as so ciate d with asset ownersh ip; and • C an relia bly me asu re and will a ctuall y rece ive the pro ce ed s. Equity share capital and r eserves Equity share capital Equit y sh are cap ital in clud es th e total ne t proc ee ds (b oth nom inal value a nd sha re premiu m) on issu e of the C omp any’s equi ty s hare cap ital . Share p remium re pres ents th e amou nt of proc ee ds rec eive d for sh ares in exce ss o f their n omina l value. Ca pit al re dem ption res er ve The c apit al red empti on res er ve maint ains th e nomin al valu e of the equ ity s hare c apit al of the C omp any when s hare s are repu rchas ed or cancelled. Shares held by emplo yee shar e t rusts Shares held by emplo yee shar e t rusts compr ise ord inary shares held by employ ee shar e tr usts. Oth er re se r ves Oth er res er ves c ompr ise th e merge r and reval uation re ser ve s previo usly re co gnis ed un der U K GAA P , tog ether w ith the res er ve arisi ng as a c ons equ enc e of the G roup’s capit al reorg anis ation in Jun e 200 5. T he revaluati on res er ve relate s to the previo us revalu ations of prop er t y , pl ant and e quip ment wh ich were in clud ed at d eem ed co st on ad optio n of IFR S. Follow ing the ch ang e in pres ent ationa l curren cy to US do llars i n 200 8, thi s rese rve al so in clud es exchan ge die renc es ari sing on re transl ation to p erio d- en d exchang e rates of equ ity s hare c apit al, the c apit al rede mptio n rese rve a nd sh ares he ld by employ ee shar e tr usts. Fair valu e res er ve The fa ir value re ser ve c ompri ses m oveme nts in the va lue of inan cial as sets m ea sured at f air value th rough oth er co mpre hen sive inc ome . Ca sh l ow hed ge res er ves The c as h low he dg e rese rve s com pris e: • C ash low he dge re ser ve: th e ee ctive po rti on of the c umulati ve net ch ang e in the fair va lue of he dgin g instr ument s use d in c ash low h edg es p endi ng sub seq uent re co gnition i n pro it or lo ss; an d • C ost of h ed ging res er ve: the g ain or lo ss w hich is exclu de d from the de sign ated he dgi ng ins trumen t relating to th e foreign c urrency bas is sp read of c urrenc y swaps . Cur rency trans lati on re ser ve The c urrency tra nsl ation res er ve co mpris es th e moveme nt in exchan ge die renc es ari sing from th e trans latio n of foreign o pe rations a nd exchang e die renc es on fo reign cur rency b orrowing s and de rivative inancial instru ments t hat pr ovide a hedge aga inst net in vestmen ts in foreig n ope ration s. On a dopti on of I FRS, cu mulative exch ange die renc es were d eem ed to b e $nil. Non - contro lling intere st A non - contro lling inte rest is e quit y in a su bsid iar y of the G roup not attri but able, di rectly o r indire ctly , to the Gro up. Share-based pa yments The c ost o f equi ty- set tle d share - bas ed p ayment tra nsa ctio ns with emp loyees i s me asure d by referen ce to fair val ue at the d ate at whic h the right to the s hare s is grante d. Fair value i s determ ine d by an exte rnal valu er us ing opti on pric ing mo del s. The c ost o f equi ty- set tle d share - bas ed p ayment tra nsa ctio ns is rec ogni sed, to geth er with a c orres pon ding in crea se in e quit y , over the p erio d in whic h any per form anc e or se rv ice c onditi ons are ful ille d, en ding on th e date on w hich the re levant e mployee s be com e fully e ntitle d to the award (vesting d ate). The in com e st ateme nt charg e for a pe riod re pres ents th e moveme nt in cumu lative exp ens e reco gnis ed at th e be ginning a nd en d of that pe riod. N o expe nse i s rec ogni sed fo r awards that d o not ultim ately vest , except for awa rds whe re vestin g is co nditio nal up on a ma rket or no n-ve sting c ondi tion, whi ch are treate d as ve sting irre sp ecti ve of whe ther o r not the m arket or no n-ves ting c onditi on is s atis ie d, provid ed that a ll other p er form anc e and/or ser vic e con ditio ns are sati s ied . New accounting standards Adoption of new ac counting st andard s The G roup ha s app lied th e requi reme nts of Inte rest Rate B en chma rk Reform – P has e 2 – Amen dme nts to IF RS 9, IAS 39, I FRS 7 , I FRS 4 a nd IFR S 16. T he ame ndm ents p rovide ad dition al guid anc e on the im pac t of new inte rest rate b enc hmar ks on ce rt ain he dge re latio nship s and o n the me asure ment o f cer ta in in anci al as set s and inan cial liabi lities . The c ontra ctual c as h lows of th e Grou p’ s deri vatives are unch ange d and t here is n o chan ge in the G roup’s risk ma nage me nt strate gy or de in ed h edg e acc ountin g relatio nsh ips. Valuin g the Group’s deri vatives with in he dge rel ation ship s (see note 24) usin g overnight i ndex swap (‘O IS ’) rate s inste ad of inte rbank ra tes do es not have a materi al imp act on t he ca rry ing amo unt of de rivative inanc ial liabi lities o r amo unts rec ogn ise d in the c ash low he dge re ser ve at 31 D ec emb er 202 1. In ad dition, th e Grou p has ap plie d the am endm ent s to IFRS 1 6 – Covi d-19 Rel ated Re nt Co nce ssi ons b eyond 3 0 June 2 02 1. The re was no mate rial imp act o n the G roup’s r ep or ted inan cial p er forma nce or po sitio n. New s tan da rds i ss ue d but n ot yet ee cti ve Fr om 1 J anuar y 20 2 2, the G roup will a pply th e ame ndme nts to: • IAS 37 – O ne rous C ontrac ts: C ost of Ful illin g a Contr act ; • IAS 1 6 – Prope rt y , Plant an d Equip ment: P roce ed s befo re Intend ed Us e; and • O ther exi sting s tan dards ari sing f rom the Ann ual Im proveme nts to IFRS s 20 18 – 202 0 cycle. Fr om 1 J anuar y 20 23, the G roup wi ll appl y the ame ndm ents to: • IAS 1 an d IFR S Prac tice S tatem ent 2 – Di scl osure of A cco unting Policies; • IAS 8 – D e initio n of Acc ountin g Estim ates; an d • IAS 12 – D efer red T ax relate d to As sets a nd Lia bilitie s aris ing from a Singl e T ra nsa ctio n. The re is no anti cipate d materi al imp act from th es e ame ndme nts on the G roup’s repor ted ina ncia l per form anc e or po sitio n. The e ec tive date for th e amen dme nt to IAS 1 – Cla ss ii catio n of Lia bilitie s as Cu rrent or N on - Curre nt has b een d eferre d to 1 Jan uar y 202 3. Th ere is no a nticipa ted mate rial imp act fro m thes e ame ndme nts on th e Grou p’ s repo rte d in anci al pe rfo rman ce or po sitio n. The e ec tive date for I FRS 17 ‘ Insu ranc e Cont ract s’ has b ee n defe rred to 1 Ja nuar y 20 23. Th e Grou p has no t yet determi ned th e impa ct of thi s sta ndard o n the Grou p’ s repo rte d i nanc ial pe rfor manc e or p ositio n. 157 IHG | Annua l Repo rt a nd Form 20 F 202 1 Acc ounting p olic ies Group Financial Statements Notes to the Gr oup F inancial Statements 1. E xcha nge r ates The re sult s of ope ration s have be en tran slate d into US d ollar s at the averag e rates of exch ange fo r the year. In the ca se of ste rling, th e trans lation r ate is $1 = £0.73 (202 0: $1 = £0.78, 20 19: $ 1= £ 0.78 ). In the c ase o f the euro, the tra nsl ation rate is $ 1 = €0. 85 (2 020 : $1 = €0. 88, 2019: $1= €0. 89) . As sets a nd liab ilitie s have be en tran slate d into US do llars a t the rates o f exchang e on the la st day of th e year . In the c as e of sterli ng, the trans lation r ate is $1 = £0.7 4 ( 2020 : $1 = £0.73, 201 9: $ 1= £0.76). In the ca se of th e euro, the tran slati on rate is $ 1= €0.8 8 (20 20: $ 1 = €0. 81, 2019: $1= €0. 89) . 2. S egme ntal information The G roup ha s four rep or tab le se gme nts re le cting it s geo grap hica l regio ns (Am eric as, EM E A A, G reate r Chin a) and its C entral fun ctio ns. Ce ntral fun ction s incl ude tec hno logy, sales a nd mar keting, in anc e, huma n reso urces a nd co rpo rate ser vic es; C entra l revenue ar ise s princ ipall y from tec hnol ogy fe e inc ome. No op erati ng se gmen ts have be en ag greg ated to form th ese re por t able s egm ents . Man age ment m onitor s the op eratin g resul ts of the se re por ta ble s egm ents for th e purp os e of mak ing de cisi ons ab out re sou rce allo catio n and p er forma nce a ss ess me nt. Ea ch of the g eo graphi cal re gion s is le d by its own C hief E xecu tive O ic er who re por ts to th e Group C hief E xecutive O icer. The S ystem Fund is n ot man age d to gen erate a pro it or l os s for IH G over the l onge r term. A s such , its res ults are n ot regul arly reviewe d by the Chi ef Op eratin g De cisi on Ma ker (‘CO DM ’) an d it do es not c ons titute an op erati ng se gmen t unde r IFR S 8 ‘Ope rating S egm ents’ . Simil arly , reimbu rse ment s of co sts are n ot repo rte d to the CO DM a nd so a re not inc lude d within th e repo rt abl e seg ment s. Se gment al pe r forman ce is eva luated b as ed on o per ating pro it or l os s and is m eas ured c ons istentl y with op eratin g pro it or lo ss in th e Group Fin ancia l State ment s, excludi ng Sys tem Fund and exce ption al items . Grou p in ancin g activ ities , fair valu e gains o r los se s on co ntinge nt purch ase c ons ide ration an d inc ome t axes are ma nag ed on a G roup b asis a nd are not a lloc ated to rep or tab le se gme nts. Reve nu e Y ear ended 31 December 2021 $m 2020 $m 2019 $m Americas 7 74 512 1,04 0 EME AA 303 221 723 Greater China 116 77 135 Ce ntral 197 182 185 Rev enue from rep ortable segments 1,390 992 2,0 83 System Fu nd re venues 928 76 5 1,373 Reimbursement of costs 589 637 1 ,1 7 1 T ot al revenue 2 ,907 2,394 4,627 Proit/(los s) Y ear ended 31 December 2021 $m 2020 $m 2019 $m Americas 559 29 6 700 EME AA 5 ( 50) 217 Greater China 58 35 73 Ce ntral (88) (6 2) (125) Op er atin g pro it f rom re po rt ab le s egm en ts 534 219 865 System Fu nd (11) (10 2) (4 9 ) Op era ting exc epti ona l item s (note 6) (2 9) (270) (1 86) Ope rating proit/(los s) 494 (1 53) 630 Net inancial expens es (13 9) (140) (115) Fai r val ue gains on cont ingent pu rchase considera tion 6 13 27 Proit/(los s) before tax 361 ( 28 0) 5 42 Ta x (96) 20 (156 ) Pro it /(los s) for t he ye ar 265 (26 0) 386 158 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 2 . Se gme nta l info rmati on co ntinue d Op eratin g pro it from rep or tab le se gme nts inc lude s the foll owing, w hich are in clud ed in oth er op eratin g inco me in th e Group income sta tement : • In 20 2 1, $5m g overnme nt grant in com e relatin g to the EM EA A re gion; • In 20 20, $4 m bus ine ss inte rruption i nsura nce p roce ed s and $ 4m favoura ble liti gation s et tlem ent, b oth in the Am eric as re gion, and $ 3m g ain on dis po sal of h otel as set s in the EM E A A regio n; and • In 20 19, $ 10m b usin es s interrupti on ins uranc e proc ee ds rel ating to the A meric as re gion . No n- ca sh ite ms i ncl ude d wit hin o pe ratin g pro it fro m rep or tab le s egm en ts Year en de d 31 D ec em be r 20 21 Americas $m EMEAA $m Greater China $m Central $m Group $m Depreciation and amortisat ion a 30 18 6 44 98 Equi ty-settled share-based pa yments cost 8 4 3 11 26 Sha re of lo ss es o f ass oc iate s 7 1 – – 8 Year en de d 31 D ec em be r 20 20 Americas $m EMEA A $m Gre ater China $m Centra l $m Grou p $m Depreciation and amortisat ion a 41 21 6 42 11 0 Equi ty-settled share-based pa yments cost 7 3 2 7 19 Sha re of lo ss es o f ass oc iate s and j oint ve nture s 14 – – – 14 Year en de d 31 D ec em be r 20 19 Americas $m EMEA A $m Gre ater China $m Centra l $m Grou p $m Depreciation and amortisat ion a 44 25 5 42 116 Equi ty-settled share-based pa yments cost 9 4 2 13 28 Sha re of lo ss es /(gain s) of as soc iate s and j oint ve nture s 9 (6) – – 3 a I ncl ude d in th e $9 8 m (20 20 : $11 0m, 2 01 9: $ 116 m) of de pre ci atio n and a mo rti sa tio n is $2 0m ( 20 20: $ 29 m, 20 19 : $3 2m) rel ati ng to co st o f sal es i n own ed, l ea se d an d man ag ed le as e hote ls, a nd $ 78m ( 202 0: $ 81m , 20 19: $ 8 4m) re lati ng to ot her a ss et s. A fu rt her $ 94 m (2 020 : $6 2m, 2 01 9: $ 54 m) of de pre ci atio n and a mo rti sa tio n was re co rde d wit hin S yste m Fu nd expenses. Capit al expend iture Year en de d 31 D ec em be r 20 21 Americas $m EMEAA $m Greater China $m Central $m Group $m Capital e xpendit ure per managemen t r eporting 35 25 1 39 100 Contract acquisit ion costs (32) (1 0) (1) – (4 3) Timing dier ences and other adjust ments 3 (5) – 4 2 Add iti ons p e r the G ro up Fin an ci al St ate me nts 6 10 – 43 59 Co mpr isin g ad ditio ns to: Goodwill a nd other intang ible assets 1 – – 32 33 Prop er t y , p la nt and e qui pme nt 1 5 – 11 17 Inve stme nt in a ss oci ates a nd jo int ven tures 4 – – – 4 Other inancia l assets – 5 – – 5 6 10 – 43 59 Year en de d 31 D ec em be r 20 20 Americas $m EMEA A $m Gre ater China $m Centra l $m Grou p $m Capital e xpendit ure per managemen t r eporting 46 44 2 56 148 Contract acquisit ion costs (33 ) ( 29) (2) – (6 4) Timing dier ences and other adjust ments 17 4 – (1) 20 Add iti ons p e r the G ro up Fin an ci al St ate me nts 30 19 – 55 104 Co mpr isin g ad ditio ns to: Goodwill a nd other intang ible assets 1 1 – 50 52 Prop er t y , p la nt and e qui pme nt 12 13 – 5 30 Inve stme nt in a ss oci ates a nd jo int ven tures 17 – – – 17 Other inancia l assets – 5 – – 5 30 19 – 55 104 159 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 2 . Se gme nta l info rmati on co ntinue d Geo graphic al information Y ear ended 31 December 2021 $m 2020 $m 2019 $m Reven ue United Kingd om 142 77 26 5 Uni ted St ate s 1,263 1 ,06 7 1, 957 Res t of Worl d 574 485 1,0 32 1,979 1,62 9 3,25 4 Sys tem Fund (not e 33) 928 76 5 1,373 2,9 07 2,394 4,627 For the pu rpos es of th e above t able, fe e bu sine ss, ow ned , lea sed a nd ma nage d le ase a nd reimb urs abl e revenue s are deter mine d acc ording to the lo catio n of the hote l and oth er revenu e is at tribute d to the co untr y of origin . In ad dition to th e Unite d King dom, reve nue rel ating to an indi vidu al cou ntry i s sep aratel y disc los ed wh en it rep rese nts 10 % or mo re of total reve nue. Sy stem Fund revenu es are n ot inclu de d in the geo grap hica l analy sis as t he Grou p doe s not mo nitor the Fund ’s revenue by loc ation o f the hote l, or in the c ase o f the loyalt y prog ramme, acc ordin g to the loc ation w here m emb ers c ons ume the ir rewards . 31 December 2021 $m 2020 $m Non-current as sets United Kingd om 64 72 Uni ted St ate s 1,346 1,4 87 Res t of Worl d 661 70 0 2 ,07 1 2,259 For the pu rpos es of th e above t able, n on -c urrent as se ts co mpris e go odwill a nd othe r intan gibl e ass ets, p rope r ty , plant a nd eq uipm ent, right-of-u se as se ts, inves tment s in as so ciates a nd joint ve ntures, n on -c urrent co ntrac t cos ts and n on -c urrent c ontrac t ass ets . In ad dition to the Un ited K ingdo m, non - curre nt ass ets re lating to an in divid ual co untr y are se parate ly disc los ed wh en th ey repres ent 10 % or mo re of total non - current a ss ets, a s de ine d above . 3. R even ue Dis aggreg ation of revenue Year en de d 31 D ec em be r 20 21 Americas $m EMEAA $m Greater China $m Central $m Group $m Franch ise a nd b ase m ana ge men t fee s 683 120 91 – 894 Incenti ve ma nagement f ees 8 29 25 – 62 Ce ntral reve nue – – – 197 197 Reven ue fro m fee b usi ne ss 691 14 9 116 197 1 ,1 5 3 Reven ue fro m owne d, l eas ed a nd ma na ged l ea se ho tels 83 15 4 – – 237 7 74 303 116 197 1,39 0 Sys tem Fund re venu es (note 3 3) 928 Reimbursement of costs 589 T ot al revenue 2,9 07 Year en de d 31 D ec em be r 20 20 Americas $m EMEA A $m Gre ater China $m Centra l $m Grou p $m Franch ise a nd b ase m ana ge men t fee s 4 52 93 61 – 606 Incenti ve ma nagement f ees 5 14 16 – 35 Ce ntral reve nue – – – 182 182 Reven ue fro m fee b usi ne ss 4 57 107 77 182 823 Reven ue fro m owne d, l eas ed a nd ma na ged l ea se ho tels 55 114 – – 169 512 221 77 182 992 Sys tem Fund re venu es (note 3 3) 765 Reimbursement of costs 637 T ot al revenue 2,394 160 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 3. Reven ue c ontinu ed Year en de d 31 D ec em be r 20 19 Americas $m EMEA A $m Gre ater China $m Centra l $m Grou p $m Franch ise a nd b ase m ana ge men t fee s 840 247 87 – 1,1 74 Incenti ve ma nagement f ees 13 90 48 – 151 Ce ntral reve nue – – – 185 18 5 Reven ue fro m fee b usi ne ss 853 337 135 185 1, 510 Reven ue fro m owne d, l eas ed a nd ma na ged l ea se ho tels 1 87 386 – – 573 1,04 0 723 135 185 2 ,08 3 Sys tem Fund re venu es (note 3 3) 1,373 Reimbursement of costs 1,1 7 1 T ot al revenue 4,627 In 20 20, followin g com munic ation wi th the IH G Ow ners A ss oci ation, fe es an d expe nse s as soc iated wi th the Inte rC ontine ntal A mbas sa dor progr amme (the Inte rC ontin enta l Hotel s & Res or ts pai d-for l oyalty p rogram me) previou sly rep or ted w ithin C entral reven ue were move d into the Sys tem Fund to align wi th the treatm ent of I HG ’s other bran d loyalt y progr amme s. Reven ue aris ing from th e lice nce o f intelle ctua l prop er ty u nder c o -br and cre dit c ard agre eme nts previ ousl y reco rded w ithin the S ystem Fund wa s moved into C entral reve nue. T his ch ange was e ecti ve from 1 Jan uar y 202 0. For the year e nde d 31 D ec emb er 20 20, this ch ange re sulte d in an inc reas e of $20 m to Ce ntral revenu e and $ 21m to op eratin g pro it from rep or tab le se gme nts, an d an eq uivale nt redu ction to S ystem Fund revenu es an d incre ase to S ystem Fund ope rating l oss . Ha d this arra ngem ent exi sted in 2 019, C entral reve nue an d ope rating p roit i n 2019 wo uld have b een $ 18 m and $2 2m hig her resp ec tively; Sys tem Fund revenue s would h ave reduc ed a nd Sys tem Fund ope rating l oss wo uld have in creas ed by th e sam e amou nts. Contra ct balan ces 2021 $m 2020 $m T rad e rec eiva ble s (note 18) 399 309 Contract assets 346 336 De ferre d revenu e (1,6 13) (1, 56 9) Contra ct ass ets 2021 $m 2020 $m At 1 Jan uar y 336 334 Additi ons 45 74 Rec og nis ed a s a de duc tion to reve nu e (35) (25) Impairment cha rges – (5 3) Repay ments (1) – Exchange a nd ot her adjust ments 1 6 At 31 D ec em be r 346 336 Analyse d as: Curre nt 30 25 No n- curre nt 316 3 11 346 336 The G roup al so ha s future co mmitm ents fo r key money paym ents w hich are c onting ent up on future eve nts and m ay reverse . At 31 De ce mbe r 202 1, the m aximu m expos ure rema ining un der p er forma nce g uarante es wa s $8 5m (20 20: $ 72m). In 20 20, impai rment of c ontra ct as set s relate d prima rily to dep os its ma de to Se rv ice Pro per tie s T ru st (‘SVC ’) of $ 3 3m. T he rema ining impa irment o f $20 m relate d to key money and p er form ance g uarante e payme nts on i ndivi dual p rope rti es whic h were tes ted with re ferenc e to future fran chis e and m anag eme nt fee s. O f the total i mpair ment in cludi ng SVC balan ce s, $4 2m relate d to the Ame rica s regio n and $ 11m to the EM E AA re gion . 161 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 3. Reven ue c ontinu ed Deferre d revenue Loya lt y programme $m Other co-brand fees $m Application & re-licensing fees $m Other $m To t a l $m At 1 Jan uar y 20 20 1,23 3 66 172 93 1,56 4 Inc reas e in de ferre d revenu e 344 – 14 45 403 Rec og nis ed a s revenu e (33 2) (11) (2 0) (39 ) (4 0 2) Exchange a nd ot her adjust ments – – – 4 4 At 31 D ec emb er 2 020 1,24 5 55 166 103 1,5 69 Inc reas e in de ferre d revenu e 384 – 19 45 448 Rec og nis ed a s revenu e (33 7 ) (1 1) (2 2) (3 5) (40 5 ) Exchange a nd ot her adjust ments – – – 1 1 At 31 D ec em be r 202 1 1,292 44 16 3 114 1,6 13 Analyse d as: Curre nt 535 11 21 50 617 No n- curre nt 757 33 142 64 996 1,292 44 16 3 114 1,6 13 At 31 D ec emb er 2 020 : Curre nt 376 11 22 43 4 52 No n- curre nt 86 9 44 14 4 60 1,117 1,24 5 55 166 103 1,5 69 This t abl e doe s not in clud e amount s whic h were rec eive d and rec ogn ise d as revenu e in the s ame ye ar . A mount s reco gnis ed a s revenue were inc lude d in de ferred reve nue at the b egi nning of th e year. Loyalty p rogra mme revenu es, s hown gro ss in th e tabl e above, are p rese nted n et of the c orres pon ding re dem ption c ost in th e Group income statement. Oth er de ferred reve nue inc lude s tec hnic al ser vi ce fee s and g ues t dep osi ts rec eive d by owned, l ea sed a nd man age d le ase h otels . T ransaction price al located to remaining perfor mance obligations The G roup ha s app lied th e prac tica l expe dient in I FRS 1 5 not to dis clo se the a ggreg ate amoun t of the tran sac tion p rice all oc ated to the pe rfor manc e obli gation s that are un sati s ied o r par tiall y uns atis ie d as at the e nd of the re por ting p eri od for all a mount s whe re the Grou p has a ri ght to con side ration i n an amou nt that co rres pon ds dire ctly with th e value to th e custo mer of th e Group’s per form anc e com plete d to date (inc ludin g franch ise an d man age ment fe es). Amo unts rec eive d and n ot yet reco gnis ed re lating to p er forman ce ob ligati ons tha t were uns atis ie d at the ye ar end a re as follow s: 2021 2020 Lo yal ty and co-brand $m Other $m To t a l $m Loyalty and co-brand $m Othe r $m To t a l $m Ex pe cte d tim ing o f rec og nit ion Les s th an on e year 546 71 617 387 65 4 52 Be twe en o ne an d two ye ar s 406 45 4 51 313 40 353 Be twe en t wo an d thre e year s 155 33 188 24 9 29 278 Be twe en th ree a nd fou r year s 98 25 123 176 24 200 Be twe en fo ur an d iv e year s 53 22 75 73 22 95 Mo re than ive ye ars 78 81 159 10 2 89 19 1 1,336 27 7 1,6 13 1,30 0 269 1, 569 No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 162 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 3. Reven ue c ontinu ed Contra ct cost s 2021 $m 2020 $m At 1 Jan uar y 75 72 Co st s incu rred 11 11 Amortisation (9) (9) Exchange a nd ot her adjust ments – 1 At 31 D ec em be r 77 75 Analyse d as: Curre nt 5 5 No n- curre nt 72 70 77 75 4. Sta costs and Directors ’ remunerati on 2021 $m 2020 $m 2019 $m Sta costs Wage s an d sal arie s 1,315 1,23 3 1,9 82 So cia l se curit y c ost s 86 86 131 Pension and o ther post -retiremen t beneits: De i ne d ben e it p lan s (note 27 ) 2 3 3 Deined contri bution plans 41 36 64 1,44 4 1,35 8 2 ,1 8 0 Analyse d as: Co st s bor ne by IH G a 569 500 73 5 Co st s bor ne by the S yste m Fund b 304 242 313 Costs reimbursed 571 616 1,1 3 2 1,44 4 1,35 8 2 ,1 8 0 a I ncl ude d $2 7m in 20 20 c la ssi i ed a s exce pti ona l rel atin g to re orga nis ati on p rog ramm es a nd $ 9m i n 201 9 cl as si ie d as exc ep tio nal re la ting to t he c omp reh en sive e ici enc y pro gra mme c om ple ted i n 20 19. b I nc lud ed $ 20 m in 20 20 re lati ng to th e 20 20 c orp ora te reo rga nis ati on pr ogr amm e and $ 8m i n 20 19 re lati ng to th e co mpr ehe ns ive e i cie ncy p rog ram me c omp let ed in 2 01 9. St a co sts are p rese nted ne t of governm ent su ppo rt i nco me of $2 3m (20 20: $ 36 m). $12m (20 20: $ 28m) relate s princ ipally to e mploye e co sts at c er tain o f the Gro up’ s lea se d hotel s and $ 11m (202 0: $8 m) relates to on going s upp or t rece ived in th e form of t ax cre dits wh ich relate to the G roup’s corp orate o ice p rese nc e in cer t ain co untries . The i nco me ha s bee n rec ogni se d as a redu ctio n to the payroll c ost s that the g rants an d cred its are inte nde d to comp en sate. T here are n o unful ille d co nditio ns or oth er c ontinge nci es at tac hed to th es e grants . 2021 2020 2019 Monthly av erage n umber of employ ees, includi ng part -time emplo yees Emp loyee s wh ose c os ts are b orn e by IH G: Americas 1,481 1,93 1 2 ,1 70 EME AA 2,808 4 ,08 8 5,2 27 Greater China 299 3 14 339 Ce ntral 1,425 1,8 13 1,90 0 6,0 13 8 ,1 4 6 9,63 6 Emp loyee s wh ose c os ts are b orn e by the S yste m Fund 4,508 4,68 6 4,80 0 Emp loyee s wh ose c os ts are re imb urs ed 11,807 15,98 0 2 2, 207 22 ,328 28 ,812 36 ,64 3 163 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 4. S ta c os ts an d Dire cto rs’ re mun era tion c ontinu ed 2021 $m 2020 $m 2019 $m Directo rs’ remuneration Ba se s ala rie s, fee s, a nnua l pe rfo rma nce p aym ents a nd b ene i ts 8.4 4.2 6.4 M ore de tai led i nform atio n on th e remu ner atio n incl udin g pe nsi ons , sh are award s and s har eho ldin gs fo r eac h Dire cto r is sh own in t he Di rec tors’ Rem une ratio n Rep or t on p age s 115 a nd 12 3. In a ddi tion , amo unts re ce ive d or rec ei vabl e und er lo ng -ter m inc entiv e sch em es are s how n on pa ge 115 . 5. Audi tor’ s remuneration 2021 $m 2020 $m 2019 $m Audi t of the F ina nci al St atem ent s 3.7 3.0 3 .0 Audit of subsidiaries 3.4 3.3 3. 2 Audi t-rel ated a ss uran ce s er vic es 0. 2 0. 2 0. 2 Oth er a ss uran ce s er vic es a 0.7 1 .1 1. 3 Oth er n on -au dit s er vic es n ot cove red by t he ab ove – 0.1 0.1 8.0 7.7 7. 8 a I n 202 0, excl ude d fe es o f $0. 2m wh ich h ad n ot be en i nc urre d as at 3 1 De ce mb er 2 020 . In 20 21, au ditor ’s remunerati on was p aid to Pric ewaterh ouse C oop er s LLP; in 20 20 and 2 019 a uditor ’s remune ration wa s paid to Ern st & Y oung L LP . Audit fe es in re sp ect of th e pe nsio n sch eme we re not mate rial. Und er S EC regulatio ns, th e auditor ’s remune ration of $ 8.0 m (202 0: $7 .7 m, 201 9: $7 .8m) is re quired to b e pres ente d as follow s: audit $ 7 .3 m (20 20: $ 6.5 m, 20 19: $ 6.4 m); other aud it-relate d $0.7m (2020 : $1.1m, 201 9: $1 .3m); and a ll other fe es $ nil (20 20: $ 0.1m, 2019: $ 0.1m ). No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 164 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 6. E xcep tion al ite ms Note 2021 $m 2020 $m 2019 $m Co st of s al es: De rec ogn itio n of rig ht-of- use a ss ets a nd le as e lia bili ties (a) ( h) – 22 – Gai n on le as e term inat ion (b) – 30 – Pro vision f or onerous contract ual e xpenditur e ( h) – (1 0) – Reorganisat ion costs (c) ( h) – (8) – – 34 – Administrative expenses: Reorganisat ion costs (c) – ( 19) (2 0) Acq uis itio n and in tegr ation c os ts (d ) – (6) (7) Liti gati on an d com me rcial d isp ute s (e) (2 5) ( 5) (28) (2 5) (3 0) ( 55) Imp airm ent l os s on ina nci al as set s (f ) – (4 8) – Other imp airment charges: Goo dwill ( h) – – (4 9) Management agreements 13 – (4 8) (5 0) Prop er t y , p la nt and e qui pme nt 14 , (h) – (9 0) – Right-of-use assets 15 , ( h) – (1 6) (32 ) Associa tes 16 (4 ) (1 9) – Contract assets 3 – (5 3) – (4) (2 26) (13 1) Ope rating exceptional items (2 9) (270) (1 86) Financial e xpenses (g) – (14) – Fair val ue g ain s on c ont ing ent p ur cha se c on si de rati on ( h) – 21 38 Exc ept ion al it em s be fore t ax (2 9) (26 3) (14 8) T ax on exc ept ion al item s (i) 3 52 20 Exceptional tax (j) 26 – – Ta x 29 52 20 Op era ting exc epti ona l item s ana lys ed a s: Americas (2 2) (11 8) (62) EME AA (7) (128) (109) Greater China – (5) – Ce ntral – (1 9) (1 5) (2 9) (270) (1 86) Th e above i tems a re trea ted a s excep tion al (as de ine d by man age me nt) by rea so n of the ir si ze, nat ure, or i nci den ce a s fur the r de scr ibe d on p age 1 52. (a ) De rec ogn itio n of righ t-of-us e as se ts an d le as e liab ilit ies In 20 20, relate d to right-of-us e as set s ($4 9m) and le ase l iabili ties ($7 1m) asso ciate d with the U K po rt foli o and G erma n lea ses w hich we re dere co gnis ed foll owing a rea ss es sme nt of the l eas es as f ully varia ble. T he ne t gain of $ 22m wa s pres ente d as excep tiona l due to the si ze of the d erec ogni se d ass ets an d liab ilitie s. (b) Gain o n le as e termi nati on In 20 20, relate d to the termin ation of th e Inter Co ntinent al Sa n Jua n lea se, whi ch was p art o f the SVC por t folio. Th e right-of-u se as set s ($60 m) and le ase li abiliti es ($9 0m) as so ciated w ith this ho tel were de rec ogni sed, re sulti ng in a net g ain of $ 30 m, which wa s pres ente d as exceptio nal du e to the valu e of the as set s and li abilitie s de reco gnis ed an d for co nsi stenc y with the im pairm ents of ot her a sse ts rela ted to the SVC por t folio. 165 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 6. E xcep tion al ite ms c ontinu ed ( c) Reorganisation costs In 20 20, reorga nis ation c ost s relate d to the UK p or tfo lio (see b elow), other ow ne d and le ase d hote ls and a c orp orate reo rganis ation com plete d in the ye ar rel ec ting the re ass es sme nt of ne ar-term priori ties an d the res ourc es ne ed ed to sup por t re duce d leve ls of de mand . An ad dition al $20 m relati ng to the co rpo rate restru cturin g was ch arged to th e Syste m Fund. In 20 19, relate d to a com prehe nsi ve e icien cy prog ramme to fu nd a se ries of n ew strate gic initi atives to drive a n acc ele ration in I HG ’s future grow th. The p rogra mme c omme nce d in 20 18 and wa s co mplete d in 20 19; no f urth er re struc turing c ost s relate d to this pro gramme we re incu rred in 20 20. The 2 019 c os t inclu ded c on sulta ncy fee s of $ 6m and s everan ce c ost s of $8 m. An ad dition al $28 m was ch arge d to the System F und. The se ch arge s were cla ss ii ed as exc eption al as th ey relate d to a signi ic ant prog ramme c arrie d out i n resp ons e to the imp act s of Covi d-19 and p revious ly to a com preh ens ive progra mme to reo rgani se Gro up ope ration s, whic h do not re le ct no rmal, o ngoin g cos ts of th e busi nes s. (d) Acqui sition and integ ration cost s In 20 19, prim arily rel ated to the a cqui sition o f Six Se nse s and i n 2020, rel ated to the in tegratio n of that b usin es s into the op eratio ns of the G roup. C ost s were pre sente d as excep tiona l rel ectin g the fac t that the a cqu isitio n of Six S ens es is n ot a recu rring event . (e ) Litig atio n an d com me rci al dis pu tes In 20 21, re lates to the p rovisio nally a gree d co sts to se ttl e two c omme rcial di spute s, $1 8m in th e Ameri ca s region a nd $7m relatin g to a lea se d prop er ty in t he EM EA A re gion . In 20 20, relate d to the agre ed c ost of s et tlem ent of $ 14m in res pec t of a laws uit in the E ME A A regi on, o set p rimaril y by the par tial re lea se of the 20 19 provi sion re late d to a lawsuit in th e Ame rica s regio n whic h was set tle d in 20 20. In 20 19, prim arily rep rese nted m anag eme nt ’ s be st es timate of th e set tlem ent in re spe ct of th e Ame rica s lawsui t, toge ther w ith the co st of an arb itration award m ade a gain st the G roup in the E ME A A regi on. The se c ost s are pres ente d as excepti onal re le ctin g (i) the natu re of the 20 21 di spute s whic h arose a s a direc t resul t of tradin g per form anc e during C ovid -19; (ii) the q uantum of th e set tle ment s; and (iii) i n resp ec t of rele ase s, co nsi sten cy with the tre atment a pplie d in pri or year s. (f) Im pai rmen t los s on ina nc ial a ss ets In 20 20, comp ris ed $ 33 m and $ 15m rel ated to SVC and othe r trad e dep osit s and l oans re sp ecti vely (see n ote 17). T he imp airme nt los se s were pre sente d as exce ption al as they re lated to th e terminati on of a si gni ica nt por t folio of over 1 00 m anag eme nt agre eme nts an d to signi ic ant ch ange s in cre dit ris k on othe r trade d ep osit s and lo ans a s a resul t of the pa nde mic. (g) Fina nci al exp en se s In 20 20, mana gem ent un der too k actio ns to stren gthe n liquid ity an d exte nd the m aturit y pro ile of the G roup’s debt. T he G roup is sue d a tend er oe r for its £ 4 00 m 3.8 75% 20 2 2 bon ds res ulting in a re payme nt of £2 27m an d con currentl y iss ued € 50 0m 1 .625% 2 024 bo nds an d £4 0 0m 3. 37 5% 2028 b ond s. Th e exceptio nal ch arge inc lud ed the p remium o n repaym ent and a ss oci ated write - o of fe es a nd dis cou nt. The c harge wa s pres ente d as excepti onal p rimari ly due to the s ize of the c harge a s well as th e nature of th e re inan cing whi ch was dri ven by increase d liquidity requirem ents resulting from the pande mic. (h) Exce ptio nal i tem s rel atin g to the U K po rt folio Inc lude d within exce ption al item s are the foll owing ite ms rela ting to the U K por t folio: 2021 $m 2020 $m 2019 $m Co st of s al es: De rec ogn itio n of rig ht-of- use a ss ets a nd le as e lia bili ties – 18 – Pro vision f or onerous contract ual e xpenditur e – (10) – Reorganisat ion costs – (4 ) – – 4 – Other imp airment charges: Goo dwill – – (4 9) Prop er t y , p la nt and e qui pme nt – ( 50) – Right-of-use assets – – (32) – ( 50) (8 1) Ope rating exceptional items – (4 6 ) (8 1) Fair val ue g ain s on c ont ing ent p ur cha se c on si de rati on (not e 25) – 21 38 Exc ept ion al it em s be fore t ax – (2 5) (4 3) The U K po rt folio ex peri enc ed hu gely c hall engin g tradin g con dition s as a res ult of C ovid-19, wi th all 12 hotel s clo sing for ex ten ded p erio ds during 2020 and experiencing historically low occupancie s during periods of temporary reop enings. In 20 20, the right-o f-use a ss et ($2 2m) and lea se lia bilit y ($4 0m) relating to th e UK p or tfo lio were de rec ogni sed a s a resu lt of the re - es timatio n of the ‘i n- subs tan ce ixed ’ rent payabl e unde r the le as es, re sulting i n a gain of $ 18m; fro m 2020 th e le ase s were co nsi dere d to be fully va riabl e. In 20 20, a $10 m provis ion was re co gnis ed to the ex tent the c os ts of co ntractu al exp enditu re comm itte d und er the h otel le ase s excee de d the futu re eco nomi c ben e its exp ecte d to be re ceive d und er the l eas es . No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 166 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 6. E xcep tion al ite ms c ontinu ed In 20 20, hotels i ncurre d a total c ost o f $4m to re struc ture hotel o pe rations i n resp ons e to the imp act of C ovid -19 on hote l occ upan cy and re venu es . As sumptio ns us ed in 2 020 im pairm ent tes ting of pro per t y , p lant an d equi pme nt are det aile d in note 14. In 20 19, goo dwill ($ 49 m) and the right- of-us e ass et ($32 m) (prior to de rec ogniti on) were impai red as a re sult of tra ding di srupti on aris ing from hote l renovatio ns and re bran ding. A fair valu e gain o n contin gent p urcha se co nsi derati on of $2 1m was re cog nise d in 20 20 (20 19: $ 3 8m), arising f rom a redu ction i n expe cted future rent als p ayable su ch that th ere is n o remain ing ab ove- market el eme nt. Info rmatio n on the fai r value c alcul ation i s provide d in note 2 5. As a res ult of the a djus tment s outlin ed ab ove, non - current a ss ets, l eas e liabi lities a nd co ntinge nt purch ase c ons ide ration rel ating to the U K por t folio we re all me asure d at $nil at 3 1 De ce mbe r 2020 a nd 31 D ec emb er 20 21. (i) T a x on excep tion al ite ms The t ax imp act s of the exce ptiona l items a re shown in th e tab le be low: 2021 20 20 2019 Current tax $m De ferr ed t ax $m Cu rren t tax $m Deferred tax $m Cu rren t tax $m Deferred tax $m De rec ogn itio n of rig ht-of- use a ss ets a nd le as e lia bili ties – – – (4) – – Pro vision f or onerous contract ual e xpenditur e – – – 2 – – Reorganisat ion costs – – 3 2 4 – Acq uis itio n and in tegr ation c os ts – – 1 – – – Liti gati on an d com me rcial d isp ute s – 4 – – – 6 Imp airm ent l os s on ina nci al as set s – – 4 2 – – Other imp airment charges – 1 6 37 – 18 Financial expense s – – – 3 – – Fai r val ue gains on cont ingent pu rchase considera tion – – – (4) – (6) Adju stm ent s in res pe ct of p rio r year s a (2) – – – – ( 2) (2) 5 14 38 4 16 T ota l cur rent a nd d efe rre d tax 3 52 20 a I n 202 1, re lat es to exc ep tion al i tem s rec ord ed in 2 014 w hic h are u nde rgo ing t ax au dit (s ee p ag e 171). I n 20 19, re lat ed to a 2 014 d isp os al. ( j) Exce pti ona l tax An excepti onal t ax cre dit of $ 26m ha s be en rec orde d as a re sult of th e ena ctme nt of a cha nge to the U K rate of co rpo rate inco me t ax from 19% to 2 5%, e ec tive 1 April 2 023 . The ch ang e has re sulted i n the re -me as ureme nt of thos e UK d eferre d tax a ss ets an d liabi lities w hich are forec ast to b e utilis ed o r to cr ysta llise af ter th is ee ctive d ate, usin g the high er ta x rate. A fur the r credi t of $4 m has b ee n reco rded w ithin the G roup st ateme nt of com preh ens ive inco me in re spe ct of m ovement s in defe rred t ax as set s and lia bilitie s origi nally re cord ed th ere. The val ue at tribut able to un reco gnis ed d eferre d tax a ss ets ha s incre ase d by $3 4m a s a resul t of the rate ch ange . This h as no im pac t on the rep or ted t ax cha rge. 167 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 7 . Fi nan ci al inc om e and ex pe nse s 2021 $m 2020 $m 2019 $m Financial incom e Fin anc ial in co me on d ep os its an d mo ney ma rket fun ds 2 2 3 Inte res t inc ome o n lo ans an d oth er as se ts 6 2 3 8 4 6 Financial e xpenses Inte res t expe ns e on ex tern al b orrowi ngs 109 102 78 Inte res t expe ns e on le as e lia bilit ies 29 37 41 Capi tali sed i nt erest – (1) (5) Unwi nd of di sc ount o n de ferre d purc ha se co ns ide ratio n 1 1 1 Other char ges 8 5 6 147 14 4 121 Analyse d as: Financial expenses before exceptio nal it ems 147 130 12 1 E xcep tion al inan cia l expe ns es (note 6) – 14 – 147 14 4 121 All inanc ial inc om e relate s to ina ncial a ss ets h eld at am or tise d co st. Intere st exp ens e on exte rnal b orrowing s and unwi nd of dis co unt on de ferred p urcha se co nsi derati on relate to inan cial li abiliti es whi ch are hel d at amo rti sed c os t. Oth er ch arge s inclu des b ank ch arge s and no n- bank in terest ex pen se. In 20 21, $ 1m (20 20: $ 3m, 20 19 : $13 m) was payable to the I HG Re wards loyalt y prog ramme re lating to inte rest o n the ac cumul ated b alanc e of ca sh rec eive d in adva nce of th e con sump tion of p oints award ed. T he expe ns e and co rres pon ding Sy stem Fund intere st inc om e are elimi nated w ithin inanc ial exp ens es . Finan cial i nco me inc lude s $2m (2 020 : $nil, 20 19: $ nil) of oth er inte rest wh ich is al so at tribut abl e to the Sys tem Fund. Cap ital ise d interes t relate s to the Sys tem Fund. Th ere was n o interes t cap itali se d during th e year (rate use d for ca pita lis ation of inte rest in 202 0: 2. 9% , 20 19: 3 . 1%). Net i nterest p ayable o n a frozen GAA P bas is as c alc ulated fo r bank c ovenant s was $ 133 m (20 20: $ 111m, 201 9: $9 9 m) . Furthe r det ails are provid ed on p age 1 90. No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 168 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 8 . Ta x T a x on pr oit /(los s) 2021 $m 2020 $m 2019 $m Curr ent ta x UK t ax at 1 9.00 %: Curren t peri od 1 – 5 Adju stm ent s in res pe ct of p rio r pe riod s – (2) 13 1 (2) 18 For eign tax: Curren t peri od 138 43 154 Be ne it o f tax r elie fs o n whic h no de ferre d ta x prev iou sly re co gni se d – (2) ( 2) Adju stm ent s in res pe ct of p rio r pe riod s 4 (5) (1 1) 142 36 141 143 34 159 Deferred tax Ori gina tion a nd reve rs al of tem po rar y di ere nce s (2 1) (3 5) 11 Ch ang es in t ax rate s an d tax l aws (2 5) (8) 2 Adju stm ent s to es timate d re cove rabl e defe rre d tax a ss et s a 2 (14) (2) Red uct ion in d efe rred t ax ex pen se by p revio usl y unre co gni se d defe rred t ax a ss ets – (1) – Adju stm ent s in res pe ct of p rio r pe riod s (3) 4 (14) (47 ) ( 5 4) (3) In com e ta x ch arg e/(cred it) for t he yea r 96 (2 0) 156 Ana lys ed a s tax re lati ng to: Pro it b efore e xcept ion al ite ms b 125 32 176 Exception al it ems: T ax on exc ept ion al item s (note 6) (3) (52) ( 20) E xcep tion al ta x (note 6) (2 6) – – 96 (2 0) 156 a Re pre se nts a r ea ss es sm ent o f the re cov er y of de fer red t axe s in li ne wi th the G rou p’s pro it fo re ca sts . b I nc lud es $ 115 m (2 020 : $4 1m, 20 19 : $11 3m) in re sp ec t of U S ta xes . 169 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 8. T ax co ntinu ed To t a l a Before excepti onal i tems an d Sys tem Fu nd b 2021 % 2020 % 2019 % 2021 % 2020 % 2019 % Rec on cil iat ion o f tax c ha rge UK t ax at s tan dard r ate 19.0 19.0 19.0 19 .0 19.0 19.0 Ta x c r e d i t s (0 .1) 0.5 (0.8) (0 .1) (1.7 ) (0. 6) System Fu nd c 0.4 (6. 6) 1 .1 (0 .1) (1 .1) (0. 5) Impairment cha rges – – 1 .7 – – – Other perma nent d ierences 1.4 (4 . 2 ) 1.3 1. 2 1 2 .1 0.8 No n-re cove rabl e forei gn taxe s d 3.5 (5 .1) 3. 2 3 .1 16.9 2.4 Ne t ee ct of d ie rent ra tes of t ax in ove rs ea s bus ine ss es e 6.8 (4 . 5) 6 .7 6.9 18.9 5. 5 Ee ct of c han ges i n tax r ates a nd ta x law s f ( 7. 0 ) 2.9 (0. 4) – (9.6) (0 .3) Red uct ion in c urre nt ta x expe ns e by previ ous ly un rec ogn ise d de ferre d tax assets ( 0.1 ) 0.7 (0. 4) (0 .1) (2.4 ) (0. 3) Ite ms on w hich d efe rred t ax aro se b ut wh ere n o defe rred t ax i s rec ogn ise d g 2.0 (1. 9) – 1.3 5.1 – Ee ct of a djus tme nts to e sti mate d rec overa ble d efe rred t ax a ss ets h 0.5 5 .1 (0 .4) 0.4 (16 .9) (0 .3) Red uct ion in d efe rred t ax ex pen se by p revio usl y unre co gni se d defe rred tax assets – 0. 3 – – – – Adju stm ent to t ax ch arge i n res pe ct of p rior p eri od s 0. 2 0.9 ( 2. 2) (0. 4) ( 2 .7 ) (1. 9) 26.6 7. 1 28. 8 31.2 3 7. 6 23 .8 a C alc ula ted i n rel atio n to tot al pr o its i ncl udi ng exc epti on al ite ms a nd Sy ste m Fund. b C al cul ate d in re lati on to p ro its e xclu din g exce ptio na l item s an d Sys tem Fun d ea rnin gs . c Th e Sys tem Fun d is , in ge ne ral, n ot su bje ct to t axa tio n. d T he l arg e inc rea se in 2 02 0 whe n co mp are d to 20 19 is a re su lt of th e ma teri al de cre as e in G roup p ro it abi lit y. This m ea nt tha t the G rou p was n o lon ge r abl e to ob tai n ee cti ve rel ief for w ithh ol din g taxe s in curr ed o n its re ven ues a nd in r es pe ct of o the r taxe s, p rim ari ly in th e US a nd Si nga po re. e Be for e exce ptio na l item s an d Sys tem Fun d inc lud es 6 .7 pe rce nta ge p oint s (2 02 0: 18 .9 p erc ent ag e po ints , 20 19 : 4. 9 per ce nta ge p oint s) driv en by th e rel ativ ely h igh b len de d US r ate, whi ch in clu de s US Fe de ral a nd St ate t axe s as we ll as B as e Ero si on an d Anti -Avo ida nc e T ax ( 'B E AT'). I n 202 0, the l owe r pro it ab ilit y re sul ted i n a larg e im pac t of B E A T , and t he tr adin g res ult s in th e yea r le d to a high er p rop or tio n of th e Gro up’s pro i t be ing t axe d in th e US . f In 2 02 1, th e UK G ove rnm ent e na cte d an in cre as e to the U K rat e of C orp ora tion Tax fr om 19 % to 25 %. T his h as l ed to a n inc rea se i n valu e to the G rou p’s exis tin g def erre d ta x as se ts in th e UK , co ntr ibu ting to a b en e it to t he G roup’s tot al e e ctiv e rate o f 7 .1 perc ent ag e po int s. In 2 02 0, the U K Go vern me nt reve rs ed a p revio us ly en ac ted d rop to th e U K rate of C orp ora tio n T ax , co ntri buti ng to a b en e it to th e Gro up e ec tive t ax ra te, b efor e exce ptio na l item s an d Sys tem Fun d, of 7.9 pe rc ent age p oi nts . g P red om ina ntly i n res pe ct of l os se s ari sin g in th e yea r . h In 20 20, th e Gro up si mp li ie d its G rou p str uct ure wh ich l ed to a n inc rea se to e xis tin g defe rre d ta x as set s wit hin th e U K. A rec oncil iation b etwe en tot al ta x rate and t ax rate befo re exceptio nal ite ms and S ystem Fund i s shown b elow: 2021 2020 20 19 Proit be fore t ax $m Ta x $m Rate % (L os s)/ pro it befo re tax $m Ta x $m Rate % Pro it befo re tax $m Ta x $m Rate % Group income sta tement 361 96 26.6 (28 0) ( 20) 7.1 5 42 156 28.8 Adjust for : E xcep tion al ite ms (note 6) 29 29 263 52 14 8 20 System Fu nd 11 – 102 – 49 – 401 12 5 31 .2 85 32 3 7. 6 73 9 176 23.8 In form ation c on ce rnin g Non - GA AP m eas ure s can b e fou nd in th e Stra tegi c Rep or t on p age s 73 to 7 7. Ta x p a i d T ot al ne t tax p aid durin g the year o f $8 6m (20 20: $ 41m, 20 19: $ 141m) is all in resp ec t of ope rating a ctiviti es. The tot al ta x paid in clud es, in re sp ect o f the US : • paym ents o f $8 8m (20 20: $ 29 m, 201 9: $ 80 m); and • refun ds ari sing fro m earlie r pe riod s of $1 5m (20 20: $ 24m, 20 19: $ nil); and in re sp ect of th e UK : • paym ents o f $1m (20 20: $ 2m, 20 19: $ 13m); and • refun ds ari sing fro m earlie r pe riod s of $3 m (20 20: $ nil, 201 9: $ni l). No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 170 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 8. T ax co ntinu ed A rec oncil iation of t ax pa id to the tota l tax ch arge in th e Group i nco me st ateme nt is as fol lows: 2021 $m 2020 $m 2019 $m Cur rent t ax ch arge i n the G roup in co me st ate ment (14 3) (3 4) (15 9) Cur rent t ax (cha rge)/ cre dit in t he Gro up st ate ment o f co mpre he nsi ve inc ome – (1) 2 Cur rent t ax cre dit t aken d irec tly to e quit y – – 4 T ota l curre nt ta x cha rge (14 3) (3 5) (15 3) Move me nts to t ax co ntin gen cie s a 4 (8) 3 Tim ing di ere nc es of c as h ta x pai d and fo reig n excha nge di ere nc es b 53 2 9 T ax pa id p er c as h low (86) (41 ) (14 1) a Tax co ntin ge ncy m ovem ent s are i ncl ude d wi thin t he cu rre nt ta x cha rge b ut do n ot im pa ct c ash t ax p aid i n the ye ar. Set tle me nts o f ta x con tin gen cie s are i ncl ud ed wi thi n ca sh ta x pai d in th e yea r but n ot re co rde d in th e curr ent ye ar t ax ch arg e. b 202 1 in clu de s $20 m of re fun ds in r es pe ct of e arl ier ye ar s, $ 12m of o the r rec ei vabl es w hic h have b ee n all oc ate d to pay me nts th at oth er wi se wo uld h ave b ee n due a nd $2 8m o f paym ent s due i n 20 22 . Curr ent tax Withi n current t ax payab le is $24 m (202 0: $2 5m) in resp ect o f unce r tain t ax po sitio ns, with th e large st s ingle ite m not exce edin g $10 m (2020: $8m). The c alcu lation o f the Gro up’ s total t ax ch arge involve s con side ration o f appli cab le ta x laws an d regula tions in m any juris dictio ns through out th e world. From time to tim e, the G roup is su bjec t to tax au dits an d unc er tainti es in the se ju risdi ction s. Th e is sue s involved can b e co mplex a nd audi ts may ta ke a numbe r of years to c onc lude . Whe re the interp retatio n of lo cal t ax law is n ot cle ar , m ana gem ent reli es on ju dge ment an d ac countin g esti mates to e nsure all u nce rt ain tax p osi tions a re ade quatel y provide d for in th e Group F inan cial S tatem ents , in acc orda nce wi th IFR IC 23 ‘ Un cer t ainty ove r Inc ome Tax T re atmen ts’ , rep rese nting th e Group’s view of the m ost l ikely outc ome, o r , wh ere multip le is sue s are co nsid ere d likely to be s ettl ed tog ethe r , the pro babil ity we ighted a mount s of the ran ge of ou tcome s. T his may involve c ons ider ation of s ome o r all of the fo llowing fa ctor s: • stre ngth of te chnic al argum ent, i mpac t of ca se law a nd cla rity o f legi slatio n; • profession al advice; • exp erie nce of in teracti ons, a nd pre ce dent s set, w ith the pa rti cular t axin g autho rity; and • agre em ents p revious ly rea che d in othe r juris dictio ns on c omp arabl e iss ues . The G roup’s most m aterial te rritorie s for ta x are the US A and the U K . In the U SA , the Intern al Revenu e Se rvi ce (‘ IRS ’) ha s a right to co mme nce a rou tine au dit of the fe der al inc ome t ax returns fo r up to three ye ars followi ng the iling of th e fede ral return . The G roup ha s agre ed all fe dera l inco me t ax returns u p to and inc ludin g thos e il ed for th e 2017 year exce pt for the 2 014 year , and n o audit s have so far b ee n initiate d for p erio ds from 20 18 onward s. Th ere are t wo iss ues un der d iscu ss ion in res pec t of the 20 14 year fo r which tot al fed eral t ax as se sse d by the I RS is $2 8m. S hould t he IRS ’s views be s ust aine d, st ate taxes o f $4m and inte rest of u p to $9m wo uld al so be p ayable. T he Gro up is co ntesti ng ce rt ain el eme nts of th e IRS a sse ss ment b ut ha s reco rded fe de ral tax p rovisio ns of $ 8m (2 020 : $6m), st ate tax provi sion s of $1m ( 2020 : $1m) and inte rest of $ 3m ( 2020 : $2m), which th e Group c on side rs the mos t likely ou t low. It is the Gro up’s e xpe ct ation th at this aud it will b e reso lved in 2 02 2, howeve r there are p os sibl e sce nario s whic h would lea d to a long er p erio d of time to ultim ate reso lutio n, inclu ding li tigation . The i ssu es involve d are is olate d to the 20 14 year . In the U K , HM Reve nue an d Cus toms (‘ HM RC ’) ha s a right to co mme nce a rou tine au dit of U K Corp orati on T ax returns fo r up to 12 month s followi ng the iling of th e return. T he Grou p has a gree d all UK t ax return s up to and in clud ing 20 15. Th e Group re ce ived a si ngle qu esti on from H MRC in re sp ect of a 2 016 re turn in 20 19, to which a re spo nse wa s provid ed al so in 20 19. Alth ough fo rmal ag reem ent of th e return has n ot yet be en rec eive d from H MRC, th e Grou p con side rs the re to be minim al ris k of any adju stme nt. A tran sfer pri cing au dit was in itiated in Se ptemb er 20 19 in res pe ct of the 2 017 p erio d but is s till at the d ata gath ering s ta ge with no i ssu es h aving so fa r be en ide nti ied a nd com munic ated to the G roup; H MR C have rese rve d the rig ht to cons ide r simil ar point s in late r peri ods if a ny adjus tment s were to be ultima tely agre ed . The G roup ha s provisi ons of $ 2m (20 20: $2m) in res pe ct of U K Co rpor ation T ax unc er tai nties . 171 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 8. T ax co ntinu ed Deferred tax Property , plant, equipment and soft ware $m Other intangible assets $m Application fees $m Defe rred ga ins o n loan not es $m Associates $m Losse s $m Employ ee beneits $m Defe rred compen- sation $m Credit losses $m Contrac t costs $m Other sho rt-term temporary dierences $m To t a l $m At 1 Jan uar y 20 20 (11 9) (14) 43 (3 4) (5 8) 27 33 41 12 (1 6) 33 ( 52) Group income statemen t 23 14 (2) – – 28 – 1 10 ( 1) (19) 54 Group statemen t of compr ehensive income – – – – – 6 1 – – – 8 15 Group statemen t of ch ang es in e qui ty – – – – – – ( 1) – – – – (1) Exchange and other ad justme nts 1 – 1 – 1 – 1 – – – (2) 2 At 31 D ec emb er 2 020 (9 5) – 42 (3 4) (57 ) 61 34 42 22 (17 ) 20 18 Group income statemen t 15 – (2) – 2 21 4 6 (1) 4 (2) 47 Group statemen t of compr ehensive income – – – – – 4 – – – – (1 5) (1 1) Group statemen t of ch ang es in e qui ty – – – – – – 2 – – – – 2 Exchange and other ad justme nts (1) – – – – (2) (1) – ( 1) (1) 4 (2) At 31 D ec em be r 202 1 (81) – 40 (34) (5 5) 84 39 48 20 (1 4) 7 54 The d eferre d tax o n the lo an note s repres ent s tax th at is expe cte d to bec ome d ue in 20 25. Th e defe rred t ax in res pe ct of lo ss es of $ 84 m (20 20: $ 61m) com pris es $ 84m i n resp ec t of revenue l oss es ( 2020 : $6 0m) and $ nil in res pec t of ca pita l los se s (202 0: $1m). The re are no amou nts rec ogni se d in relati on to unc er tain t ax po sitio ns with in defer red ta x in eith er the cu rrent or p rior yea r . A defe rred ta x as set of $ 120 m (202 0: $9 5m) ha s bee n rec ogni se d in leg al entiti es whi ch have mad e a los s in the c urrent or th e previo us year. Of th e 202 1 amo unt, $ 114m (20 20: $ 89 m) is within the U K ta x group an d pred omina ntly repre se nts revenu e tax lo ss es an d future t ax deductions f or amortisati on. Additi onal U K defe rred t ax as set s of $13 m (20 20: $ 14m) are reco gnis ed in l ega l entitie s which we re pro ita ble in b oth the cur rent and previo us year s. The re covera bilit y of the U K defe rred t ax as set s has b ee n ass es se d by: • st ar ting with th e Ba se C ase fore ca sts (se e pag e 149 with in ‘Go ing co nce rn’); • overl aying tax p rinci ple s to thos e forec ast s; and • foll owing the m etho dolo gy re quired by IA S 12 ‘In com e T a xes’ . This h as de mon strate d that the U K defe rred t ax as set , inclu ding $73 m in res pec t of lo sse s, sh ould reve rse over a s even - to ten-yea r peri od. Und er U K law, tax los se s do not exp ire, altho ugh they c an onl y be o set a gains t 50% o f annua l UK t axabl e pro its . If the anti cipate d rec over y of RevPAR to 2019 l evels for th e Europ ean an d UK m arkets were to b e one ye ar later th an is fore ca st within th e Ba se C ase, o r if actu al future UK t axab le pro its we re to be 20 % lower tha n thos e currentl y forec ast , then th e rec overy p erio d for the d eferre d tax a ss et woul d be exte nde d by approxim ately on e fur ther ye ar . The G roup’s T CF D disc los ures on p age s 32 to 35 d es cribe h ow physic al an d transi tiona l climate ri sks pre sent b oth ris ks and op po rtun ities for IH G. Th e potenti al down side ri sk ha s be en co nsid ere d in the co ntext of th e UK d eferre d tax a ss et rec overabili ty , witho ut tak ing ac cou nt of opp or tuniti es or mi tigating a ctio ns, an d coul d be ab sorb ed w ithin the s ens itivitie s dis clo se d above. The a nalys is of the d eferre d tax b alan ce af ter c ons ideri ng the o set o f ass ets an d liab ilitie s within enti ties wh ere the re is a le gal righ t to do so, and a nalys is of the m ost m aterial te rritorie s as foll ows: 2021 $m 2020 $m De ferre d ta x as set s 1 47 113 Deferre d tax liabilities (93) (95) 54 18 Analyse d as: United Kingd om 127 103 Uni ted St ate s (87 ) (89 ) Othe r 14 4 54 18 No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 172 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 8. T ax co ntinu ed The G roup do es n ot reco gnis e defe rred t ax as set s if it ca nnot antic ipate b eing ab le to o set th em aga inst exi sting d eferre d tax li abiliti es or ag ainst f uture pro its o r gain s. The tot al unre cog nise d defe rred t ax po sitio n is as foll ows: Gros s Unrecognised deferred tax 2021 $m 2020 $m 2021 $m 2020 $m Reven ue lo ss es 458 467 87 76 Capital losses 551 562 138 109 1,0 0 9 1, 029 225 18 5 Ta x c r e d i t s 10 12 10 12 Othe r a 16 19 3 3 1,0 3 5 1,06 0 238 200 a P rima ril y rel ates to c os ts i ncu rre d for wh ich t ax re lie f ha s not b ee n obt ai ne d. The re is no exp iry d ate to any of the ab ove unreco gnis ed a ss ets othe r than fo r the lo sse s and t ax cre dits a s show n in the ta ble b elow: Gros s Unrecognised deferred tax 2021 $m 2020 $m 2021 $m 2020 $m Ex pir y da te 2021 – 33 – 8 2022 10 11 3 3 2023 2 2 – – 2024 4 5 1 1 2025 100 110 25 26 2026 13 1 2 – 2027 – 3 – 1 2028 6 7 2 2 Af ter 20 28 12 17 11 15 No de ferre d tax li abilit y ha s be en provid ed in re spe ct of $ 0.4b n (20 20: $ 0.5b n) of taxabl e temp orar y di erenc es re lating to su bsid iarie s (compri sing un distri bute d earnin gs an d net inh erent g ains) be cau se the G roup is in a p osi tion to co ntrol the tim ing of the reve rsa l of thes e temp orar y die renc es an d it is p robab le that s uch di eren ces w ill not rever se in the fo rese ea ble fu ture. T a x ris ks, po lic ies a nd g overna nce The G roup’s Chief F inanc ial O i cer & G roup H ead o f Strateg y has re spo nsib ilit y for ta x and t ax pol icie s at Bo ard level. T hes e po licie s and p roce dures a re subje ct to reg ular revie w and up date and a re approve d by the Audit C omm itte e. Proc edu res to minim ise ri sk inc lude the pre parati on of tho rough t ax risk a ss es sme nts for al l trans actio ns c arr ying ma terial t ax ris k and, wh ere app ropriate, m ateria l tax unc er tainti es are dis cus se d and re sol ved with t ax auth oritie s in adva nce . IH G’s Approa ch to T a x doc ume nt is availab le on I HG ’ s web site at ww w .ihgplc.com/ e n/ res ponsible-bu siness/ policies . In ad ditio n, as a res ult of its b usi nes s pro ile a s a hotel ma nag er and a lso a s a resid ual leg acy from p rior ac quis ition s, IH G ha s a small n umbe r of sub sidi aries i n juris dictio ns co mmo nly po rtraye d as ta x havens . IH G mana ges suc h subs idiari es on a b asi s con sis tent with it s bus ines s prin cipl es (for examp le, by mak ing so me forei gn inc orpo rated c omp anies U K ta x resi dent o r by ope rating othe rs so th at lo cal p roit s are co mmen surate wi th loc al ac tivit y). Factor s th at may ae ct t he fut ure ta x ch arg e Many fa ctors w ill aec t the G roup’s future tax rate, th e main on es b eing f uture le gisl ative develo pme nts, f uture pro ita bilit y of und erlyi ng sub sidia ries an d tax u nce rt aintie s. The im pac t of Covi d-19 ha s resu lted in ch ange s to the G roup’s current ge ograp hic pro it mi x which i s likely to co ntinue to res ult in a sli ghtly highe r than u sual t ax rate for th e Group i n the sh or t term. Worldwi de ta x reform co ntinue s, not ably w ith the O ECD’s propo sa ls in co nne ction w ith its revi ew into “Tax Chall eng es Ari sing from Digi talis atio n” , a nd this c ould i mpac t the G roup over the l onge r term. T he Gro up co ntinue s to monitor a ctivi ty in thi s area . 173 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 9. Dividends 2021 20 20 2019 cents per shar e $m cents per share $m cents per share $m Pai d duri ng t he yea r Fin al (dec lar ed for p revi ous ye ar) – – – – 7 8 .1 139 Inte rim – – – – 39.9 72 Sp eci al (note 2 9) – – – – 262. 1 510 – – – – 3 8 0.1 72 1 The ina l divid end of 8 5. 9¢ p er ordin ar y share (amo unting to $1 57m) is propo se d for app roval at the AGM on 6 M ay 202 2 . No divi den ds were paid i n 202 1 or 20 20. 10. Earnings/ (loss) per ordinary share 2021 2020 2019 Basic ear nings/ (loss ) per ordi nary shar e Pro it /(lo ss) avail abl e for e quit y ho lde rs ($ m) 266 (2 60) 385 Ba sic we ighte d aver age n umb er of o rdina r y sha res (mill ion s) 183 182 18 3 Ba sic e arn ings /(lo ss) pe r ordin ar y sh are (cen ts) 145 .4 (14 2. 9) 2 10.4 Dil ute d ea rnin gs /(los s) pe r ord in ar y sha re Pro it /(lo ss) avail abl e for e quit y ho lde rs ($ m) 266 (2 60) 385 Dil uted w eigh ted ave rage n umb er of o rdin ar y sha res (mill ion s) 184 182 184 Dil uted e arn ing s/(lo ss) pe r ordi nar y sh are (ce nts) 144 .6 (142 .9) 20 9. 2 Dil uted w eigh ted ave rage n umb er of o rdin ar y sha res i s cal cul ated a s: Ba sic we ighte d aver age n umb er of o rdina r y sha res (mill ion s) 183 182 18 3 Dil utive p oten tial o rdina ry s ha res (mill ion s) 1 – 1 184 182 184 The e ec t of the noti onal exerc ise of o utst and ing ordin ar y share awa rds was anti -d ilutive in 20 20 an d therefo re was not in clud ed in th e dilute d earn ings p er sh are cal culati on. 11. Ac qui siti on of b us ine ss es Six Senses On 12 Feb ruar y 20 19, the G roup ac quire d a 100 % owne rshi p interes t in Six S ens es H otels Re sor ts S pas (‘ Six S ens es’ ), a lea ding op erato r of top -tie r luxur y hotel s, res or ts an d spa s with a worl d-re nown ed rep utatio n for well nes s and s ust ainab ilit y . T he total p urcha se co nsi derati on was $ 304 m, co mpri sing $2 99 m pai d on ac quis ition, in cludi ng the s ettl eme nt of worki ng ca pita l and $ 5m of co ntinge nt purch ase c ons ide ration . The fa ir value of n et as set s acq uired wa s $246 m, inc luding b rand s of $18 9 m, mana gem ent ag reem ents o f $4 5m, a nd a right-o f-use a ss et of $1 9m o set by an e qua l lea se lia bilit y . G oo dwill re co gnis ed was $ 58 m. The val ue of the c ontin gent p urchas e co nsid eratio n was rea ss es sed a t 31 De ce mbe r 202 1 (see n ote 25). The val ue of ma nag eme nt agree men ts and ri ght-of-us e as set s reco gnis ed on a cqu isitio n were imp aired by $ 41m and $ 5m res pe ctivel y in 202 0 (see note s 13 and 1 5). UK portfolio Followin g a 201 8 deal w ith Covi vio to op erate 10 U K hotel s und er lon g-te rm lea se s, in 20 19 the G roup ad ded a f urth er t wo hotel s to the por t folio b ringing t he total h otels in th e UK p or tfo lio to 12. The tot al purch as e con side ration fo r the 12 hote ls was $73 m, co mpris ing $ 10m p aid on a cqui sitio n, a workin g cap ital ref und of $ 3m an d $6 6m of c onting ent pu rchas e con sid eratio n. The f air value o f the net a ss ets ac quire d was $14 m and go od will of $6 4m wa s rec ogni sed , of whic h $12m wa s reco gnis ed in 2 019. Go odw ill and no n- cur rent as set s alloc ated to th e UK p or tfo lio were imp aired i n full durin g 201 9 and 20 20 su ch that th e remain ing value is $ni l (see note 6). The c onting ent pu rchas e con sid eratio n was valu ed at $n il as at 31 D ec emb er 20 21 (se e note 25). Ca sh l ows re latin g to ac qui sit ion s 2021 $m 2020 $m 2019 $m Ca sh p aid on a cq uisi tion , inc ludi ng wor king c ap ita l set tle me nt – – 299 Set tl eme nt of s tam p dut y lia bilit y – – 3 Les s: c as h and c as h equ ival ent s acq uire d – – (7) Les s: wo rkin g ca pit al se ttl em ent re cei ved i n year fo llow ing ac qui siti on – – (3) Net cash outlo w ar ising on acquisitions – – 292 1 74 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 12 . As set s an d liab iliti es s old Thre e hotel s in the Am eric as regi on have be en s old in 2 02 1. T o tal c ash c ons ide ration of $ 46 m was re ceive d with no g ain or l oss a risin g af ter cha rging dis po sal c ost s. N et as sets o f $4 4m d isp ose d co mpris ed $ 4 5m prop er t y , pl ant and e quip ment a nd $2m rig ht-of-us e as sets , les s $ 3m le ase li abiliti es. T he ne t cas h in low aris ing was $ 4 4m. In 20 20, the Gro up sol d one h otel in EM E AA , th e Holi day Inn M elb ourne A irpo rt . T ot al co nsid eratio n of $2m was re ce ived wi th a total gai n, net of di sp osa l cos ts, of $ 3m . The g ain was in clud ed in oth er op eratin g inco me in the G roup in com e sta tement . 13. G oo dwil l and ot he r inta ngi ble a ss et s Goodwill $m Brand s $m Sof tware $m Management agreem ents $m Other intangibles $m To t a l $m Cost At 1 Jan uar y 20 20 52 9 4 39 864 122 23 1,97 7 Additi ons – – 50 – 2 52 Dispo sals – – ( 29) – – ( 29) Exchange a nd ot her adjust ments 8 – 1 – – 9 At 31 D ec emb er 2 020 537 4 39 886 122 25 2 ,00 9 Additi ons – – 32 – 1 33 Dispo sals – – (40) – – (4 0) Exchange a nd ot her adjust ments (5) – – – – ( 5) At 31 D ec em be r 202 1 532 439 8 78 12 2 26 1,997 Amor tisation and imp airment At 1 Jan uar y 20 20 (19 0) – (3 40) (6 3) (8) (6 0 1) Provided – – (3 6) (1) (1) (38) Sys tem Fund ex pe nse – – (51) – ( 2) (5 3) Impairment cha rge – – – (4 8 ) – (4 8 ) System Fund impairment charge – – (4 ) – – (4 ) Dispo sals – – 29 – – 29 Exchange a nd ot her adjust ments (1) – – – – (1) At 31 D ec emb er 2 020 (19 1) – (4 0 2 ) (112) (1 1) (7 16) Provided – – (3 0) (1) ( 1) (3 2) Sys tem Fund ex pe nse – – (8 2) – (1) (8 3) Dispo sals – – 28 – – 28 Exchange a nd ot her adjust ments – – 1 – – 1 At 31 D ec em be r 202 1 (19 1) – (4 8 5 ) (11 3) (1 3) (8 02) Ne t boo k val ue At 31 D ec em be r 202 1 341 439 3 93 9 13 1 ,1 9 5 At 31 D ec emb er 2 020 346 4 39 484 10 14 1, 293 At 1 Jan uar y 20 20 339 439 524 59 15 1 ,376 Goo dwill and brands Brand s Bran ds rel ate to the ac quisi tions of K impton ($ 193 m), Regent ($ 57m ) and Si x Sen se s ($189 m). They are ea ch co nsid ere d to have an inde in ite life give n their s trong bra nd awaren es s and rep utati on, and m ana gem ent ’s commitm ent to co ntinue d investm ent in th eir grow th. Th e bran ds are protec ted by trad ema rks and the re are not b elieve d to be any le gal, reg ulator y or c ontrac tual p rovisio ns that lim it the us eful li ves of the b rand s. In the h otel ind ustr y the re are a numb er of br ands th at have existe d for ma ny years an d IH G has b rands th at are over 6 0 years o ld. Allo catio n of go odwil l and bra nds to C GU s At 1 January 2020 $m Exc ha nge adjus tments $m At 31 December 2020 $m Exchange adjustments $m At 31 December 2021 $m Analysed as: Goodwill $m Brand s $m Ame ric as (g roup o f CG Us) 421 – 421 ( 2) 419 132 287 EM EA A ( group o f CG Us) 332 7 339 (2) 337 201 136 Greater China 25 – 25 (1) 24 8 16 778 7 785 (5) 780 3 41 439 175 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 13. G oo dwil l and ot he r inta ngi ble a ss et s contin ue d The re covera ble am ounts o f the CG Us , or group s of CG Us, h ave bee n dete rmine d from valu e in use c alc ulatio ns. T he key assu mption s are RevPAR growth a nd the exp ec ted rec over y pe riod (deta iled o n pag e 149 wi thin ‘Go ing co nce rn’), termi nal grow th rates a nd pre -t ax dis count ra tes. C ash lows b eyond the ive -year p erio d are extra pol ated us ing term inal grow th rate s that do no t excee d the averag e lon g-term g rowth ra tes for the re levant m arkets. C ash low proj ecti ons are di sc ounted u sing p re- tax rate s that are b ase d on the G roup’s weighte d average c os t of cap ital a nd inc orp orate adju stme nts re le cting ri sks sp eci ic to th e territor y of th e CG U. The we ighted aver age term inal grow th rate s and pre -t ax dis cou nt rates are a s follows: 2021 20 20 T e rminal grow th rate % Pre-t ax discount rate % Te r m i n a l grow th rate % Pre-tax discount rate % Americas 2 .0 1 0.2 1.7 8. 5 EME AA 2.2 12. 8 1.9 1 2 .1 Greater China 2.5 12 .6 2.5 13. 3 The in crea se in di sco unt rates i n 202 1 in Ame ric as and E ME A A was pr imarily d riven by inc reas ed lo ng- term ris k -free r ates. The re covera ble am ounts o f the CG Us , or group s of CG Us, exc ee ded th eir c arr ying val ue suc h that no im pairm ent ha s aris en. As sumptio ns were s ens itise d, inc ludin g usin g the Dow nsid e Ca se sc ena rio (detail ed on p age 14 9 within ‘ Goin g con cern’ ) with no impairment aris ing. The G roup’s T CF D disc los ures on p age s 32 to 35 d es cribe h ow physic al an d transi tiona l climate ri sks pre sent b oth ris ks and op po rtun ities for IH G. Th e potenti al down side ri sk ha s be en co nsid ere d when te sting g oo dwill an d bran ds and c ould b e abs orb ed wi thin existi ng he adroo m, witho ut tak ing ac cou nt of opp or tunitie s or mi tigating a ction s. Sof twa re Sof t ware incl ude s $23 3m rel ating to the d evelop ment o f the nex t-ge nerati on Gu est R ese rva tion Sys tem with A mad eus . Interna lly devel ope d sof t ware with a valu e of $1 55m d evelop ed w ithin the t wo ph ase s of the p rojec t is be ing amo rti se d over 10 yea rs and e ight year s resp ec tively , with seve n years re maini ng at 31 D ec emb er 20 21, re le cting th e Grou p’ s expe rienc e of the l ong life of g ues t rese r vation sys tems an d the initia l term over whi ch the G roup is p art y to a tec hnol ogy a greem ent wit h Amad eus . The re mainin g proje ct valu e relate s to enha nce ment s to existin g system s as pa rt of th e proje ct, w hich are am or tise d over ive year s. In 20 21, n o impair ment wa s charg ed. I n 2020, $ 4m imp airme nt was ch arge d to the Sys tem Fund relatin g to proje cts wh ich are no l onge r exp ec ted to c om ple te. A los s on di spo sal o f sof twa re ass ets of $ 12m was re cord ed in 2 02 1, relatin g to amount s previo usly c apit alis ed in re sp ect of c os ts inc urred to impl eme nt clou d com puting a rrang eme nts. T hes e los se s are rec orde d within d epre ciatio n and am or tisati on ($8 m) and System Fund dep reci ation an d amor tis ation ($ 4m) in the Gro up inc ome s tatem ent. Management agreements Man age ment a gree ment s relate to co ntrac ts rec ogni se d at fair valu e on ac quisi tion. T he weighte d averag e remai ning amo r tisati on pe riod for all m anag eme nt agre eme nts is 17 yea rs (20 20: 1 8 years). In 20 21, th ere were no i ndic ators of fu rth er imp airme nt relati ng to mana gem ent ag reem ents a nd no in dica tors that im pairm ent lo ss es rec ogni sed i n prior ye ars may h ave reverse d. 2020 i mpair ment of ma nagement agr eements The 2 020 imp airm ent cha rge of $ 48 m relate d to the Kim pton ($5m), Reg ent ($2m) and Six S en ses ($ 41m) manage men t agree ment por t folio s acq uired in 2 015, 2 018 a nd 20 19 res pec tively. The key assu mption wa s RevPAR growth wh ich as sum ed a re cover y to 201 9 level s over a i ve-ye ar pe riod from 2 02 1. Co ntract s were valu ed at the h ighe r of value in u se an d fair valu e les s co sts of d isp osa l, usin g disc ounte d cas h low te chni ques . Whe re the rec overabl e amount w as me asure d at fair val ue, this wa s cate goris ed a s a Level 3 fair va lue me asu reme nt. Management agreement portfolios Region Basis of recoverable amount Rec overab le amount $m Long-term grow th r ate % Pre-tax discount rate % Kim pton Americas Value in u se 4 1 .7 8.4 Rege nt G reater China Value in u se 3 2.0 4.6 7. 0 1 5 . 9 Six S en se s (open h otel s) EMEA A F air val ue le ss c os ts of d isp os al – 2.0 8.91 4.7 Greater China Fair va lue l es s co sts o f dis pos al – 2 .0 9.9 Six S en se s (pip el ine) Americas Value in u se 1 2.0 9.8 EME AA Value in us e 2 2 .0 8.9 Greater China Valu e in us e – 2 .0 8. 5 2019 i mpair ment o f mana gement a greemen ts The 2 019 im pairm ent ch arge of $ 50m re late d to the Kimp ton man age ment a greem ent p or tfol io acq uired in 2 015 a nd aros e from revis ed expe cta tions re gardin g future trad ing, the ra te of hotel exit s and th e cos t of retai ning hote ls in the p or tfo lio. The re cover able a mount wa s bas ed o n value in u se c alcul ations u sing m ana gem ent fee p rojec tion s bas ed on n ear-term ind ustr y proj ecte d grow th rates for th e se ctor and di sco unted at a ra te of 8.0% . No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 176 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 14. Pro pe rt y , pla nt an d equ ipm en t Land and buildings $m Fixture s, itting s and equipment $m To t a l $m Cost At 1 Jan uar y 20 20 207 3 07 514 Additi ons 2 28 30 Fully de pre ciat ed as se ts wr itte n o – (17) (17 ) Dispo sals (1) ( 2) (3) Exchange a nd ot her adjust ments – 6 6 At 31 D ec emb er 2 020 208 32 2 530 Additi ons – 17 17 Fully de pre ciat ed as se ts wr itte n o – (7) (7) Dispo sals (103) (2 9) (132) Exchange a nd ot her adjust ments – (4) (4) At 31 D ec em be r 202 1 105 299 4 04 Depre ciation and imp airment At 1 Jan uar y 20 20 (73) (132) (2 05) Provided (4 ) (3 3) (3 7 ) Sys tem Fund ex pe nse – ( 5) (5) Impairment cha rge (3 9) (51) (9 0) System Fund impairment charge – (5) ( 5) Fully de pre ciat ed as se ts wr itte n o – 17 17 Dispo sals 1 1 2 Exchange a nd ot her adjust ments – (6) (6) At 31 D ec emb er 2 020 (115) (2 14) (32 9) Provided (4) (27 ) (3 1) Sys tem Fund ex pe nse – (4) (4) Fully de pre ciat ed as se ts wr itte n o – 7 7 Dispo sals 66 21 87 Exchange a nd ot her adjust ments – 3 3 At 31 D ec em be r 202 1 (5 3) ( 2 14) (267) Ne t boo k val ue At 31 D ec em be r 202 1 52 85 137 At 31 D ec emb er 2 020 93 108 201 At 1 Jan uar y 20 20 134 175 309 The G roup’s prope rt y , p lant an d equ ipme nt mainl y com pris es bu ilding s and le as eho ld improve ment s on 19 hote ls (2 020 : 23 hotel s), but also o ice s and c ompu ter hardwa re, through out the wo rld. In 20 21, th ere were no i mpairm ents re lating to p rope rt y , p lant an d equ ipme nt and n o indic ators th at impa irment l os ses re co gnis ed in p rior years m ay have reverse d. 202 0 imp airm en t of pro pe rt y , p la nt and e qu ipm ent T ot al imp airme nt cha rges of $ 90 m were re cog nise d in rel ation to prop er t y , pl ant and e quip ment i n 2020, in a dditio n $5m wa s rec ogni sed in the Sy stem Fund. The re covera ble am ount of p rope rt y , p lant an d equ ipme nt in the U K por t folio wa s mea sure d at value in u se, us ing a dis co unted c ash low app roach . The key as sumptio ns were 2 02 1 revenue s and p roit s, ba se d on hotel b udg ets . For the purp os es of im pairm ent tes ting it wa s as sume d that th e landl ord woul d exercise a te rminati on right su ch that th e current l ea ses wo uld en d in 202 2 an d that th e hotels wo uld remai n los s- maki ng over this p erio d. Th e rec overabl e amount o f the prop er t y , pl ant and e quip ment te sted fo r impa irment wa s as ses se d as $n il resul ting in an imp airm ent ch arge of $ 50m . Esti mated f uture ca sh l ows were dis co unted at a pre -t ax rate of 10.1% . An imp airme nt charg e of $3 5m wa s also re co gnis ed on p rope rt y , plant a nd eq uipme nt relati ng to three p remium -b rande d hote ls in Nor th Am eric a. Th e rec overabl e amou nt was me asure d at value i n use, u sing a di sco unted c as h low ap proac h that m eas ures the p rese nt value of p rojec ted in com e lows (over a 10 -yea r peri od) a nd the in com e from the p rope rt y s ale. Th e key assu mption s were RevPAR grow th as suming a ive -year p erio d of rec over y to 2019 l evels, d isc ount rate s and term inal c apit alis ation rate s. C ash lows b eyond the ive -year p erio d were ex trapo lated u sing a U S lon g-term g rowth ra te of 1.7% . Esti mated f uture ca sh l ows were di sco unted at p re-t ax rate s of 11.0% -12.0% and c apit alis ation rate s of 7 . 5% - 9.0% were us ed to c alcul ate the eventu al sal es valu es of th e hotel s. Th e hotels we re sol d in 202 1 (see n ote 12). 17 7 IH G | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 14. Pro pe rt y , pla nt an d equ ipm en t contin ued Imp airme nt charg es of $ 3m we re also re co gnise d in rel ation to thre e land s ites h eld by the G roup in th e US whi ch were me asu red at fair va lue. The s ites were a pprai se d by a profes sion al exte rnal val uer u sing c omp arabl e sal es dat a. Wi thin the fai r value hie rarchy , th is is c atego rise d as a Level 3 m ea surem ent. Imp airme nt charg es of $7m were re cog nise d in rel ation to prop er t y , pl ant and e quip ment in t he US c orp orate he adqu ar ters . The key as sumptio ns an d sen sitivi ties are d etail ed in n ote 15. $ 5m of thi s impai rment c harge wa s born e by the Sys tem Fund in line w ith the pri ncip les for co st all oca tion rel ating to this fa cilit y . The rem ainin g $2m was re cog nise d in the A meric as re gion ($1m) and C entr al ($1m). Net b oo k valu e by ope ratin g se gme nt Americas $m EMEAA $m Greater China $m Central $m To t a l $m Land and buildin gs 41 1 – 10 52 Fix ture s, it ting s and e qui pme nt 31 11 – 43 85 72 12 – 53 137 15. L eas e s Right-of-use as sets Property $m Other $m To t a l $m Cost At 1 Jan uar y 20 20 822 5 827 Addit ions and other re-measurements 12 1 13 Derec ognition (93) – (93) T erminations (125) ( 2) (127 ) Exchange a nd ot her adjust ments 1 – 1 At 31 D ec emb er 2 020 617 4 62 1 Addit ions and other re-measurements 4 – 4 T erminations (6) (1) (7 ) Dispo sals (3) – (3) Exchange a nd ot her adjust ments (5) – (5) At 31 D ec em be r 202 1 607 3 610 Depre ciation and imp airment At 1 Jan uar y 20 20 (33 5) ( 2) (3 37 ) Provided (3 4) (1) (35) Sys tem Fund ex pe nse (4) – (4) Impairment cha rge (16) – (16) System Fund impairment charge (32) – (32) Derec ognition 44 – 44 T erminations 64 1 65 Exchange a nd ot her adjust ments (3) – (3) At 31 D ec emb er 2 020 (31 6) (2) (31 8) Provided (2 6) (1) (27) Sys tem Fund ex pe nse (3) – (3) System Fund impairment reversal 3 – 3 T erminations 4 1 5 Dispo sals 1 – 1 Exchange a nd ot her adjust ments 3 – 3 At 31 D ec em be r 202 1 (33 4) ( 2) (3 3 6) Ne t boo k val ue At 31 D ec em be r 202 1 273 1 2 74 At 31 D ec emb er 2 020 301 2 303 At 1 Jan uar y 20 20 4 87 3 490 The G roup’s leas ed a sse ts mai nly co mpris e hotel s and o ic es . Leas es c onta in a wide r ange of d iere nt terms an d con ditio ns. T he term of prop er ty l eas es ra nge s from 19 9 year s. Th e weighte d average l eas e term rem aining o n the G roup’s t op ei ght lea se s (which co mpris e 94% of the rig ht-of-us e ass et ne t boo k value) is 56 ye ars . The Inte rC ontin ental B os ton le ase, exp iring in 2 10 5, ha s a signi ic ant imp act o n this weighte d average l ea se term . Undi sco unted c ash lows o n the Bo ston l eas e of $3 ,2 52m (2020 : $3 ,26 8m) repre sent 9 4% of the tot al undi sco unted c ash lows re lating to le as e liabili ties di scl ose d in note 24 . No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 178 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 15. L eas e s contin ued Many of th e Group’s prop er ty l eas es c ontai n exten sion o r earl y termin ation opti ons, w hich are u se d for op eratio nal l exibilit y . The l eas e agre eme nt over the U S corp orate h ead quar ter s cont ains a m aterial ex ten sion o ption whi ch is no t inclu ded i n the ca lcul ation of th e lea se as set an d liabil ity a s the ex tensi on woul d not ta ke eect b efore 20 31 an d there i s no rea son able c er tai nty th e option w ill be exerci se d. The val ue of the u ndis cou nted rent al paym ents re lating to this l ea se and n ot incl ude d in the valu e of the l eas e as set an d liabil ity i s $28 3m. Additi onall y , the G roup h as the o ption to ex tend the te rm of the I nterC ontin enta l Bos ton le ase fo r two ad ditio nal 20 -yea r terms , the i rst of whic h would t ake ee ct from 2 10 5. The se ex tens ion op tions h ave not be en inc lud ed in the c alc ulatio n of the le as e liabili ty. 202 1 im pairm en t revers al of ri ght-o f -u se a ss ets The re were no imp airm ents re lating to le as es he ld by the G roup in 20 21. Imp airme nt revers als of $ 3m we re reco gnis ed in re lation to th e US co rpo rate hea dqua rte rs and a rose a s a result o f contra ctua l agree ment s to subl eas e or sur rende r ce rt ain are as for the re main der of th e lea se ter m, removin g unc er taint y over futu re cas h low s for thos e area s. The re covera ble am ount was m ea sured at va lue in us e, usi ng a dis coun ted ca sh l ow bas ed o n the agre ed c ontrac tual te rms. A p re- tax dis count ra te of 9.5% was a pplie d. The im pairm ent rever sal wa s subs tanti ally all re cog nise d in the S ystem Fund in li ne with exi sting p rincip les fo r cos t allo catio n relatin g to this fac ilit y . 202 0 imp airm en t of right- of-us e as set s For impa irme nt testin g of hotel p rope rti es, e ach ho tel is de em ed to be a C GU. I n 2020, th e impa ct of C ovid-19 an d the rec over y pe riod on trad ing was c ons idere d as a trig ger fo r impai rment te sting fo r all hotel a ss ets an d an imp airme nt charg e of $5 m was rec ogni se d relatin g to one ho tel in the EM E A A regio n, ba sed o n value in u se c alcul ation s. T rading p rojec tion s rel ecte d a i ve-yea r RevPAR recover y pe riod to 201 9 level s and es timate d future c ash lows were d isc ounted a t a pre -tax r ate of 8.8 % . Additi onall y , imp airme nt cha rges of $ 4 3m we re reco gnis ed in re lation to th e US co rpo rate hea dqu arte rs foll owing ma nage me nt approval of a de cisi on to subl et app roximately h alf of th e spa ce in th e Group’s US co rpor ate hea dqua rte rs. Th e area to b e subl et was vac ated i n earl y 202 1. Future subl eas e rent als are exp ecte d to be lowe r than th e hea d lea se rent als w hich, to gethe r with the im pac t of the exp ecte d time t aken and c ost s incu rred to sub let the s pac e, resu lted in an i mpairm ent ch arge of $ 50 m at 31 D ece mbe r 202 0, $7m of which rel ated to prop er ty , pla nt and e quipm ent. The re covera ble am ount was m ea sured at f air value l es s cos ts of di spo sa l. This wa s equ ivalen t to value in us e given s uble tting t he lo ors was co nsi dere d to repre sent th e highe st an d be st us e of the as set a nd so th e cas h low s were the s ame in b oth sc ena rios . The key as sumpti ons we re the time t aken to suc ce ssf ully sub let th e whol e spa ce (over 202 12023) and s uble ase re ntal s per s quare fo ot. A pre -ta x disc ount rate of 8 .5% wa s app lied . Within th e fair valu e hiera rchy , this wa s cate gori sed a s a Level 3 fai r value me as ureme nt. $3 2m of this imp airm ent cha rge was b orne by th e Syste m F und in li ne with th e princ iple s for co st all oc ation rel ating to this fa cilit y . The re mainin g $11m was re co gnis ed in th e Amer ica s regio n ($5m) and C entral ($6 m). Leas e liabilities The m ajorit y of th e Group’s lea se liab ilitie s are dis counte d at inc reme ntal b orrowing ra tes of up to 11% . The ra te implic it in the Inter Co ntinent al B oston l eas e was 9.7% an d was de rived fro m a valuatio n of the h otel at le ase i nce ption in 20 0 6. 2021 $m 2020 $m Curr ency US dollars 3 74 385 Ste rling 6 10 Euros 5 7 Othe r 34 48 419 4 50 Analyse d as: Curre nt 35 34 No n- curre nt 384 416 419 4 50 179 IH G | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 15. L eas e s contin ued Amo unt s rec ogn is ed in t he G roup i nc ome s tate me nt 2021 $m 2020 $m 2019 $m De pre ciat ion of r ight- of-us e as se ts 27 35 38 Sys tem Fund d ep reci atio n of righ t-of- use a ss ets 3 4 5 Impairment cha rge – 16 32 System F und i mpairmen t ( reversal) / charge (3) 32 – De rec ogn itio n of rig ht-of- use a ss ets a nd le as e lia bili ties – ( 2 2) – Gai n on le as e term inat ion – (3 0) – E xpe ns e rela ting to va riab le le as e paym ent s 31 7 58 E xpe ns e rela ting to s hor t-ter m lea se s and l ow-va lue a ss ets 1 2 3 Income from subleasing rig ht -of-use assets (1) (1) (2) Rec og nis ed i n op era tin g pro it /(lo ss) 58 43 134 Inte res t on le as e liab iliti es 29 37 41 T ota l rec og nis ed i n th e Gro up in co me s tate me nt 87 80 175 V ariable lease pa yments Variable l eas e paym ents are p ayable un der c er tain o f the Gro up’ s hotel l eas es a nd aris e whe re the Grou p is co mmit ted to ma king a dditio nal lea se p ayment s that are c ontinge nt on the p er form anc e of the hote ls. The U K po rt folio l ea ses a nd two G erm an hote l lea ses c ont ain gua rantee s that the G roup wil l fund any sh or tfa lls in le as e payme nts up to an annu al and c umulati ve cap. Si nce th ere is no lo or to the rent re duc tions a pplic abl e unde r the se le ase s, they a re treated a s fully vari able . On e of the G erma n lea ses te rminate d in ea rly 202 2 , followin g set tlem ent of a c omme rcial di spu te. Sublease s At 31 De ce mbe r 202 1, the G roup is p ar ty to c er tain o per ating sub lea se arra nge ment s with the l arges t relatin g to the Gro up’ s US c orpo rate he adqu ar ters. S uble as e inco me rel ating to the U S he adqu ar ters is p rincip ally re cog nise d in the S ystem Fund. T he ne t boo k value of th e relate d right-of-u se a sse ts is $ 1m. Th e dep reciati on cha rge for the ye ar on th ese a ss ets was $ nil an d subl eas e inc ome re cog nise d in the ye ar on the se an d other l ea sed a ss ets wa s $1m (20 20: $ 1m, 20 19: $ 2m). Operati ng sublea se payments receivabl e Le ss t ha n 1 yea r $m Between 1 an d 2 yea rs $m Between 2 an d 5 yea rs $m To t a l $m 31 December 2021 2 2 5 9 The un dis counte d future c ash lows re cei vable fro m subl eas ed p rope rtie s amo unted to $2 m in 2020 a nd $ 3m in 20 19. Amo unt s rec ogn is ed in t he G roup s tate me nt of c as h lows T ot al c ash p aid durin g the year re lating to l eas es of $ 87m (202 0: $1 04m , 201 9: $1 59m) co mpris es $ 55 m (20 20: $ 39 m, 20 19: $ 100 m) paid in res pec t of op eratin g activi ties an d $3 2m (202 0: $ 65m , 201 9: $5 9m) paid i n resp ect o f in ancin g activ ities . Ex pos ure to f uture c as h ou tl ows A lea se li abilit y is re corde d whe n the le as ed as se ts are availab le for u se by the G roup. In 20 21, th e Group s igne d an agre eme nt to lea se a ne w glob al he ad o ice in th e UK fo r a peri od of 15 ye ars at an ave rage an nual re ntal of app roximately $ 3m . The l eas e was sig ned a nd co mme nce d in Ja nuar y 20 22 . At 31 De ce mbe r 202 1 and 3 1 De ce mbe r 2020, th e Group wa s not co mmit ted to futu re cas h out l ows in relati on to any other l ea ses th at have not yet c omme nce d. The m aturit y anal ysis of l eas e liab ilitie s is dis clos ed in n ote 24. No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 180 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 16. I nvest men t in as so ci ates a nd jo int ven ture s 2021 $m 2020 $m Cost At 1 Jan uar y 136 14 5 Additi ons 4 17 Sha re of lo ss es (8) (14) Sys tem Fund s hare o f los se s ( 2) (1) Dividends and distri butions – (7) Exchange a nd ot her adjust ments 2 (4) At 31 D ec emb er 132 136 Impairment At 1 Jan uar y (55) (3 5) Ch arge fo r the ye ar a – (2 3) Exchange a nd ot her adjust ments – 3 At 31 D ec em be r (55) (5 5) Ne t boo k val ue 77 81 Analyse d as: Materia l asso ciates 42 43 Other associat es 35 38 a I n 202 0, the $ 23 m imp air men t cha rge w as pre se nte d ne t of $4 m ga in on re la ted p ut op tio n (see n ote 6). In 20 21, th ere were no i ndic ators of fu rth er imp airme nt relati ng to investm ents in a ss oci ates and n o indic ators t hat imp airme nt los se s rec ogni sed i n prior ye ars may h ave reverse d. Barclay associate The G roup he ld on e materi al as soc iate investm ent at 3 1 De cem ber 2 02 1, a 19.9 % interes t in 111 Ea st 4 8th Stre et Ho lding s, LLC (the ‘B arcl ay as soc iate’) wh ich owns I nterC onti nent al New York Barcl ay , a hote l mana ge d by the Grou p. The inves tment i s cla ssi ie d as an a ss oci ate and equ ity a cco unted. W hils t the Gro up has th e abilit y to exercis e signi ic ant in lue nce th rough c er tain d eci sion ri ghts, ap proval right s relatin g to the hote l’s oper ating and c api tal bu dge ts res t sole ly with th e 80.1% majori ty me mbe r . T he G roup’s ability to re cei ve cas h divid end s is dep en dent on t he hotel g ene rating s ui cient i nco me to sati sf y sp eci ie d owne r returns . $18 m was provid ed in 2 02 1 in relati on to set tle ment of a co mme rcial dis pute re garding ow ner retu rns durin g the pa nde mic. Du e to the signi ic ant tra ding imp act of C ovid -19 and re sultin g restric tion s in New York, the h otel was c los ed for m ost o f 2020 a nd Spri ng 202 1. The c losu re peri od an d the sign ii cant im pac t on RevPAR during th e recove ry p erio d resu lted in an i mpairm ent ch arge of $ 13m in 2 020. The re covera ble am ount of th e investm ent was m eas ured at fa ir value l es s cos ts of dis po sal, b ase d on th e Group’s share of th e market valu e of the ho tel le ss de bt in the a ss ociate . The ho tel was ap prais ed by a p rofess ion al exte rnal valu er us ing an in com e cap itali satio n app roach whic h is a dis counte d ca sh l ow techn ique th at mea sure s the pre sent va lue of pro jecte d inc ome lows (over a 10 -year p erio d) an d the prop er ty s ale . Within th e fair valu e hiera rchy , this wa s cate gori sed a s a Level 3 fai r value m eas ureme nt. Th e extern al valu er as sum ed a return to 201 9 RevPAR levels over a thre e - to four- year p erio d, bas ed o n indu str y data s pe ci ic to the N ew Y o rk market an d supp ly fac tors in th e luxur y ma rket loc ated cl ose to the I nterC onti nent al New York Barcl ay . Th e pre -ta x dis count a nd ca pita lisa tion rates u se d in the valu ation were 7 . 5% an d 6.0% re spe ctive ly . The 2 020 imp airm ent cha rge was p rese nted ne t of a $4 m fair valu e gain on a p ut opti on over pa rt o f the Grou p’ s investm ent in the a ss oci ate given th ere is an in terdep end ency b et wee n the value o f the optio n and th e fair valu e of the as so ciate inves tment . This f air value g ain revers ed in 20 21 . 181 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 16. I nvest men t in as so ci ates a nd jo int ven ture s conti nue d Summ aris ed inan cial info rmatio n in resp ec t of the B arclay as so ciate is s et out b el ow: 31 December 2021 $m 2020 $m Non-current assets 485 4 97 Curren t assets 38 32 Current liabilities (3 2) (19) Non -current liabili ties (24 6) (2 47) Net assets 245 263 Gro up sh are of re po rte d net a ss et s at 19.9 % 49 52 Adju stm ent s to re lec t imp airm ent , ca pit alis ed c os ts, a nd ad diti ona l right s and o bli gati ons under t he shar eholder a greement (7) (9) Carrying amount 42 43 Y ear ended 31 December 2021 $m 2020 $m Reven ue 42 16 Los s fro m cont inui ng op erat ion s and tot al c omp reh ens ive lo ss fo r the ye ar (2 4) (52) Gro up’s share o f los s for t he yea r , incl udin g the c os t of fun ding o wne r return s (5) (13) In 20 19, the G roup’s share of lo sse s from th e Barcl ay ass oci ate was $1 0m. Ot her a s soc iate s an d join t ventu res Associates Joint ventures 2021 $m 2020 $m 2019 $m 2021 $m 2020 $m 2019 $m (Los se s)/pro its fro m co ntinu ing op er ation s and to tal c om preh en sive (lo ss)/i nco me fo r the ye ar (3) (3) 7 – 2 – In 20 20, impai rment c harge s of $8 m were rec ogn ise d in relati on to two a ss ocia tes, b oth in the Am eric as reg ion. C as h lows we re bas ed on man age ment fore ca sts c overing a ive -year p erio d, and di sco unted at p re- tax rate s of 12.0 % and 8. 4%, re sultin g in recove rable a mount s of $1m an d $4 m resp ec tively . A fur ther a ss oci ate with a value o f $5m a t 31 De ce mbe r 201 9 was liqu idate d in 202 0. A ina l divid end of $ 3m wa s rec eived a nd the re mainin g investm ent of $2 m was imp aired to $n il in 202 0; the ch arge was re co gnis ed wit hin Ce ntral co sts . $2m was re ce ived in 20 20 on li quid ation of a jo int venture. 17 . O the r i nan cia l as set s 2021 $m 2020 $m Equity securities 106 88 Restricted funds: Shortfall reserve deposit 6 9 Rin g-fe nc ed a mou nts to s atis fy i nsu ranc e cl aims : Cash 4 3 Mo ney ma rket fun ds 8 15 Ba nk ac co unts p le dge d as s ec urit y 42 43 Othe r 1 3 61 73 T rade deposits and loans 8 8 175 16 9 Analyse d as: Curre nt 2 1 No n- curre nt 173 168 175 16 9 182 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 17 . O the r i nan cia l as set s co ntinue d Equit y securitie s The m etho dolo gy to ca lcula te fair value a nd the s ens itivitie s to the rel evant signi i cant un obs er vabl e input s are det aile d in note 25 . The s igni ic ant investm ents a re as follow s: 2021 20 20 Fair value $m Dividen d income $m Fair value $m Dividend income a $m Inve stme nt in e ntit y whi ch own s: Inte rC onti nen tal T he Wi llar d Washi ngto n DC 25 – 22 – InterC ontin ental S an Francisco 17 – 15 1 Inte rC onti nen tal G ran d St anford H on g Kong 35 – 27 – a Re po r ted w ithi n othe r op er atin g inc om e in the G ro up inc om e st ate men t. Res tricte d fund s The s hor t fall res er ve dep osi t is he ld for the s pe ci ic purp os e of fund ing sh or tfal ls in owne r returns re lating to th e Barcl ay ass oci ate. Any sho rt fall s funde d are su bjec t to potenti al clawb ack in f uture year s. Th e maxi mum len gth of tim e for whic h the res tricte d funds w ill be hel d is the li fe of the hote l mana gem ent ag reem ent. $ 3m wa s withdr awn from the d epo sit du ring the ye ar to fund wor king c apit al requ ireme nts. In 20 20, $16 m was with drawn b oth in con nec tion wi th the re inan cing of th e hotel ’s senio r bank l oan an d to fund work ing c apit al requ ireme nts. Amo unts ring -fen ce d to satis fy i nsura nce c laims a re princi pally h eld in t he Grou p’ s Capti ve, which i s a regul ated enti ty (se e note 21). The b ank ac cou nts pl edg ed as s ec urit y (£3 1m) are subjec t to a charg e in favour of the m emb ers o f the UK u nfund ed p ens ion arra ngem ent (see note 2 7). T he amo unts p led ged a s se curit y may cha nge in f uture year s subje ct to the tru stee s’ agre em ent and u pdate d actu arial valuati ons . The b ank ac count s will c ontinue to b e ple dge d as s ecu rity unti l the date at wh ich the U K unfun de d pen sion l iabili ties h ave be en full y disc harge d, unle ss o ther wis e agre ed with t he trus tees . Ex pe cte d cre dit lo s se s Oth er inanc ial as se ts with a tot al value of $ 61m ( 2020 : $6 6m) are subj ect to th e expe cted c redit l oss m od el requ ireme nts of I FRS 9 ‘F inan cial In strum ents’. Equity s ecuri ties, m oney m arket fund s and othe r amo unts me asu red at fair va lue are exclu ded . With the exc eption of the exp ec ted cre dit lo ss ari sing on tr ade d epo sits a nd lo ans (see b elow), expe cte d credi t los se s are con sid ered to b e immate rial. Inc lude d within tra de de po sits a nd loa ns is an ow ner l oan with a p rinci pal valu e of $6 m whe re repaym ents du e in 202 1 an d 2020 h ave not b een re cei ved; an d an owne r loan w ith a prin cipal va lue of $ 4m whi ch be cam e pa st due in 2 02 1. The se l oans a re impai red in full . Oth er trad e dep osi ts and l oan s are not pa st du e. In 20 21, $ 4m wa s coll ecte d in res pe ct of an a sse t which wa s me asure d at $nil at in itial rec ogniti on as p art o f a bus ines s ac quis ition. 2021 $m 2020 $m T rade deposits and loans: Gro ss an d ne t bal anc e with n o sig ni ic ant inc rea se in c red it ris k sin ce in itial r ec ogni tion 6 4 Gro ss b ala nce w ith a si gni ic ant in cre as e in cre dit ri sk si nce i niti al rec og nitio n 17 19 Provi sio n for lif etim e expe cte d cre dit l os se s a (15) (1 5) a C om pri se s $6 m and $ 9m ( 20 20 : $6 m and $ 9m) re lat ing to t he Am eri ca s and E ME A A re gio ns re sp ec tive ly. Cre dit risk Res tricte d funds a re hel d with ban k coun terpar tie s whic h are rated at l eas t A+ base d on S tan dard and P oor ’s ratings. The m aximu m expos ure to credi t risk of ot her inan cial a ss ets at the e nd of th e repo rtin g per iod by ge ogra phic re gion is a s follow s: 2021 $m 2020 $m Americas 66 72 EME AA 67 64 Greater China 42 33 175 16 9 183 IH G | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 18. Trade an d oth er re ce ivabl es 2021 $m 2020 $m T rade receivables a 399 309 Other receiv ables 102 129 Prepa yments 73 76 5 74 514 a I ncl udi ng co st re imb ur se men ts of $ 23 m (20 20 : $26 m). Oth er rec eivab le s inclu des $ 53 m (20 20: $7 7m ) relatin g to the UK p or tfo lio rent . The G roup ha s defer red ce rt ain rent p ayment s due s ince 1 April 2 020 wi th con side ration g iven to the U K Gover nment a nd othe r com merci al tena nt protec tion me asu res whic h are in pl ace up to 31 M arch 20 22 . A rent rec onc iliatio n was i nalis ed in 2 02 1 which re sulte d in cre dit note s bein g rece ived a gain st unp aid 20 20 renta ls. A fu rth er rec oncil iation wi ll be p er forme d in 202 2 , at which p oint am ounts d ue at the e nd of 20 21 w ill be e liminate d. $2 9m (2 020 : $6 5m) has b een rec ogni sed w ithin trad e and oth er payab les in re latio n to the rents d ue und er the l eas es at 3 1 De cem ber 2 02 1, with the re cei vable b alan ce rel ec ting the re cover y of b oth amou nts due a nd amo unts pa id in the ye ar . Ex pe cte d cre dit lo s se s The a gein g of trade re ce ivable s sh own be low rel ec ts the ini tial term s unde r the invoic e rathe r than the rev ise d terms w here p ayment lexi bilit y has b ee n provid ed to owne rs. T he ne t bala nce s pres ente d in the ta ble b elow c ould re sult in a dditio nal c redit l oss es if th ey are ultima tely foun d to be unc olle ct able . Ex pe cted c redit lo ss es rel ating to othe r rec eivab les are im materi al. 2021 2020 Gros s $m Credit los s allowance $m Net $m Gros s $m Credit loss allowance $m Net $m Not p as t due 249 (2) 2 47 153 (1) 1 52 Pas t due 1 to 3 0 days 66 ( 5) 61 59 (2) 57 Pas t due 3 1 to 9 0 days 52 (7) 45 61 (6) 55 Pas t due 9 1 to 18 0 days 36 (9) 27 40 (7) 33 Pas t due 1 81 to 3 60 d ays 38 (2 1) 17 74 (6 2) 12 Pas t due m ore th an 3 61 d ays 91 (89) 2 n /a n /a n /a 532 (13 3) 399 387 (7 8) 30 9 As a res ult of the i ncrea se d credi t risk fa ce d from cus tome rs due to th e pand emic th e Grou p has in crea sed i ts foc us on ol der re ce ivable s. In 20 21, thi s has re sulte d in both an i ncre ase in c as h coll ecti ons rel ating to ol der re cei vable s and a re ass es sm ent of tho se rec eiva ble s previo usly c ons ide red to be ir recover able . $6 0m of ful ly provid ed rec eivab le s have be en rein state d lea ding to an in crea se in b oth gros s rec eivabl es an d the exp ecte d cred it los s provis ion. I n addi tion, de bts o lde r than 18 0 days have be en di scl ose d into fur the r agei ng cate gori es. The se ch ange s have no im pac t on total a mount s rece ivabl e, total c redit lo ss p rovisio ns or th e impai rment l os s reco rded in th e Grou p income statement. 2021 $m 2020 $m Move me nt in th e al lowa nce f or exp ec ted l ifet ime c re dit l os se s At 1 Jan uar y ( 78) (1 8) Fu lly pr ovided receivables r einstated (60) – Impairment lo ss a (4) (4 0) System Fund impairment reversal/(loss) 6 (24) Amo unt s writ ten o 8 7 Exchange a nd ot her adjust ments (5) (3) At 31 D ec em be r (13 3) ( 78) a T he im pai rme nt lo ss o n i nan ci al as se ts di sc los ed o n the f ac e of th e Gro up in com e st ate men t als o in clu de s a gai n of $4 m (2 020 : lo ss o f $4 8m) re lat ed to tr ade d ep os its a nd l oan s. Cre dit risk The G roup tra des o nly with re co gnise d, cre dit wor thy third par ties . It is th e Group’s poli cy that all c ustom ers wh o wis h to trade on c redit terms a re subje ct to cre dit veri ic ation p roce dure s. Th e maxim um expo sure to cre dit risk fo r trade a nd othe r rece ivabl es, exclu ding prep ayment s, at the e nd of the re por tin g peri od by ge ograp hic reg ion is a s follows : 2021 $m 2020 $m Americas 275 2 12 EME AA 172 18 3 Greater China 54 43 501 438 No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 184 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 19. C ash a nd cash equiv alents 2021 $m 2020 $m Ca sh at b ank a nd in h and 124 104 Short-t erm deposits 301 358 Mo ney ma rket fun ds 1,0 2 5 892 Repurc hase agreemen ts – 321 Ca sh a nd c as h eq uiva len ts a s rec ord ed i n th e Gro up s tate me nt of ina nc ial p os iti on 1,450 1,6 75 Ba nk overd raf ts (note 2 2) (59) (5 1) Ca sh a nd c as h eq uiva len ts a s rec ord ed i n th e Gro up s tate me nt of c as h l ows 1,391 1 ,624 Ca sh at ba nk and in h and in clud es ba nk bal anc es of $ 67m (202 0: $5 5m) whic h are matche d by ban k overdraf ts of $ 59 m (202 0: $ 51m ) unde r the G roup’s cash p ooli ng arran gem ents . Und er the se arr ange ment s, ea ch po ol co ntain s a numb er of b ank ac cou nts with th e sam e in anci al insti tution an d the G roup pays inte rest o n net overdraf t b alan ces w ithin ea ch po ol. T he ca sh p ool s are use d for day-to - day ca sh ma nag eme nt purp ose s and a re mana ged a s clo sel y as po ss ible to a ze ro balan ce on a n et ba sis for e ach p oo l. Over se as sub sidi aries a re typ ical ly in a ca sh- po sitive p ositi on with th e matchin g overdraf ts he ld by the G roup’s central tre asur y c ompa ny in the UK . Ac cordin gly , bank overdr aft s are incl ude d within c as h and c ash e quival ents fo r the purp os es of th e cas h low s tatem ent. At 31 De ce mbe r 202 1, $9 m (20 20: $ 5m) is res tricte d for us e on ca pita l expen diture un der h otel le ase a gree ment s and the refore not avail able for wid er us e by the Gro up. An add ition al $7 7m (202 0: $ 44 m) is held w ithin co untrie s from whic h fund s are not cur rently abl e to be repatr iated to the G roup’s central tre asu ry c omp any . Det ails o f the cre dit risk o n ca sh and c as h equi valent s is inc lude d in note 24 . 20. T rad e and ot he r payabl es 2021 $m 2020 $m Curr ent T rade pay ables 109 80 Oth er t ax an d so cia l se curit y p ayabl e 29 37 Other pa yables 119 146 De ferre d pu rcha se c ons ide rati on (note 25) – 13 Accruals 322 190 579 466 Non -c urre nt Other pa yables 4 4 De ferre d pu rcha se c ons ide rati on (note 25) 12 11 Contingent purchase consideration ( note 25) 73 79 89 94 Oth er payab les in clud es $2 9m ( 2020 : $6 5m) relatin g to the UK p or t folio rent (se e note 18). 21 . Pr ovi si on s Litigation and commercial disputes $m Insurance reserv es $m Onero us contrac tual expenditure $m Other $m To t a l $m At 31 D ec emb er 2 020 12 36 8 4 60 Provi de d, of whi ch $2 5m i s rec orde d with in exce ptio nal i tems 25 13 – 2 40 Utilise d ( 1) (10) – – (1 1) Relea sed (2) – – – (2) Rec la ssi i cati on fro m trad e and o the r payab les 3 – – – 3 At 31 D ec em be r 202 1 37 39 8 6 90 Analyse d as: Curre nt 36 10 2 1 49 No n- curre nt 1 29 6 5 41 37 39 8 6 90 185 IH G | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 21. P rovis ion s conti nue d Litig atio n an d com me rci al dis pu tes The in crea se in th e provisi on in the ye ar relate s to the provi sion ally agre ed c ost o f set tling c omme rcial di spu tes in the A meri cas a nd EME A A re gion s. Du ring the ye ar the G roup set tle d mat ters w hich all ege d vio lation s of anti- trust re gulati ons; th ese m atte rs were p revious ly dis clos ed a s a contin gent l iabilit y . The p rovisio n at 31 D ece mbe r 202 0 princ ipall y relate d to mana gem ent ’s best e stim ate of set tlem ents re quire d in res pec t of laws uits ile d agai nst th e Group in th e Ame rica s regio n. Se ttle men t terms h ave bee n agree d and p ayment s are expe cte d to be ma de in 20 2 2. The re are ce rt ain amo unts th at the Gro up will pur sue in re latio n to thes e mat ters, up to th e full co st of s ettl eme nt; a s thes e amo unts are not v ir tually ce rt ain as at 3 1 De cem ber 2 02 1 they have not b ee n reco gnis ed . Insurance reser v es The G roup ho lds in suran ce p olici es with thi rd-p ar ty in surer s agai nst c er tain ri sks rel ating to its c orp orate op eratio ns an d owne d and le ase d prop er ties , and al so ac ts as third -p ar ty in surer fo r cer ta in risks o f its ma nage d hote ls. An e lem ent of th ese r isks are rei nsure d throug h the Group’s Cap tive insur ance c omp any , whi ch red uce s the co st of th e Group’s insur ance p olic ies . The in suran ce re ser ves m ainly re late to gen eral thi rd-p ar ty li abilit y , US worker s’ com pen satio n, glob al em ployee b ene i ts and e mploym ent prac tice s liab ility i nsura nce s. Th e amo unts are b ase d on res er ves h eld p rincip ally in th e Group’s Capti ve insura nce c omp any , an d are est abl ishe d us ing ind epe nde nt actu arial a ss es sme nts whe rever po ss ible, o r a reas ona ble as se ss ment b ase d on p ast c laims ex peri enc e provid ed pri marily by third -p ar ty cl aims h andl ers an d the third -p art y ins urers . Of th e total re ser ves , $28m re lates to in curre d but not re por te d claim s. Th e utilis ation o f thes e rese r ves is d epe nde nt on the tim ing of cl aims bei ng rep or ted and u ltimate ly bei ng set tle d; bas ed o n histo rical ex peri enc e this is exp ec ted to be a pproximate ly i ve years fo r a major ity of the claims. Amo unts utili se d within th e rese rve s are pai d to a third-p ar ty i nsure r or a de dica ted cl aims ha ndle r for sub se quent s et tlem ent with th e claim ant. In orde r to protec t the third -pa rt y ins urer ag ains t the so lvency ri sk of th e Captive, th e Grou p has ou tst andin g let ters of c redit (se e note 31). Over a nd ab ove the actu arially d etermi ned re ser ve s, the G roup is p otentiall y expo sed to c laims w ith indi vidua l cap s which d o not exce ed $4 m for pe riod s prior to 2 011 and u p to $62m (of whic h $5 3m is in re sp ect of t he las t ive p olicy ye ars) in aggre gate for p erio ds si nce 20 11, noting th at actu al cla ims did n ot die r signi ic antly to e stimate s in 202 1 or 2 020. In res pe ct of the m ana ged h otels, th e Grou p rece ived in suran ce pre miums o f $17m (202 0: $ 19m, 2 019 : $19 m) and inc urred cl aims exp en se of $14 m (202 0: $1 6m, 20 19 : $18 m). Insuran ce pre miums e arne d are inc lude d in C entral reven ue. Other Includes dila pidations pro visions. 22 . L oan s an d othe r bo rrowin gs 2021 $m 2020 $m Maturity date Disco unt at issue % Curr ent Ba nk overd raf ts (note 1 9) n /a n /a 59 51 Commercial paper 16 M arch 2 02 1 0. 444 – 818 £17 3m 3. 87 5% bo nds 2 02 2 28 No vemb er 20 2 2 1. 213 233 – 292 869 Non -c urre nt £17 3m 3. 87 5% bo nds 2 02 2 28 No vemb er 20 2 2 1. 213 – 23 5 €500m 1.625% bonds 2 024 8 Octo be r 2024 0.43 7 565 611 £3 0 0m 3 .75% bo nd s 202 5 14 Augu st 20 25 0.9 86 4 08 41 3 £350m 2.125 % bonds 2026 24 Au gus t 20 26 0. 55 0 473 47 9 €500m 2.125 % bonds 2027 15 M ay 202 7 0. 470 570 6 18 £4 0 0m 3 .37 5% b ond s 202 8 8 Oc tob er 20 28 1 .03 4 5 37 542 2,55 3 2,898 T ota l loa ns a nd ot he r bo rrowi ngs 2,8 45 3 ,76 7 De nom inat ed in th e foll owin g curre nci es: Ste rling 1,652 2 ,490 US dollars 57 31 Euros 1 ,1 3 5 1, 242 Othe r 1 4 2,8 45 3,7 6 7 Bonds Intere st is p ayable ann ually o n the date s in the t able a bove, at the rate s sta ted ab ove. No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 186 I HG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 22 . L oan s an d othe r bo rrowin gs c o ntinu ed Commercial paper In 20 20, the Gro up iss ue d £60 0m u nde r the U K Governm ent ’s Covid C orp orate Fin anci ng Facilit y (‘CC FF’ ) whic h mature d on 16 M arch 20 21. Syndic ated and Bil ateral Facilities The re were no am ounts d rawn as at 3 1 De cem ber 2 02 1 or 31 D ec emb er 20 20. The S yndic ated Fac ility c omp rise s a $1, 27 5m revolv ing cre dit fac ilit y and the B ilate ral Facilit y co mpris es a $7 5m revolv ing cre dit fac ility. Ea ch is un sec ured an d cont ains th e sa me term s and cove nants (se e note 24). A variabl e rate of intere st is p ayable on a mount s drawn un der both fa cilitie s, whi ch were un drawn throu ghout 2 02 1. Th e maxim um amo unt drawn in 20 20 was $ 69 0 m. Facili tie s provi ded by b anks 2021 20 20 Within 1 yea r $m Between 1 an d 2 yea rs $m Within 1 yea r $m Betwee n 2 and 5 y ear s $m Unutilise d facilities Commit ted – 1,350 – 1,350 Uncommit ted 50 – 50 – 23. N et d ebt 2021 $m 2020 $m Cash and cash equival ents 1,450 1,67 5 Loa ns an d othe r bo rrowin gs – cur rent (292) (8 6 9) – no n- c urren t ( 2, 5 53) (2,8 98) Lea se l iabi litie s – cu rrent (35) (3 4) – no n- c urren t (38 4) (41 6) De rivat ive i nan cia l ins trume nts h ed ging d ebt v alue s (note 24) (67 ) 13 Ne t deb t ( 1,881) (2 ,52 9) Move me nt in n et de bt 2021 $m 2020 $m Ne t (decre as e)/inc rea se in c as h and c as h equ ival ent s, net o f overdr af ts (23 6) 1,43 0 Add b ack in anc ing c ash low s in res pe ct of o the r com po nent s of ne t de bt: Princi pal elemen t of lease pa yments 32 65 Is su e of lon g- term b ond s, in clu ding e e ct of cu rren cy swap s – (1,0 9 3) Repay ment/( issue ) of commercia l paper 828 (7 38) Repay ment o f long-t erm bonds – 29 0 De cre as e in othe r bo rrowi ngs – 125 860 (1 ,3 51) De cre as e in net d ebt a ris ing fro m ca sh l ows 624 79 Other mo vements : Leas e liabilities (7) 14 4 Increase in accrued inter est (1) (5) Disposals 3 19 Exchange a nd ot her adjust ments 29 (10 1) 24 57 De cre as e in net d ebt 648 136 Ne t deb t at be ginn ing of t he yea r ( 2, 52 9) (2,66 5) Ne t deb t at en d of t he yea r (1,881) (2 ,529) Info rmat ion c onc ern ing N on - GA AP me as ures c an b e foun d in the S trate gic R epo r t on pa ge s 73 to 7 7 . Net d ebt o n a frozen GA A P bas is as c al cul ated fo r ban k cove nant s was $ 1,8 01 m (20 20: $ 2, 375 m). F ur the r det ail s are prov ide d on p age 1 90. 187 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements 23. N et d ebt c ontinu ed Loan s and oth er bo rrowing s ( excludin g bank ove rdraf ts), leas e liab ilities a nd curre ncy swap s com pris e the liab ilitie s inclu de d in the inan cing activ ities s ec tion of th e Group s tatem ent of c ash lows an d thei r moveme nts are an alys ed as fo llows: At 1 Ja nu ar y 2021 $m Financing cash lo ws $m Exchange adjustments $m Disposal $m Other a $m At 31 December 2021 $m Leas e liabilities 450 (3 2) (3) (3) 7 41 9 £17 3m 3. 87 5% bo nds 2 02 2 235 – (3) – 1 233 €500m 1.625% bonds 2 024 611 – (4 8) – 2 565 £3 0 0m 3 .75% bo nd s 202 5 413 – (5) – – 408 £350m 2.125 % bonds 2026 479 – (6) – – 47 3 €500m 2.125 % bonds 2027 618 – (4 8 ) – – 5 70 £4 0 0m 3 .37 5% b ond s 202 8 542 – (7) – 2 537 Commercial paper 818 (82 8) 13 – (3) – 4 ,1 6 6 (860 ) (107 ) (3) 9 3,20 5 Currency swaps 17 – – – 45 62 4 ,1 8 3 (860 ) (107 ) (3) 54 3,267 At 1 January 2020 $m Financing cash lows $m Exchange adjus tments $m Dispos al $m Othe r a,b $m At 31 December 2020 $m Unsecured bank loans 125 (1 25) – – – – Leas e liabilities 680 (6 5) (2) (19) (14 4) 450 £17 3m 3. 87 5% bo nds 2 02 2 528 ( 29 0) – – (3) 235 €500m 1.625% bonds 2 024 – 585 26 – – 6 11 £3 0 0m 3 .75% bo nd s 202 5 399 – 13 – 1 41 3 £350m 2.125 % bonds 2026 462 – 16 – 1 479 €500m 2.125 % bonds 2027 564 – 53 – 1 618 £4 0 0m 3 .37 5% b ond s 202 8 – 511 29 – 2 542 Commercial paper – 73 8 78 – 2 818 2,7 5 8 1,3 54 213 (19) (14 0) 4 ,1 6 6 Cur renc y swap s (exchang e of pr inci pal ) 20 (3) – – – 17 Cur renc y swap s (init ial fe e rec eive d) – 3 – – (3 ) – 2,7 7 8 1, 354 213 (19) (14 3) 4 ,1 8 3 a T he ch ang e in va lue o f cur ren cy swa ps re pre se nts fa ir va lue m ovem ent s. b I nc lud ed $ 9 0m le as e ter min atio n rel ati ng to In ter Co ntin ent al S an J uan (s ee n ote 6). 24. Fi nancial risk managemen t a nd der iv ati ve inancial i nstr uments Ove r vie w The G roup is exp os ed to inan cial ris ks that ari se in re lation to un derl ying bu sine ss a ctivi ties . The se ris ks inclu de: m arket risk , liqu idit y risk , cred it risk a nd ca pita l risk . The re are Boa rd approve d poli cies i n plac e to man age the se ri sks. Treasur y ac tivitie s to mana ge the se ri sks may incl ude mo ney ma rket funds, re purch ase a gree ment s, sp ot and for ward fo reign exchan ge ins trume nts, c urrency swa ps, inte rest rate swa ps and for ward rate a gree ment s. Mark et risk Mar ket risk is th e risk th at the fair val ue or fu ture cas h low s of a in anci al ins trume nt will lu ctuate b ec aus e of cha nge s in market pri ces . Mar ket risk co mpris es: fo reign excha nge ris k and inte rest ra te risk. F inan cial in strum ents a ec ted by market ri sk inc lude l oans a nd othe r bor rowings, c as h and c ash e quival ents , debt a nd eq uity i nvestme nts an d deriva tives. For eign e xcha nge risk The U S doll ar is the p redo mina nt curren cy of the G roup’s rev enu e and c ash lows. M oveme nts in fo reign exchan ge rates c an a ect th e Group’s repo rte d pro it or l oss , net lia bilitie s and it s intere st cover. The mo st signi i cant exp osu res of the G roup are in c urrenc ies th at are free ly co nvertib le. Th e Grou p’ s repo rte d deb t has an ex pos ure to borrowi ngs he ld in ste rling an d euros . Af ter the e ect o f curren cy swaps , the G roup hol ds its b on d debt in s terling w hich i s the prim ar y curren cy of sha reho lder re turns. U S dol lars are a lso b orrowed w hen re quire d to rel ect th e pred omin ant tradin g curren cy and a ct as a ne t investm ent he dge o f US do llar de nomi nated a ss ets. The G roup tran sa cted cu rrency swa ps at the s ame ti me as th e €50 0 m 2.125% 202 7 and € 50 0m 1.6 25% 20 24 bon ds were is sue d in Novem ber 2 018 an d Oc tobe r 2020 re sp ective ly in ord er to swap the b ond s’ proc ee ds an d interes t low s into sterlin g (see pa ge 18 9). Inte res t rate ri sk The G roup is exp os ed to intere st rate ri sk in rel ation to its ixed a nd lo ating rate b orrowin gs. Th e Grou p’ s poli cy requi res a minim um of 50 % ixe d rate debt ove r the nex t 12 mo nths. W ith the exce ption of ove rdraf ts, 10 0% o f borrowi ngs were ixed rate d ebt at 31 D ec emb er 20 2 1 (2020: 100%). No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 188 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 24 . Fin anc ial ri sk m ana ge men t and d erivat ive in anc ial i nst rum ent s conti nue d Derivative inancial instruments De rivatives a re reco rded in th e Grou p state ment of ina ncia l pos ition at fa ir value (se e note 25) as fo llows: Description Hedg e relationshi p 2021 $m 2020 $m Put opt ion None – 4 Currency swaps Ca sh low he dg e (62) (17 ) (62) (1 3) Analyse d as: Non-current assets – 5 Non -current liabili ties (62) (1 8) (62) (1 3) The c arr ying a mount of c urrenc y swaps of $ 62m lia bilit y (20 20: $ 17m liabilit y) comp ris es $6 7m loss ( 202 0: $1 3m gain) rela ting to exchang e movem ents o n the und erlyi ng prin cipal, i nclu ded w ithin net d ebt (se e note 23), and $ 5m gai n (202 0: $ 30 m los s) relating to othe r fair val ue mo vemen ts. Det ails o f the cre dit risk o n deri vative in anci al ins trume nts are inc lude d on p age 19 1. Ca sh l ow hed ges Curre ncy swap s have be en tran sac ted to swap th e proc ee ds from th e euro bo nds to ste rling a s follows: Dat e of de si gn ati on Pay l eg Interest rate Receive leg Interest rate M aturity Ri sk Hedge ty pe He dged i tem Nove mbe r 201 8 £4 36m 3 .5% €500m 2. 125% May 2 02 7 For eign e xchange Cas h lo w €500 m 2. 125% bonds 2027 Oc tob er 20 20 £454m 2.7 % €500m 1.625% O ctob er 2 024 Forei gn ex change Ca sh low € 500m 1.625% bonds 2024 The re is an e con omic rel ation ship b etwe en th e hed ged i tem and th e he dging in strum ent as th e critic al term s are align ed, s uch that th e he dge ratio i s 1: 1. The c hang e in the fair va lue of h edgi ng ins trume nts us ed to me asu re hed ge ine ec tivene ss in th e pe riod mi rrors that o f the hypoth etic al deri vative (he dge d item) and wa s $4 0m l oss ( 202 0: $7m gain). He dge in ee ctive nes s aris es wh ere the c umulative c hang e in the fai r value of th e swaps exce ed s the ch ange in f air value o f the future ca sh l ows of the b ond s, and m ay be due to any op enin g fair valu e of the he dgin g instr ument , or a ch ange in th e cred it risk o f the Grou p or co unterp ar ty . The re was no in ee ctive nes s in 20 21 or 2 020. Amo unts rec ogn ise d in the c ash low he dge re ser ve s are anal yse d in note 29. Net i nvestme nt he dge s The G roup de sign ates the fo llowin g as net inve stme nt he dge s of its fore ign op eratio ns, b eing th e net as set s of ce rt ain G roup sub sidi aries with a U S dolla r func tiona l curren cy: • B orrowing s unde r the Sy ndic ated an d Bil ateral Facili ties; an d • Short-dated for eign ex change sw aps. The d esig nated ri sk is th e spo t foreign exch ange ri sk and i nterest o n the se inanc ial in strume nts is t aken throu gh in anci al inc ome o r expe nse. Sho rt- dated fo reign excha nge swap s are us ed wh en ne ed ed to man age s terling s urplu s ca sh and re duc e US do llar b orrowing s whils t maint aining o pe ration al lexi bilit y . N o sh or t-date d foreign exch ange swa ps have be en h eld s ince th e ir st qua rte r of 202 0. The re is an e con omic rel ation ship b etwe en th e hed ged i tem and th e he dging in strum ent as th e net inves tme nt create s a foreign exch ange risk th at will ma tch the forei gn exchang e risk o n the US d olla r borrowi ng. Th e Group h as es tab lish ed a h edg e ratio of 1:1 as the und erlyi ng risk o f the he dging i nstrum ent is i denti cal to the h ed ged ri sk co mpo nent . The c hang e in value o f hed ging in strume nts re cog nise d in the c urrency tra nsl ation res er ve throu gh other c omp rehe nsive in com e was $nil ( 2020 : $1m lo ss). The re was no in ee ctiven es s reco gnis ed in th e Grou p inco me st ateme nt during t he curre nt or prio r year . 189 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 24 . Fin anc ial ri sk m ana ge men t and d erivat ive in anc ial i nst rum ent s conti nue d Intere st and fo reign excha nge ris k se nsitiv ities The fo llowing t abl e shows th e impa ct of a ge ne ral stren gthen ing in the U S dol lar ag ainst s terlin g and eu ro on the Gro up’s proit or l os s before tax a nd net li abiliti es, an d the imp act o f a rise in U S doll ar , e uro and s terling i nterest r ates on th e Group’s pro it or lo ss b efore ta x. Th e impa ct of the s trength ening i n the euro a gains t sterli ng on ne t liabil ities i s also s hown, a s this imp act s the fair va lue of th e curren cy swaps . 2021 $m 2020 $m 2019 $m Incre ase/( dec rease) in proit before ta x Ste rling : US do lla r excha nge ra te 5¢ f all 7. 0 5.9 4.0 Euro: U S dol lar exc han ge rate 5 ¢ fall 0.2 0. 3 (2 .6) US d olla r inte rest r ates 1% incr ease 7. 1 2. 2 (1 .6) Ste rling i ntere st rate s 1% increase 5. 2 12 .9 0.6 De cre a se in n et li abi liti es Ste rling : US do lla r excha nge ra te 5¢ f all 2 9.1 30. 2 39.9 Euro: U S dol lar exc han ge rate 5¢ fal l 49 .7 50.6 24 .1 Ste rling : euro exc han ge rate 5¢ fal l 6 7. 4 68.2 33 .0 In 20 21 an d 202 0, interest ra te sen sitivit y rel ates to ca sh ba lanc es an d would o nly be re alis ed to the ex tent d epo sit rate s incre ase by 1% . Intere st rate se nsiti vitie s inclu de the i mpac t of he dging a nd are c alcul ated ba se d on the ye ar - end n et debt p os ition. Liquidity risk Group p oli cy ens ures su ic ient li quidit y is m aintai ned to m eet all fo rese ea ble m edium -term c as h requi rement s and p rovide he adro om against u nfor eseen obligati ons. Ca sh and c as h equi valent s are hel d in sh or t-term dep osit s, rep urchas e agre eme nts, an d ca sh fun ds whic h allow da ily with drawals of c ash . Mo st of the G roup’s funds are h eld in th e UK o r US, al thoug h $7 7m (202 0: $4 4 m) is held in c ountri es wh ere rep atriation i s restri cted (see n ote 19). Me dium an d long -term b orrowin g require ment s are met th rough c ommit ted b ank fa cilitie s and b ond s as det aile d in note 2 2. S hor t-term bor rowing req uireme nts may b e met from d rawings u nde r unco mmit ted overdr aft s and fa cilitie s. The S yndic ated a nd Bil ateral Faci lities c ont ain two ina ncial c ovena nts: intere st c over and a leve rage r atio. Coven ants are m onitore d on a ‘froze n GAAP ’ bas is exclud ing the im pac t of IFR S 16 ‘L eas es’ a nd are tes ted at ha lf year an d full yea r on a trailin g 12-mo nth bas is. The inte rest c over cove nant re quires a ra tio of Cove nant EB ITDA: Cove nant intere st p ayable ab ove 3.5 : 1 and th e levera ge ratio re quires Cove nant ne t debt: C oven ant EBI TDA of be low 3. 5:1. Coven ant EB ITDA is c alcu lated (on a frozen GA AP ba sis) as op eratin g pro it be fore exceptio nal ite ms, d epre ciatio n and am or tisati on and S ystem Fund reven ues a nd expe nse s. The se c ovenant s were waive d from 30 J une 20 20 throu gh 31 D ec emb er 20 21 an d have be en rel axed for te st date s in 20 22 . A temp orar y minimu m liquid ity c ovenant o f $4 00 m is tes ted at e ach te st date up to an d inclu ding 3 1 De cem ber 2 02 2. For c ovenant p urpo se s, liqui dit y is de in ed a s unres tricte d cas h and c ash e quiva lent s ( net of b ank overdr aft s) plus und rawn facil ities w ith a remai ning term o f at lea st six mo nths. 2019 and prior 30 June 2020 to 31 December 2021 30 June 2022 31 December 2022 30 June 2023 Am end ed c oven ant t es t leve ls for S yn dic ate d an d Bil ate ral Fac ili tie s Lever age <3 . 5x wai ved <7. 5 x <6.5x <3 . 5x Intere st c over >3.5x waived >1 . 5x >2 .0 x >3. 5x Liquidit y n /a $400m $400m $400m n /a The m eas ures u sed i n the cove nant tes ts are c alcul ated on a f rozen GAA P bas is and d o not alig n to the value s repo r ted by the G roup as Non-GAAP meas ur es: 2021 2020 2019 Cove na nt EB ITDA ($m) 601 272 897 Cove na nt net d ebt ($ m) 1,801 2,375 2 ,241 Cove na nt intere st p ayabl e ($m) 133 111 99 Lever age 3.0 0 8 .73 2. 50 Intere st c over 4. 52 2.4 5 9.0 6 Liquidit y ($m ) 2 ,65 5 2,9 25 n /a The inte rest m argin payab le on th e Synd icate d and B ilatera l Facilitie s is linked to th e levera ge ratio an d can va ry b et ween U SD L IBO R + 0.9 0% an d US D LIB OR + 2.75% . 190 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 24 . Fin anc ial ri sk m ana ge men t and d erivat ive in anc ial i nst rum ent s conti nue d The fo llowing a re the undi sc ounted c ontrac tual c ash lows of ina ncial l iabili ties, i nclu ding intere st paym ents . Lia bilitie s relatin g to the Gro up’ s defe rred co mpe ns ation pl an are exclud ed; th eir se ttle ment i s fund ed e ntirely by the re alis ation of th e relate d defe rred c omp ens ation p lan investm ents a nd no ne t cas h low a rise s. 31 December 2021 Le ss t ha n 1 yea r $m Between 1 an d 2 years $m Between 2 an d 5 years $m More than 5 yea rs $m To t a l $m Non- derivative inancial liabilities: Ba nk overdra ft s 59 – – – 59 £17 3m 3. 87 5% bo nds 2 02 2 241 – – – 2 41 €500m 1.625% bonds 2 024 9 9 575 – 593 £3 0 0m 3 .75% bo nd s 202 5 15 15 435 – 465 £350m 2.125 % bonds 2026 10 10 50 2 – 52 2 €500m 2.125 % bonds 2027 12 12 36 5 78 638 £4 0 0m 3 .37 5% b ond s 202 8 18 18 55 575 666 Leas e liabilities 58 49 12 3 3, 212 3,442 T rad e and ot her p ayabl es (exclu din g defe rred a nd c ontin ge nt purc has e co nsi de ratio n) 550 2 1 2 555 De ferre d an d con ting ent pu rcha se c on sid erati on – – 52 42 94 Derivative inancial liabilities: Cur renc y swap s he dgin g €5 00 m 1.6 25% b ond s 20 24 out l ows 16 16 628 – 660 Cur renc y swap s he dgin g €5 00 m 1.6 25% b ond s 20 24 in lows (9) (9) (575) – (5 93) Cur renc y swap s he dgin g €5 00 m 2.125% b on ds 20 27 o ut low s 21 21 62 598 70 2 Cur renc y swap s he dgin g €5 00 m 2.125% b on ds 20 27 in l ows (1 2) (1 2) (36) (578) (6 38) 31 December 2020 Le ss th an 1 yea r $m Betwee n 1 and 2 year s $m Betwee n 2 and 5 year s $m Mo re tha n 5 yea rs $m To t a l $m Non- derivative inancial liabilities: Ba nk overdra ft s 51 – – – 51 £17 3m 3. 87 5% bo nds 2 02 2 9 24 5 – – 25 4 €500m 1.625% bonds 2 024 10 10 634 – 654 £3 0 0m 3 .75% bo nd s 202 5 15 15 456 – 486 £350m 2.125 % bonds 2026 10 10 31 488 539 €500m 2.125 % bonds 2027 13 13 39 640 70 5 £4 0 0m 3 .37 5% b ond s 202 8 19 18 55 601 6 93 Commercial paper 819 – – – 819 Leas e liabilities 57 55 136 3, 257 3,505 T rad e and ot her p ayabl es (exclu din g defe rred a nd c ontin ge nt purc has e co nsi de ratio n) 416 2 1 1 420 De ferre d an d con ting ent pu rcha se c on sid erati on 13 5 13 81 112 Derivative inancial liabilities: Cur renc y swap s he dgin g €5 00 m 1.6 25% b ond s 20 24 out l ows 16 16 6 52 – 684 Cur renc y swap s he dgin g €5 00 m 1.6 25% b ond s 20 24 in lows (10) (10) (6 3 4) – (6 5 4) Cur renc y swap s he dgin g €5 00 m 2.125% b on ds 20 27 o ut low s 21 21 63 627 732 Cur renc y swap s he dgin g €5 00 m 2.125% b on ds 20 27 in l ows (13) (1 3) (3 9) (6 40) (70 5) Cre dit risk Cre dit risk o n ca sh and c as h equi valent s is mini mise d by ope rating a p olicy o n the inves tment of s urplu s ca sh that g ene rally res trict s cou nterpar tie s to thos e with a B BB - c redit rati ng or b ette r or tho se provid ing ad equ ate sec urit y . T he Grou p use s lon g-ter m credit r atings from St and ard and Po or ’s, Moo dy ’ s and F itch Rating s as a ba sis fo r set ting it s counte rpar t y limit s. In orde r to man age the G roup’s credit ri sk exp osure, th e treas ur y functi on se ts co unterpa rt y exp osure lim its us ing me trics in clud ing cre dit rating s, the rel ative pla cing of c redit d efault s wap prici ngs, ti er 1 ca pita l and sh are pric e volatil ity of th e relevan t counte rpar t y . Repu rchas e agre eme nts are ful ly coll aterali se d investm ents, w ith a maturi ty of th ree mo nths or le ss . The G roup ac ce pts on ly governm ent or supr anatio nal b onds w here th e lowes t credi t rating is A A - or bet ter a s coll ateral. I n the event o f defaul t, owne rshi p of the se se curiti es woul d rever t to the Grou p. The s ecuri ties h eld a s coll ateral are to prote ct ag ains t defau lt by the co unterpa rt y . The G roup’s exposu re to credit ri sk ari ses fro m defau lt of the c ounterp ar ty, with the maxi mum expo sure e qual to the c arr yin g amount of ea ch i nanc ial as set , inclu ding d erivative inan cial in strum ents . The ex pec ted cre dit lo ss o n cas h and c ash e quiva lent s is co nsid ered to be imm aterial . 191 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 24 . Fin anc ial ri sk m ana ge men t and d erivat ive in anc ial i nst rum ent s conti nue d The t abl e bel ow analy ses th e Group’s sho rt-term d epo sits , mon ey market fun ds and re purch ase a greem ent c ollate ral cla ss ii ed as c as h and ca sh eq uivale nts by co unterpa rt y cre dit rating: 31 December 2021 AAA $m AA $m AA- $m A+ $m A $m A- $m To t a l $m Short-t erm deposits – – 87 45 169 – 301 Mo ney ma rket fun ds 1,0 2 5 – – – – – 1,0 2 5 31 December 2020 AAA $m AA $m AA- $m A+ $m A $m A- $m To t a l $m Short-t erm deposits – – 98 165 94 1 358 Mo ney ma rket fun ds 892 – – – – – 892 Repur chase agr eement col later al 23 8 65 18 – – – 32 1 Capita l r isk mana gement The G roup ma nag es its c api tal to en sure that i t will be a ble to co ntinue a s a going c onc ern . The c apit al stru cture co nsi sts of n et de bt, is sue d sha re capi tal an d rese r ves. T he stru cture is m anag ed wi th the obj ecti ve of maint aining a n investm ent grad e cred it rating, to provi de on going returns to s hareh olde rs an d to ser vic e deb t oblig ation s, whils t maint ainin g maxim um ope ration al l exibilit y . A key charac teris tic of IH G’s man age d and fra nchi sed b usin es s mod el is th at it is hig hly ca sh ge ner ative, with a high re turn on c apit al emp loyed. S urplu s cas h is eith er reinves ted in the b usin es s, us ed to rep ay debt or re turne d to share hold ers . The G roup’s debt is m onitore d on the b asi s of a ca sh l ow levera ge ratio, be ing ne t debt di vide d by adju sted EB IT DA. T he Grou p has a s tated aim of ma intain ing this rati o at 2. 5x to 3.0x. The r atio at 31 D ec emb er 20 21 (which d ier s from the rati o as ca lcula ted on a frozen GA AP b asi s for cove nant tes ts) was 2. 98 (2 020 : 7 .6 9). The G roup cur rently ha s a sen ior uns ec ured lo ng- term cre dit rating o f BB B - from St and ard and Po or ’s. In the event thi s rating was d owngra de d be low BB B - the re would b e an add ition al step - up cou pon of 1 .2 5% payabl e on the b ond s which wo uld res ult in ad dition al intere st of app roximately $ 35 m pe r year . 25. Classi icat ion a nd measur ement of inancia l ins trumen ts Accounting class iication and fair v alue hierarchy 2021 2020 Hierarc hy of fair v alue measurement Fair value a $m Amortised cost $m Not cate gori sed as a ina nc ia l instrument $m To t a l $m Fair value a $m Amortised cost $m Not catego rised as a ina nc ial instrum ent $m To t a l $m Financial as sets Other inancia l assets 1,3 b 114 61 – 175 103 66 – 169 Cash and cash equival ents 1 1,0 2 5 425 – 1,450 892 783 – 1,675 Derivative inanci al instruments 2,3 c – – – – 5 – – 5 Deferred compensation plan inves tments 1 2 56 – – 256 236 – – 236 T rade and o ther r eceivables – – 501 73 5 74 – 4 38 76 514 Financial liabil ities Derivative inanci al instruments 2 (62) – – (6 2) (18) – – (1 8) Deferred compensation plan liabilitie s 1 (2 5 6) – – (2 56) (2 36) – – ( 236) Loa ns an d othe r bo rrowin gs – – ( 2, 8 45) – (2, 8 45) – ( 3,7 67 ) – (3 ,76 7 ) T rade and o ther pa yables 3 (7 3) (5 66) (2 9) ( 668) ( 79) (444 ) (37 ) (5 60) a Wit h the exc ep tion o f eq uit y se cur itie s, w hic h are m ea sure d at fa ir val ue th rou gh oth er c omp reh en siv e inc om e, all a re me as ure d at fai r valu e thro ug h pro it o r lo ss . Of th os e, th e i nan cia l as se ts re late d to th e def erre d co mp en sat ion p lan i nves tme nts w ere d es ign ated a s su ch up on i niti al re co gni tion . b Of t ho se me as ure d at fa ir val ue, $ 8m ( 202 0: $ 15 m) are Lev el 1 an d $1 06 m (2 020 : $8 8 m) are Leve l 3. c I n 20 20, $1 m were L evel 2 a nd $ 4m we re Le vel 3 . 192 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 25. Classi icat ion a nd measur ement of inancia l ins trumen ts continu ed Fin ancia l ass ets a nd liab ilitie s mea sure d at amor tis ed c ost w hos e carr yin g amou nt is not a re aso nabl e app roximation of f air value a re as fo llows : Hierarc hy of fair v alue measurement 2021 2020 Carrying v alue $m Fair value $m Carrying value $m Fair value $m Deferred purchase considerat ion 2 (12 ) (13) (2 4) ( 26) £17 3m 3. 87 5% bo nds 2 02 2 1 (2 33) ( 23 9) (2 35) ( 24 8) €500m 1.625% bonds 2 024 1 (5 65) (5 85) (61 1) (6 3 0) £3 0 0m 3 .75% bo nd s 202 5 1 (4 0 8 ) (42 8 ) (41 3) (4 4 8) £350m 2.125 % bonds 2026 1 (47 3) (47 1) (47 9) (4 8 9) €500m 2.125 % bonds 2027 1 (570) (6 0 1) (61 8) (6 50) £4 0 0m 3 .37 5% b ond s 202 8 1 (537 ) (5 66) (5 42) (6 03) Rig ht of o set Oth er tha n in relatio n to cas h po oling a rrange me nts (see n ote 19), there are n o in ancia l instr ument s with a sig ni icant f air value s ubje ct to enforc eabl e mas ter ne tting a rrang eme nts and o ther si milar a gree ment s that are not o s et in the G roup st ateme nt of i nanc ial po sitio n. V aluation techniques Mo ney market fun ds, d eferre d com pen satio n plan i nvestme nts an d bon ds The fa ir value of m oney m arket fund s, defe rred c omp ens ation p lan inves tment s and b ond s is ba sed o n thei r quoted m arket pric e. Unq uoted e quit y se curitie s Unq uoted e quit y se curitie s are fair va lue d using a d isc ounte d cas h low m ode l, eithe r intern ally or u sing p rofes sion al exte rnal valu ers . The s igni ic ant unob se rva ble inp uts u sed to d etermin e the fair va lue of th e equit y se curi ties are Rev P AR grow th (b ase d on the m arket- sp eci ic grow th as sum ptions u se d by extern al valu ers), pre -tax d isc ount rate whi ch rang ed fro m 6.3 % to 9.3% (2 020 : 6.4% to 10.0%), and a n on- market abilit y fac tor whic h range d from 20.0 % to 30.0% (2 020 : 20.0% to 30.0 %). App lying a o ne -year sl ower /fas ter RevPAR recove ry p erio d would re sult in a $ 7m (2020 : $6 m/$8m) (decre ase)/incre as e in fair valu e resp ec tively. A one perc ent age p oint inc reas e/ dec reas e in the di sco unt rate woul d result i n a $9 m (202 0: $ 12m/$16 m) ( d ec reas e)/increa se in fair val ue res pec tively. A ive pe rcent age p oint inc reas e/ de crea se in the n on- market abilit y fac tor woul d resul t in a $6 m (202 0: $ 5m) (decre ase)/incre as e in fair valu e resp ec tively. Derivative inancial instruments Curre ncy swap s are mea sure d at the pre sent va lue of fu ture ca sh low s disc ounte d bac k bas ed o n quoted fo rwa rd exchang e rates an d the app lica ble yie ld cur ve s derive d from qu oted inte rest rate s. Adju stme nts for c redit ri sk us e obs er vabl e credi t defau lt swap sp read s. The p ut optio n over par t of th e Group’s investm ent in the B arcl ay ass ocia te has b een va lue d as the exce ss of th e amo unt rece ivabl e unde r the opti on (which is b as ed on th e Group’s cap ital inve sted to d ate) o ver fair va lue. I n 202 1, the fai r value of th e hotel wa s derive d from a limite d upd ate to the 202 0 appra isa ls, provid ed by a profe ss iona l exter nal valu er . In 202 0, the fair valu e of the h otel was b ase d on the va lue as c alcul ated for im pairm ent tes ting us ing dis co unted futu re cas h low s as de scrib ed in n ote 16. Deferr ed purc hase considerat ion De ferred p urcha se co nsi derati on aros e in resp ec t of the ac quis ition of R ege nt, and c omp rise s the p rese nt value of $ 13m p ayable in 2 024. The irs t inst alme nt of $1 3m was p aid in 20 21 . The di sco unt rate app lied i s bas ed o n obs er vabl e US co rpo rate bon d rates of s imilar te rm to the expe cte d payme nt date. Contingent purchase consideration Reg ent $73 m (202 0: $74m) In 20 18, the G roup ac quire d a 51% contro lling intere st in Re gent H os pita lit y Worldwid e, Inc (‘ RH W ’), with p ut and c all opti ons exi sting over the rem aining 4 9 % share hol ding exercis abl e in a pha se d mann er from 2 026 to 20 33 . The G roup ha s a pres ent own ers hip intere st in the remai ning sh ares an d the ac quis ition wa s acc ounte d for as 10 0 % owne d with no no n- c ontrollin g interes t reco gnis ed an d co ntinge nt purch ase c ons ide ration c ompri sing th e pres ent valu e of the exp ec ted amo unts p ayable on exerc ise of th e optio ns ba se d on the an nual trailin g revenue of R HW in the ye ar pre ce ding exercis e with a loo r appli ed. The val ue of the c ontin gent p urchas e co nsid eratio n is sub jec t to perio dic re ass es sme nt as inte rest rate s and R HW revenu e expe ctati ons ch ange . At 31 De ce mbe r 202 1, it is a ss ume d that $ 39 m will be p aid in 20 26 to ac quire an ad dition al 25% of R HW with th e remai ning 24% ac quired i n 2028 fo r $42m . This a ss ume s that the o ptions w ill be exerci se d at the ea rlies t per miss ible d ate which i s con sis tent with th e ass umptio n mad e on ac quis ition. T he am ount rec ogn ise d is the di sc ounted va lue of the tot al exp ecte d amou nt payabl e of $8 1m. The d isc ount rate ap plie d is bas ed o n obs er vabl e US co rpo rate bon d rates of s imilar te rm to the expe cte d payme nt dates . The r ange of p os sibl e outc ome s remain s unch ange d from th e date of ac quis ition at $ 81m to $26 1m (undisc ounte d). The s igni ic ant unob se rva ble inp uts u sed to d etermin e the fair va lue of th e contin gent p urcha se co nsi deratio n are the p rojec ted traili ng revenue s of RH W and th e date of exercis ing the o ptions . If th e annua l trailing reve nue of R HW were to exce ed the loo r by 10% , the a mount of the c onting ent purc has e con side ration re co gnis ed in th e Group F inan cial S tatem ents wo uld inc reas e by $7m (2020 : $7m) . If th e date for exercis ing the o ption s is as sume d to be 20 33 , the amo unt of the u ndis counte d co ntinge nt purch ase c ons ide ration wou ld be $ 86 m (2020: $86 m ). 193 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 25. Classi icat ion a nd measur ement of inancia l ins trumen ts continu ed UK p or tfoli o $nil (2 020 : $nil ) The c onting ent pu rchas e con sid eratio n com pris es the p rese nt value o f the above - market el eme nt of the exp ec ted le ase p ayment s to the le ss or . The ab ove -mar ket ass es sme nt is dete rmine d by com parin g the expe cte d lea se paym ents a s a pe rcent age of fo rec ast ho tel ope rating p roit ( be fore dep recia tion an d rent) with ma rket metric s, on a ho tel by hotel b asi s. The re is no loo r to the amo unt payabl e and no ma ximum am ount. M arket rent s were initia lly dete rmine d with as si stan ce of p rofes sion al third- par t y adv ise rs. Th e fair valu e is sub jec t to peri odic re as ses sm ent as inte rest ra tes and ex pec ted le as e payme nts ch ange . A fair valu e adju stme nt of $2 1m was rec ogn ise d in 202 0, resultin g in a redu ctio n to the value of th e liab ility a risin g mainl y from a redu ctio n in expe cte d future rent als p ayable su ch that th ere is no a bove -m arket ele ment (se e note 6). No fur the r adju stme nt has b ee n mad e in 202 1. The fa ir value i s not se nsiti ve to reaso nab ly po ssib le ch ange s in as sump tions . Six S ens es $ nil (20 20: $ 5m) The c ond itions re lated to a p ipe line pro per t y have not b een m et suc h that no a mount s will be p aid. Level 3 re co nci liat ion Other inancial assets $m Derivative inancia l instruments $m Conting ent purchas e considerat ion $m At 1 Jan uar y 20 20 128 – (91) Additi ons 5 – – T rans fer s into Leve l 3 8 – – Repay ments a nd disposals (5) – – Valuati on lo ss es re co gni se d in oth er c omp rehe ns ive inc om e (47 ) – – Unre ali se d ch ange s in fa ir valu e a – 4 13 Exchange a nd ot her adjust ments (1) – (1) At 31 D ec emb er 2 020 88 4 ( 79) Additi ons 3 – – Valuati on ga ins re co gni se d in oth er co mpr ehe ns ive inc om e 15 – – Unre ali se d ch ange s in fa ir valu e b – (4) 6 At 31 D ec em be r 202 1 106 – ( 73) a $2 1m fai r valu e ga in on c ont ing ent p urch as e co nsi de rati on an d $4 m ga in on d eri vati ve i nan cia l ins tru me nts we re pre se nte d as exc ep tio nal i tem s in the G ro up inc om e st ate men t. Th e rem aini ng $ 8m fa ir val ue l os s on co nti nge nt pu rch ase c on si der atio n rel ate d to Re gen t. b Th e cha ng e in the f air va lu e of de riva tive in anc ial i nst rum ent s is re co gni se d wit hin ot her i mp airm ent c ha rge s in th e Gro up in com e st ate men t and i s pre se nte d as an e xce ptio nal i tem . 194 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 26. Re co nc iliat ion of p ro it/(lo ss) for t he yea r to ca sh l ow from o pe ratio ns 2021 $m 2020 $m 2019 $m Pro it /(los s) for t he ye ar 265 (26 0) 386 Adjustmen ts for : Net inancial expens es 139 14 0 115 Fai r val ue gains on cont ingent pu rchase considera tion (6) (1 3) (27 ) Income tax charge /( credit) 96 (2 0) 156 Operating proit adjustmen ts: Imp airm ent l os s on ina nci al as set s – 88 8 Other imp airment charges 4 2 26 131 Other opera ting ex ceptio nal it ems 25 (4) 55 Depreciation and amortisat ion 98 11 0 116 127 420 310 Contract assets deduction i n re venue 35 25 21 Share-based paymen ts cost 28 21 30 Sha re of lo ss es o f ass oc iate s and j oint ve nture s 8 14 3 71 60 54 System Fu nd adjust ments: Depreciation and amortisat ion 94 62 54 Imp airm ent (reve rs al)/l os s on ina nci al as se ts (6) 24 12 Other im pairmen t ( re versals )/ charges (3) 41 – Other opera ting ex ceptio nal it ems – 20 28 Share-based paymen ts cost 13 11 12 Sha re of lo ss es o f ass oc iate s 2 1 – 100 159 106 Work ing c apit al an d oth er ad jus tme nts: Inc reas e in de ferre d revenu e 39 1 57 De cre as e in inven torie s 1 1 – (Incr ease) / decrease i n tr ade and other r eceivables (75) 38 ( 70) Increase/ (decrease ) in trade and o ther pa yables 153 (6 9) (63) Othe r adjus tments (8) 2 (1) 110 (27 ) (77) Ca sh lows re lati ng to exce ptio nal i tems (1 2) (87 ) (55) Co ntra ct ac qui siti on co st s, ne t of rep ayme nts (42 ) ( 64) (6 1) T otal adjustments 583 56 8 52 1 Cash lo w from operat ions 848 308 9 07 27 . Re tirement beneits UK Sinc e 6 Augu st 20 14, UK reti remen t and de ath in se rv ice b ene i ts are provid ed for e ligib le emp loyee s by the IH G UK D e ine d Co ntributi on Pen sion Pl an. M emb ers , inclu ding tho se wh o have be en auto - enro lle d sinc e 1 Septe mbe r 201 3, are provid ed wi th de ine d co ntributio n arrang eme nts un der thi s pla n; ben e its are b ase d on e ach in dividu al me mbe r’s per son al ac count . The p lan is H M Revenu e & Cus toms regis tered a nd gover ned by an in dep en dent tru stee, a ss iste d by profes sion al adv ise rs as an d whe n requi red. Th e overall o pera tion of th e pla n is subj ect to th e oversig ht of The Pe nsi ons Re gulato r . The fo rmer d e ine d ben e it pla n, the Inte rC ontine ntal H otels U K Pe nsio n Plan, wa s wound u p on 21 J uly 20 15 foll owing th e comp letio n of the buy- ou t and tran sfer of th e de ine d be ne it o bligati ons to Roth es ay Life on 31 O ctob er 20 14. Res idual d e ine d ben e it obl igatio ns rem ain in res pec t of ad dition al be ne its p rovide d to memb er s of an unfun de d pen sion a rrang eme nt (‘U K pl an’) who we re aec ted by lifeti me or an nual all owanc es und er the fo rmer d e ine d be ne it arran gem ents . Acc rual un der thi s arrang eme nt ce ase d with e ec t from 1 Jul y 2013 a nd a ca sh -o ut oe r in 20 14 resulte d in the ex tingui shm ent of ap proximatel y 70% of the unfun ded p en sion o bligati ons . The G roup me ets th e be ne it paym ent ob ligatio ns of th e remain ing me mbe rs as th ey fall due . A charge ove r ce rt ain ring -fen ced b ank a cco unts tot alling $ 42m (£ 31m) at 31 De ce mbe r 202 1 (see n ote 17) i s currently h eld a s se curit y on b ehal f of the remaining memb ers. 195 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 27 . Retire me nt be ne it s conti nue d US Duri ng 201 8, the G roup co mple ted a term inatio n of the US f unde d Inter- Conti nent al Hote ls Pen sio n Plan, wh ich involve d cer t ain qua lif ying mem ber s rec eivin g lump -s um ca sh -o ut paym ents wi th the rem aining p ens ion ob ligati ons su bjec t to a buy- out by B ann er Life In suran ce Co mpany , a subs idiar y of Le gal & G en eral Am eric a. The G roup c ontinue s to maint ain the u nfund ed Inte r - Conti nent al Hote ls No n- qu ali ied Pe nsi on Pla ns (‘ US pl ans’ ) and unfu nde d Inter-C ontin enta l Hote ls Co rpo ration Po stretirem ent M edi cal, D ent al, Vis ion an d De ath Be ne it Pl an (‘U S po st-retirem ent pl an’), both o f which are d e ine d be ne it pl ans. B oth pl ans are c los ed to new m emb ers . A Retirem ent C ommit tee, c omp risin g sen ior Gro up emp loyee s and as sis ted by profes sio nal a dvis ers a s and wh en req uired, h as res pon sibil ity fo r oversig ht of the pl ans . Movem ent i n UK an d US re tire me nt be ne it ob lig atio ns Deined beneit obligati on Fair va lu e of pl an a ss et s Net deined beneit obl igation 2021 $m 2020 $m 2019 $m 2021 $m 2020 $m 2019 $m 2021 $m 2020 $m 2019 $m At 1 Jan uar y 103 96 91 – – – 103 96 91 Rec og nis ed i n pro i t or lo ss Intere st exp en se 2 3 3 – – – 2 3 3 2 3 3 – – – 2 3 3 Recognised in other comprehensive income Actuarial (gain)/loss arising from cha nge s in: Demographic assumptions (3) (3) (1) – – – (3) (3) (1) Financial assumpti ons (3) 10 9 – – – (3) 10 9 Experience adj ustments (1) 1 (1) – – – (1) 1 (1) Re-measurement (gain )/loss (7) 8 7 – – – (7) 8 7 Exchange adj ustments (1) 2 1 – – – (1) 2 1 (8) 10 8 – – – (8) 10 8 Other Group c ontributio ns – – – (5) (6) (6) (5) (6) (6) Beneits paid (5) (6) (6) 5 6 6 – – – (5) (6) (6) – – – (5) (6) (6) At 31 D ec em be r 92 103 96 – – – 92 10 3 96 Comprising: UK p lan 30 31 26 – – – 30 31 26 US plans 45 50 48 – – – 45 50 48 US post -ret iremen t plan 17 22 22 – – – 17 22 22 92 103 96 – – – 92 103 96 Assumption s The p rincip al inanc ial as sum ptions u se d by the actu arie s to determi ne the d ei ned b en e it obli gation s are: 2021 % 2020 % 2019 % UK p lan o nly: Pension incr eases 3.4 3 .0 2 .7 Inl ation rate 3.4 3.0 2.7 Discount rat e: UK p lan 1.8 1.4 2 .1 US plans 2 .4 1.9 2. 9 US post -ret iremen t plan 2.4 2.0 2.9 US h eal thc are co st tre nd ra te as sum ed fo r the nex t ye ar : Pre - 6 5 (ultimate r ate rea ch ed in 2 031) 6. 2 6.4 6 .7 Pos t-6 5 (ultim ate rate re ac he d in 20 31) 6.5 6.8 7. 1 Ulti mate r ate that t he co st ra te tren ds to 4.5 4.5 4.5 Mo rt alit y is the m ost s igni ica nt dem ogra phic as sum ption. T he curre nt as sumpti ons for th e UK are b ase d on th e S3 P A ‘light ’ year o f bir th tab les w ith proje cted m or tali ty im proveme nts us ing the C MI _ 20 20 mo del a nd a 1. 25% p er ann um long -term tre nd an d a smo othing p arame ter (‘s-kap pa’) o f 7 . 5 with weig htings of 9 5% and 8 2% fo r pen sion ers a nd 98 % and 8 1% for non -p en sion ers, m ale an d fema le res pec tively. In the US, the cur rent as sumpti ons us e rates fro m the Pri -2012 M or talit y Stu dy and G en eratio nally Pro jec ted with S cal e MP202 1 mo rt alit y tab les . 196 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 27 . Retire me nt be ne it s conti nue d The a ssu mption s app lied to the U K pl an and U S pla ns for life exp ec tan cy at retireme nt age a re as follow s: UK US 2021 Y ears 2020 Ye a r s 2019 Ye a r s 2021 Y ears 2020 Ye a r s 2019 Ye a r s Cur rent p ens ion er s at 65 a – ma le 24 24 24 22 22 21 – female 26 26 26 23 23 23 Future pe ns ion ers a t 65 b – male 25 25 25 23 23 22 – female 28 28 28 25 24 24 a Re la tes to a ss ump tion s ba se d on l ong evi ty (i n yea rs) fol lowi ng re tire me nt at th e end o f the re po r ting p er iod . b R el ates t o as sum ptio ns b as ed on l on gev ity ( in ye ars) re lat ing to a n emp loye e reti rin g in 20 41. The a ssu mption s allow for ex pec ted in crea ses in l ong evit y . Sen sitivitie s Cha nge s in as sumptio ns us ed fo r determi ning retire ment b ene i t cos ts and o blig ations m ay have an imp act on th e Grou p inco me st ateme nt and th e Group s tatem ent of inan cial p osi tion. T he key ass umption s are the di sco unt rate, the rate o f inl ation, th e ass ume d mor ta lity r ate and th e hea lthca re cos ts tren d rate. The s en sitivit y an alysi s bel ow relate s to the be ne it ob ligatio n and i s bas ed on ex trap olati ng reas ona ble cha nges i n thes e as sumpti ons, u sing ye ar - end c ondi tions an d as sumin g no interde pe nde ncy be twe en the a ssu mption s: 2021 $m 2020 $m Increase /( decrease) in liabil ities Discount rat e 0.25% decrease 2.8 3. 2 0.25% incr ease ( 2 .8) (3 . 2) Inl ation rate 0.25% decrease (1 . 2) (1 .4) 0.25% incr ease 1.3 1.4 Mor talit y rate On e -year i ncre as e 5 .1 5 .7 He alth ca re co sts tre nd ra te 1% decrea se (1. 2) ( 1.6) 1% incr ease 1.3 1 .7 Estim ated future be neit p ayments 2021 $m 2020 $m Wit hin on e yea r 5 6 Be twe en o ne an d i ve year s 21 22 Mo re than ive ye ars 96 101 122 129 Av erage du ration of pens ion obligati ons 2021 Y ears 2020 Ye a r s UK p lan 19.0 19.0 US plans 9.0 9. 3 US post -ret iremen t plan 9.4 9. 9 Other pensi on pla ns Philippine s The G roup ma intain s a fur ther, immaterial, p en sion p lan for e mploye es in th e Philipp ine s which i s acc ounte d for as a de i ned b en e it plan . At 31 De ce mbe r 202 1, the n et retirem ent be ne it a ss et was $2m c omp risin g plan a ss ets of $ 9m an d a de ine d be ne it ob ligati on of $7m. Plan a ss ets c ompri se $7m dom esti c governm ent se curiti es an d $2m do mes tic equ ity i nvestme nts. Co ntributi ons in th e year were $ 1m; the ch arge to the G roup in com e state ment a nd all oth er movem ents we re les s than $ 1m. Key assu mption s use d in the val uation a re the dis cou nt rate of 5.0% an d the rate of s alar y in crea ses o f 7 .0% (af ter 202 2). Th e weighte d average d uration o f liabili ties i s 13 years ; estim ated fu ture ben e it paym ents are l es s than $ 1m in all year s. Deined con tri bution scheme s The G roup al so op erate s a numb er of sm alle r pen sion s che me s outs ide th e UK , the m ost si gni ica nt of whic h is a de in ed co ntributi on sch eme i n the US . 197 IH G | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 28. Shar e-based paymen ts Annual Perfor mance Plan Und er the I HG A nnual P er forman ce Pl an (‘ APP ’ ), eligib le emp loyee s (inclu ding E xec utive Dire ctors) ca n rece ive all or p ar t of thei r bonu s in the form of de ferre d share s and/or rece ive one - o awa rds of sh ares. D efe rred sh ares are re lea se d on the thi rd anniver sar y of th e award date. Und er the te rms of award s that are refe rred to in this n ote, a ixe d perc ent age of th e award is ma de in the fo rm of sha res. Award s unde r the APP are c ondi tiona l on the p ar ticipa nts rem aining in th e emp loyme nt of a par tic ipating c omp any or le aving for a qu alif yin g reas on as p er the pl an rule s. Th e grant of d eferre d sha res und er the A PP is at th e disc retion of th e Remun eratio n Co mmit tee. The nu mbe r of sha res is c alcu lated by div iding a s pe ci ic pe rcent age of t he par tic ipant ’s annual p er form ance - relate d award by the averag e of the mi ddle m arket quote d pric es on th e three c ons ecu tive bus ines s days foll owing th e anno unce ment o f the Gro up’ s resu lts for th e relevant inancial year . Lon g T e rm Inc en tive Pla n The Lo ng T erm In centi ve Plan (‘ L TI P ’) a llows E xecuti ve Direc tors an d eligi ble em ployee s to rece ive co nditio nal sh are awards, w hich n ormall y have a vesti ng pe riod of th ree yea rs. In a dditio n, ce rt ain awards to E xec utive Dire ctors a re subje ct to a fur the r two -year h oldi ng pe riod af ter ves ting. Performance-related a war ds: Exec utive Dire ctors , and oth er eli gible e mploye es, are g ranted s hare awards c ont aining p er forma nce - bas ed vesti ng con ditio ns set by th e Remun eratio n Co mmit tee, whi ch are no rmally m ea sured ove r the ves ting pe riod . Restri cted st ock uni ts: A wards to el igibl e empl oyees are gr anted su bjec t to conti nued e mpl oyment . Awards are no rmally m ade a nnuall y and, exce pt in excepti onal c ircums tan ces , will not exce ed 3 .5 tim es s alar y for e ligib le emp loyee s. Colleague Share Plan The C oll eagu e Sha re Plan give s elig ible c orpo rate emp loyee s the opp or tunit y to purch as e share s up to an annu al limit o f $1,00 0 (or loc al curren cy equ ivale nt limit) or su ch othe r amo unt deter mine d by the Bo ard or it s duly auth oris ed c ommit tee . Afte r the en d of the p lan year, the pa rti cipant w ill be award ed the r ight to rece ive one m atchin g share for eve r y purcha se d sha re ( subj ect to c ontinu ed em ploym ent). If the p ar ticip ant hol ds the p urcha se d share s until the s ec ond an nivers ar y of the e nd of th e plan ye ar , th e con dition al right to matc hing sha res ves ts. D uring th e year , 31, 234 ( 2020 : 36 ,29 8, 20 19 : nil) sh ares we re purch ase d by par ticip ating e mployee s. M atchin g share s were awarde d for the irst cyc le in 20 21 an d will ves t af ter 12 mo nths. The tot al fair val ue of the C oll eagu e Sha re Plan is n ot signi ic ant. Mo re det ail ed in form ation o n the p er for man ce me as ure s for award s to E xecu tive Di rec tors i s sho wn in th e Dire cto rs’ Re mun erati on Re po rt on p age s 10 4 to 125. Costs r elati ng t o sha re-based pa yment tr ansactio ns 2021 $m 2020 $m 2019 $m Equity-settled Op era ting p roi t be fore Sy stem Fun d and exc epti ona l item s 26 19 28 Operati ng ex ceptional it ems – – 1 System Fu nd 13 11 12 39 30 41 Cash-settled Op era ting p roi t be fore Sy stem Fun d and exc epti ona l item s 2 2 2 41 32 43 No c ons idera tion was re cei ved in re spe ct of o rdinar y sh ares is su ed un der op tion sc hem es du ring 20 21, 20 20 or 2 019. The G roup us es s epa rate optio n pricin g mod els an d as sumpti ons de pe nding o n the pl an. APP LT I P Binomial valuation model Monte Car lo Simulat ion and Binomial valuation model 2021 2020 2019 2021 2020 2019 Weigh ted ave rage s ha re pric e (p en ce) 5,0 0 9.0 3 ,7 7 1 . 0 4,597 .0 4,980. 0 3,450.0 4,8 5 0.0 Exp ected dividend yield 1 .11 % 1.4 8% 2.1 6 % Ris k-free i ntere st rate 0.09 % 0.02 % 0 .72 % Volatility a 43% 3 3% 19% Te r m ( y e a r s ) 1.5 3 .0 3 .0 3.0 3 .0 3.0 a T he exp ec te d vol atili ty w as de ter min ed by c alc ula tin g the hi sto ric al vo lat ilit y of th e C omp any ’s sha re pri ce c orr esp on din g to the e xpe cte d li fe of th e sh are awa rd. 198 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 28. Shar e-based paymen ts continu ed Movem ents i n the awards o utst andi ng und er the s che mes a re as follow s: APP LT I P Nu mb er of s ha re s thousands Performance-related awards Nu mb er of s ha re s thousands Rest ricted sto ck u nit s Nu mb er of s ha re s thousands Ou tst and ing at 1 J anu ar y 20 19 591 1,088 1,3 01 Gra nted 2 17 287 540 Ve st e d (276) ( 29 3) (4 2 2 ) Share capi tal consolidat ion (2 1) – – Lapsed or cancel led (15) (3 87 ) (14 4) Ou tst and ing at 3 1 De ce mb er 20 19 496 695 1, 27 5 Gra nted 138 383 696 Ve st e d (1 88) (179) (41 3) Lapsed or cancel led (33) (85) (137 ) Ou tst and ing at 3 1 De ce mb er 20 20 413 814 1,421 Gra nted 90 281 4 42 Ve st e d (1 47) ( 70) (39 1) Lapsed or cancel led (8) (1 53) (12 2) Outstanding a t 31 December 2021 348 872 1,350 Fair val ue of a ward s gra nte d du ring t he ye ar (ce nts) 2021 6,888. 5 4,67 6.3 6 ,5 5 9.7 2020 4,965.9 2 ,473 . 5 4 , 3 9 7. 5 2019 5,888. 7 4, 985.6 5,862.1 Weig hte d avera ge re ma ini ng c ont rac t life (yea rs) At 31 D ec em be r 202 1 0. 5 1. 2 1.2 At 31 D ec emb er 2 020 1.0 1.4 1.3 At 31 D ec emb er 2 01 9 1 .1 1. 3 1. 2 The a bove awards do n ot vest u ntil the pe r forman ce an d ser vic e co nditio ns have b een m et. The we ighted aver age sh are pric e at the d ate of exercise fo r share awa rds veste d durin g the year wa s 5,081 .2p ( 202 0: 4,8 7 4 .5 p) . The c los ing sha re price o n 31 D ec emb er 202 1 was 4 ,781.0p an d the rang e during th e year wa s 4,3 99.0 p to 5,33 6.0 p. 29. E qui ty Equity share capital Number of s har es millions Nominal valu e $m Share premium $m Equity share capital $m All ott ed, c al le d up an d ful ly pa id At 1 Jan uar y 20 19 (ordi nar y s hare s of 19 17 ⁄ 21 p each ) 197 50 96 146 Share capi tal consolidat ion (10) – – – Exchange adj ustments – 2 3 5 At 31 D ec emb er 2 01 9 (ordina ry s hare s of 20 340 ⁄ 399 p each ) 187 52 99 1 51 Exchange adj ustments – 1 4 5 At 31 D ec emb er 2 020 (ord inar y s hare s of 20 340 ⁄ 399 p each ) 187 53 103 156 Exchange adj ustments – – (2) (2) At 31 D ec em be r 202 1 (ordi na ry s ha res o f 20 340 ⁄ 399 p e a ch) 187 53 10 1 15 4 The au thorit y give n to the Co mpa ny at the AGM he ld on 7 M ay 202 1 to purch ase it s own sh ares was s till valid at 3 1 De ce mbe r 202 1. A reso lutio n to renew the a uthori ty wi ll be pu t to share hold ers at th e AGM on 6 M ay 202 2. The C omp any no lo nger h as an au thori sed s hare c apit al. In Oc tobe r 201 8, the G roup ann ounc ed a $ 50 0m return o f fund s to share hold ers by way of a sp ec ial divi den d and s hare co nso lidati on. On 11 J anuar y 20 19, sh areho lde rs app roved the s hare co nso lidati on on th e bas is of 19 ne w ordina ry s hare s of 20 340 ⁄ 399 p pe r share fo r ever y 20 exis ting ordin ar y sha res of 19 17 ⁄ 21 p, which b ec ame e ec tive on 14 Jan uar y 20 19 and re sulte d in the co nso lidati on of 10 m sha res. T he sp eci al divid end wa s pai d on 29 J anuar y 20 19 at a c ost of $ 510 m. Th e divid end an d sha re con soli dation h ad the s ame e co nomic e ec t as a sh are repurc has e at fair valu e, there fore previo usly re por te d earnin gs pe r sha re was not re state d. 199 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 29. Eq uit y co nti nue d Sh are s he ld by em ployee s ha re tru sts Number of share s millions Carrying value $m Ma rket valu e $m 31 December 2021 0.9 2 1.7 5 7. 3 31 December 2020 0.1 1.4 3 .1 31 December 2019 0 .1 4.9 9.6 T re asur y share s Duri ng 202 1, 1.4 m (20 20: 0.6 m, 20 19: 0.8 m) treasur y s hares we re trans ferred to th e empl oyee sh are trust s. At 31 D ec emb er 20 21, 3 .7 m sha res (20 20: 5.1m, 20 19: 5.7m ) with a no mina l value of $ 1.0m (2 020 : $1. 4m, 20 19: $ 1.6 m) were held a s treas ury s hare s. Ca sh l ow he dg e res er ves Ca sh low h ed ge re se r ves Cash l ow hedge reserv e $m Co st o f hedging reserv e $m To t a l $m At 1 Jan uar y 20 19 (3) (1) (4) Co st s of he dgi ng de ferre d and re co gni se d in oth er c omp rehe ns ive in com e – (6) (6) Ch ang e in fair v alue o f curre ncy sw aps re co gni se d in oth er co mp rehe ns ive inc om e (3 4) – (3 4) Rec la ssi i ed fro m othe r co mpre he nsi ve inc om e to pro it or l os s – inc lud ed in in anc ial exp en se s 38 – 38 At 31 D ec emb er 2 01 9 1 (7) (6) Co st s of he dgi ng de ferre d and re co gni se d in oth er c omp rehe ns ive in com e – (6) (6) Ch ang e in fair v alue o f curre ncy sw aps re co gni se d in oth er co mp rehe ns ive inc om e (1) – (1) Rec la ssi i ed fro m othe r co mpre he nsi ve inc om e to pro it or l os s – inc lud ed in in anc ial exp en se s (13) – (13) Deferred tax 4 – 4 Exchange adj ustments (2) – (2) At 31 D ec emb er 2 020 ( 11) (13) ( 24) Co st s of he dgi ng de ferre d and re co gni se d in oth er c omp rehe ns ive in com e – 2 2 Ch ang e in fair v alue o f curre ncy sw aps re co gni se d in oth er co mp rehe ns ive inc om e (62) – (62 ) Rec la ssi i ed fro m othe r co mpre he nsi ve inc om e to pro it or l os s – inc lud ed in in anc ial exp en se s 96 – 96 Deferred tax (7) – (7) At 31 D ec em be r 202 1 16 (1 1) 5 Amo unts rec las si ie d from othe r com prehe nsi ve inco me to i nanc ial exp ens es co mpri se $1 5m (2 020 : $9m , 201 9: $8 m) net intere st payabl e on the c urrency swa ps an d an exchang e los s of $ 81m (20 20: $ 22 m gain, 20 19: $ 30 m lo ss) which o se ts a co rresp on ding gai n or los s on th e hedged bonds. 30. Capital and o ther commitments 2021 $m 2020 $m Co ntr act s pl ac ed fo r exp end itu re no t provi de d for i n the G ro up Fi nan ci al St ate me nts Prop er t y , p la nt and e qui pme nt 13 17 Intangibl e assets 4 2 17 19 The G roup ha s als o com mitte d to invest a fu rth er $6 m (20 20: $ 6m) in one o f its as so ciate s. 200 IHG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 31. Contin genci es and gua rantees Security inciden ts In 20 16, the G roup wa s noti ied o f data s ecu rity i ncid ents . T wo laws uits re lated to th ese h ave bee n set tle d in full. A f urth er cl aim, iled in 20 17 , rema ins op en. T here c ontinu es to be u nce rt aint y around th e timing o f the le gal pro ce ss; ac co rdingly th e likeliho od of a favou rable or unfavou rable re sult c anno t be rea son ably d etermin ed an d it is no t pos sib le to determ ine wh ether a ny loss i s likely or to e stim ate the amou nt of any los s. A sep arate cl aim was ile d in 20 19, alle ging a bre ach of th e res er vation sys tem previo usl y use d by Kimpto n. The re conti nue s to be unc er taint y aroun d the timi ng of the l egal p roce ss ; acc ordingl y the likelih oo d of a favourab le or unfavou rable re sult c ann ot be rea son ably deter mine d and it i s not po ss ible to de termine w hethe r any los s is likel y or to esti mate the am ount of any lo ss . Litigation Fr om tim e to time, the G roup is s ubje ct to le gal pro ce edin gs the ulti mate outc ome of e ach b ein g always subj ect to m any unce rt aintie s inhe rent in litig ation . The se le gal c laims a nd pro cee ding s are in vario us st age s and in clud e disp utes re lated to s pec i ic hotel s where th e pote ntial mate rialit y is no t yet known; s uch pro ce edin gs, ei ther in divi dually o r in the ag greg ate, have not in the re ce nt pas t and are no t likely to have a signi ic ant e ect o n the Gro up’ s i nanc ial po sitio n or pro it abilit y . T wo su ch dis putes i n the EM EA A re gion a re expec ted to be reso lved i n early 2 02 2. The G roup ha s als o given warr anties in re sp ect o f the dis pos al of c er tain o f its form er sub sid iarie s. It i s the view of th e Dire ctors th at, oth er than to the ex tent th at liabi lities h ave bee n provid ed for in th es e Group F inan cial S tatem ents (se e note 2 1), it is not po ss ible to qu antif y any los s to which t hes e proc ee ding s or cla ims und er the se wa rrantie s may give ris e, however , as at the d ate of repo rti ng, the G roup do es not be lieve that the o utco me of the se m atter s will have a ma terial e ec t on the G roup’s inan cial p ositi on. Third-party bank loans In limite d ca se s, the G roup may gua rantee p ar t of mor tga ge loa ns ma de to faci litate third -p art y own ers hip of hote ls und er IH G ma nage me nt or fran chis e agre eme nts. T hes e guar antee arr ange ment s are treate d as ins uranc e co ntract s as IH G is in suring th e ban k again st de fault by the hote l, with a lia bilit y only b eing re co gnis ed in th e event that a p ayout be com es pro bab le. At 31 D ec emb er 20 21, th ere were gu arante es of up to $6 9m i n plac e (20 20: $ 56 m) . Duri ng 202 0 and 20 21, th e und erlyin g mor tgag e loan s were sub jec t to peri ods of fo rbe aranc e, defe rring de bt se rvi ce paym ent s; and/or , in the c as e of seve ral loa ns, were m odi ie d to be intere st on ly throug h a given tim e peri od. The l arges t guar antee is $ 21m a nd the un derl ying lo an mature s in 20 29. The u nde rlying m anag ed h otel ha s be en subj ect to fo rbe aranc e agre eme nts and , as at 31 D ec emb er 20 21, th e coven ant test re lated to th e loa n is met . The p oss ibilit y of a p ayment un der th e guar antee is currentl y con side red to b e not prob abl e althou gh unc er tain ty rem ains a s to the co ntinue d impa ct of the p and emic. S houl d the G roup fund any amou nt unde r the gua rantee, th ere is a c ross -in demn ity th at the G roup woul d see k to purs ue for th e other p ar ties’ s hare. Other At 31 De ce mbe r 202 1, the G roup ha d out stan ding l ette rs of cre dit of $ 4 5m (20 20: $ 4 3m) mainly re lating to th e Group’s Capti ve ( se e note 2 1). The l ette rs of cre dit do n ot have set exp iry d ates, b ut are reviewe d and a men ded a s requi red. In 20 20, the Gro up mad e bus ines s ins uranc e clai ms in rel ation to a sm all numb er of ow ned, l ea sed a nd man age d prop er tie s relatin g to the impa ct of C ovid -19. Thes e cla ims are on going a nd it is n ot currentl y pos sib le to dete rmine th e amount s whic h may ultimate ly be re covere d. 201 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 32 . Rel ated p ar ty d isc lo sure s 2021 $m 2020 $m 2019 $m T otal com pensation of ke y management personnel Short-t erm employ ment beneits 1 9.3 10. 5 15.8 Contribut ions t o deined contr ibution pension plans 0.5 0.3 0. 5 Equity compensation beneits a 8 .1 2. 3 1 2 .1 2 7. 9 1 3.1 28.4 a A s me asu red i n acc or dan ce wi th I FRS 2 ‘ Sh are -b as ed P ayme nt ’. The re were no oth er tran sac tions w ith key manag eme nt pe rso nne l during th e years e nde d 31 D ec emb er 20 21, 20 20 or 2 019. Key man age ment pe rso nnel c omp rise s the B oard an d Exe cutive C ommi tte e. 2021 $m 2020 $m 2019 $m Associates Fee reve nue f rom as so ci ates 3 1 10 Amo unt s owed by a ss oci ates 11 11 3 Amo unt s owed to a ss oci ate s – (4 ) (4) The G roup ha s given a g uarante e of $12m ( 202 0: $12 m) against th e ban k loan o f one as so ciate (se e note 31) and h as a pe r forman ce gu arantee with a ma ximum exp osu re remain ing of $1 0m (2 020 : $10 m) for anothe r as soc iate. The G roup fun ds sh or tfa lls in own er return s relatin g to the Barc lay ass oc iate (see note 17 ). In a dditio n, loa ns both to an d from the B arcl ay as soc iate of $23 7m (2020 : $237m) are os et in ac corda nce w ith the provi sion s of IAS 32 ‘ Fin anci al Ins trume nts: Pre sent ation’ an d pres ented net in th e Group s tatem ent of ina ncial p os ition. I nteres t payable a nd rec eivab le und er the l oan s is eq uivale nt (a verag e intere st rate of 0.9 % in 202 1 (2 020 : 0.8%)) and pres ente d net in th e Group in com e st ateme nt. $1 8m was p rovide d in 202 1 in rel ation to se ttle me nt of a com merci al disp ute reg arding own er return s during th e pan demi c (see note 6). 33 . Syste m Fund Syste m Fund revenue s com pris e: 2021 $m 2020 $m 2019 $m As se ss men t fee s and c ontr ibut ion s rec eive d from h otel s 727 490 1 ,03 6 Loyalt y pro gra mme rev enu es, n et of th e co st of p oint re de mpti ons 201 275 337 928 76 5 1,373 Syste m Fund expen se s inclu de: 2021 $m 2020 $m 2019 $m M arke ti ng 147 109 461 Payro ll co sts (no te 4) 304 242 313 Depreciation and amortisat ion 94 62 54 Imp airm ent (reve rs al)/l os s on ina nci al as se ts (note 18) (6) 24 12 Other im pairmen t ( re versals )/ charges (3) 41 – 202 I HG | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements 34 . Gro up c omp ani es In ac cord anc e with Se ctio n 40 9 of the C omp anie s Act 20 06 , a full lis t of entitie s in whi ch the G roup ha s an intere st of gre ater than o r equ al to 20% , the re gis tered o ic e and e ecti ve perc enta ge of e quit y owne d as at 3 1 De cem ber 2 02 1 are disc los ed b elow. Unle ss oth er wis e sta ted, the own ers hip intere st di sclo se d com pris es ei ther o rdinar y sh ares, c er ti icate d or un - cer ti ic ated m emb ers hip intere sts wh ich are indire ctly h eld by Inte rC ontine ntal H otels G roup PLC. Fully own ed s ub sid iari es 24th S tree t Op erato r Sub, L LC (k) 36 th Stre et I HG S ub, LLC (k ) 426 M ain Ave, L LC (k) 46 N evin s Stre et A ss oci ates , LLC (k ) 2 250 B lake S tree t Hote l, LLC ( k) Alp ha Ki mba ll Ho tel, LLC ( k) Asi a Pac i ic Ho ldi ngs L imite d (n) Ba rclay O pe ratin g Co rp. (cj) BH M C Can ad a Inc . (o ) BH R Ho ldi ngs B . V . (p) BH R Pa ci ic H old ing s, In c. (k) BH TC Can ad a Inc. (o) Bly th swo od S qua re Gla sg ow Hote l Op C o Ltd. (n) BO C Ba rclay S ub, LLC (cj) Bri stol O ak broo k T en ant C omp any (k ) Ca mbri dge L odg ing, L LC (k) Ca pit al Lo dgin g, LLC ( k) CF I rv ing O wne r , LLC (k ) CF M cK inn ey Ow ner, LLC (k) CF Wa co O wne r , L LC (k) Co mpa ñia I nter-C on tine nta l De H otel es El S alv ado r SA (n) Crow ne Pl az a, LLC (k ) Cum be rlan d Aker s Hote l, LLC ( k) Dunw oo dy Op era tion s, LLC ( k) Edin burg h Ge orge S tre et Ho tel Op C o Ltd. (n) Edinburgh IC Limited ( cr) EV EN Re al E sta te Ho ldin g, LLC ( k) Ge ne ral In nkee ping A cc ept anc e Co rp orati on (b) (l ) Gra nd C entr al Gl as gow H otel O pC o Lim ited (n) Gu ang zho u SC Ho tels S er vi ce s Ltd. (t) H. I. S oa ltee M an age me nt Co mpa ny Ltd. (ac) HI S uga rlo af, LLC ( ci) Ha le Inte rna tion al Ltd. (v) HC I ntern atio nal H ol ding s, In c. (w) HH Fran ce H old ing s SAS (x) HH H otel s (EM E A) B.V . ( p) HH H otel s (Rom ani a) SRL (y) HI M (Aru ba) NV (z ) Hof t P rope r ties , LLC (k ) Ho liday H os pit alit y Franc his ing, L LC (k) Ho liday I nn M exic ana S . A. d e C.V . (ab) Ho liday I nns (C hin a) Ltd. (ac) Ho liday I nns (C our t alin) H oldi ng SAS (x ) Ho liday I nns (C our t alin) SAS (x ) Ho liday I nns ( Engl and ) Lim ited (cy) Ho liday I nns (G erm any), LLC (l ) Ho liday I nns ( Jam aic a) Inc. ( l) Ho liday I nns ( Mid dle E as t) Limi ted (ac) Ho liday I nns ( Phili ppi nes), In c. (l ) Ho liday I nns (S aud i Arab ia), Inc . (l) Ho liday I nns ( Th ail and ) Lim ited (ac) Ho liday I nns ( UK ), In c. (l ) Ho liday I nns C rown e Pla za (H on g Kong), In c. (l ) Ho liday I nns H ol ding s (Aus tral ia) Pt y Li mite d (aa) Ho liday I nns I nc. ( k) Ho liday I nns I nves tme nt (Ne pal ) Lim ited (ac) Ho liday I nns o f Ame ric a (U K) L imite d (cb) Ho liday I nns o f Be lgiu m N.V . (ad ) Holiday Paciic Equ ity Corporation (k) Ho liday P aci i c, LLC (k ) Ho liday P aci i c Par tne rs, L P (k ) Hote l Inte rC ont ine ntal L ond on (H old ing s) Limite d (n) Hote l Inte r-C onti nent al Lo nd on Lim ite d (n ) Hote le s Y T uris mo H IH S RL (n) IC H otel betr ieb sfü hrun gs G mbH (ae) IC Hot els Management (Portugal) Uni pessoal, Ld a (a f ) IC I ntern atio nal H otel s Lim ited L iab ilit y C omp any (ag) IH C Ara bia fo r Ma nag eme nt, L LC (u ) IHC Buckhead, LL C ( ci) IHC Edinburgh (Hol dings) ( cy) IHC Hopkins (Holdin gs) Corp. (k) IH C Ho tel Li mite d (n ) IH C Inte r-C onti nent al (H ol ding s) Cor p. (k) IHC London (Hold ings ) ( n ) IH C May Fai r (Ho ldin gs) Limi ted (cb) IH C May Fai r Hote l Limi ted (n) IH C M H (H old ings) C orp. ( k) IH C Ove rs eas ( U.K .) Limi ted (n) IH C UK ( Hol din gs) Limi ted (cy) IH C Uni ted S tate s (H old ings) C orp. ( b) (k) IH C Wi llard (H ol ding s) Cor p. (k) IH G (M ars eill e) SAS (x) IHG (Myanmar) Limited ( ah ) IH G ( Tha ilan d) Li mite d (b u) IHG Amster dam Mana gement B V (p ) IH G Ba ngkok L td. (v) IH G Br asil A dmin istr ac ao de H otei s e Se rv ico s Lt da (ak ) IH G Civ H ol ding M ain Fun d, LLC ( k) IH G Co mmi ss ion s Se rv ice s SR L (co) IH G Co mmu nit y Deve lo pme nt, L LC (ci) IH G de Ar gent ina SA (al ) IH G ECS (B arb ad os) SR L (co) IHG Fr anchising Brasi l Lt da. (bd) IH G Franc hisi ng D R Co rpo ratio n (k) IHG Fr anchising, LLC (k) IH G Ho tels (N ew Ze ala nd) L imi ted (an) IH G Ho tels L imite d (n) IH G Ho tels M an age me nt (Aus trali a) Pt y Lim ited ( b) (a a) IH G Ho tels N ige ria L imite d (ao) IH G Ho tels S out h Afric a (P ty) Li mite d (ap) IH G Inte rnat ion al Par tn ers hip (n) IH G Is tan bul O tel Yön etim L imit ed Si rketi (bx ) IH G Ja pan (M an age me nt), LLC (ar) IH G Ja pan (O sak a), LLC (ar) IH G Ma nag em ent (M ar yl and ), LLC (as) IH G Ma nag em ent (N eth erl and s) B. V . (p) IH G Ma nag em ent d.o.o. B e ogr ad (cc) IH G Ma nag em ent M D Ba rclay S ub, LLC (cj) IH G Ma nag em ent S L d.o.o. (b o) IH G Mex ico O pe rac ion es SA d e CV (ab) IH G Orc hard S tre et Me mb er , LLC (k ) IH G Per u SR L (cf ) IH G PS N omi ne es Li mite d (n) IH G Se rmex SA d e CV (ab) IH G Sys tem s Pt y Ltd . (b) (aa) IH G Sz allo da B uda pe st Szo lga lta to Kf t. (at) IH G T ec hno log y Sol utio ns, L LC (k) IN D Ea st V illa ge S D Ho ldin gs, L LC (k) Inte rC onti nen tal B erl in Se r vic e Co mpa ny Gmb H (au) Inte rC onti nen tal (B ran sto n) 1 Limite d (c ) (cy) Inte rC onti nen tal (P B) 1 (n) Inte rC onti nen tal (P B) 3 Lim ited (n) InterContinental Brasil Ad ministracao de Hoteis Lt da (q ) Inte rcon tine nta l D.C. Op era ting C orp. ( k) Inter-C ontine ntal Flori da Investm ent Corp. ( k) Inte r - Co ntin ent al Fl orid a Par tn er C orp. ( k) Inte rC onti nen tal G es tion H ote ler a SLU ( by) Inte rcon tine nta l Ho spi tali ty C or por ation ( k) Inte rC onti nen tal H otel B er lin G mbH (au) Inte rC onti nen tal H otel D üs se ldo r f Gmb H (av) Inte r - Co ntin ent al Ho tele ira L imit ad a (aw ) Inter-C ontine ntal Hotel s (Montre al) Op erating C or p. (ax ) Inter-C ontine ntal Hotel s (Montre al) Ownin g C or p. (ax ) Inte rC onti nen tal H otel s (Pu er to Ric o) Inc. (az ) Inte r - Co ntin ent al Ho tels (S ing apo re) Pte . Ltd. (ai) Inter - Continental Hotels Corporation (k) Inter continental Hotels Corporation de V enezuela C. A . ( b a) Inte rcon tine nta l Hote ls C orp ora tion L imite d (b) (m) InterContinental Hotels Gr oup (Asia Paciic) P te Ltd. (ai) InterC ontin ental H otels Grou p (Australia) P ty L imite d (aa) Inte rC onti nen tal H otel s Gro up (Ca nad a) Inc. (o) Inte rC onti nen tal H otel s Gro up (E spa ña) SAU (by) Inte rC onti nen tal H otel s Gro up (Gre ater C hin a) Li m it ed (ac) Inte rC onti nen tal H otel s Gro up (In dia) P v t. Ltd. (aq ) Inte rC onti nen tal H otel s Gro up (Ja pan) In c. (l ) Inte rC onti nen tal H otel s Gro up (N ew Zea lan d) Limited (an ) Inte rC onti nen tal H otel s Gro up (Sh angh ai) Ltd . (bb) Inte rC onti nen tal H otel s Gro up Cu stom er S er vic es Limited (n ) Inte rC onti nen tal H otel s Gro up do B ras il Lim ita da ( bc) Inte rC onti nen tal H otel s Gro up He alt hca re T rus tee Limited (n ) Inte rC onti nen tal H otel s Gro up Op er ating C orp . (e ) (k) Inte rC onti nen tal H otel s Gro up Re sou rce s, LLC ( b) (k) Inte rC onti nen tal H otel s Gro up Se r vic es C omp any (n) Inte rC onti nen tal H otel s It alia , S.r.L . (be) Inte rC onti nen tal H otel s Lim ited (a) (n ) InterCont inental H otel s Management G mbH (bf) InterCont inental H otel s Management M ont enegro d.o.o. (ce) InterConti nental Hot els Nevada Corporation ( ck) Inte rC onti nen tal H otel s of S an Franci sc o Inc . (k) Inte rcon tine nta l IO HC (M aur itiu s) Limite d (b g) InterCont inental M anagement AM, LL C (cm ) InterCont inental M anagement Bulgar ia E OOD (bp ) InterC ontin ental M anag ement France SAS (x) Inte rC onti nen tal M an age men t Pol and s p. Z.o.o (cn) Inte rC onti nen tal O ver se as Ho ldi ngs , LLC (k ) KG Ben e its , LLC (aj) KG Gif t Ca rd Inc . (aj) KG Liab ilit y , LLC (k ) KG T e chn olo gy, LLC (k) KH RG 8 51, LLC ( k) KH RG Ae rt so n, LLC ( k) KH RG Al leg ro, LLC (k ) KH RG Arg yle , LLC (k) KH RG Atl anta M idto wn, LLC ( k) KH RG Au stin B ever age C om pany, LLC (k) KH RG B alti more, L LC (k) KH RG B orn, L LC (k) KH RG B osto n Ho tel, LLC ( k) KH RG B ozem an, LLC ( k) KHRG Buckhead, LL C (k) KH RG C ana ry, LLC (k) KH RG C ayma n, LLC (k ) KH RG C ayma n Empl oyer Ltd . (k) KH RG D alla s, LLC ( k) KH RG D alla s Be vera ge C omp any , LLC (k ) KH RG Em ploye r , L LC (k) KH RG G ole ta, L LC (k) KH RG G ray , LLC (k) KH RG G ray U2, L LC (k) KH RG H untin gton B ea ch, L LC (k) KH RG Key Wes t, LLC ( k) KH RG K ing S tree t, LLC ( k) KH RG L a Pe er , LLC (k ) KH RG M iami B ea ch, L LC (k) KH RG M use , LLC (k) KH RG N ew Or lea ns, L LC (k) KH RG N PC , LLC (k) 203 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements No t es t o the Gr oup F i na nc ia l St a t emen ts c o ntin u e d 34 . Gro up c omp ani es c ontinu ed KH RG Pa lla dian , LLC (k ) KH RG Pa lom ar Ph oe nix , LLC (k) KH RG Ph illy M on aco, L LC (k) KHRG Pit tsburgh, LLC (k) KH RG Po rs che D rive, L LC (k) KH RG Rey nol ds, L LC (k) KH RG Ri verp lac e, LLC ( k) KH RG S acra me nto, LLC (k ) KHRG Schoield, LLC (k) KH RG S FD, LLC (k ) KH RG S F Wha rf, LLC (k ) KH RG S F Wha rf U 2, LLC ( k) KH RG S outh B ea ch, L LC (k) KH RG S tate S tree t, LLC ( k) KH RG Su tte r , LLC (k ) KH RG Su tte r Uni on, L LC (k) KH RG Tacon ic, LLC ( k) KH RG Tari, LLC (k) KH RG Texas Ho spi tal it y , L LC (k) KH RG Texas Op era tion s, LLC ( k) KH RG Tryon, L LC (k) KH RG Vero B ea ch, LLC ( k) KH RG V inta ge Pa rk , LLC (k) KH RG V Z Aus tin, L LC (k) KH RG Wab as h, LLC (k ) KH RG Wes tw oo d, LLC (k ) KH RG W ils hire, L LC (k) Kim pton H oll yw oo d Lic ens es , LLC (k ) Kim pton H otel & R es taur ant G roup, LLC ( k) Kim pton P hoe nix L ice ns es H old ing s, LLC (k ) Louisiana A cquisitions Corp . (k) Luxu ry R eso r ts an d Spa s (Franc e) SAS (ct) Ma nch es ter Ox ford S tre et Ho tel Op C o Limi ted (n) Me rce r Fair view H ol ding s, LLC ( k) Me t Lee ds H otel O p Co Li mite d (n) MH L odg ing, L LC (k) Ox ford S pire s Hote l Op Co L imi ted (n) Ox ford T ham es H otel O pC o Li mite d (n ) PM L Se rv ice s, LLC (as) Pollstr ong Lim ited ( n) Powe ll Pin e, Inc . (k) Pris cil la H olid ay of T exas , Inc . (cl) PT Re ge nt In don es ia (b h) PT S C Hote ls & Re so rt s In don es ia (b h) Rai son d ’ Etre Ho ldin gs (BV I) Limi ted (v) Rai son d ’ Etre Se rv ice s (BVI) L imi ted (v) Rai son d ’ Etre Sp as, L LC (k) Rai son d ’ Etre Sp as, S wed en AB (db) Reg ent A sia P aci i c Hote l Ma nag eme nt Ltd. ( bw) Reg ent A sia P aci i c Man age me nt Ltd. (cp) Reg ent B er lin Gm bH (cq ) Reg ent I ntern atio nal H ote ls Ltd ( bw) Res or t Se r vic es In tern atio nal (C ayo Larg o) L. P . (ci) Roxburghe Hotel Edinburgh OpC o Limited ( n) Rus se ll Lon do n Hote l Op Co L imite d (n) SB S Ma ry lan d Bev era ge C omp any , LLC (as) SC H otel s Inte rnati ona l Se rv ice s, In c. (k ) SC Leisure Group Limited ( n) SC NA S 2 Limi ted (n) SC Q ue st Lim ite d (n ) SC Re se rv ation s (Phi lipp ine s) Inc. ( l) SC H Ins ura nce C om pany ( bi) SC IH B ran ston 3 (cy) Se mira mis fo r train ing of H otel P ers on nel a nd Hote ls M ana ge men t SAE (ch) SF M H Ac quis itio n, LLC ( k) Six C ont ine nts H old ings L imit ed (n) Six C ont ine nts H otel s de C olo mbi a SA (bj ) Six C ont ine nts H otel s Inte rnati ona l Limi ted (n) Six C ont ine nts H otel s, In c. (k) Six C ont ine nts In tern ation al H old ing s B.V . (p) Six C ont ine nts Inve stm ent s Lim ited (f ) (n) Six C ont ine nts Li mite d (n ) Six C ont ine nts O vers ea s Ho ldin gs Li mite d (n) Six C ont ine nts Re st aura nts Li mite d (cy) Six Co N or th Am eric a, I nc (w) Six S en se s Ame ric as I P , L LC (k) Six S en se s Cap ita l Pt e. Ltd (ay) Six S en se s Nor th A mer ica M an age me nt, LLC ( k) SLC Su st ain abl e Luxur y C yp rus L imite d (cs) SP HC M ana ge men t Ltd. (b q) St D avid ’s Cardi Hot el Op C o Limi ted (n) Sustain able Luxury Ho ldings (BVI) Limited ( v) Sus ta inab le Lu xur y La nka P v t. Lt d (cv) Sus ta inab le Lu xur y Ma ldive s Pri vate Li mite d (cw) Sus ta inab le Lu xur y Ma uriti us Lim ite d (cx) Sus ta inab le Lu xur y Se rv ice s (BVI) L imi ted (v) Sustain able Luxury Singa pore Private Limited ( ai) Sus ta inab le Lu xur y UK L imite d (n) Sus ta inab le Lu xur y USA L imite d (cz) The G ran d Ce ntra l Hote l Gl asg ow Lim ited (n) The M et H otel L ee ds Li mite d (n) The P rinc ipa l Edin burg h Ge orge S tre et Lim ited (n) The P rinc ipa l Lon don L imite d (n) The P rinc ipa l Ma nch es ter Li mite d (n ) The P rinc ipa l Y ork L imite d (n) The Roxburghe Hotel Edinburgh Limited (s ) Vi sta R ock vi lle F F&E, LLC (as) Whi te Shie ld C omp any Li mite d (b k) Wotto n Ho use H ote l Op Co L imite d (n) W Y BL L Ow ner, LLC (k) Y ork S tati on Ro ad H otel O pC o Lim ite d (n ) Sub si dia ries w he re the e e ctive int ere st is le s s tha n 10 0% IH G AN A Hote ls G roup J apa n LLC ( 7 4.6 6%) (ar) IH G AN A Hote ls H oldi ngs C o., Ltd . (66 %) (ar ) Reg ent H os pit alit y Worl dwi de, I nc. (51%) (b t) Sustain able Luxury Ho lding (Thail and) Limited (7 3.9 9 %) ( c) ( j) (cu) Sustain able Luxury Ho spitalit y (Thailan d) Limited (7 3.9 9 %) ( c) ( j) (cu) Sustainable L uxury Management (Thailand) Lim ited (4 9%) (c) (j) (cu) Sustainable L uxury Operations (Thailand) L td. (99. 99 %) ( j) (cu) Uni vers al d e Hote le s SA (99. 99 %) ( j) ( bj) World T rade Centre Montr eal Hotel Corporation ( 74 .1 1 %) ( b l ) As soc iate s, j oint ve nture s an d oth er 111 Ea st 4 8th S tre et Ho ldi ngs L LC (19.9 %) (g) (h) (k) Alk oer , Sociedad de Responsabilidad Limitada de Ca pit al Variab le (5 0%) (h) (cg) Be ijin g Ori ent E xp res s Hote l Co ., Ltd. (16 .15%) (bm) Blu e Bl oo d (T ian jin) Equi ty I nvest men t Ma nag em ent C o., Lim ited (3 0.05%) ( bn) Ca rr Cl ark SW W Su bventu re, LLC (2 6.6 7%) (g) (ca) Ca rr Water fro nt Hote l, LLC (11 .4 6%) (g) (h) (ca) Chi na H otel I nvestm ent L imite d (30.0 5%) (i) (am) De sa rroll o Alkoe r Ira pua to S. de R . L. d e C.V . (5 0 %) (c g) De sa rroll o Alkoe r Sa ltill o S. de R . L. d e C.V . (5 0 %) (c g) De sa rroll o Alkoe r Sil ao S . de R .L . de C.V . ( 50%) (cg) ED G Alph aret t a EH, L LC (0%) (d) (h) (r ) Ge sti on Ho tele ra G es tel, C. A . (5 0%) (c) (h) (ba) Gro ups 36 0, LLC (13 .05 %) (h) (k) H. I. S oa ltee H ote l Co mpa ny Private Lt d. (26 %) (b r) Inte r - Co ntin ent al Ho tels S au di Ara bia L imite d ( 40%) (bs ) NF I II S eat tle , LLC (2 5%) (g) (r ) NF I II S eat tle O p C o, LLC (25 %) (g) (r ) Nu evas Fronte ras S .A . ( 23. 66 %) (cd) Pre sid ent H otel & Tower C o Ltd. (30 %) (bu) Sha ngh ai Yuhuan I ndu str ial D evel opm ent C o., Ltd. (1 %) (d a) Sus ta inab le Lu xur y Grav it y Glo ba l Private L imi ted (51%) (h) (bz) SU RFS amu i P te. Ltd. (4 9%) (ay) Ti anjin I C BC I IH G Equi ty I nves tmen t Fund Ma nag em ent C o., Lim ited ( 21 .04%) (bv) Key (a) Di rec tly own ed by I nter Co ntine nt al Hote ls G roup P LC (b) Ordi nar y s hare s and p refe renc e sh are s (c ) Ordi nar y A an d ordi nar y B sh are s (d) 8% cu mul ative p refere nc e sha res (e) ¼ vote ord inar y s hare s and o rdin ar y sha res (f) Ord inar y s hare s, 5% cu mul ative pref eren ce s hare s an d 7% c umul ative prefe renc e sh ares (g) T he en titie s do no t have sh are c api tal and a re gove rne d by an op era ting agreement (h) Ac co unte d for as a ss oc iate s and jo int ventu res du e to IH G’s de ci sio n- mak ing rights containe d in the partners hip agreement (i) Ac co unte d for a s anoth er ina nci al as set d ue to I HG b ein g unab le to exerci se s igni ic ant i nl uen ce ove r the i nan cial a nd op er ating p oli cy de cis ion s of the e ntit y ( j) M ino rit y inter est re late s to on e or mo re individual shareholders who are emp loye d or we re previ ous ly em ploye d by the e ntit y 204 IH G | Annua l Repo rt a nd Form 20 F 202 1 Group Fi nancial Stat ements Regi ster ed ad dre ss es (k) 3 411 Si lver sid e Roa d, Tatnall B uild ing # 10 4, Wil ming ton, D E 19 810, U SA (l ) 2 05 Po well Pl ac e, 3702 7 Bre nt woo d, TN 370 27, USA (m) C la rend on H ous e, 2 Ch urch S tree t, H amilto n HM11, Bermuda (n) B road water P ark , De nha m, Bu cki ngha ms hire, U B9 5 RH , UK (o ) 33 3 B ay Stre et, S uite 4 00, Toronto M 5H 2 R 2, Ontario, Canada (p) K ing sfor dweg 1 51, 10 4 3 GR Am ste rdam , The Netherlands (q) A lam ed a Jau 5 36 , Suit e 3s -A , 014 20 0 0 0, Sã o Paul o, Bra zil (r ) The Corporation T rust Centre , 1209 Or ange Stre et, W ilm ingto n, D E 198 0 1, USA (s) C ale don ian E xch ang e, 19 a Can ning S tre et, Edin burg h, EH 3 8H E, U K (t) B uil ding 4 , No 1 3 Xiao G an g Zho ng Ma R oad , Zhuhai Dist rict, Guangzhou, Guangdong, P . R. China (u ) Leve l 6, Ak aria P laz a, N or th Wi ng, G ate D, Ol aya Stre et, P O Box 9 32 28, R iyah d 114 8, KSA (v) Fl emm ing H ous e, Wi ckh am s Cay , P .O. Box 66 2, Ro ad Town, T or tola VG 1110, B riti sh Virgin Island s (w) W ilm ingto n T rus t SP S er vic es , Inc . 110 5 No rth M arke t Stre et, S uite 13 0 0, Wilm ingto n, DE 1 98 01, U SA (x) 3 13 3 rue M og ado r , 750 0 9 Pari s, Franc e (y ) Bucharest, 1st District, 5052 Buzesti St, 83 m odu le, 11 lo or , Rom ania (z) 23 0 J E Irau sq uin B oule vard, Pa lm B eac h, Aruba (aa) Leve l 11, 20 B on d Stre et, S ydney N SW 20 0 0, Australia (ab) On tari o # 10 10, Co l. Prov ide nci a, Guad alajara, Jalis co CP446 30, Mexico (ac) Le vel 5 4, Ho pe well C ent re, 18 3 Qu ee n’s Roa d Ea st, H on g Kong SA R (ad) Ron d- Po int Ro ber t S chum an 11, 1 04 0 Brus sels, Be lgium (ae) Q BC 4 – A m Be lve dere 4 , 110 0, Vi enn a, Aus tria (af ) Ave nid a da Re pub lic a, no 52 – 9, 10 6 9 – 211 , Lisbon, Portugal (ag) 24, Ru sa kovskaya S tr., Mosc ow 1070 14, Russian F ederation (ah) N o. 8 4, Pa n Hal iain S tree t, Un it # 1, Leve l 8, Uniteam Marine O ice Buil ding, Sanchuang T ownship, Y angon, Myanmar (ai) 23 0 Vi ctor ia Stre et , # 13 0 0 Bug is J unc tion T owers, 188024, Si ngapore (aj) 4 64 0 Adm iralt y Way , 5th Fl oor, Mari na de l Rey , CA 9 029 2, U SA (ak) Al am eda J au 5 36 , Suite 3 S B, 0 1420 0 00 Sã o Paul o, Bra zil (al) Aven ida C ord oba 1 547, piso 8, o i cin a A, Bu eno s Aire s, Arg ent ina (am) T he Ph oe nix C entre , Ge orge S tre et, B ell evill e St. Michael, Barbados (an) L evel 1 0, 55 Sh or tla nd St reet , Auc kla nd Ce ntral , Auck lan d 10 10, Ne w Zeal and (ao) 1, M ur ta la Mu ham me d Drive , Ikoyi, L ago s, Nigeria (ap) C entra l O ic e Par k Unit 4 , 257 J ea n Avenu e, Ce nturi on 0 157, South Af ric a (aq) 11th Fl oo r , B uil din g No. 10, Tower C, D LF Pha se - II , DL F Cy be r Cit y , Gurg ao n, Haryana -122002, India (ar) 20 th Flo or, T o rano mon Koto shi ra T ower, 28, T oranomon 1-chom, Minato-ku, T ok yo , Japan (as) 2 W isc on sin C ircl e #700, C hev y C has e, M D, 20 815 , USA (at) 10 52 B uda pe st, A pác zai C se re Já nus u . 1214A , Hun gar y (au) B ud ap este r Str. 2, 10787 B er lin, G erm any (a v) Konigsallee 59 , D 40215, Dusseldorf, Germany (aw) Al ame da J au 5 36, S uite 3 S E, 0 1420 0 00 Sã o Paul o, Bra zil (ax) 19 80 P éro dea u Stre et, Vau dreu il- D orio n, J7 V 8 P7, Queb ec , Can ad a (ay) 16 8 Rob ins on Ro ad, # 1 6 0 1 SI F Buil din g, 068 899, Singapore (az) 3 61 S an Franc is co St reet P enth ous e, Sa n Ju an, PR 0 09 0 1, Pue r to Ric o (b a) Hote l Tamana co In ter-C on tine nta l, Fin al Av . Ppa l, Me rce de s, C arac as , Venezu el a (b b) 2 2n d Flo or, Citigro up Tower , N o. 3 3 Huaya nshiqiao R oad, Pudong, Shanghai , P . R. China (b c) Ala me da Ja u 53 6, Su ite 3S C, 014 20 00 0 Sã o Paul o, Bra zil (b d) A lam ed a Jau 5 3 6, Sui te 3S D, 014 20 00 0 Sã o Paul o, Bra zil (b e) Vi ale M onte N ero n .8 4, 20 13 5 Mil ano, I tal y (bf ) T hurn -u nd-T axi s- Pla tz 6 – 6 03 13 Frank fu rt am M ain, G erm any (b g) J uri s T ax Se r vic es Ltd . Level 1 2, NeX Terac om T ower I I, Eb en e, Ma uriti us (b h) Me na ra Imp eri um 2 2nd F loo r , Suite D, J I. HR . Ra sun a Sai d Kav. 1, Gun tur Su b- di stri ct, Set iab udi D istr ict , Sou th Ja kar ta 1 29 80, Indonesia (bi ) P rimm er Pi pe r Eggle sto n & Cra mer P C, 3 0 Ma in St ., Suite 5 00, P .O. B ox 148 9, Bur ling ton, V T 0 54 0214 89, U SA (bj ) C all e 49, S ur 4 5 A 30 0 of 11 02 Env iga do Antioquia, Colombia (b k) 2 1 En gine er L an e, Gib ral tar, GX11 1AA , Gibralt ar (b l) S uite 2 50 0, 10 00 d e La G auc het iere S t. West , Mo ntre al C H3 B OA 2, C ana da (b m) Ro om 311 , Buil din g 1, No. 6 E as t Wen Hu a Yuan Roa d, B eiji ng Eco no my and T echnology Development Z one, Beiji ng, P . R. China (b n) Ro om N 30 6, 3rd F lo or , Bui ldin g 6, Bi nha i Fin anc ial S tree t, N o. 52 West X inch en g Roa d, Ti anjin E con omy an d T ech nol ogy Deve lo pme nt Zon e, Ti anji n, P .R . Ch ina (b o) C e sta v M e stni l og 1, 1 00 0 Lju blja na, S love nia (b p) 3 7 A Profe ss or Frid tjof N ans en S tree t, 5th Fl oor, Dis trict S red ets , So ia , 1142, B ulg aria (b q) C/o Ho lid ay Inn & Su ites , Cnr Wa igan i Dri ve & Wards Ro ad, P or t Mo res by , N ati ona l Ca pit al Di stri ct, P apu a New G uin ea (br) T ahachal, Kat hmandu, Nepal (b s) M adin ah Ro ad, J ed dah , P .O B ox 94 56 , Pos t Co de 2 1413, J e dda h, Sau di Ar abia (bt) M apl es C orp ora te Se rv ice s Ltd. – P O Box 30 9, Ugl and H ou se, G ran d Caym an – KY 1104, Cayman Islands (b u) 97 1, 973 P loe nch it Ro ad, Lu mpin i, Path umwan, B an gkok 10 33 0, Th aila nd (bv) Ro om R3 16, 3 rd Flo or, Build ing 6, B inh ai Fin anc ial S tree t, N o. 52 West X inch en g Roa d, Ti anjin E con omy an d T ech nol ogy Deve lo pme nt Zon e, Ti anji n, P .R . Ch ina (bw) 14th F lo or , Sou th Ch ina B uild ing, 1 3 Wyn dha m Stre et , Hon g Kong, S AR (bx) E ski B üy ükder e Cd. P ark Pl az a No:14 K: 4 Ma sla k – Sar ıyer, Ist anb ul, T urkey (by) Pa se o de Re co leto s 37 – 41, 28 0 04 M adri d, Spain (bz) B 11515 B hikaj C am a Pla ce, N ew D elhi , Sou th De lhi, I ndi a 110 06 6 (ca) C arr H os pit alit y , LLC, 14 5 5 Penn syl vania Avenu e, NW, Suite 1 00, Wa shin gton , DC 20004 , U SA (cb) Two Snowhi ll, Sn ow Hill , Que en sway , Bir ming ham B 4 6GA , U K (cc) K run ska 7 3, Be og rad, 11 00 0, Se rbi a (cd) M oren o 80 9 2 Pi so, Bu en os Ai res, A rge ntina (ce) B ule var Sve tog Pe tra C etinj skog 14 9 – 81 00 0 Pod gor ica, M onte ne gro (cf ) Be rna rd Mo ntea gud o 201 , 15076, L ima , Peru (cg) Aven ida E jerc ito Na cio nal M exic an o No. 76 9, T orre B Pi so 8 , Gra nad a, Mi gue l Hid alg o, Ciu dad d e Mex ico, C P 1152 0, Mexi co (ch) Gro und F loo r , Al Ka mel L aw B uild ing, P lot 52-b, B anks A rea, S ix of O ctob er C it y , Egypt (ci) 2 98 5 Go rdy P ark way , 1st Fl oo r , M ari et ta, GA 30066, USA (cj) 6 00 M am aron ec k Avenue # 40 0, 10 528 Ha rris on, N Y 10 528, U SA (ck) 82 75 S out h Ea ster n Avenue # 2 00, L as Veg as, NV 8 91 23, U SA (cl) 54 4 4 Wes the ime r # 10 00, H ous ton, T X 7 70 56, USA (cm) 23/6 D, Anh aght S tr., Y ere van, 0 06 9, Ar men ia (cn) G ene rati on Par k Z – ul. Towarowa 28, 0 0 8 39 Warsaw , Poland (co) Sui te 1, Gro und F loo r , The F ina nci al Se rv ice s Ce ntre, B ish op s Co ur t Hill, S t. M ich ael , Ba rba dos , BB 140 04 (cp) B rumby C en tre, Lot 42 , Ja lan M uhib bah , 870 00 L ab uan F .T ., M al aysia (cq) C harl ot tens tras se 4 9, B erli n, Ge rma ny (cr) C/O B DO LL P , 4 At lanti c Qu ay , 70 York Stre et, G la sg ow, G2 8JX, U K (cs) ATS Ser vi ce s Limi ted, C ap ita l Ce nter, 9th F lo or , 24 Arch , Mak ario s II I Ave., 10 6 5 Nicosia, Cyprus (ct) 95 B lvd. B er th ier, 750 17 Pari s, Franc e (cu) 57, 9th Flo or, Park Venture s Eco pl ex, U nit 90 29 04 , Wire le ss Ro ad, L impi ni, Pa thum Wan B angkok 1 03 3 30, Th aila nd (cv) S hop N o. L3 6, Ami ty B uil ding , No. 12 5, Highlevel Road, Maharagama, Colombo, Sri Lanka (cw) Pr emie r Ch amb er s, M. L ux Lo dge, 1 st Fl oo r , Orc hid M agu, M al e, Rep ubl ic of M aldi ves (cx) Ven ture C orp orate S er vi ce s (Mau ritiu s) Ltd, Leve l 3, T ower 1, N ex tera co m T owers , Cyb ercity , Ebene, Mauritius (cy) 5 Temp le Sq uare, Temp le St reet , Live rpo ol, L 2 5R H (cz) 2 51 Lit tle Fall s Dri ve, Wi lmin gton, D E1 98 08 , USA (da) 1s t Flo or , No. 6 8, Zh upa n Roa d, Zhu qia o T own, P udo ng Ne w Are a, Sha ngh ai, Ch ina (db) G revga tan 1 3, 114 53 S toc kho lm, Sw ede n 34 . Gro up c omp ani es c ontinu ed 205 IHG | Annua l Repo rt a nd Form 20 F 202 1 Note s to the Grou p Fina ncial S tate ment s Group Financial Statements Par e n t C omp an y Finan cial St a t e m e n t s 208 Paren t Company Financial Stat ements 210 Note s to th e Pare nt C omp any Financial Sta tements Crowne Plaza® Budapest, Hungary 206 IHG | Annua l Repo rt a nd Form 20 F 202 1 Six S en se s Lis bon , Por tug al 207 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Company Financial Statements Parent Comp any Financial Statem ents 31 December 2021 Note 2021 £m 2020 £m Fi xed a s se ts Investm ents 3 3 ,1 6 0 3 ,1 3 1 Curr ent asset s De btor s: due a fte r mo re than o ne ye ar 4 28 18 De btor s: due w ithi n one ye ar 4 922 927 Cre dito rs: am oun ts fal ling d ue wit hin on e yea r 7 (83 2) (6 00) Ne t curr ent a s set s 118 345 T ota l as set s le s s curr ent l iab ili tie s 3 ,2 78 3,476 Cre dito rs: am oun ts fal ling d ue af ter o ne ye ar 8 (1,9 41) (2,138) Net assets 1,337 1,33 8 Capital and r eserves Ca lle d up sh are c apit al 10 39 39 Share premium account 75 75 Cap ita l rede mptio n res er ve 7 7 Share-based pa yment r eserve 393 364 Ca sh low he dg e res er ves 6 3 (19) Pro it an d lo ss ac co unt 820 872 T ot al equity 1,337 1,3 38 Sign ed on b eh alf of the B oard, Paul Edgeclie- J ohnson 21 Feb ruar y 20 2 2 The l oss a fte r tax am ounts to £ 52m (20 20: £ 56 m). Registered numb er 05134 420 Par e n t C omp an y Finan cial S tat e me nts P ar ent Com pa n y sta te men t of i nan ci al posi t io n 208 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Company Fi nancial Statements P ar ent Com pa n y sta te men t of c ha nges i n equ i ty Called up share capital £m Share premium account £m Capital redemption reserv e £m Share - based pay me nt reserv e £m Cash l ow hedge reserv es £m Proit and loss account £m To t a l equity £m At 1 Jan uar y 20 20 39 75 7 339 (5) 928 1,3 83 Los s for th e yea r – – – – – (5 6) ( 56) Other compr ehensive income (items that may be subsequen tly rec las si i ed to pro i t or lo ss): Los se s on c as h low h ed ge s, ne t of rel ated t ax c redi t of £ 3m – – – – 2 – 2 Co st s of he dgi ng – – – – ( 5) – (5) He dgi ng ga ins re cla ss i ied to in anc ial ex pen se s – – – – (11) – (11) T ota l othe r com pre hen sive l os s for th e year – – – – (14) – (14) T ota l com pre hen sive l os s for th e year – – – – (14) (56) ( 70) Share-based paymen ts capital contri bution – – – 25 – – 25 At 31 D ec emb er 2 020 39 75 7 364 (1 9) 872 1,33 8 Lo ss fo r the ye ar – – – – – (52) (5 2) Ot he r com pr eh en sive in co me (i tem s th at may b e su bs eq uen tly r ec las si i ed to p ro it or l os s): Los se s on c as h low h ed ge s, inc lud ing re late d ta x cha rge of £ 5m – – – – (5 0) – (50) Co st s of he dgi ng – – – – 2 – 2 He dgi ng lo ss es re cla ss i ie d to in anc ial ex pen se s – – – – 70 – 70 T otal other comprehensive income for the year – – – – 22 – 22 T otal comprehensiv e income / (loss) for the y ear – – – – 22 (52) (3 0) Share-based paymen ts capital contri bution – – – 29 – – 29 At 31 D ec em be r 202 1 39 75 7 393 3 820 1,3 37 N otes o n pag es 2 10 to 2 15 fo rm an in tegr al pa rt of t he se Fi nan cial S ta teme nts . 209 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Company Financial Statements Parent Comp any Financial Statem ents 1. Accoun ting poli cies Authoris ation of Financ ial Stateme nts and state ment of co mpl ian ce wi th FRS 10 1 The P arent C omp any Finan cial S tatem ents o f Inter Conti nent al Hote ls Group P LC ( the ‘C omp any’ ) for the ye ar en ded 3 1 De cem ber 2 02 1 were auth oris ed for i ssu e by the Bo ard of Di rector s on 21 Feb ruar y 20 2 2 and the s tatem ent of ina ncial p os ition was s igne d on the B oard ’s beha lf by Paul Edg ecl ie - Joh nso n. The C om pany is a pub lic limite d com pany inc orp orated a nd regi stere d in Engl and and Wale s. T he Co mpa ny’s ordinar y sh ares are p ublic ly trad ed on the Lon don S tock E xcha nge an d it is not u nde r the co ntrol of any singl e sha rehol der. The Co mpany ’s primar y ac tivit y is ac ting as a hol ding co mpa ny for the Grou p’ s investm ents . The D irec tors have as se ss ed, in th e light of cu rrent and a nticip ated ec onom ic co nditio ns, the C om pany ’ s abili ty to co ntinue a s a goin g con ce rn. Havin g con sid ered th e going c onc ern s tatus a nd liqu idit y of the G roup (see p age 14 9) the Dire ctor s con irm th ey have a reas ona ble exp ec tatio n that the C omp any has s ui cient re so urces to contin ue op eratin g until at le ast 3 0 Jun e 2023 a nd the re are no materi al unc er tainti es that m ay cas t doub t on the C omp any’s going con ce rn statu s. Ac cordin gly , th ey conti nue to ado pt the go ing co nce rn bas is in pre parin g the Pare nt Co mpany Fi nanc ial St ateme nts. The P arent C omp any Finan cial S tatem ents a re pres ented i n sterlin g and all va lue s are round ed to the n eare st millio n pou nds (£ m) e xcept when ot herwise indicat ed. The se F inanc ial St atem ents h ave bee n prep ared in a cco rdanc e with Fin ancia l Repo rti ng St anda rd 101 ‘ Red uce d Di sclo sure Framework ’ (FRS 101) . No in com e state ment i s pres ente d for the C omp any as pe rmit ted by Sec tion 4 08 of th e Co mpan ies Ac t 200 6. The au dit fe e of £0.02m (2 020 : £0.02m) was bo rne by a sub sidia ry unde r taki ng in both ye ars . Bas is of preparati on The P arent C omp any Finan cial S tatem ents h ave bee n prep ared in ac corda nce w ith FRS 10 1, as ap plie d in ac cord ance w ith the provis ions o f the Co mpa nies Ac t 20 06 . FRS 10 1 set s out a re duce d dis clos ure frame work for a ‘qualif ying e ntit y’ a s de ine d in the sta ndard w hich ad dres se s the inanc ial rep or ting re quirem ents and di scl osure exemp tions in t he indi vidua l in anci al sta temen ts of qua lif ying enti ties th at other wi se app ly the re co gnition , me asure ment an d dis clos ure requi reme nts of U K -ad opted I FRS s. FRS 10 1 set s out am end ment s to adop ted IF RSs th at are ne ces sa ry to achi eve comp lian ce with th e Co mpani es Act a nd rel ated Re gulatio ns. The fo llowing d iscl osure s have not b ee n provide d as p ermit ted by FRS 101: • A c ash low st ateme nt and rel ated note s as re quired by IA S 7 ‘S tatem ent of C ash F lows’ ; • A co mpa rative pe riod re con ciliatio n for sh are cap ital a s requi red by IAS 1 ‘P rese ntatio n of Fin anci al St ateme nts’ ; • Di scl osure s in res pec t of tran sac tions w ith who lly owne d sub sidia ries a s require d by IAS 24 ‘Re late d Par ty D isc los ures’ ; • Di scl osure s in res pec t of ca pita l mana gem ent as re quire d by para graph s 134 to 13 6 of IAS 1 ‘ Pre sent ation of F inan cial S tatem ents’ ; • Th e ee cts of n ew but n ot yet ee ctive I FRSs a s requi red by para graph s 30 an d 31 of IAS 8 ‘Acco unting Pol icie s, Ch ange s in Acc ountin g Estim ates an d Errors’ ; and • Di scl osure s in res pec t of the c omp ens ation o f key manag eme nt pe rso nnel a s requi red by para graph 17 o f IAS 24 ‘Re lated Party Disclosures’ . Whe re the C ons olida ted Fin anci al St ateme nts of the C om pany incl ude the e quiva lent di scl osure s, the C omp any has al so t aken the exempti ons un der F RS 10 1 availabl e in resp ec t of the follow ing disclosures: • Th e require ment s of pa ragrap hs 4 5( b) and 46 to 52 of IF RS 2 ‘Sh are -b ase d Payme nt’ i n resp ec t of group - set tled s hare - bas ed paymen ts; and • Th e require ment s of pa ragrap hs 91 to 9 9 of I FRS 13 ‘ Fair Value Me asure ment ’ an d the dis clo sure s require d by IFR S 7 ‘F inanc ial Instruments: Disclosures’ . The a cco unting p olic ies s et out h erein h ave, unles s othe rw ise sta ted, be en ap plie d co nsis tently to all p erio ds pre se nted in the se Financi al Sta temen ts. Crit ica l acc ou ntin g pol icie s an d th e use o f jud ge men ts, estim ates and as sumpti ons The re are no criti cal e stim ates or ju dge ment s which a re con side red to pres ent sig ni icant ri sk of a m aterial a djus tment to the P arent Co mpany Fi nanc ial St ateme nts in th e next ina ncia l year . No t e s t o t he P ar en t Com pa n y Fi nan ci al S ta t emen ts 210 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Company Fi nancial Statements 1. Ac cou ntin g po lici es c ontinu ed Signiicant acco unting policies Foreig n curre nc ies T ra nsa ctio ns in forei gn curren cie s are trans lated to th e Com pany ’s func tiona l curren cy at the exchan ge rate s ruling o n the date s of the tran sac tion s. Mo net ar y ass ets a nd liab ilitie s deno minate d in foreign c urrenc ies a re retransl ated to the f unctio nal cu rrency at the rel evant rates of exch ange r uling on th e las t day of the p erio d. Foreign exch ange di eren ce s arisin g on tran slatio n are rec ogni se d in the in com e state ment . Non- derivative inancial instruments Non - der ivative in anc ial ins trume nts co mpri se inves tment s in equ ity se curitie s, amo unts du e from an d amount s due to G roup und er tak ings and lo ans a nd othe r borrowi ngs . Invest ment s in eq uity s ec uritie s Investm ent s in subs idiar ies are c arrie d at co st plu s dee me d cap ital contr ibutio ns aris ing from s hare -b as ed paym ent tran sa ction s les s any provisi on for imp airm ent. Th e car ryi ng amo unt is reviewe d at eac h repo rti ng date, in cludin g a com pari son to the m arket cap ital isati on of the C omp any (£8 .8b n) on 31 De cem ber 2 02 1, to deter mine wh ethe r there is a ny indic ation of im pairm ent. I f any such indic atio n exist s, then th e as set ’s recovera ble am ount is e stim ated. An imp airme nt los s is rec ogn ise d if the c arr ying a mount of a n ass et excee ds it s esti mated re covera ble am ount. I mpair ment lo ss es are rec ogni sed i n the inc ome s tatem ent. Amo unts d ue from an d amo unts d ue to Gro up un der tak ing s Amo unts due f rom Grou p unde rt akin gs are rec ogn ise d initia lly at fair valu e and s ubse que ntly me asu red at amo r tise d cos t usin g the e ecti ve interes t rate metho d le ss provi sion fo r expe cted c redit los se s. All owance s for exp ecte d cre dit los se s are ma de ba se d on the ri sk of no n- payme nt, ta king into a cco unt age ing, p revious experience, economic condit ions and forward-looking data. Suc h allowan ces a re mea sured a s eith er 12-m onth expe cte d credi t los se s or lifetim e expe cte d credi t los se s dep endi ng on ch ange s in the cre dit qu alit y of the c ounterp ar ty. Amo unts due to G roup un der ta king s are reco gnis ed in itially at f air value a nd sub se quentl y mea sure d at amor tis ed c ost u sing th e ee ctive inte rest rate m ethod . Loan s and o ther b orrowin gs Loan s and oth er bo rrowing s are initiall y reco gnis ed at th e fair value of th e co nsid eratio n rece ived l es s direc tly attri buta ble trans acti on co sts . They are s ubs equ ently me asu red at am or tise d co st. Fi nanc e cha rges, i nclu ding tran sac tion c ost s and any dis co unt or pre mium on i ssu e, are rec ogni sed i n the inc ome s tatem ent us ing the e ecti ve interes t rate metho d. Bo rrowings a re clas si ie d as due a fte r more tha n one yea r whe n the repaym ent date i s more tha n 12 month s from the p erio d- en d date or wh ere they are draw n on a faci lity w ith more th an 12 mo nths t o e x p i r y. Deriva tiv e inancial instr uments a nd hedging De rivatives a re initiall y reco gnis ed an d sub seq uently m ea sured at fair valu e. Th e subs equ ent ac cou nting treatm ent de pe nds o n wheth er the de rivative is d esig nated a s a he dging in strum ent, a nd if so, th e nature of th e item b eing he dg ed. Cha nge s in the fair va lue of d erivative s which h ave eithe r not be en des ignate d as he dgin g inst rument s or rel ate to the ine ec tive por tio n of he dge s are rec ogni sed i mme diatel y in the inc ome s tatem ent. Do cume ntatio n outlin ing the m eas ureme nt and e ec tivene ss of any hed ging arr ange ment i s maint aine d through out th e life of the hedge relat ionship . Intere st aris ing from c urrency d erivative s and inte rest r ate swaps is rec orde d in eithe r in anc ial inc ome o r expe nse s over the te rm of the agre eme nt, unl ess t he ac counti ng treatm ent for th e hed ging relati onsh ip requi res the inte rest to b e taken to res er ves . Capital and rese rves Acc ounting p olic ies re lating to c apit al and re ser ve s, whic h are als o app lica ble to the C omp any , c an be fo und on p age 1 57 of the G roup Financi al Sta temen ts. Share-based paymen ts The c ost o f equi ty- set tle d share d- bas ed p ayment tr ans actio ns with emp loyees i s me asure d by referen ce to fair val ue at the d ate at which the right to th e share s is gra nted. Fair valu e is dete rmine d by an external valuer using op tion pr icing models. The c ost o f equi ty- set tle d share - bas ed p ayment tra nsa ctio ns is rec ogni sed, to geth er with a c orres pon ding in crea se in e quit y , over the p erio d in which a ny per forma nce o r ser vi ce co nditio ns are ful ille d, en ding on th e date on wh ich the re levant em ployee s be com e fully e ntitle d to the award (vesting d ate). The in com e st ateme nt charg e for a pe riod re pres ents th e moveme nt in cumu lative exp ens e reco gnis ed at th e be ginning a nd en d of that pe riod. N o expe nse i s rec ogni sed fo r awards that d o not ultim ately vest , except for awa rds whe re vestin g is co nditio nal up on a ma rket or no n-ve sting c ondi tion, whi ch are treate d as ve sting irre sp ecti ve of whe ther o r not the m arket or no n-ves ting c onditi on is s atis ie d, provid ed that a ll other p er form anc e and/or ser vic e con ditio ns are sati s ied . Whe re the C ompa ny grants awards ove r its own s hares to th e emp loyees o f its sub sidi arie s, it rec ogni se s, in the Pa rent Co mpa ny Fin ancia l State ment s, an in crea se in the c ost o f investm ent in it s subsidiaries equivale nt t o the equity-set tled share -bas ed payment cha rge rec ognis ed i n its C ons olid ated Fin anci al St ateme nts with the corresp onding credit b eing reco gnised direc tly in equity . 211 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Comp any Financial Statem ents Note s to the Pare nt Com pany Fin anci al St ateme nts 2. Directors’ remuneration The avera ge num ber o f Direc tors of th e Co mpany duri ng the yea r , an alyse d by cate gor y , was as fol lows: 2021 2020 Nu mbe r of D ire cto rs Non-E xecutiv e Dir ectors 10 9 E xecu tive Di rec tors 3 3 13 12 2021 £m 2020 £m Directo rs’ remuneration Ba se s ala rie s, fee s, a nnua l pe rfo rma nce p aym ents a nd b ene i ts 6.1 3.3 M ore de tai led i nform atio n on th e remu ner atio n incl udin g pe nsi ons , sh are award s and s har eho ldin gs fo r eac h Dire cto r is sh own in t he Di rec tors’ Rem une ratio n Rep or t on p age s 115 a nd 12 3. In a ddi tion , amo unts re ce ive d or rec ei vabl e und er lo ng -ter m inc entiv e sch em es are s how n on pa ge 115 . 2021 2020 Nu mbe r of D ire cto rs Dire cto rs in re sp ec t of wh ose q uali f ying s er vi ces s ha res we re rec eive d or re ce ivab le un de r lon g-te rm inc en tive sc he mes 3 3 3. In vestments £m Co st a nd ne t bo ok va lue At 1 Jan uar y 20 2 1 3, 131 Share-based paymen ts capital contri bution 29 At 31 D ec em be r 202 1 3 ,1 6 0 The C omp any is the b ene i cial own er of all t he eq uity s hare c apit al of Inte rC ontine ntal H otels L imited , a comp any regis tered i n Engla nd and Wales. A fu ll lis t of sub si diar y an d othe r rel ated u nde r tak ing s is give n in no te 34 o f the G roup F inan cia l St atem ent s on pa ge s 203 to 2 05 . 4. Debtors 2021 £m 2020 £m Du e af ter m ore t ha n one ye ar De ferre d ta x (note 5) 28 18 28 18 Du e wit hin o ne yea r Amounts due fr om Group undertakings 912 926 UK Corporation tax 10 1 922 927 Notes to the Par ent Compan y Financial Statements continued 212 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Company Fi nancial Statements 5. De ferre d ta x Losse s £m Curr ency swaps £m To t a l £m At 1 Jan uar y 20 2 1 14 4 18 Income stat ement 15 – 15 Other comprehensi ve i ncome – (5) (5) At 31 D ec em be r 202 1 29 (1) 28 De ferred t ax is re cog nise d on th e bas is of an exp ect ation o f su icie nt future p roit s within th e Group. More d et aile d info rmat ion o n the b asi s for de ferre d ta x rec og nitio n is sh own in n ote 8 of th e Gro up Fin an cial S tate me nts o n pag e 172 . 6. D erivati ve ina nc ial in st rume nts a nd h ed ging Curre ncy swap s have be en tran sac ted to swap th e proc ee ds from th e euro bo nds to ste rling a s follows: Fair value Dat e of de si gn ati on P ay le g Interes t rate Receive leg Interest rate Maturit y Hedged item 2021 £m 2020 £m Nove mbe r 201 8 £436m 3. 5% €500m 2.125% May 20 27 € 500m 2. 125% bonds 2027 (16) – Oc tob er 20 20 £454m 2.7 % €500m 1.625% O ctob er 2 024 € 500m 1.625% bonds 2024 (31) (1 4) He dge in ee ctive nes s aris es wh ere the c umulative c hang e in the fai r value of th e swaps exce ed s the ch ange in f air value o f the future ca sh l ows of the b ond s. Th e chan ge in valu e of the he dge d item u se d as the b asis fo r rec ogni sing he dg e inee ctive nes s for th e peri od was a £ 30 m los s (20 20: £ 5m g ain). The c as h low he dg e rese rve s are ana lyse d as foll ows: Ca sh low h ed ge re se r ves Cash l ow hedge reserv e £m Co st o f hedging reserv e £m To t a l £m At 1 Jan uar y 20 20 – ( 5) (5) Co st s of he dgi ng de ferre d and re co gni se d in oth er c omp rehe ns ive in com e – (5) ( 5) Ch ang e in fair v alue o f curre ncy sw aps re co gni se d in oth er co mp rehe ns ive inc om e (1) – (1) Rec la ssi i ed fro m othe r co mpre he nsi ve inc om e to pro it or l os s – inc lud ed in in anc ial exp en se s (11) – (11) Deferred tax 3 – 3 At 31 D ec emb er 2 020 (9) (10) (19) Co st s of he dgi ng de ferre d and re co gni se d in oth er c omp rehe ns ive in com e – 2 2 Ch ang e in fair v alue o f curre ncy sw aps re co gni se d in oth er co mp rehe ns ive inc om e (4 5 ) – (4 5 ) Rec la ssi i ed fro m othe r co mpre he nsi ve inc om e to pro it or l os s – inc lud ed in in anc ial exp en se s 70 – 70 Deferred tax (5) – ( 5) At 31 D ec em be r 202 1 11 (8) 3 213 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Comp any Financial Statem ents Note s to the Pare nt Com pany Fin anci al St ateme nts 7 . C red itor s: am oun ts fal ling d ue wit hin o ne yea r 2021 £m 2020 £m Amo unt s due to G roup un de rt ak ings 659 – Loa ns an d othe r bo rrowin gs: Commercial paper – 600 £17 3m 3. 87 5% bo nds 2 02 2 173 – 832 600 Mo re det ail ed in form ation o n lo ans a nd oth er b orrowi ngs i s sho wn in no te 22 o f the G roup F ina nci al St atem ent s on p age s 18 6 to 187. 8. C red itor s: am ount s fall ing d ue af ter o ne yea r 2021 £m 2020 £m De rivat ive i nan cia l liab iliti es (note 6) 47 14 Loa ns an d othe r bo rrowin gs: £17 3m 3. 87 5% bo nds 2 02 2 – 173 €500m 1.625% bonds 2 024 419 4 48 £3 0 0m 3 .75% bo nd s 202 5 303 302 £350m 2.125 % bonds 2026 351 3 51 €500m 2.125 % bonds 2027 423 453 £4 0 0m 3 .37 5% b ond s 202 8 398 397 1,9 41 2 ,1 3 8 M ore de tai led i nform atio n on lo an s and oth er b orrow ing s is sh own in n ote 2 2 of the G rou p Fin anc ial S tate men ts on p ag es 18 6 to 187. 9. Employ e e beneits Share-based pa yments The C omp any ope rates th e Annu al Per form ance P lan, Lo ng T e rm Inc entive Pl an (p er forma nce - relate d awards an d restric ted s tock unit s) and the Colleagu e Share Plan. Mo re det ail ed in form ation o n the p lan s is sh own in n ote 28 of t he Gro up Fi nan cia l St atem ents o n pa ge s 198 to 1 99. The we ighted aver age sh are pric e at the d ate of exercise fo r share awa rds veste d durin g the year wa s 5,081 .2p ( 202 0: 4,8 7 4 .5 p) . The s hare awards o uts tand ing at the ye ar en d have a weighte d average c ontrac tual life o f 0.5 yea rs (20 20: 1.0 ye ars) for the Ann ual Per form ance P lan, 1. 2 yea rs (20 20: 1 .4 year s) for per forma nce - relate d awards an d 1.2 ye ars (2 020 : 1.3 ye ars) for restr icted s tock un its. Notes to the Par ent Compan y Financial Statements continued 214 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Company Fi nancial Statements 10. Ca pit al an d res er ves All ot ted , ca lle d up a nd fu lly p ai d Number of s har es millions Equity share capital £m At 31 D ec em be r 202 0 an d 31 De c emb er 2 02 1 (ordi na ry s ha res o f 20 340 / 399 p e a ch) 187 39 The au thorit y give n to the Co mpa ny at the AGM he ld on 7 M ay 202 1 to purch ase it s own sh ares was s till valid at 3 1 De ce mbe r 202 1. A reso lutio n to renew the a uthori ty wi ll be pu t to share hold ers at th e AGM on 6 M ay 202 2. The C omp any no lo nger h as an au thori sed s hare c apit al. At 31 De ce mbe r 202 1, 3,701,4 08 (2 020 : 5,06 1,40 8) share s with a no minal va lue of £7 71, 82 2 (20 20: £ 1,05 5,411) were hel d as trea sur y sh ares. The s hare pre mium ac cou nt repre sent s the am ount of pro ce eds re ce ived for s hare s in exces s of the ir nomi nal valu e. 11. Di vide nd s an d sh are hol de r return s The ina l divid end of 8 5. 9¢ p er ordin ar y share (amo unting to $1 57m) is propo se d for app roval at the AGM on 6 M ay 202 2 . No divi den ds were paid i n 202 1 or 20 20. 12. C ontinge ncie s The fo llowing U K sub sidi aries w ill take ad vantag e of the au dit exempti on set o ut within S ec tion 479A of the C omp anie s Act 20 0 6 for the year e nde d 31 D ece mbe r 202 1: Company name Company number InterC ontin ental (PB) 1 0 6724223 Inte rC onti nen tal (P B) 3 Lim ited 0 69 4760 3 IH C May Fai r Hote l Limi ted 0232303 9 Asia Paciic Holdings Limit ed 0 39 4178 0 Six C ont ine nts H otel s Inte rnati ona l Limi ted 007 2 240 1 Hotel In terContinen tal London (Holdings ) Li mited 06 4511 28 The C omp any will gu arantee a ll outs tan ding li abilitie s of the a bove UK s ubsi diar y und er tak ings a s at the b alanc e sh eet d ate in acc ordan ce with Se ctio n 479C of th e Co mpan ies Ac t 200 6. T he C omp any has as se ss ed th e proba bilit y of lo ss un der th e guara ntees a s remote. In 20 21 an d 202 0, there were no c ontin gent li abiliti es to dis clo se in res pe ct of gu arantee s of the l iabiliti es of s ubsi diarie s. 215 IHG | Annua l Repo rt a nd Form 20 F 202 1 Parent Comp any Financial Statem ents Note s to the Pare nt Com pany Fin anci al St ateme nts Ad d iti o n a l I nf o rm ati o n 218 Othe r i nan cia l info rmati on 226 Directors’ Report 231 Group inf ormation 231 His tory a nd deve lopm ents 231 Ris k factor s 237 Di rector s’ and E xec utive Co mmit tee members’ sharehold ings 237 E xecu tive Direc tors’ b ene i ts upo n termin ation of o ic e 238 De scri ption of s ecu rities oth er tha n equit y securities 239 Ar tic les of A ss oci ation 240 Work ing T ime Re gulatio ns 19 98 241 Mate ria l co ntrac ts 242 L eg al pro ce e din gs 242 E xchang e contro ls and re stric tion s on paym ent of di vide nds 243 Shareholder infor mation 243 Taxation 245 Di sclo sure c ontrols a nd pro ced ures 246 Sum mar y of sig ni icant c orp orate govern ance d iere nce s from NYS E listi ng standar ds 247 Return of f unds 248 Pu rchas es of e quit y se curiti es by the Company and aili ated pu rchaser 248 D ivid end hi stor y 249 Shareholder proiles 250 Exhibits 251 Forward-looking sta tements 252 Form 20 F cro s s-r efere nc e gui de 255 Glossar y 257 Us eful i nform atio n 257 Investor infor mation 258 F inancial calen dars 259 Contacts Hote l In digo B el gra de, S erbi a Holiday Inn Bangk ok , Thailand 216 IH G | Annua l Repo rt a nd Form 20 F 202 1 Hotel Indi go Bali Semin yak Beach, Indonesia 217 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Addit ional Inf ormat ion O th e r in a n c ia l i nf o rm atio n Use o f Non-GAAP measures In ad dition to p er forma nce m eas ures dire ctly o bse rva ble in th e Group F inan cial S tatem ent s (IFRS m eas ures), addi tiona l mea sures (desc ribe d as No n- GA AP) are pre sen ted that a re use d interna lly by man agem ent a s key measu res to as se ss pe r forman ce. N on - GAA P me asure s are eith er not d e ined u nde r IFR S or are adju ste d IFRS igure s. Fur the r expl anat ion in re lat ion to th es e me asu res an d the ir de i nitio ns c an be fo und o n pa ge s 73 to 7 7 . Rev e nue and opera ting proi t Non-GAAP reconciliations Hig hlig hts fo r the ye ar e nde d 31 D ec emb er 2 02 1 Reportable segments Reven ue Operati ng proit 2021 $m 2020 $m Change $m Change % 2021 $m 2020 $m Change $m Change % Per Gr oup i ncome stat ement 2,9 07 2,394 513 2 1.4 494 (15 3) NM a NM a System Fu nd (928 ) (76 5) (1 63) 21.3 11 102 (9 1) (89 .2) Reimbursement of costs (58 9) (63 7 ) 48 ( 7. 5 ) – – – – Operati ng ex ceptional it ems – – – – 29 270 ( 241) (8 9. 3) Reportable segments 1,390 992 398 40 .1 534 219 315 14 3 .8 Reportable segments analysed as : Fee busi ness 1 ,1 5 3 823 330 4 0.1 570 278 292 10 5.0 Owned, leased and managed lease 237 169 68 4 0.2 (36) (59) 23 39.0 1,390 992 398 40 .1 534 219 315 14 3 .8 a Pe rc ent age c ha nge c on sid ere d no t me anin gfu l, su ch a s whe re a po si tive b ala nc e in the l ate st p eri od i s com pa rab le to a ne ga tive o r zero b al anc e in th e pri or p eri od . Und erlyi ng revenue a nd und erly ing op erating p roi t Reven ue Operati ng proit 2021 $m 2020 $m Change $m Change % 2021 $m 2020 $m Change $m Change % Rep or ta ble s eg men ts (se e above) 1,390 992 398 40 .1 534 219 315 14 3 .8 Signiicant liquidat ed damages a (6) (1) (5) 500.0 (6) (1) (5) 500.0 Own ed a nd le as ed a ss et di spo sa ls b (11) (2 1) 10 (4 7. 6 ) 3 6 (3) (50 .0) Currency impact – 16 (16) – – (1) 1 – Underlyi ng re venue and under lying operatin g proit 1,373 986 387 39. 2 531 223 308 1 3 8 .1 a $ 6m re co gni se d in 20 2 1 re le ct s the s igni i ca nt liq uid ate d dam ag es re lat ed to o ne ho tel in G re ater C hi na. T he $ 1m re co gnis e d in 20 20 re le ct s the c on tinu ed re c ogn itio n of th e sig ni ic ant l iqu ida ted d ama ge s rel ate d to the p revi ou sly d isc lo se d exit o f a po rt fo lio of 2 .1k hote ls i n Ge rma ny . b T he re su lts o f thre e E VEN H ote ls h ave be en re move d in 2 02 1 (b ein g the y ear o f dis po sa l for th es e hot els) a nd th e pri or ye ar to de term ine u nd erl yin g grow th . The re su lts o f hote ls rem ove d in 20 20 (b ei ng th e yea r of di spo s al or l ea se te rmin ati on fo r the se h otel s) have al so b ee n rem ove d to det erm ine u nde rly ing g row th. Und erlyi ng fee reven ue and u nde rlying fe e op erating p roi t Reven ue Operati ng proit 2021 $m 2020 $m Change $m Change % 2021 $m 2020 $m Change $m Change % Rep or ta ble s eg men ts fe e bus ine ss (se e ab ove) 1 ,1 5 3 823 330 4 0.1 570 278 292 10 5.0 Signiicant liquidat ed damages a (6) (1) (5) 500.0 (6) (1) (5) 500.0 Currency impact – 11 (11) – – – – – Un de rlyin g fee r even ue an d un de rlyi ng fe e operatin g proit 1 ,14 7 833 314 3 7. 7 564 27 7 287 10 3.6 a $ 6m re co gni se d in 20 2 1 re le ct s the s igni i ca nt liq uid ate d dam ag es re lat ed to o ne ho tel in G re ater C hi na. T he $ 1m re co gnis e d in 20 20 re le ct s the c on tinu ed re c ogn itio n of th e sig ni ic ant l iqu ida ted d ama ge s rel ate d to the p revi ou sly d isc lo se d exit o f a po rt fo lio of 2 .1k hote ls i n Ge rma ny Addition al Information 218 I HG | Annua l Repo rt a nd Form 20 F 202 1 Revenu e an d ope rati ng pr oit N on - GAAP r eco nc ilia tion s co ntinue d Ameri cas Reven ue O perating pro it b 2021 $m 2020 $m Change $m Change % 2021 $m 2020 $m Change $m Change % Per G roup in anc ial s tate men ts, n ote 2 7 74 512 262 51. 2 559 296 26 3 88.9 Reportable segments analysed as ª : Fee busi ness d 691 457 234 51 . 2 568 323 245 75.9 Owned, leased and managed lease 83 55 28 50.9 (9) (27) 18 ( 6 6.7 ) 7 74 512 262 51. 2 559 296 26 3 88.9 Rep or ta ble s eg men ts (se e above) 7 74 512 262 51. 2 559 296 26 3 88.9 Own ed a nd le as ed a ss et di spo sa ls c (11) (17 ) 6 (3 5. 3) 3 7 (4) ( 5 7. 1 ) Currency impact – – – – – 2 ( 2) – Underlyi ng re venue and under lying operatin g proit 763 495 26 8 5 4 .1 562 305 257 84.3 a Re ven ues a s in clu de d in the G ro up Fi nan cia l St atem en ts, n ote 3 . b B efore exc eptio nal item s. c Th e res ult s of th ree E VE N Hot els h ave b ee n rem oved i n 202 1 ( be ing th e yea r of di sp os al fo r the se h otel s) and t he pr ior ye ar to d ete rmin e un der lyi ng grow t h. Th e res ult s of ho tel s rem ove d in 20 20 (b ei ng th e yea r of di spo s al or l ea se te rmin ati on fo r the se h otel s) have al so b ee n rem ove d to det erm ine u nde rly ing g row th. d Fee ma rgin c al cul ate d as fe e bu sin es s op era ting p ro it b le ss s igni i ca nt liq uid ate d dam ag es , div ide d by fe e bus in es s reve nue l es s sig ni ic ant l iqu ida ted d ama ge s: 20 2 1 ($5 68 m/$ 69 1m), 2020 ($323m/$457m ), 2019 ( $663m/$8 53m). EME AA Reven ue O perating pro it b 2021 $m 2020 $m Change $m Change % 2021 $m 2020 $m Change $m Change % Per G roup in anc ial s tate men ts, n ote 2 303 221 82 3 7. 1 5 (50) 55 NM e Reportable segments analysed as ª : Fee busi ness f 149 107 42 39. 3 32 (18) 50 NM e Owned, leased and managed lease 154 114 40 3 5 .1 (27) (32) 5 ( 15. 6) 303 221 82 3 7. 1 5 (50) 55 NM e Rep or ta ble s eg men ts (se e above) 303 221 82 3 7. 1 5 (50) 55 NM e Signiicant liquidat ed damages c – (1) 1 – – (1) 1 – Owned asset di sposal s d – (4) 4 – – (1) 1 – Currency impact – 8 (8) – – (2) 2 – Underlyi ng re venue and under lying operatin g proit 303 2 24 79 3 5.3 5 (5 4) 59 NM e a Re ven ues a s in clu de d in the G ro up Fi nan cia l St atem en ts, n ote 3 . b B efore exc eptio nal item s. c $1 m rec og nis ed in 2 02 0 re le ct s the c onti nue d re co gni tion o f the s ign i ic ant li qui date d da ma ges r ela ted to t he pr evio us ly di sc los ed e xit of a p or t foli o of 2.1k h ote ls in G er many. d T he re su lts o f the h otel s rem ove d in 20 20 ( be ing th e yea r of di sp os al or l ea se te rmi nati on fo r the se h ote ls) have b ee n rem ove d to det erm ine u nde rly ing g row th. e Pe rce nta ge c han ge c ons id ere d not m ea nin gful , suc h as w her e a po siti ve ba lan ce i n the l ates t pe rio d is c omp ar abl e to a ne gat ive or z ero b ala nc e in the p rio r pe rio d. f Fe e mar gin c alc ula ted a s fe e bus ine s s ope rat ing p ro it b le ss s igni i ca nt liq uid ate d dam ag es , div ide d by fe e bus in es s reve nue l es s sig ni ic ant l iqu ida ted d ama ge s: 20 2 1 ($3 2m/$ 149 m), 20 20 ($ (19) m/$ 10 6m), 20 19 ($ 19 1m/$ 32 6m). 219 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Oth er inanc ial info rmation Other inanci al in f or mat ion c o ntin u e d Revenu e an d ope rati ng pr oit N on - GAAP r eco nc ilia tion s co ntinue d Greater China Reven ue O perating proit b 2021 $m 2020 $m Change $m Change % 2021 $m 2020 $m Change $m Change % Per G roup in anc ial s tate men ts, n ote 2 116 77 39 5 0.6 58 35 23 6 5.7 Reportable segments analysed as ª : Fee busi ness d 116 77 39 5 0.6 58 35 23 6 5.7 Rep or ta ble s eg men ts (se e above) 116 77 39 5 0.6 58 35 23 6 5.7 Signiicant liquidat ed damages c (6) – (6) – (6) – (6) – Currency impact – 5 (5) – – 1 (1) – Underlyi ng re venue and under lying operatin g proit 110 82 28 3 4 .1 52 36 16 4 4.4 a Re ven ues a s in clu de d in the G ro up Fi nan cia l St atem en ts, n ote 3 . b B efore exc eptio nal item s. c $6 m re co gnis e d in 20 21 re l ec ts th e sig ni ic ant l iqu ida ted d am age s rel ate d to on e pro pe rt y. d Fe e ma rgin c al cul ate d as fe e bu sin es s op era tin g pro it b le ss s igni i ca nt liq uid ate d dam ag es , div ide d by fe e bus in es s reve nue l es s sig ni ic ant l iqu ida ted d ama ge s: 20 2 1 ($52 m/$1 10m), 20 20 ($ 35 m/$7 7m), 20 19 ($ 73m /$1 35 m). Hig hlig hts fo r the ye ar e nde d 31 D ec emb er 2 02 0 Reportable segments Reven ue Operati ng proit 2020 $m 2019 $m Change $m Change % 2020 $m 2019 $m Change $m Change % Per Gr oup i ncome stat ement 2,394 4,627 (2,23 3) (4 8. 3 ) (15 3) 630 ( 78 3) NM a System Fu nd ( 765 ) ( 1,3 73) 608 (4 4 . 3 ) 102 49 53 108. 2 Reimbursement of costs (6 37 ) ( 1 ,17 1) 534 (4 5 .6 ) – – – – Operati ng ex ceptional it ems – – – – 270 18 6 84 45. 2 Reportable segments 992 2,0 8 3 (1 , 091) (5 2.4) 2 19 865 (6 4 6) ( 74 . 7 ) Reportable segments analysed as : Fee busi ness 823 1,51 0 (6 87 ) (4 5. 5) 2 78 813 (53 5) (65. 8) Owned, leased and managed lease 169 5 73 (4 0 4) ( 70.5) ( 59) 52 (111) NM a 992 2,0 8 3 (1 , 091) (5 2.4) 2 19 865 (6 4 6) ( 74 . 7 ) Und erlyi ng fee reven ue Reven ue 2020 $m 2019 $m Change $m Change % Rep or ta ble s eg men ts fe e bus ine ss (se e ab ove) 823 1,51 0 (6 87 ) (4 5. 5) Signiicant liquidat ed damages (1) (11) 10 (9 0. 9) Currency impact – (4) 4 – Un de rlyin g fee r even ue 822 1,4 95 (673) (4 5 .0) a Pe rc ent age c ha nge c on sid ere d no t me anin gfu l, su ch a s whe re a po si tive b ala nc e in the l ate st p eri od i s com pa rab le to a ne ga tive o r zero b al anc e in th e pri or p eri od . Addition al Information 220 I HG | Annua l Repo rt a nd Form 20 F 202 1 Revenu e an d ope rati ng pr oit N on - GAAP r eco nc ilia tion s co ntinue d Hig hlig hts fo r the ye ar e nde d 31 D ec emb er 2 019 Reportable segments Reven ue Operati ng proit 2019 $m 2018 $m Change $m Change % 2019 $m 2018 $m Change $m Change % Per Gr oup i ncome stat ement 4,627 4,3 37 290 6 .7 630 582 48 8.2 System Fu nd (1,37 3) (1 ,2 33) (14 0) 11 .4 49 146 (9 7) (6 6. 4) Reimbursement of costs ( 1 ,17 1 ) ( 1,1 7 1 ) – – – – – – Operati ng ex ceptional it ems – – – – 186 104 82 78.8 Reportable segments 2,0 8 3 1,93 3 150 7. 8 865 832 33 4 .0 Reportable segments analysed as : Fee busi ness 1,51 0 1, 486 24 1.6 813 793 20 2.5 Owned, leased and managed lease 573 4 47 126 28.2 52 39 13 33.3 2,0 8 3 1,93 3 150 7. 8 865 832 33 4 .0 Und erlyi ng fee reven ue Reven ue 2019 $m 2018 $m Change $m Change % Rep or ta ble s eg men ts fe e bus ine ss (se e ab ove) 1,510 1,4 86 24 1.6 Signiicant liquidat ed damages (11) ( 13) 2 (15 . 4) Acquisitions a (14) – (14) – Currency impact – (17) 17 – Un de rlyin g fee r even ue 1,48 5 1,4 56 29 2 .0 a T he re sul ts of a cq uire d bu sin es se s (Si x Sen se s an d two U K p or tfo lio h ote ls) are re move d on ly in t he ye ar of a cqu isi tio n whe n de term ini ng un de rlyi ng gro wt h co mpa red to t he prior year . Fee marg in reconciliat ion 2021 $m 2020 $m 2019 $m 2018 $m 2017 $m Reven ue Rep or ta ble s eg men ts an alys ed a s fee b us ine ss ( pag e 16 0) 1 ,1 5 3 823 1,51 0 1, 48 6 1,379 Signiicant liquidat ed damages (6) (1) (11) ( 13) – Ca ptive in sur anc e co mpa ny (note 21) (17 ) (19) (1 9) (11) (9) 1 ,1 3 0 803 1,48 0 1,462 1,3 70 Ope rating proit Rep or ta ble s eg men ts an alys ed a s fee b us ine ss ( pag es 2 18 to 2 2 1) 570 278 813 793 73 1 Signiicant liquidat ed damages (6) (1) (11) ( 13) – Ca ptive in sur anc e co mpa ny (note 21) (3) (3) (1) (1) – 561 2 74 801 7 79 73 1 Fee m ar gi n a 49.6 % 3 4 .1% 5 4 .1 % 53.3% 5 3. 4% a Re po r ted a s a KP I on pa ge 52 . 221 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Oth er inanc ial info rmation Other inanci al in f or mat ion c o ntin u e d Net cap ital expen diture rec oncilia tion 12 m ont hs e nd ed 31 December $m 2021 $m 2020 $m Ne t ca sh fro m inve sti ng ac tiv itie s (12) (6 1) Adjust ed for : Co ntra ct ac qui siti on co st s net of r epay men ts (42 ) (6 4) System Fu nd depreciat ion and amortisation a 91 58 De ferre d pu rcha se c ons ide rati on pa id 13 – Net capit al expenditu re 50 (67 ) Analyse d as: Ca pit al exp end iture : main tena nc e (inc lud ing c ontra ct ac qui siti on c ost s, ne t of rep ayme nts o f $4 2m (20 20 : $6 4m)) (7 5) (107 ) Cap ita l expe nditu re: recyc labl e inves tment s 53 17 Ca pit al exp end iture : Sys tem Fund c api tal i nvest men ts 72 23 Net capit al expenditu re 50 (67 ) a E xcludes depreciati on on right - of-use assets. Gros s capit al expend iture reco nciliatio n 12 m ont hs e nd ed 31 December $m 2021 $m 2020 $m Net capit al expenditu re 50 (67 ) Add back: Disposal recei pts (58) (18) Rep ayme nts o f con trac t acq uis itio n co sts (1) – Di strib utio ns fro m as so ciat es an d join t ventu res – (5) System Fu nd depreciat ion and amortisation a (91) (58) Gros s capita l expenditure (10 0) (14 8) Analyse d as: Ca pit al exp end iture : main tena nc e (inc lud ing gro ss c ontr act a cqu isi tion c os ts of $ 4 3m (2 02 0: $ 64 m)) (76) (107 ) Cap ita l expe nditu re: recyc labl e inves tment s (5) (6) Ca pit al exp end iture : Sys tem Fund c api tal i nvest men ts (19) (35 ) Gros s capita l expenditure (10 0) (14 8) a E xcludes depreciati on on right - of-use assets. Adju ste d fre e ca sh l ow rec on cili atio n 12 mo nths end ed 31 December 2021 $m 2020 $m 2019 $m 2018 $m 2017 $m Net cas h from operating activitie s 636 137 653 70 9 616 Adjust ed for : Paym ent of c ont inge nt pu rcha se c ons ide rati on – – 6 – – Princi pal elemen t of lease pa yments (32) (6 5) (59) (35) (2 5) Purc has e of s hare s by emp loye e sha re trus ts – – (5) (3 ) (3) Ca pit al exp end iture : main tena nc e (excludi ng co ntrac t ac qui siti on co st s) (33) (4 3) (8 6) (6 0) ( 72) Adj us ted fr ee c as h lo w a 571 29 509 611 516 a Re po r ted a s a KP I on pa ge 52 . Addition al Information 222 I HG | Annua l Repo rt a nd Form 20 F 202 1 Adjuste d interest rec oncili ation 12 m ont hs e nd ed 31 December 2021 $m 2020 $m Ne t in an cia l expe ns e s Financia l income 8 4 Financial expense s (147 ) (14 4) (13 9) (14 0) Adjust ed for : Inte res t attr ibu tab le th e Sys tem Fund (3) (3) Ca pit alis ed i ntere st re latin g to Sys tem Fund a ss ets – (1) Exceptional inan cial expenses – 14 (3) 10 Adju sted inte rest (142) (13 0) Adjuste d EBITDA reconcili ation 2021 $m 2020 $m 2019 $m Ope rating proit/(los s) 494 (15 3) 630 Add back Sys tem Fund re sul t 11 102 49 Operati ng ex ceptional it ems 29 270 18 6 Depreciation and amortisat ion 98 110 11 6 Adjusted EBIT DA 632 329 981 Adjusted ear nings per ordinary share reconciliation 12 m ont hs e nd ed 31 December 2021 $m 2020 $m Proit/ (loss) av ailable f or equity holders 266 (26 0) Adjusting items: Sys tem Fund re venu es an d exp ens es 11 102 Inte res t attr ibu tab le to th e Sys tem Fund (3) (4) Operati ng ex ceptional it ems 29 270 Exceptional inan ce expenses – 14 Fai r val ue gains on cont ingent pu rchase considera tion (6) (13) T ax on f air val ue ga ins o n con ting ent p urcha se c on sid erati on 1 – T ax on exc ept ion al item s (3) (52) Exceptional tax (2 6) – Adjusted earnings 269 57 Ba sic we ighte d aver age n umb er of o rdina r y sha res (mill ion s) 183 182 Adj us ted e arn ing s pe r or din ar y sh are (ce nt s) 1 4 7. 0 31.3 223 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Oth er inanc ial info rmation Other inanci al in f or mat ion c o ntin u e d Revenu e pe r availa ble r oom (RevPAR), averag e dai ly rate an d oc cu pan cy RevPAR is the pri mar y metri c use d by mana gem ent to trac k hotel p er forma nce a cros s regio ns and b rand s. RevPAR is als o a co mmon ly use d pe rfor manc e me asure in th e hotel in dus try. RevP A R com pris es I HG sys tem room s revenue d ivide d by the num ber o f room nig hts availab le and c an be m athem atic ally de rived fro m occ upan cy rate multip lied by avera ge dai ly rate (AD R). Oc cupa ncy rate is roo ms o ccup ied by hote l gue sts exp res se d as a pe rcent age of ro oms th at are availab le. AD R is ro oms reven ue divi ded by th e numb er of roo m nights s old . Refere nce s to RevPAR, oc cup ancy an d ADR a re pres ented o n a com parab le ba sis c ompr ising g rouping s of hote ls that h ave trade d in both the cur rent and p rior yea r , inc ludin g the imp act of h otels te mpo rarily cl ose d as a re sult of C ovid -19. The pr incip al exclusi ons in d erivi ng this me asure are n ew hotel s, hotel s clo sed fo r majo r refurbi shm ent and h otels s old in e ithe r of the t wo years . RevPAR and AD R are quote d at a con st ant US $ conver sion r ate, in orde r to allow a bet ter un der sta nding o f the co mpar able ye ar - on-yea r tradin g per form anc e excludin g disto rtio ns cre ated by l uctu ations i n exchang e rates. The fo llowing t abl es pre sen t RevP AR st atisti cs for th e year e nde d 31 D ece mbe r 202 1 an d a com paris on to 20 20. Fee bu sine ss an d owne d, lea se d and m anag ed le as e stati stic s are for co mpar able h otels an d incl ude on ly thos e hotel s in the G roup’s System at 3 1 De cem ber 2 02 1 and fra nchi sed, m ana ged, ow ne d, lea se d or man age d lea se by the G roup si nce 1 J anua ry 20 20. Th e com paris on wit h 2020 i s at con sta nt US $ exchang e rates . Fee business Own e d, le as ed a nd managed lease 2021 Change vs 2020 2021 Change vs 2020 Ameri cas InterC ontinenta l Occ upancy 40. 8% 15. 7ppt – – Average daily rate $185. 22 6.4% – – RevP AR $75.55 73.0 % – – Kimp ton Occ upancy 51.5 % 21. 5ppt – – Average daily rate $233.27 10 .7 % – – RevP AR $12 0.04 9 0.1 % – – Cro wne P laz a Occ upancy 4 3 .1% 13. 2ppt – – Average daily rate $112 .9 1 7. 2 % – – RevP AR $ 48 .7 2 54 .4% – – Hotel Indigo Occ upancy 55.8% 18.9ppt – – Average daily rate $153.25 20 .7 % – – RevP AR $85.4 4 82.4% – – EVEN Ho tels Occ upancy 53.8% 23.5 ppt – – Average daily rate $ 12 2 .1 7 19.8 % – – RevP AR $ 6 5 .74 112.4 % – – Holiday Inn Occ upancy 51. 4% 14.8ppt – – Average daily rate $1 0 9.76 11 .7 % – – RevP AR $56 .42 56.8% – – Ho lid ay Inn E xp res s Occ upancy 62. 2% 16.7 ppt – – Average daily rate $ 11 2 .1 8 12 .1 % – – RevP AR $69. 79 53.3% – – avid Occ upancy 58.6 9% 28.6ppt – – Average daily rate $81 .67 10.6 % – – RevP AR 4 7. 9 3 % 115. 4% – – Stay bridge Suites Occ upancy 72 .7 % 16.9ppt – – Average daily rate $10 8.68 7. 7 % – – RevP AR $79.0 2 40. 4% – – Can dlewoo d Suites Occ upancy 7 4. 2% 12.7ppt – – Average daily rate $ 85 .73 8.2% – – RevP AR $6 3.61 30. 5% – – Addition al Information 2 24 IHG | Annua l Repo rt a nd Form 20 F 202 1 RevPAR, averag e da ily rate a nd o ccu pan cy co ntinue d Fee business Own e d, le as ed a nd managed lease 2021 Change vs 2020 2021 Change vs 2020 EMEAA InterC ontinenta l Occ upancy 38 .5% 6.3ppt 18.6 % (0 .8)ppt Average daily rate $18 0.8 7 6 .1% $ 2 52 .1 9 4.6% RevP AR $69. 65 26.9% $ 4 7. 0 1 0.1 % Cro wne P laz a Occ upancy 40.5 % 9.4p pt – – Average daily rate $10 9.31 3 .1% – – RevP AR $44.27 34.3% – – Hotel Indigo Occ upancy 36.9% 12.0ppt – – Average daily rate $128.23 9.9 % – – RevP AR $ 4 7. 3 7 62.6% – – Holiday Inn Occ upancy 42 .0% 9.6p pt – – Average daily rate $85. 65 3.9% – – RevP AR $3 6.0 1 34 .4% – – Ho lid ay Inn E xp res s Occ upancy 4 7. 2 % 12.0ppt – – Average daily rate $76 . 2 2 9.0% – – RevP AR $3 6.0 1 46.2 % – – Stay bridge Suites Occ upancy 5 7. 9 % 11.0 ppt – – Average daily rate $135. 00 18.3% – – RevP AR $78. 2 1 46.2 % – – Gr eate r Ch in a InterC ontinenta l Occ upancy 51.1% 6.2ppt – – Average daily rate $119. 19 6.2% – – RevP AR $60.85 20.8 % – – HUA LUX E Occ upancy 50 .7% 5.7p p t – – Average daily rate $68. 77 0.4% – – RevP AR $34.84 13 .1 % – – Cro wne P laz a Occ upancy 48 .0% 7.1 p p t – – Average daily rate $ 74 . 9 0 2.6% – – RevP AR $35.96 20.4% – – Hotel Indigo Occ upancy 49.1% 6.3ppt – – Average daily rate $130.82 16. 4% – – RevP AR $64.28 33 .4% – – Holiday Inn Occ upancy 4 7.7 % 7. 9 p p t – – Average daily rate $55. 64 1.6% – – RevP AR $26.56 21.8% – – Ho lid ay Inn E xp res s Occ upancy 49. 3% 6.7 ppt – – Average daily rate $ 41.7 3 4. 5% – – RevP AR $20.58 20.9 % – – 225 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Oth er inanc ial info rmation Dir e ct ors’ Rep or t This D irec tors’ Re por t inc lude s the info rmatio n require d to be given in l ine with th e Co mpani es Act o r , wh ere provi ded e lse where, an app ropria te cross re ferenc e is give n. Th e Govern anc e Repo r t app roved by the Bo ard is p rovide d on pag es 8 0 to 127 an d inc orp orate d by refe ren ce h erei n. Sub si dia ries , joi nt ventu res a nd a ss oc iate d und er ta king s The G roup ha s aroun d 39 0 sub sidia ries, j oint venture s and re lated unde r taki ngs (in cludi ng bran che s out side of t he Unite d Kin gdo m) . A list o f subs idiari es an d ass oci ated un der ta king s disc los ed in acc orda nce wi th the C ompa nies Ac t is provi ded at n ote 34 of the G roup Fin anci al St ateme nts on p age s 203 to 20 5. Directors The D irec tors may exercis e all the p ower s of the C omp any , subj ect to th e Arti cle s of As soc iation, l egi slatio n and re gulatio n. This i nclu des th e abilit y to exercis e the auth orit y to allot or p urcha se the C omp any’s share s purs uant to aut horitie s grante d by share hol der s at the C omp any’s AGM ever y year. F u rth er det ails o f the powe rs of the C omp any’s Dire ctors c an be fo und on p age 2 39. For bi ogr aphi es of t he cu rrent D irec tor s se e pag es 8 2 to 85 . Directors ’ and Oficers’ ( D&O ) liabili ty insurance and e xistence of qualifyin g indemnit y provisions The C omp any maint ains th e Group’s D& O liabil ity in suran ce p olicy , whic h covers D irec tors an d O ice rs of th e Com pany defe ndin g civil proc ee ding s brought a gain st the m in thei r cap acit y as D irecto rs or O ic ers of th e Co mpany (in cludi ng thos e who s er ved a s Dire ctors or O ic er s during th e year). There we re no ind emnit y provi sion s relatin g to the UK p en sion p lan for th e be ne it of the D irec tors during 2 02 1. Major instit utional shareholders As at 2 1 Febru ary 2 02 2, b eing th e las t prac ticab le date, th e Co mpany ha d be en noti ie d of the fo llowing s igni ic ant hol ding s in its ordin ary s hare s unde r se ction 5 o f the UK D is clos ure Gui danc e and Transpare ncy Rul es (DTRs). IHG d id not re ceive n oti icatio ns b etwe en 31 D ec emb er 202 1 an d 21 Feb ruar y 20 2 2. As at 2 1 Feb ru ar y 202 2 As at 2 2 Fe bru ar y 20 21 A s at 17 Fe bru ar y 20 20 Shareholder Ordinar y s h a r e s /A D S s a % a Ordinary shares/ ADSs a % a Ordinary shares/ ADSs a % a BlackRock, Inc. 11,247 ,319 b 6 .12 10,429 ,827 c 5.7 1 9,939, 317 5.46 Boron In vestments B. V . 6,890 ,000 3 .7 7 6,8 9 0,0 00 3 .7 7 11 ,4 50,0 0 0 6 .01 Ce da r Roc k Cap ita l Limi ted 9, 076,898 4.9 5 14,923,417 5.07 14,923,417 5.07 Fiera Capital Corp oration 11,037 ,8 91 6.0 6 1 1 , 0 3 7, 8 9 1 6 .06 1 1 , 0 3 7, 8 9 1 6.06 Fundsmith LLP d 8,9 89,6 47 4.91 10 ,222,246 5.1 8 10 ,2 22,246 5.1 8 Royal B ank o f Can ad a 9,189,5 4 9 5.02 9,1 6 1 , 0 2 1 e 5.0 1 n /a n/a a T he nu mbe r of s har es an d pe rce nta ge o f votin g rig hts wa s de term ine d at th e tim e of th e rel evant d is clo su res m ade i n ac co rdan ce w ith Ru le 5 of th e DTR s and d oe sn’t n ec es s aril y re le ct th e imp ac t of any s har e co nso lid ati on or a ny ch ang es in s ha reh old ing s ubs eq ue nt to th e date o f noti i ca tion t hat a re not r equ ire d to be n oti ie d to us u nd er th e DTRs . b Tota l sh own in clu de s 2,0 80, 427 q ua lif yin g i nan ci al in stru me nts to w hic h voti ng rig hts a re at ta che d. c Total s how n inc lud es 1, 4 31,074 qua lif yi ng ina nci al in str ume nt s to whi ch voti ng ri ght s are at ta ch ed. d T he C om pany u nd ers ta nds t hat Fun ds mith L LP s ubs e que ntly d isp os ed o f it s enti re inte res t in th e Co mp any ’s ordin ar y sh are s. e Total s how n inc lud es 12 3,16 0 qua lif yi ng ina nci al in str ume nt s to whi ch voti ng ri ght s are at ta ch ed. The C omp any’s majo r sha rehol der s have the s ame voting ri ghts as oth er sh areh olde rs. T he C omp any doe s not kn ow of any arrang eme nts the op eratio n of whic h may resu lt in a cha nge in it s cont rol. For fur th er de tail s on s hare hol de r pro ile s se e pa ge 24 9. Articl es of Ass ociation A sum mar y is p rovid ed o n pag es 2 39 an d 240 . The C om pany ’s Ar ticl es of A ss oc iatio n may o nly b e ame nde d by sp eci al re sol utio n and a re availa ble o n the C om pany ’s webs ite at ww w .ihgplc.com/i nv estors under Corpora te g overna nce. Sha res Share capital The C omp any’s is sue d share c api tal at 31 D ec emb er 2 02 1 con siste d of 187 , 717 ,720 ordina ry s hare s of 20 ⁄ pe nce e ach, in clud ing 3,701,40 8 sha res he ld in trea sur y , which c ons tituted 1 .97 % of the total i ssu ed sh are ca pita l (inclu ding tre asur y sh ares). The re are no sp ecia l contro l rights or re stric tion s on sh are trans fers or l imitati ons on the h oldin g of any cla ss of s hare s. Duri ng 202 1, 1,3 60,0 00 s hares we re trans ferred f rom treas ur y to the employ e e shar e ow nership t rust. As far a s is kn own to mana gem ent, I HG i s not dire ctly or in direc tly owne d or co ntrolle d by anoth er co mpany or by any gove rnme nt. The B oard fo cus es on s hare hold er valu e creatio n. Wh en it de cid es to return ca pita l to share hold ers , it con sid ers all o f its opti ons, incl uding s hare bu yba cks and s pe cial div ide nds . Share issues and buyback s In 20 21, th e Com pany did n ot iss ue any new s hare s, nor di d it buy bac k any existin g share s. Dividends While t he Bo ard dete rmine d that it wo uld not b e app ropriate to pay a divid end d uring 20 21, s ubje ct to sh areho lder a pproval at th e 202 2 AGM, a ina l divid end of 8 5. 9¢ in re sp ect of 2 02 1 will be p ayable o n 17 May 20 22 to s hareh old ers on t he regi ster at th e clos e of bu sine ss on 1 Ap ril 202 2. Addition al Information 226 IHG | Annua l Repo rt a nd Form 20 F 202 1 The Companies ( Misc ellaneous Reporting ) Regulations 2018 Set o ut be low is our e mpl oyee eng age ment s tatem ent an d on pag e 2 28, our s tatem ent sum mari sing how th e Dire ctors h ave had rega rd to the ne ed to foste r the C omp any’s busi nes s relati ons hips with suppliers, customers and others. D eta ils of h ow the D ire ctor s have ha d reg ard to th e mat ter s set fo r th in Se cti on 172 (1)(a) to (f) of t he C omp anie s Ac t is prov ide d on p age s 90 a nd 9 1. Employ e e engagement sta tement Our s tatem ent rel ates to IH G’s direc tly emp loyed in dividu als an d sho uld be re ad in c onjun ction w ith our p eop le se ctio n, Se ction 17 2 sta tement , Voice of the Em ployee a nd wid er work forc e remune ration and e mployee e nga gem ent dis clo sure s on pag es 24 to 26, 9 1 and 92, 1 01, 107 , 108 , 112 and 114. Duri ng 202 1, the m ain co mmuni catio n chan nel s to provide inform ation of c onc ern to em ployee s inclu de d week ly new slet ters , vir tual town h alls, C EO and reg iona l lea der ship c alls, p od cas ts, b log s, ema il broa dca sts , vide os an d busi nes s func tion te am me eting s. Empl oyees h ave bee n con sulte d and give n opp or tunitie s to expres s their v iews an d con cern s throug h par ticip ation in th e emp loyee eng age ment s urvey , Voice of the Em ployee s es sion s, ERG s, N ext events (i nterac tive ses sio ns rel ating to IH G’s strateg y and b ehavi ours), quar terl y per form anc e, develo pme nt and we llbe ing me eting s, team me etings a nd the Q &A s es sio n as par t of th e CEO qua rte rly bus ine ss update call. Ea ch De ce mbe r , em ployee s are invite d to join the e mploye e sha re plan . The pl an is availa ble to arou nd 98 % of our c orp orate emp loyees b elow th e se nior/ m id- man agem ent leve l (who rece ive L T IP and re stricte d stoc k unit s awards). F urth er de tails a re on pa ge 2 28. Empl oyees h ave bee n mad e aware of the inan cial an d ec onom ic facto rs ae cting th e pe rfo rmanc e of the C omp any through q uar terly bus ine ss up date ca lls with th e CEO, as well a s busi nes s func tion team m eetin gs, an d other re gion al le ade rship c all s. The C hair an d othe r Direc tors h ave engag ed wi th empl oyees th rough a numb er of m ean s, incl uding di rect inte racti ons, Voice o f the Empl oyee se ssi ons, N ext eve nts an d a seri es of op po rtun ities h eld during th e year to me et E xecu tive Dire ctors v ia vide o me eting s or in person. Det ails o f how Dire ctors h ave had reg ard to emp loyee intere sts , and the e ect o f that reg ard, incl uding p rincip al de cis ions t aken by IH G during th e year c an be fo und on p age s 91 a nd 92 , 101, 1 07 , 108 , 112 and 114. Employ ee numbers Havin g a pred omina ntly fran chis ed an d mana ge d busi nes s mo del me ans that m any of thos e pe opl e who work a t hotels o pe rated unde r our b rands a re not our e mploye es. W hen th e Grou p’ s entire est ate is t aken into acc ount (i nclu ding tho se work ing in ou r franc hise d and m ana ged h otels), approxim ately 32 5,00 0 pe opl e worked gl oball y acros s IH G’s bran ds as at 3 1 De cem ber 2 02 1. The avera ge num ber o f IH G empl oyees, i nclu ding pa rt-time emp loyees , during 2 02 1 were as fol lows: • 6,01 3 peo ple wo rldwi de (inc ludin g thos e in our c orpo rate o ice s, ce ntral res er vation s oi ces a nd owne d hote ls (ex clu ding tho se in a cate gor y b elow)), whose c os ts were b orne by the G roup; • 4, 508 p eo ple wh o worked dire ctly o n beh alf of th e Syste m Fund and wh ose c os ts were b orne by the S ystem Fund; an d • 11,8 07 Gen eral M ana ger s and (in th e US pre dom inantly) othe r hotel workers , who work in m ana ged h otels, w ho have co ntract s or are direc tly emp loyed by IH G and w hos e cos ts are b orne by tho se h otels . S ee no te 4 of the G roup F ina nci al St ate ment s on p age s 16 3 an d 16 4. Employment of disabled persons IH G conti nue s to focus o n providin g an incl usive e nvironme nt, in whic h empl oyees are val ued fo r who they a re and wh at they brin g to the Gro up, and in whi ch tal ente d indivi dual s are retain ed th rough all leve ls of the o rganis ation . We look to ap poi nt the mo st app ropriate p ers on for th e job an d are co mmit ted to provid ing eq ualit y of op por tuni ty to all e mploye es witho ut dis crimin ation. Ever y eo rt i s mad e to ensu re that app licati ons for e mpl oyment fro m disa ble d emp loyees a re fully and fai rly co nsid ered a nd that di sab le d empl oyees h ave equal opp or tunitie s to trainin g, care er deve lop ment an d prom otion. S ee ou r pe opl e dis clo sur es on p ag es 24 to 26 . Visit www.ihgpl c.com/ respon sible-business f or more infor mation. 202 1 sh are awa rds a nd gr ant s to emp loyee s Our c urrent p olicy is to s ettl e the maj orit y of awards o r grants under t he Company’ s share pla ns wit h shar es pur chased in t he market or f rom sha res he ld in trea sur y; however , the Co mpa ny conti nue s to review this p olicy. The Co mpany ’s share pla ns inc orpo rate the curre nt Inves tment A sso ciati on’ s guid elin es on dilutio n whic h provide th at com mitme nts to is sue n ew sha res or re- is sue tre asur y sh ares un der exe cutive pl ans s hould n ot excee d 5%, a nd und er all p lans s houl d not exce ed 10 % , of the is sue d ordin ary s hare c apit al of the C omp any (adjuste d for sh are is suan ce and c anc ellati on) in any 10 -year pe riod . Durin g the inanc ial yea r end ed 3 1 De cem ber 2 02 1, the C ompa ny transfe rred 1,3 6 0,000 treas ur y share s (0.72% of the tot al is sue d sha re capi tal ) to satis fy obligat ions u nder its sha re pl ans. The e stim ated ma ximum dil ution fro m awards ma de und er the Co mpany ’s share pl ans over th e last 1 0 years i s 4.0% . As at 31 D ec emb er 20 21, th ere were n o option s out sta nding . The C omp any has n ot utilis ed th e autho rity g iven by sha reho lder s at any of its AG Ms to allo t share s for ca sh wit hout irs t oerin g such sha res to existi ng sha reho lder s. Employ ee share o wnership tr ust (ESO T ) IH G ope rates a n ESOT for the b ene it of e mpl oyees an d forme r emp loyees . The E SOT rece ives trea sur y sh ares from th e Co mpany an d purch ase s ordin ary s hare s in the ma rket and rel eas es them to c urrent an d forme r empl oyees in s atis factio n of sh are awards. D uring 2 02 1, the ES OT releas ed 5 38 ,77 7 s hares a nd at 31 D ec emb er 202 1 it h eld 8 89,796 o rdinar y sh ares in th e Co mpany . The ESO T adopts a pr udent ap proach t o purchasing shares, using fund s provide d by the G roup, bas ed o n expe ctati ons of futu re requ irem ent s. In Ju ly 201 9, share s hel d in the ES OT that had b een a lloc ated to share plan participants und er the Annual Performance Plan were trans ferred to Eq uatex UK L imited (now C omp uters hare Inves tor Ser vi ces P lc) where they a re held i n a nomin ee a cco unt on b ehal f of thos e par tici pant s (Nomi nee). The s hare s hel d by the No mine e have be en all oca ted to sha re plan p ar ticip ants on te rms that e ntitle th ose par tici pants to re que st or re quire the N omin ee to exerci se the votin g rights re lating to th ose s hares . The N omi nee exerci se s thos e votes in ac corda nce w ith the dire ction s of the p ar ticip ants. S hare s that have not b een a lloc ated to s hare pl an par tici pants u nde r such te rms conti nue to be h eld by th e ESOT and alth ough th e truste e has t he right to vote or ab sta in from exercis ing the ir voting right s in relati on to thos e share s, it h as a po licy of not voti ng, whic h is in lin e with guid eline s. T he trus tee al so ha s the right to ac ce pt or reje ct any oer re lating to th e share s, in any way it se es it. 227 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Report The N omin ee ho lds o rdinar y sh ares in th e Co mpany , in the form o f unvested share plan aw ards, allocated to Annual Performance Plan sha re plan p ar ticipa nts. T he num ber of s hare s can b e found i n note 28 to the G roup Fin anci al Sta teme nts on p age s 198 a nd 19 9. Unl ess o ther wis e requ este d by the C omp any , the tru stee o f the ESOT waives a ll ordina ry di vide nds o n the sh ares h eld in th e ESOT , oth er than s hares w hich h ave bee n allo cate d to par ticip ants on te rms whi ch entitl e them to the b en e it of divi den ds, excep t for suc h amou nt per sha re as sha ll, whe n multipl ied by the n umbe r of sh ares he ld by it on the re levant date, e qua l one p enc e or le ss . Colleague Share Plan The C omp any’s emp loyee sh are pla n, known a s the C olle agu e Share Plan, wa s ir st intro duce d in 20 19 foll owing ap proval by sha rehol der s at the C omp any’s 201 9 AGM, an d the irst P lan Y ear c omm enc ed in January 20 20. In ac cord anc e with the C olle agu e Share P lan Rule s, p arti cipa nts’ contr ibutio ns are us ed to pu rchas e sha res on a m onthly b asi s on be half of the in divid uals (P urchas ed S hare s) and held w ithin the N omin ee. At the en d of the Pl an Y e ar , the par tic ipant s rece ive a co nditio nal right to rec eive on e sha re (Matchin g Sha re) f or ever y on e Purch ase d Sha re that they have pu rchas ed . Providing th e par tici pants h old th e Purch ase d Sha res in the N omin ee unti l the se con d annive rs ary o f the en d of the Pl an Y ear , the co nditio nal rig ht to Matchin g Share s will ve st . In 20 21, 3 56 sh ares ve sted o uts ide of th e usua l timet able d ue to dea ths or go od l eavers , and in J anua ry 20 2 2, 3 5,378 sh ares ve sted as pa rt of t he i rst Pl an Y e ar . As at 2 1 Febru ary 2 02 2, th e Nomi nee hel d 29,5 94 Purch ase d Sh ares in re lation to th e sec ond P lan Y ear, and 2, 54 8 sh ares in re latio n to the third Pla n Y e ar . Co de of C on duc t The C od e of Co ndu ct (our Co de) appli es to all Di rector s, o ice rs and emp loyees a nd co mplie s with th e NYSE ru les a s set o ut in Se ction 40 6 of the U S Sar bane s- O xley Act 2 00 2. Furth er det ails o n our C ode are set o ut in the S trategi c Repo rt o n pag es 37 an d 38 an d the Bo ard’s oversig ht of the C ode i s set o ut on pa ge 9 8. Busines s rela tionships with suppliers, customers and o thers Our b usin es s relatio nsh ips with o ur gue sts , hotel own ers a nd supp lier s are fund ame ntal to ou r comm ercia l suc ce ss. D uring th e year , the B oard co nsi dere d mat ters rel ated to the m and h ad reg ard to the imp act of d eci sion s on the m as de taile d in the key mat ters dis cus sed by th e Bo ard on pa ges 9 0 an d 91. T hes e incl ude d strate gic and o perati onal m atte rs rel ated to bran d integri ty , bran d por t folio, loyalt y strateg y , a s well as te chno log y , su pply c hain an d proc ureme nt. The B oard m onitor s relatio nsh ips throu gh a mix ture of pre sent ation s, reports and d irect en gagement. The Responsible Busi ness Co mmit tee sp ec ii call y reviews res po nsib le pro curem ent pro ces se s, targets and t he Suppli er Code of Conduct. Det ails o f how relati ons hips have b ee n maint aine d during th e year are set o ut in the key st akehol der e ngag eme nt tab les o n pag es 20, 21 a nd 39. The G roup is p ar ty to a te chno logy a gree ment w ith Ama deu s Ho spit alit y Ame rica s, Inc . (Ama deus), for the n ext g ene ration c entral rese r vation sys tem us ed by the G roup. Th e initial te rm of 10 yea rs will expi re in 2028 , and the G roup ha s the right to ex tend th is agre eme nt for two a dditi onal p erio ds of up to 10 ye ars e ach o n the sam e terms , con dition s and p ricing . The inan cial an d pe rfo rmanc e obli gation s in this a greem ent are gu arante ed by Am ade us IT G roup S. A ., the pa rent co mpany of Am ade us. Oth er wis e, there are n o spe ci ic in dividu al co ntract s or arran gem ents con sid ered to b e es senti al to the bu sine ss of th e Grou p as a who le. Future b usi ne ss d evelo pme nts o f the G rou p Det ail s on the se a re set o ut in th e Str ateg ic Rep or t on p ag es 2 to 7 7. Financ e Political do nations The G roup ma de no p oliti cal do natio ns und er the C om panie s Act during th e year an d prop ose s to maint ain this p oli cy in resp ec t of suc h dona tions . The G roup’s wider p olitic al do natio ns po licy conti nue s to be kept und er review. Financ ial r isk management Th e Gro up’s in anc ial ri sk ma nag em ent o bje ctive s an d po lici es, i ncl udin g its u se of in anc ial in stru me nts, a re set o ut in n ote 24 to the G roup Fin anc ial S tate me nts on p ag es 18 8 to 19 2. Signiicant agr eements and change of control pro visions The G roup is a p ar ty to the fo llowin g arrang eme nts whi ch cou ld be termin ated up on a ch ange of c ontrol o f the Co mpa ny and whic h are con sid ered s igni ic ant in term s of their p otenti al impa ct on th e bus ine ss of th e Group a s a whol e: • Th e 10 -year £ 4 00 mill ion bo nd is sue d by the C omp any on 28 Nove mbe r 2012 , unde r which , if the b ond ’s credit rating wa s downg rade d in co nne ction w ith a cha nge of c ontrol, the b on d hol der s would have th e option to re quire the C omp any to rede em or , at the Co mpa ny’s option, re purch ase th e outs tan ding note s toget her wi th interes t acc rue d. • Th e $1. 27 5 billi on synd icate d loa n facilit y ag reem ent date d 30 M arch 20 15 an d maturing i n Septe mbe r 202 3, unde r whic h a cha nge of c ontrol of th e Co mpany woul d entitle e ach l end er to can cel i ts co mmitm ent and d ecl are all am ounts d ue to it payabl e. • Th e 10 -year £ 30 0 milli on bo nd is sue d by the C omp any on 14 Augus t 201 5, und er whic h, if the b ond ’s credit ratin g was downg rade d in co nne ction w ith a cha nge of c ontrol, the b on d hol der s would have th e option to re quire the C omp any to rede em or , at the Co mpa ny’s option, re purch ase th e outs tan ding note s toget her wi th interes t acc rue d. • Th e 10 -year £ 3 50 millio n bon d is sue d by the Co mpany on 24 Augus t 201 6, und er whic h, if the b ond ’s credit ratin g was downg rade d in co nne ction w ith a cha nge of c ontrol, the b on d hol der s would have th e option to re quire the C omp any to rede em or , at the Co mpa ny’s option, re purch ase th e outs tan ding note s toget her wi th interes t acc rue d. • Th e 8. 5 -year €5 00 m illion b ond i ssu ed by the C om pany on 15 Nove mbe r 201 8, und er whic h, if the b ond ’s credit ratin g was downg rade d in co nne ction w ith a cha nge of c ontrol, the b on d hol der s would have th e option to re quire the C omp any to rede em or , at the Co mpa ny’s option, re purch ase th e outs tan ding note s toget her wi th interes t acc rue d. • Th e four- year € 50 0 millio n bon d iss ue d by the Co mpany on 8 Oc tobe r 2020, un der wh ich, if th e bon d’s credit r ating was downg rade d in co nne ction w ith a cha nge of c ontrol, the b on d hol der s would have th e option to re quire the C omp any to rede em or , at the Co mpa ny’s option, re purch ase th e outs tan ding note s toget her wi th interes t acc rue d. • Th e eight-year £ 40 0 millio n bo nd is sue d by the Co mpa ny on 8 Oc tobe r 2020 (of whic h £173 mill ion rem ains ou tst andin g), under whic h, if the b ond ’s credit rating wa s downg rade d in co nne ction with a ch ange o f control, th e bo nd hol der s would h ave the optio n to require th e Co mpany to red ee m or , at th e Co mpany ’s option, repur chase the outstandi ng not es toge ther wi th i nter est accrued. Fur the r det ails o n mate ria l con trac ts are s et ou t on pa ge 241 . Di scl os ure of in form atio n to Audi tor For det ail s, se e pa ge 13 0. Dir ectors ’ Rep or t c o nti nu e d Addition al Information 228 IH G | Annua l Repo rt a nd Form 20 F 202 1 Scope We repor t s cop e 1, sc ope 2 a nd sc ope 3 e mis sion s as de in ed by the G HG Proto col C orp orate Ac counti ng and Re po rtin g Sta ndard meth odo logy, under th e ope ration al contro l appro ach: • Sc op e 1 emis sio ns are dire ct em iss ions fro m the bur ning of fu els or from ref rigera nt los se s by our man age d, owne d, le ase d and managed lease hotels. 2021 2020 2019 Reporting boundary Measure Global UK a nd U K osh ore only G lobal UK a nd U K oshore only Global UK a nd U K oshore only Emissions from operations un der o ur d ire ct c ont rol – co rpo rate o ic es an d IH G own ed, l ea se d, managed and manage d lease hotels Ene rgy – fu el u se fro m hote l op erati on s and h otel tran sp or t se rv ice s (k Wh) 1,941,261,216 1 2 , 174 ,0 2 2 1,49 5,5 81,9 91 6, 776,94 5 1,990,594,1 75 1 1 ,7 3 9,1 4 8 Energy – pur chased electr ici ty , heat, st eam and c oo ling ( kW h) 3,417 ,8 66,055 9,884 , 029 2,86 5,754,370 8,59 8,040 3, 597 ,26 6,54 0 11,417,267 T ota l Ene rgy – fu el us e from h otel o pe ratio ns an d hotel transport ser vices, purchased elect ricity , heat, ste am an d co olin g (kW h) 5,359 , 127 ,271 2 2 ,0 5 8,0 51 4,361, 336,361 1 5,37 4,98 5 5,587,860,715 23, 156,415 Sc op e 1 Dire ct e mis sio ns (tC O 2 e from f uel u se and refrigerants) 4 4 0,7 1 9 2, 279 335,35 9 1,2 81 464, 215 2, 247 Sc op e 2 Indi rec t emi ss ion s, Locat ion-based ( tCO 2 e from purchased ener gy ) 1,7 9 0,0 1 5 2 ,05 2 1 , 4 7 7, 5 5 7 1,950 1,902,829 2,818 Sc op e 2 Indi rec t emi ss ion s, Marke t-based (tCO 2 e from purchased ener gy ) 1,7 9 4 ,741 3 ,1 2 9 1,484,256 2,98 8 1,9 29,6 4 3 4,3 50 T ota l sco pe 1 a nd 2 emiss ions , L ocat ion-b ased (tC O 2 e) 2 , 2 30 ,73 4 4,331 1,812,916 3, 231 2,367 ,044 5 ,06 5 Sc op e 1 and 2 in tens it y , Locat ion-based ( tCO 2 e pe r (£0 00 reve nue)) 0.3 3 0.04 0.3 4 0.0 5 0. 20 0.02 Emissions from operations outside our direct operati onal control – franch ised hotels. Sc op e 3 Indi rec t emi ss ion s from franchised hot el operations (tCO 2 e) 2,072,377 1 0 6,66 5 1,90 1,097 104,625 2,5 35,4 32 148,848 Emissions from operations outside our direct operati onal control – Fuel - and e ner gy-re late d emissions (FERA) Sc op e 3 Indi rec t emi ss ion s from Fue l- an d en ergy- rel ated e mis sio ns (tC O 2 e) 79 0 ,7 17 18,486 6 8 6,7 7 5 18,29 0 89 6, 244 25,9 85 Emissions from all operati ons – corporate o ice s, I HG ow ne d, leased, managed hotels and managed lease, and franch ised hotels T ota l sco pe 1, 2 a nd 3 GH G em iss ion s (tCO 2 e) 4,3 03,111 110 ,996 3,7 14 ,0 1 3 107 ,856 4,902,476 153,9 13 Emissions from all operati ons – corporate o ice s, I HG ow ne d, le ase d and managed hotels, and franchised hot els AND FERA T ota l sco pe 1, 2 a nd 3 AN D FER A G HG e mis si ons (tC O 2 e) 5,0 9 3, 82 8 12 9,4 82 4,400 , 788 1 2 6 ,14 7 5,7 9 8,7 2 0 1 79 ,898 • Sc op e 2 emis sio ns are ind irect e mis sion s gen erate d by the en ergy purch ase d or ac quire d by our ma nage d, own ed, le as ed an d managed lease hotels. • Sc op e 3 emis sio ns are ind irect e mis sion s that ari se as a re sult of en ergy us ed in o ur fran chis ed hote ls. Greenhouse gas ( GHG) emissions By de liverin g more envi ronme ntally s ust aina ble ho tels, we create val ue for I HG, our h otel own ers an d all our s takeho lde rs. We reco gnis e the ris ks from clim ate chan ge an d the imp or tan ce of redu cing ou r carb on fo otprint an d in 202 0 we set amb itiou s 203 0 carb on re ducti on ta rgets, a pproved by th e Scie nce B as ed Targets initiati ve and alig ned to a 2 ° C sce nario. Re co gnis ing the n ee d to go fur the r , in 2 02 1 we upgra de d our exis ting sc ienc e -b ase d targ et to align with th e mos t ambi tious g oals o f the Pari s Agree ment to keep gl obal wa rming wi thin 1. 5°C. Th is upg rade d targ et requi res us to redu ce e mis sion s by 46 % acros s the e nergy u se d acros s our franchised, managed, owned, leased and managed lease hot els. Duri ng 202 1, due m ainly to th e impa ct of C ovid-19 o n our in dustr y , our ab sol ute sco pe 1 an d 2 GH G emi ssi ons from o ur man age d, owne d, le ase d and m anag ed le as e hotel s fell by 6% fro m bas e year 201 9 and ou r sco pe 3 G HG e mis sion s from our fr anchi se d hotel s plus F ER A fell by 17 % . T ot al sc ope 1, 2 a nd 3 GH G em iss ions f rom the who le es tate fell by 12 % from b ase ye ar 201 9 (towards a 203 0 redu ction targ et of 46 %). Covid -19 has c ontinu ed to imp act o ccu pancy l evels acro ss our e st ate and re quired i ntermit tent hote l clo sures in m any loc ation s, whic h, in ad dition to th e ene rgy e icie ncy eo rt s from our ho tels, h as sign ii cantly l owered o ur ca rbon fo otprint fo r the year . As the i ndus try re cover s, we will c ontinu e to focus o n achiev ing our c arbo n redu ction g oals by dri ving e nergy e i cien cy in our ho tels and in crea singl y look ing at ren ewabl e ene rgy so lution s. 229 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Directors ’ Report Methodology We work with ex ternal c on sult ants to give us a n up -to- d ate picture of IH G’s carb on fo otprint an d ass es s our p er forma nce over ti me. T o c alc ulate our e mis sion s, they us e the G HG Proto col C orp orate Acc ounting a nd Rep or ting S tan dard meth odo log y and refe r to other existi ng and e mergin g de initi ons, m etho dolo gie s and st and ards, a s relevant . Our c ons ulta nts us e utilit y con sumpti on dat a as rep or ted by hotels o n the I HG G reen En gag e™ system, c ompl ete outlie r che cks as ne ce ss ar y , ap ply s ampli ng and ex trap olatio n meth odo logy to esti mate our gl oba l ene rgy use a nd app ly the ap prop riate emi ssio n facto rs to cal culate o ur GH G emi ssi ons . For 202 1, the s ampl e covere d 90 % of our U K hote ls and 6 8% of o ur glo bal hote ls. Any mis sing d atap oints fo r ene rgy use in 2 02 1 have be en ille d usin g average c on sumptio n pe r room nig ht from the n eare st 12-mo nth period. Region -brand, regional and global average consumption pe r room nig ht were ca lculate d for e ach fu el t ype an d outlie rs were ide ntii ed by co mpa riso n to the me dian of th e relevant re gion -b rand group. C ons umptio n data h as be en e stim ated for n on- rep or ting hotel s bas ed o n regio n-b rand aver age c onsu mption p er roo m night, app lied to a ho tel’s numb er of roo m nights . This e nsu res that a ll hotel s have a con sumpti on i gure co rresp ond ing to thei r occ upie d room ni ghts. A s IH G’s System s ize is c ontinu ally ch angin g, 2020 a nd 201 9 data h ave bee n res tated . Our rep or ting i s bas ed o n cale nda r year rep or ting, s howin g annua l GH G emis sio ns for th e peri od 1 Jan uar y to 31 D ece mbe r 202 1. Th is align s with ou r in ancia l repo rtin g period, to enable analysis of both inancial and non -inanc ial indic ators fo r the s ame p erio d. Energ y reductio n initiatives IH G hotel s glob ally us e the I HG G reen E ngag e system, a compr ehensive o nline envir onmental management platform that help s the m mea sure, trac k and re por t the ir utilit y co nsum ption an d carb on fo otprint, a s well a s providin g over 20 0 ‘Gre en So lution s’ with de taile d guid anc e to supp or t hotel s in redu cing th eir en ergy , water an d waste imp act s. T o com ply wit h the IH G Gre en Eng age standard, hot els are requir ed amongst o thers t o r eport their mont hly ene rgy co nsum ption an d com plete key ene rgy savi ng acti ons . In ad dition, i n 202 1, hotel s were se t an annu al car bon re ducti on targ et to drive co ntinuou s improvem ent. P er forman ce ag ains t this targ et was reviewe d on a m onthly b asis a nd pre sente d to regio nal ope ration s team s. T o ince ntivis e and f acilit ate our ho tels rep or ting into Gre en Eng age, in 2 02 1 we laun che d and b ega n the rollo ut of an autom ated dat a entr y initi ative for hote ls. T his initi ative will stre amlin e the rep or ting pro ce ss for o ur hotel s so tha t they can s pe nd le ss tim e repo rti ng thei r data a nd more ti me focu ss ing on re ducin g ene rgy at their h otels . The in itiative will a lso h elp to sup por t mo re acc urate and time ly dat a from our h otels into G reen E ngag e. In 20 21, we s aw our glo bal e mis sion s fall by 12 % and e nergy con sumpti on fall by 11% c ompa red to ba se year 2 019 (sc ope 1, 2 and 3). Thi s was larg ely du e to the impa ct of C ovid -19 on our indu str y , re sultin g in low oc cupa ncy leve ls and inte rmit tent hote l clo sures , but al so in pa rt d ue to targ eted en ergy re ducti on eo rt s in our e sta te, inclu ding for exa mple th e impl eme ntatio n of a daily ene rgy co nsum ption tra cker in so me lo catio ns whic h inform ed shutd owns of p ar ts of ou r hotels w hen o ccu pancy wa s low. We also p rovide d our hote ls with info rmatio n and re sourc es on low co st, qu ick payb ack m eas ures to re duce e nerg y con sumpti on. Whe re pos sib le, we have worked c los ely wi th our hote ls throu ghout the pa nde mic to hel p minimi se en ergy co nsu mption an d utilit y co sts during h otel cl osure an d max imise e nerg y e icie ncy durin g the re- ope ning stage . Hote l En erg y Redu cti on O ppo rtu niti es (H ERO) tool T o s upp or t our hote ls to dec arb onis e, we have ide nti ied s ome key energy c ons er vation m ea sures th at will re duce e nerg y at our ho tels. I n orde r to facilit ate impl eme ntatio n at a hotel l evel, we have worked wi th glob al sp ecia list s in the bu ilt environ ment , to develo p a prio ritis ation too l for our h otels . The too l reviews th e existi ng infras truc ture of the hote l and wh at initiati ves the h otel has a lread y imple me nted and th en re comm end s me asure s to drive fur ther e i cien cie s. Thi s tool p rovides i nformati on on th e expe cted cap ital c os t of mea sure s, as wel l as indi cative e nergy a nd co st savin g informati on. T he tool w ill be l aunch ed in 2 02 2 and rei nforce d through t raining of h otel an d ope ration s team s. We are als o reviewin g in ancin g opp or tunitie s that are avail able to h otels in dierent geo graphies. Se e ou r pla net-re late d ac tivit ies a nd TCF D dis clo sur es, a s well as ou r ca rbo n footp rint K PI on p ag es 2 9 to 35 a nd 53 . Se e our Re sp on sib le Bu sin es s Rep or t an d ESG d ata bo ok at www.Ihgplc.com / responsible-business Lis ting Ru le s – com pli anc e wit h LR 9.8. 4C Section A pplicable sub-paragr aph wi thin L R 9 .8.4C Loc ation 1 Interest capitalised Gro up Fi nan cia l Sta teme nts , note 7, page 1 68 4 Deta ils of l ong -te rm inc ent ive sc hem es D irec tor s’ Rem une ratio n Rep or t, p age s 10 4 to 125 Th e abo ve tab le s ets o ut o nly th os e se cti on s of LR 9. 8. 4C w hic h are re leva nt. T he re mai nin g se cti ons o f LR 9. 8. 4 are no t app lic ab le. Dir ectors ’ Rep or t c o nti nu e d Going concern An over view of th e bus ine ss ac tivitie s of IH G, inc luding a rev iew of the key bus ines s ris ks that the G roup fa ces , is given i n the Strate gic Rep or t on pa ges 2 to 7 7 an d in the G roup infor mation o n pag es 23 1 to 242 . The re silie nce o f the Gro up’ s fee -b as ed mo del, w ide ge og raphic spread and str ong cash manag ement means t hat t he Gr oup has be en ab le to gen erate $ 63 6m of n et ca sh from op erati ng acti vitie s in a year w hen tra ding ha s still b ee n subs tanti ally imp acte d by the glob al pa ndem ic. As at 3 1 De cem ber 2 02 1 the Gro up had tot al liqui dity o f $2,6 55 m, com pris ing $1, 35 0m of un drawn b ank fac ilities and $ 1,3 05m o f cas h and c ash e quiva lent s (net of overdraf ts an d restr icted cash ). The re remain s a wid e range of p os sibl e pla nning s cen ario s over the goin g con cern p erio d. Th e sce nari os co nsid ere d and as se ss ment mad e by the Dire ctor s in ado pting the g oing c onc ern ba sis for prep aring th ese ina ncia l state ment s is inc lude d on p age 14 9. Based on the assessment completed, the Di rectors hav e a reasonable expe cta tion that th e Grou p has su i cient re sou rces to c ontinue ope rating unti l at lea st 30 J une 2 023 an d there are n o materi al unc er tainti es that m ay cas t doubt o n the G roup’s going co nce rn sta tus. Ac cordi ngly , they co ntinue to ad opt the g oing c onc ern ba sis in pr eparing t he Fina ncial Stat ements. Pl ea se se e th e viab ilit y st atem ent o n pa ges 4 8 an d 49. By ord er of the B oard, Nicolette Henfr ey Comp any Secretar y Inter Co ntinent al H otels G roup PLC Regi stere d in Engl and an d Wales, C om pany numb er 513 4 420 21 Feb ruar y 20 2 2 Addition al Information 230 I HG | Annua l Repo rt a nd Form 20 F 202 1 G rou p info rm atio n Hist or y and de v e lopments Risk fact ors The C omp any was inc orp orate d and reg istere d in Engl and an d Wales with reg istere d numb er 513 4 420 on 2 1 May 20 04 a s a limite d com pany unde r the C omp anie s Act 19 85 w ith the na me H ackre mco (N o. 21 54) Limite d. In 20 04 /05, as p ar t of a sch em e of arrang eme nt to facili tate the return of c api tal to sh areho lde rs, the fo llowin g struc tural ch ange s were ma de to the G roup: (i) on 24 M arch 20 0 5, Ha ckrem co (N o. 215 4) Limite d cha nge d its na me to New I nterC ontin ent al Hote ls Grou p Limite d; (ii) on 2 7 April 2 00 5, New I nterC ontin ent al Hote ls Grou p Limite d re -regi stere d as a pu blic lim ited co mpa ny and cha nge d its n ame to Ne w InterC onti nent al Hote ls Gro up PLC; and (ii i) on 27 Ju ne 20 05, N ew Inte rC ontine ntal H otels G roup PLC ch ange d its n ame to Inter C ontine ntal H otels G roup PLC and b ec ame th e hol ding co mpa ny of the Grou p. The G roup, form erly kn own as B as s, and th en Six C ontin ents , was his toric ally a c onglo mera te ope rating as , amon g other th ings, a brewer, soft dri nks manu factu rer , h otelie r , le isure o perato r , an d rest aurant , pub an d bar own er . In 19 88 B as s acq uired H olid ay Inn Intern ation al and th e remain der o f the Ho liday Inn b rand in 1 99 0. The I nterC ontin enta l bran d was ac quired by B as s in 19 98 an d the Can dlewo od Su ites bra nd was a cquire d by Six C ontine nts in 20 0 3. On 1 5 April 20 03 , followin g sha rehol der a nd regul ator y app roval, Six C ontine nts PLC se para ted into t wo new lis ted group s, Inter Co ntinent al H otels G roup PLC, co mpri sing the h otels a nd sof t drin ks busi nes se s, and M itche lls & B utler p lc, co mpris ing the retai l and standard commercial property dev elopments busi ness. The G roup is s ubje ct to a variet y of inh erent ri sks that m ay have an adve rse i mpac t on its b usi nes s op eratio ns, inan cial c onditi on, turnover, proits , bran ds and re put ation. T his se ctio n des crib es th e main ri sks that c ould m ateria lly ae ct the G roup’s busin es s. Th e risks be low are not th e only on es th at the Gro up fac es. S ome r isks are not yet kn own to the G roup and s ome ri sks that th e Grou p doe s not currentl y bel ieve to be mate rial co uld late r turn out to b e materi al. While t he pan dem ic, and rel ated re stricti ons im pos ed by governm ents a nd othe rs, h as not fu ndam enta lly cha nge d our ris k facto rs, it c ontinu es to he ighten the u nce rt aint y which we f ace in many are as in de liverin g our sh or t- and long er-term ambiti ons an d rec on irme d that ma ny of our ris ks are con nec ted. T his inc lude s the conti nuing s igni ica nce of t he safe ty an d se curit y of our c olle agu es and gu est s, gover nment i nter vention s impa cting d ome stic, na tiona l and inte rnatio nal travel, c ons umer c on ide nc e and ap petite to travel intern ationa lly in the lo nge r term, how we o per ate our hote ls and the overal l impa ct on ou r bus ines s res ilien ce. T he res pon se to the prim ary s afet y co nce rns of C ovid -19 also c reated s everal s ec ond ary impacts. For example: • he ighten ed ris k of ne gative rep utati onal im pac t (and the bu sine ss con se que nce s) as a result o f any of our pa nde mic cris is ma nage ment acti ons b eing n egati vely pe rcei ved by any sta kehold er grou p; • he ighten ed cyb er ris ks from work ing rem otely; • cl osure of key co rpor ate loc ation s put ting pre ssu re on our processes, syst ems and infr astruct ure ; • en hanc ed exp osu re to ke y pe rso n or work force avail abili ty ris ks; • stra in on third -pa rt y sup plie r relatio nsh ips – bo th in relatio n to bus ine ss an d ope ration al co ntinuit y and wi der ri sks of su pplie r insolven cy and/ o r default; • ch ange s to glob al or lo ca l laws or re quirem ents; a nd The G roup di spo se d of its inte rest s in the so ft dr inks bu sine ss by way of an initia l publi c oeri ng of Bri tvi c (Brit annia S of t Drinks L imite d for the p erio d up to 18 Nove mbe r 200 5, an d there af ter , B rita nnia S D Hol ding s Limite d (rename d Brit vic p lc on 2 1 Novem ber 2 00 5), whic h bec ame th e hol ding c ompa ny of the Brit vic G roup o n 18 Nove mbe r 200 5), a man ufactu rer and d istrib utor of s oft d rinks in the U K , in De cem ber 2 00 5. Th e Grou p now con tinue s as a stand-alone ho tels business. Rece nt acqui sition s and divestiture s The G roup ma de no a cqui sitio ns in 20 21, h owever defe rred pu rchas e con sid eratio n for the prev ious Re gen t acqu isitio n resul ted in a $13 mi llion c ash o ut low du ring the ye ar (2 020 : $ 0, 20 19 : $ 30 0 mi llio n). The 2 019 n et ca sh out low prin cipall y relate d to the ac quisi tion of Six S ens es H otels Re sor t s Spa s and it s mana gem ent bu sine ss (‘Si x Sen ses ’) in Febr uar y 20 19. In 20 21 th e Group di sp ose d of a po rt folio o f three E VEN H otel s in the US re sulting i n a net c ash in low of $ 4 4 millio n. Fur the r infor matio n is in clu de d in note s 11 an d 12 to the G roup F in anci al St atem ent s on pa ge s 17 4 to 175 . Capit al expend iture • Gro ss c apit al expe nditu re in 202 1 totall ed $ 10 0 million c omp ared with $ 148 milli on in 20 20 and $ 265 m illion in 2 019, s ee p age 2 2 2. • At 31 D ec emb er 20 21, c apit al co mmit ted ( bein g contr act s plac ed for exp enditu re on prop er ty, plant and e quip ment a nd inta ngibl e as sets n ot provid ed for in t he Grou p Fina ncial S tate ment s) t otal led $17 mill ion, se e pa ge 20 0. • sig ni icant c os t pres sure s for owne rs rais ing ris ks of def ault on payme nts du e to IHG, e mploye es or s uppli ers; n on- c ompl ianc e by owner s with st and ards an d other re quirem ents ; and own er ins olven cy and work-o uts; im pac ting our a bilit y to roll out in itiative s as pl anne d and th e wide r risk to o ur bus ine ss mo del . The p erio d of the p ande mic ha s als o obs er ved tre nds in oth er risk f actor s. For examp le: • fur the r waves of the p and emic an d/or a slower th an anticip ated indu str y rec overy fo r bus ines s an d leis ure travel co uld cre ate fur ther vo latilit y and c hall engin g con dition s in the c apit al mar kets mak ing it mo re di icult to ob tain a dditio nal fun ding if re quire d and pote ntial imp act to inan cial p er forma nce wh ich co uld res ult in fur ther a ctio ns requ ired to ma nage c os ts; • geopolitical and socioeconomic developmen ts (incl uding f ocus on cli mate -rel ated imp act s) which may inc reas e the likeli hoo d of disr uption to inb oun d or outb oun d travel and tra de, the p otentia l for me asure s to be t aken agai nst b usin es ses o r heig htene d expe cta tions in c orp orate pe r forman ce; an d • inh erent ri sks of bu rnout , physic al and m ent al he alth imp act s and chal leng es to at tract a nd reta in sta while un ce rt aint y in the hos pit alit y indus tr y contin ues . T o e nab le focu s on the m aterial r isk fa ctors fa cing th e Group, th e det ail be low ha s bee n orga nise d und er he adin gs co rresp ond ing to the ord ering of th e prin cipal r isks ou tline d earli er in thi s docu ment and c ons ider s the as se ss ment of i nhere nt risk tre nd an d spe ed of pote ntial imp act o n IH G obje ctive s. Th e pri ncip al ri sks are o n pa ge s 42 to 47 , t he ca utio nar y s tate men ts reg ardin g for ward -l ook ing s tate me nts are o n pa ge 251 a nd ina nci al and fo r ward- lo oki ng info rma tion i ncl udin g note 8 o n pag es 1 69 to 173 , and n ote 24 on p ag es 18 8 to 19 2. 231 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Group i nformati on 1. Ma cro ex tern al fa cto rs The G rou p is exp os ed to t he ris ks of po liti cal and economic dev elop ments The G roup is exp os ed to p olitic al, ec ono mic and ina ncia l market devel opme nts su ch as re ce ssi on, in latio n and availa bilit y of cre dit and curren cy lu ctuatio ns that c oul d lower reven ues an d redu ce inc om e. The o utloo k for 20 22 m ay wors en due to c ontinuin g disr uption fro m Covi d-19 on d ome stic an d interna tional t ravel pat terns; p otentia l disr uption s in the U S eco nomy; the imp act of luc tuating c omm odit y prices (in cluding oil) on economies dependent on such exports; conti nue d unres t in par ts of th e Mid dle E ast , Africa a nd Asi a; and b arrier s to glob al trad e, inclu ding unfo rese ea ble ch ange s in regul ation s, imp ositio n of ta ris o r emb argoe s, an d other tra de restri ction s or co ntrols . The inte rconn ec ted nature o f eco nomi es sug ges ts any of the se, or o ther eve nts, co uld trig ger a re ce ssio n that redu ce s leis ure and b usin es s travel to and from a ecte d co untries and a dvers ely a ect s room rate s and/or oc cupa ncy level s and oth er inc ome - ge neratin g activ ities . Sp eci ic ally , the Gro up is mo st exp ose d to the imp act of p oliti cal an d ec onom ic risk f actor s in relati on to the US mar ket an d to Grea ter Chin a. Th e owne rs or p otential own ers o f hotels franchise d or ma nage d by the G roup fac e simil ar ris ks that cou ld adve rse ly imp act th eir so lvency a nd the G roup’s abilit y to se cure and ret ain fra nchis e or ma nag eme nt agre eme nts. Acc ordingl y , the G roup i s par ticul arly su sce ptibl e to adver se cha nges i n thes e ec ono mies a s well as c hang es in th eir cur renci es. In ad dition to tra ding c onditi ons, th e ec ono mic outl ook al so a ect s the inan cial he alth of c urrent an d potenti al owne rs and t heir ab ilit y to acc es s cap ital, w hich c ould im pac t existin g ope ration s, time ly payme nt of IH G fee s, an d the he alth of th e pipe line. The G rou p is exp os ed to t he ris ks of overc apa cit y in th e hote l ind us tr y The f uture op erating re sult s of the G roup co uld be a dvers ely ae cted by in dustr y overc apa cit y (by numb er of ro oms) and weak d ema nd due, fo r exampl e, to the pan dem ic and a sso ciate d restri ction s on travel an d cus tomer c on id enc e in returning to bus ine ss an d leis ure travel, to the cyclic al n ature of the hote l indu str y , an d to other d iere nce s bet wee n pla nning a ssum ption s and a ctual o pera ting co nditio ns. T hes e co nditio ns co uld res ult in redu ctio ns in roo m rates an d occ upan cy level s, whic h would adve rse ly impa ct the ina ncial p er form anc e of the Gro up. 2 . Prefe rred b ran ds a nd loyal ty The G rou p is s ubje ct to a c om pet itive an d cha ng ing in du str y The G roup op erate s in a co mpeti tive indu str y and mu st co mpete ee ctivel y again st tra dition al co mpetito rs suc h as othe r glo bal hote l chai ns, lo cal h otel co mpa nies a nd ind epe nde nt hotel s to win the loyalt y of gue sts , empl oyees an d owne rs. T he co mpeti tive land sc ape als o inclu des o ther t ype s of bu sine ss es, b oth glo bal an d spe ci ic to ce rt ain mar kets, suc h as web - bas ed b ook ing ch anne ls (which in clud e onlin e travel age nts an d interme dia ries), and alte rnative s ource s of acc omm odati on su ch as sh or t-term lets o f private pro per t y . Failure to com pete e ecti vely in tra dition al and e mergi ng area s of the b usin es s cou ld imp act the G roup’s market sha re, system s ize, pro ita bilit y and relat ionships with owners and guests. The hospital ity indust ry has expe rienc ed re ce nt con soli datio n and is li kely to see th is trend conti nue as c omp anie s se ek to maint ain or in crea se c ompe titive advant age . Furthe r con soli datio n by comp etitor s may resul t in such com petito rs havin g acc es s to incre ase d res ource s, ca pabil ities o r cap acit y an d provide a dvant age s from sc ale of reve nues , marketing funds a nd/ or cost struct ures. The G rou p is re lia nt on th e rep ut ation o f its exi stin g bra nd s an d is expo se d to in her ent re pu tati on ris ks Any event that m aterial ly dam age s the rep utatio n of one o r more of the G roup’s brands an d/ or fail s to sust ain the a ppe al of th e Group’s bran ds to its c ustom ers an d owne rs may have an a dvers e impa ct on the valu e of that b rand an d subs equ ent reven ues fro m that bra nd or bu sine ss . In pa rtic ular , if the G roup is un abl e to create co nsi stent, valued and quality product s and guest experience s across the franchised, managed, owned, leased and managed lease hot els or if th e Group, it s franch ise es o r busi nes s par tne rs fail to a ct resp on sibly, this coul d result i n an adve rse im pac t on its b rand repu tation . In ad dition, th e value o f the Gro up’ s bran ds co uld be inl uen ce d by a numbe r of exte rnal fa ctors o utsi de the G roup’s contro l, such a s, bu t not limite d to, chang es in s entim ents a gains t glob al bra nds, c hang es in ap plic abl e regul ations re lated to th e hotel in dus try o r to franch ising , suc ces sfu l comm oditi sati on of hotel b rand s by online tr avel age nts and in terme diarie s, or c hang es in owne rs’ p erce ptions o f the value o f the Gro up. The G rou p is exp os ed to in he rent u nc er tai ntie s as so cia ted with br and dev elopment and e xpansion In rec ent yea rs the G roup ha s laun che d or ac quire d a numbe r of bran ds, su ch as E VE N Hotel s, HUALUX E Hotel s and Re sor ts , avid hotel s, voc o hotels , Kimp ton Hotel s & Res taura nts, Re gent , Six Se nse s, Atwe ll Suite s, Vign et te Coll ecti on and e ntere d into co -b rande d cred it card re lation ship s to supp or t the I HG Reward s progra mme and an exclu sive loyalt y pa rtn ers hip with M r & Mrs S mith. As th e roll out, i ntegratio n and grow th of th ese b rand s (incl uding a ss ocia ted loyalt y progra mme s) is dep ende nt on m arket con dition s, gue st prefe rence a nd owne r investm ent, a nd als o co ntinue d coo pe ration with third p ar ties, th ere are inh erent ri sks that we w ill be un able to recove r cos ts inc urred in d evelop ing or a cqui ring the b rands o r any new pro gramm es or p roduc ts, o r thos e bran ds, pro gramm es, or pro duct s will not s ucc ee d as we inte nd. Th e Grou p’ s ongo ing age nda to de liver in dus try- lea ding n et room s grow th create s risks relatin g to the tran sition o f system s, op erating m ode ls an d proc es ses , and m ay result in fa ilures to im prove comm erci al per for manc e, lea ding to inan cial lo ss a nd und ermini ng st akehol der c on ide nce . The G rou p is exp os ed to a vari ety o f risks r ela ted to i den tif ying , securing and retain ing fr anchise and management agreements The G roup’s growth st rategy d epe nds o n its su cc ess i n ide ntify ing, securing an d retaining franchise and m anagem ent agreeme nts. This i s an inhe rent ris k for the h otel ind ustr y and th e franc hisi ng bus ine ss an d mana gem ent mo del . Co mpeti tion with oth er hote l com pani es may ge ner ally red uce th e numb er of sui tab le franc his e, man age ment an d investm ent op por tuni ties o ered to th e Group and in crea se the b argaini ng po sitio n of prop er ty ow ners s ee king to bec om e a franch ise e or en gag e a mana ger. The terms o f new franc hise o r man age ment a greem ent s may not be a s favourab le as current a rrang eme nts; the G roup may no t be abl e to renew exi sting arrang eme nts on s imila rly favourab le term s, or at all . The re can al so b e no as suran ce tha t the Grou p will be a ble to id entif y , retain o r add f ranchi se es to the I HG S ystem, to s ecure m ana gem ent contr act s or op en hote ls in our d evelop ment p ipe line. For ex ample , the availa bilit y of suit abl e sites , market sa turation, p lann ing and other l oc al regu lation s or the avail abilit y and a orda bilit y of i nanc e may res trict the s uppl y of suit abl e hotel deve lop ment o ppo rtun ities unde r fran chis e or man age ment a gree ment s and me an tha t not ever y hotel in o ur devel opm ent pip elin e may devel op into a new h otel that en ters our sy stem. I n con nec tion wi th enterin g into franc hise or ma nage me nt agree ment s, the G roup may b e requi red to make investm ents in , or gua rantee th e oblig ation s of , third pa rtie s or guara ntee mini mum inc ome to thi rd par ties . The re are als o risks th at signi ic ant fra nchis ee s or grou ps of fran chis ee s may have intere sts that c onl ict, o r are not alig ned , with tho se of the G roup, inc ludin g, for examp le, the unw illingn es s of franc hise es to s uppo rt i ndivi dual or ma ster b rand or sy stem im proveme nt initiative s. Th is co uld res ult in fran chis ee s prema turely term inating c ontra cts wh ich co uld le ad to disp utes, li tigatio n, dam age s and oth er expe nse s and wo uld adve rse ly impa ct the ove rall IH G Sys tem size a nd the G roup’s inancial p erformanc e. G roup i nform atio n c o ntin u e d Risk fact ors c o nti nu e d Addition al Information 232 IH G | Annua l Repo rt a nd Form 20 F 202 1 3. Le ad ers hip a nd t ale nt The G rou p req uire s th e right p eo pl e, ski lls a nd c apa bili ty to ma nag e grow th a nd c han ge In orde r to remai n com petitive, th e Group m ust e mploy th e right peo ple. This inclu des hiring and retaining highly skill ed employee s with pa rti cular exp er tis e or le ade rshi p cap abilit y . The im ple ment ation of the G roup’s strategic b usin es s plan s cou ld be un derm ine d by failure to build a nd sus tain a re silie nt co rpora te culture, fail ure to recruit or ret ain key pers onn el, unexp ec ted lo ss of key se nior e mploye es, failure s in the G roup’s succ es sion p lanni ng and in centi ve plan s, or fail ure to invest in the d evelo pme nt of key skills . The G roup mu st co mpete a gain st othe r com panie s ins ide an d outside the hospit ality industr y for suitably qualiied or experienc ed emp loyees , up to and in cludi ng E xecutive D irecto rs. S ome of th e markets i n which th e Group o pe rates may exp erie nce e co nomic grow th and/or low level s of une mploym ent, p ay comp res sion, a nd there m ay be at tractive ro les an d com petiti ve rewards availab le els ewhe re which l imit the ab ilit y to attra ct and ret ain t alent in key r ol e s . Som e eme rging m arkets may not h ave the requi red lo cal ex per tis e to ope rate a hotel, p ar ticula rly for luxu ry a nd lifes ty le bran ds, an d may not b e able to at trac t the right t ale nt. Failure to attra ct an d retain emp loyees a nd inc reas ing lab our c ost s may threate n the abi lity to ope rate hotel s and ou r corp orate su ppo rt f unctio ns, a chieve bus ine ss grow th ta rgets o r impa ct the p roit abili ty of o ur ope ration s. Additi onall y , unl es s skill s are sup por ted by a s u icient i nfras tructure to enab le kn owle dge an d skill s to be pa ss ed on , the Gro up risks los ing ac cumul ated kn owle dge if key emp loyee s leave the G roup. Collectiv e bargaini ng activ ity could disrupt operations, inc rea se o ur la bo ur co st s or inte rfe re wit h th e abil ity of o ur ma nag em ent to fo cu s on exec utin g our b us ine s s stra tegi es App roximately 3, 80 0 co llea gue s at our ma nage d, own ed, le as ed an d man age d lea se hote ls in the U S, C anad a, Mexi co, Gra nd Caym an and D utch Antill es are c overed by c olle ctive ba rgainin g agree me nts and si milar a gree ment s. If re lation ship s with tho se c olle ague s or the uni ons tha t repre sent th em dete riorate, th e prop er ties we own , lea se or m ana ge co uld exp erien ce la bou r disru ptions s uch a s strikes, lockou ts, bo ycotts a nd publi c demonstr ations. Collectiv e bar gainin g agre eme nts rep rese nting ha lf of our o rganis ed c olle agu es in th e US exp ired duri ng 201 8. Th ese a gree ment s were su cce ss fully rene gotiate d durin g 2019. H otel s ecto r union m emb er pa rtic ipatio n conti nue s to increa se in key markets w ithin the A meri cas re gion, whic h may require I HG to e nter into new l abou r agree me nts as mo re emp loyees b ec ome u nioni sed i n the future . Lab our di spu tes, whi ch are gen erall y more likel y when c olle ctive b argain ing agre eme nts are bei ng rene gotia ted, co uld ha rm our rel ations hip with o ur co llea gue s, resul t in incre as ed reg ulator y inq uiries a nd enfo rcem ent by governm ent al autho ritie s and dete r gue sts . Furthe r , ad vers e publi cit y relate d to a lab our dis pute c ould h arm our rep uta tion and re duc e cus tomer d ema nd for ou r ser vic es . La bour re gulati on and th e ne gotiatio n of new or ex istin g coll ecti ve barg aining a greem ent s coul d lea d to highe r wage an d be ne it co sts , cha nges i n work rule s that ra ise o perati ng expe nse s, le gal c ost s and limit ation s on our ab ilit y or the ab ilit y of our third -p ar ty p roper t y owne rs to take co st s aving me asure s durin g eco nomi c downturn s. We do not have the a bilit y to contro l the ne gotiati ons of c olle ctive barg aining a greem ent s coverin g unioni se d labo ur emp loyed by our third- par t y prop er ty ow ners a nd fran chis ee s. In crea sed u nioni satio n of our wo rkfo rce, new l abo ur leg islati on or c hang es in re gulatio ns cou ld dis rupt our o per ations , redu ce our p roi tabil ity o r inter fere with the a bilit y of our m ana gem ent to focu s on execu ting our business str ategi es. 4. Cybersecurity and inf ormati on gov e rnance The G rou p is exp os ed to t he ris ks rel ated t o cybe rse cu rity and dat a pri vac y The G roup is in crea singl y dep end ent up on the c olle ctio n, us age, retentio n, availabil ity , integr ity an d co ni dentia lity o f informa tion, incl uding, b ut not li mited to: gu est , emp loyee and ow ner c redit card, inancial and per sonal data, busine ss per formance, inanci al repo rti ng and c omm ercial d evelo pme nt. The i nformati on is som etime s he ld in die rent form ats su ch as di gital, p ape r , voi ce rec ording s and vid eo an d cou ld be s tored in m any plac es, i nclu ding facil ities m anag ed by third -p art y s er vice p rovide rs, in ou r Co mpany man age d hotel s, and by ou r franch ise es, w ho are sub jec t to the sam e or sim ilar ris ks. Cy ber b reac hes i ncre asing ly app ear to b e an unfor tuna te realit y for mo st i rms an d we therefo re invest in tr yin g to avoid them wh ere reas ona ble an d prac tica l to do so – in re cog nition of t he po ssi ble impa ct of cyb er sec urit y brea che s beyond d ata lo ss o n ope ration al pe rfor manc e and re gulator y ac tion s or i nes , as well a s the po tential impa ct on o ur repu tatio n. The th reats toward s the ho spit alit y indu str y and th e Group’s informati on are dyn amic, an d incl ude cyb er-att acks , fraud ulent u se, lo ss or m isus e by emp loyees a nd bre ach es of ou r vendors’ security arr angements, a mongst others. The G roup exp erie nce d cyb ers ecuri ty in cide nts inc ludin g: (a ) a t a numb er of K impton ho tels tha t resulte d in una uthori se d acc es s to gue st paym ent c ard data; a nd (b) an inc ident th at involve d malware bei ng ins tall ed on s er vers th at proc es se d payme nt ca rds use d at rest aurant s and b ars of 12 I HG m anag ed p rope rti es, th at the Gro up be com e aware of in 20 16. T hes e inci dent s resul ted in the G roup reimb ursin g the imp acte d card n etwo rks for co unter feit fra ud los se s and rel ated exp ens es an d be com ing sub jec t to investigati ons rega rding co mpli ance w ith app lica ble S tate and Fe dera l data s ecu rity standards, and leg al action from individuals and organisations impa cted by th e Sec urit y Inci dent s. T o date, four l awsuit s have be en iled a gain st IH G entiti es rel ating to the S ecu rity I ncid ents . The l ega l and reg ulator y enviro nment a round d ata pri vacy and requi reme nts set o ut by the p ayment c ard indu str y surrou nding inform ation se curi ty ac ross th e many juri sdic tions i n which th e Group o pe rates are c ons tantly evo lving (suc h as the EU G DP R, China cyber sec urit y law, and Califo rnia pri vacy law). If the G roup fails to p rotect info rmatio n and en sure rel evant co ntrols are in p lac e to enab le the a cc epta ble us e and re lea se of info rmatio n through th e app ropriate c hann els in a tim ely an d acc urate man ner , IH G Syste m pe rfor manc e, gue st exp erie nce an d the rep utati on of the G roup may be a dvers ely a ecte d. Thi s cou ld le ad to revenue l os ses , in es, pe naltie s, litig ation an d other a dditi onal c ost s. We are also re quire d to comp ly with m arketing an d adver tis ing laws relatin g to our dire ct mar keting prac tice s, inc ludin g email m arketing, onlin e adve rti sing, an d po stal m ailing s. Furth er re stricti ons to the conte nt or inter pretati ons of th es e laws co uld ad vers ely imp act o ur current a nd pl anne d acti vitie s and the e ec tivene ss o r viab ility o f our marketing strat egies to maintain, exten d and acquire relationship s with cu stome rs, an d impa ct the a mount a nd timing o f our s ales o f certain products. For info rma tion o f inci de nts re latin g to cyb ers ec urit y an d dat a priv acy, se e pa ges 2 01 a nd 242 . 233 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Group i nformati on 5. Channel management and t echnology The G rou p is exp os ed to in cre as ing c om peti tion f rom on lin e travel a ge nts an d inte rme dia rie s A proportion of the Group ’ s bookings or igina te fr om large multin ationa l, regio nal an d loc al onl ine travel ag ents a nd interm edia ries wi th which th e Group h as c ontrac tual arra ngem ent s and to whi ch it pays c ommi ssi ons . The se pl atfo rms oe r a wide rang e of produ cts , of ten acro ss mul tiple b rands , have growing bo okin g and review c ap abilitie s, an d may create th e perc eptio n that they o er the l owest p rice s. S ome of th es e onlin e travel age nts and inte rme diarie s have stron g marketing b udge ts and a im to create b rand aware nes s and b rand l oyalty am ong c ons umer s and may se ek to co mmo ditis e hotel br ands th rough pri ce an d attrib ute com pari son. Fur ther, if these c omp anie s contin ue to gain m arket sha re, they may imp act th e Group’s proi tabi lity, undermi ne the Group’s own bo okin g chan nel s and valu e to its hote l owne rs, an d may be ab le to inc reas e com mis sion rate s and n egoti ate other fav ourable con tract t erms. The G rou p is exp os ed to in he rent ri sks in r ela tion to c ha ngi ng technology and s ystems As the u se of th e internet , ar tii cial inte llige nce, m obil e and dat a tech nolo gy grows, a nd new an d dis ruptive tec hnol ogy s olutio ns are devel ope d, cus tome r nee ds an d expe ct ations evo lve at pac e. The G roup may ind th at its evolv ing tec hnol ogy c apa bilit y is not su ici ent and m ay have to make subs tanti al addi tiona l investme nts in new te chno logi es or sy stems to re main c omp etitive. Failure to keep p ace wi th develo pme nts in te chno logi es or sy stems , and als o with regu lator y , ri sk an d ethic al con sid eratio ns of how th ese devel opme nts are u se d, may put th e Group at a c omp etitive dis advant age . In add ition, th e techn olo gies o r system s that th e Group c hoo se s to dep loy may not be c omm ercia lly suc ce ss ful or the te chno log y or syste m strateg y may not b e su icie ntly align ed with th e ne eds o f the bu sine ss . Any such f ailure co uld adve rse ly ae ct gue st exp erie nce s, and th e Grou p may los e cus tomer s, fail to at tract n ew cus tome rs, inc ur sub sta ntial co sts or fac e othe r los se s. Thi s coul d fur the r impa ct the G roup’s repu tation i n regard s to innovatio n. (See a lso “ 4 . C ybe rse curit y and info rmatio n governa nce” .) The G rou p is re lia nt up on th e res ilie nc e of its r es er vatio n system an d othe r key tech nol ogy p lat form s an d is exp ose d to ris ks th at co uld di sru pt th eir o pe ratio n and / or inte grit y The val ue of the G roup is p ar tly de rived fro m the abili ty to drive rese r vations th rough it s rese r vation sys tem and te chno log y plat form s which a re highly inte grated w ith othe r proc es ses a nd system s and lin ked to multip le sa les c hann els, in clud ing the G roup’s own web sites , in- hou se and th ird- par ty m ana ged c all c entres , hotel s, third- par t y interm edia ries a nd travel ag ents . The s cop e and c omp lexit y of our te chno log y infras tructu re, incl uding in crea sing re lianc e on third -p art y sup plie rs to sup por t an d protec t our sys tems an d informa tion, as we ll as th e rapidl y evolvin g cybe r threat s, me ans th at we are inhe rently vu lnera ble to physi cal dam age, fai lures, d isrupti ons, d enia l of se rvi ce, ph ishin g or othe r malwa re att acks, ra nso mware, cybe r terrori sm and fr aud, as we ll as hum an erro r , ne glige nce a nd wilf ul misu se. T hes e risks m ay be heig htene d whe n thes e ca pabil ities are p rovide d o sh ore or in clo ud- bas ed e nvironme nts . Our fra nchis ee s and s uppli ers are a lso inhe rently vu lnera ble to the s ame ri sks. La ck of res ilien ce an d ope ration al availab ilit y of thes e syste ms provid ed by the G roup or thi rd-p ar ty te chno log y provide rs an d inab ilit y or di icul ty in up datin g existin g or imp lem enting n ew func tiona lity c oul d lea d to prolo nge d ser vic e dis ruption . This m ight resul t in signi ic ant b usin ess i nterrupti on, imp act th e gues t bo okin g expe rien ce, le ad to los s of or th ef t of dat a, and s ubs eque ntly adve rse ly impa ct G roup revenue s, in cur i nanc ial co sts to re med iate or inves tigate, le ad to regu lator y and/or co ntractu al enforc eme nt acti ons or l awsuit s, or d amag e the Gro up’ s repu tatio n and relati onsh ips with h otel own ers . 6. In vestment eecti veness and eiciency The G rou p is exp os ed to ri sks re late d to execu ting a nd re ali sin g beneits f rom str ategic transactions, including acquisiti ons and res tructurin g The G roup may s eek to m ake strategi c trans acti ons, in clud ing acq uisiti ons, d ivestm ents o r investm ents i n the future . The G roup may not b e able to id entif y op por tuni ties o r comp lete tran sa ction s on co mme rcially re aso nab le term s, or at all, a nd may not re alis e the anticip ated b ene i ts from su ch tran sac tion s. Strate gic tran sa ction s com e with inh erent va luatio n, in anci al and c omm ercial ri sks, an d regul ator y and in side r inform ation ris ks durin g the executi on of the trans acti ons . The G roup may al so co ntinue to ma ke organis ation al adju stme nts to sup por t de liver y of ou r growth a mbitio ns, in cludi ng the inte gration of a cqui sitio ns into the G roup’s opera ting pro ces se s and sys tems . This c reates i nhere nt risks of c omp lexit y and th at any cha nges m ade c oul d be uns ust aina ble or th at we are una ble to achi eve the return envi sa ged th rough reinve stme nt. In ad ditio n, the G roup may fac e unfore se en co sts an d liab ilitie s, diver sion of man age ment at tentio n, as wel l as lon ger-term integr ation an d ope ration al ris ks, whic h coul d resul t in a failure to rea lise b en e its, in anci al los se s, lowe r empl oyee mor ale and l os s of tal ent. The G rou p is de pe nd ent u po n a wide r ang e of exte rna l stakeholders and busines s partners The G roup reli es on th e pe rfor manc e, be haviou rs and re put ation of a wide r ange of b usin es s par tne rs and ex tern al st akehol der s, incl uding, but n ot limite d to, owners , contra ctors , len ders , supp lier s, out sourc ed provid ers, ve ndo rs, join t -venture p ar tner s, onlin e travel ag ents, third- par t y interm edia ries an d othe r busi nes s par tne rs whi ch may have die rent ethic al valu es, in terest s and p rioritie s. Fur ther , the number and com plexi ty of int erdependen cies wi th stak eholders is evolv ing. B reakdown s in relatio nsh ips, c ontrac tual di spute s, deteri oratio n of the inan cial he alth of o ur par tne rs, p oo r vendo r pe rfor manc e, sub - sta ndard c ontrol p roce dures , bus ines s co ntinuit y arrangemen ts, insolv ency , stak eholder behavio urs or adv erse repu tation s, whi ch may be o utsi de of the G roup’s control, c ould adve rse ly impa ct on th e Group’s per form anc e and c omp etitiven es s, deli ver y of proje cts , gue st expe rien ce s or the re puta tion of the Group o r its b rands . 7 . Le ga l, re gul ator y an d ethi cal c om pli anc e The G rou p is exp os ed to t he ris k of liti gati on Ce rt ain c ompa nies in th e Grou p are the sub jec t of variou s clai ms and p roce edi ngs. T he ultim ate outc ome of th es e mat ters is s ubje ct to many unc er tainti es, in clud ing future eve nts and u nce rt aintie s inhe rent in litig ation . In add ition, th e Group c oul d be at ris k of litigati on cla ims ma de by many p arti es, in clud ing but n ot limite d to: gue sts, c ustom ers , joint ventu re par tner s, sup plie rs, em ployee s, regul ator y autho rities , franc hise es an d/or the owner s of the h otels it man age s. C laims ile d may inc lude re que sts fo r puniti ve dama ges as well a s co mpe nsato ry d amag es . Unfavoura ble ou tcom es of cl aims or pro ce edin gs co uld have a mate rial ad vers e impa ct on th e Group’s resul ts of op erati ons, c as h low an d/ or inanc ial p ositio n. E xpo sure to signi ic ant litig ation o r in es may al so ae ct the re put ation of th e Group a nd its b rand s. (Se e als o leg al proc ee ding s on pa ge 242.) The G rou p is re qui red to c om ply wi th exis ting a nd c han gin g reg ula tion s an d act i n acc ord an ce wit h so cie tal exp ec tati on s ac ros s num er ous c ou ntrie s, te rritori es an d juri sd icti ons Gover nment re gulati ons a ect c ountl ess a sp ect s of the G roup’s bus ine ss inc ludin g corp orate gove rnan ce, he alth an d safet y , th e environ ment , soc ial res pon sibil ity , brib er y and c orrup tion, em ploym ent law and d ivers ity, franchis e laws an d regul ation, di sab ility a cc es s, dat a privacy a nd inform ation p rotectio n, in anci al, acc ountin g and tax . Regul ator y cha nge s may require s igni ic ant cha nge s in the way the bu sine ss o per ates an d may inhibi t the Gro up’ s strate gy , in clud ing the ma rkets the G roup op erate s in, bran d protec tion, an d use o r trans mit tal of p ers ona l data . If the G roup fail s to comp ly with exi sting or ch angin g regula tions , the Grou p may be su bjec t to in es, pros ecu tion, lo ss of l icen ce to op erate or re put ation al dam age. G roup i nform atio n c o ntin u e d Risk fact ors c o nti nu e d Addition al Information 234 IHG | Annua l Repo rt a nd Form 20 F 202 1 The re put ation of th e Group a nd the valu e of its b rand s are inl uen ce d by a wide varie ty of f actor s, incl uding th e perc eptio n of sta kehold er grou ps su ch as gu est s, owne rs, s uppli ers an d com munitie s in whic h the Gro up ope rates . The s oci al and e nvironme ntal i mpac ts of its b usin es s are und er inc reas ing sc rutiny , an d the G roup is expo se d to the risk o f dama ge to its re put ation if it fa ils to (or fails to inluence i ts business partners to ) undertake r esponsible pract ices and e ngag e in ethic al be havio ur , o r fails to co mply w ith relevan t regu lator y re qui reme nts . The G rou p is exp os ed to ri sks as s oci ated w ith its intelle ctual p roper ty Give n the imp or tan ce of br and rec ogn ition to the G roup’s busin es s, the prote ction o f its inte llec tual pro per t y po ses a ri sk du e to the variab ilit y and ch ange s in co ntrols, l aws and e ec tivene ss of enforc eme nt glob ally , par ticu larly in ju risdi ction s whic h may not have devel ope d level s of protec tion for c orp orate as set s suc h as intell ectu al prop er ty, trade se cret, kn ow-h ow and cu stom er inform ation, a nd records. A ny widespread in fringement, misappropr iation or weakeni ng of the c ontrol e nvironme nt cou ld mate rially h arm the value of th e Grou p’ s bran ds and i ts abili ty to deve lop th e busi nes s and c omp ete currentl y or in the f uture. Thi rd-p ar ty cl aims th at we infring e thei r intelle ctua l prope r ty c ould l ead to di spute s, litig ation, dam age s and oth er expe ns es. (S ee als o “ 4. C yb ers ec urit y and information govern ance” .) 8. Financial management and control syst ems The G rou p is exp os ed to a vari ety o f risks a s soc iate d wit h its inancial stabili ty and abili ty to bor row and satisfy debt co venants While t he strate gy of the G roup is to grow thro ugh ac tivitie s that do not invol ve signi ic ant amo unts of it s own c apit al, the Gro up doe s requ ire cap ital to fu nd so me devel opm ent op por tuniti es, technologic al innovat ions and strategic acquisitions; and to maintain and im prove owne d, lea se d and ma nag ed le ase h otels . The G roup is reli ant upo n having ina ncial s trengt h and ac ce ss to bo rrowing facil ities to m eet th ese ex pec ted c apit al requ ireme nts. T he maj orit y of the G roup’s borrowing f aciliti es are on ly availab le if the inan cial coven ants in th e facili ties are c omp lied w ith. No n- c ompli anc e with coven ants c ould re sult in th e Group’s len der s dem andin g repayme nt of the fu nds ad vanc ed an d any undrawn fa cilitie s co uld be unavaila ble. I f the G roup’s inan cial p er forma nce d oes n ot me et market exp ect ation s, it may no t be abl e to rei nanc e exis ting facil ities o n terms c ons ide red favourab le. The G rou p’ s ope rati on s are de pe nd ent o n mai ntai nin g suf i cie nt liquidity to meet all foreseeable medium-term requirements and pro vide headroom against unfor eseen obligations Ca sh and c as h equi valent s is he ld in sh or t-term dep osi ts and mon ey market with s hor t matur ities . Mo st of the G roup’s funds are hel d in the U K or US , altho ugh $7 5 million ( 2020 : $4 4 mi llion) is hel d in co untries w here rep atriatio n is res tricte d as a res ult of foreign exch ange re gulati ons . Me dium an d long -term b orrowing requi reme nts are me t through c ommit te d bank fa cilitie s and b ond s. Sho rt-term b orrowing re quire ment s may be m et from drawin gs under unc ommitted overdrafts and facilities . The G rou p is exp os ed to a n imp airm ent of t he c arr ying va lue of o ur bra nd s, go odw ill or o the r tan gib le an d int ang ibl e as set s ne gat ively affec ting our con solidate d operatin g results Signiic ant amounts of goodwill, in tangible as sets, right -of-use assets, pr opert y , plant and equi pment, i nv estments and cont ract as sets a re reco gnis ed o n the Grou p bala nce s he et. We review the valu e of our go od will and i nde inite - lived int angi ble a sse ts for impa irment a nnual ly (or when ever events o r circum sta nce s indi cate impa irment m ay have occ urred ). Cha nge s to estim ated valu es c an resul t from po litic al, ec ono mic and ina ncial m arket devel opm ents or othe r shif t s in the bu sine ss c limate, the c omp etitive e nvironme nt, the p ercei ved rep utati on of our b rand s (by gue sts o r owne rs), or cha nges i n interes t rates, o pe rating c ash lows, m arket cap itali satio n, or deve lopm ents i n the le gal or re gulato ry e nvironm ent. Be cau se of th e signi ic anc e of our g ood will and o ther n on- cu rrent as sets , we have incur red and m ay incur f uture impa irme nt charg es on the se a sse ts whic h cou ld have a mate rial ad verse e ec t on our in anci al resu lts or re sult in reve rsa ls of imp airme nts not b ein g cor rectly i denti ie d and re cord ed. The G rou p is exp os ed to l uct uati ons i n excha nge ra tes , curr ency deval uati ons o r res tru cturi ngs a nd to i ntere st r ate ris k in rel atio n to its b orrow ing s The U S doll ar is the p redo mina nt curren cy of the G roup’s rev enu e and c ash lows . Movem ents in fo reign excha nge rate s can a ect th e Group’s repo rte d pro it, n et liab ilities a nd intere st cove r . T he mo st signi ic ant exp osure s of the G roup are in c urrenc ies th at are free ly conver tib le. Th e Grou p’ s repo rte d deb t has an exp os ure to borrowin gs hel d in po unds s terling (i nclu ding € 1,00 0 millio n euro b onds w hich have be en swap pe d into sterlin g usin g curren cy swaps). Co nduc ting bus ine ss in cu rrenci es othe r than U S doll ars exp ose s us to l uctu ations in exchan ge rates , curren cy devalua tions , or rest ructuri ngs. T his c ould pote ntially lowe r our rep or ted reve nues , incre ase o ur co sts, re duc e our pro it s or dis rupt our o pe ration s. Our ex pos ure to thes e fac tors is linke d to the pac e of our g rowth in te rritorie s out side th e US an d, if the p ropor tio n of our reven ues grow s, this may in crea se the pote ntial se nsiti vit y to currency m oveme nts havin g an adve rse impa ct on o ur resu lts. The G roup is a lso exp os ed to intere st rate ris k in relati on to its ixed and loatin g rate bor rowings an d may us e interes t rate swaps to man ag e the exp os ure. The G rou p co uld b e aff ecte d by cre dit ri sk o n tre asu ry t ran sa ctio ns The G roup us es lo ng- term cre dit rating s from St and ard and Po or ’s, Mo ody ’s and Fitch R atings a s a bas is for s ettin g its c ounterp ar ty li mits . In orde r to man age the G roup’s credit ri sk exp osure, th e treas ur y func tion s ets co unterp art y exp osure li mits u sing me trics i nclu ding cred it rating s, the rel ative pla cing of c redit d efault sw ap prici ngs, tier 1 c apit al and s hare p rice vol atilit y of the rel evant co unterpa rt y . The G roup tra des o nly with re co gnise d, cre dit wor thy third par ties . It is th e Group’s poli cy that all c ustom ers wh o wis h to trade on c redit terms a re subje ct to cre dit veri ic ation p roce dure s. In re spe ct of cred it risk a rising f rom in anci al as set s, the G roup’s exposure to cred it risk a rise s from de fault of th e counte rpar t y , wi th a maxim um expo sure eq ual to the c arr ying a mount of th es e instr ument s. The c arr ying a mount of ina ncia l ass ets re pres ents th e maxi mum exp osu re to cre dit ris k. The G rou p may be i mpa cte d by cha ng es af fe ctin g the avai lab ilit y of th e Lon don I nterb an k Of fere d Rate (“LI BOR ”) In lin e with ann ounc eme nts from th e U.K . Fin anci al Co nduc t Autho rity , from 1 J anuar y 20 2 2 publi catio n ce ase d of on e week and t wo month U SD L IBO R ten ors an d all teno rs for EU R, C H F , JP Y and G BP L IB OR . Publ icatio n of all oth er US D LI BOR te nor s will ce as e af ter 30 J une, 20 23. We are par ty to var ious a gree ment s where o bliga tions a re calc ulated bas ed o n LIB OR , the mo st rel evant and m ateria l bein g our Sy ndic ated and B ilatera l Facilitie s, whic h were und rawn at 31 D ec emb er 20 21. The di sc ontinua tion of LI BO R is not c urrently an ticipate d to have a materi al imp act on th e Grou p, however cha nge s from LI BO R to an alter native be nch mark rate c ould im pac t the Gro up’ s future c ost of ca pita l, rece ipts or p ayme nts und er agre em ents th at referen ce LIB OR , and th e future valu ation of d erivati ve ina ncia l instru ment s, any of whic h coul d impa ct our re por te d result s and c ash lows . 235 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Group i nformati on The G rou p’ s in anc ial p er form an ce may b e aff ecte d by cha ng es in t ax law s Many fa ctors w ill aec t the G roup’s future tax rate, th e key ones bei ng le gisl ative devel opme nts, f uture pro ita bilit y of und erlyi ng sub sidia ries an d tax u nce rt aintie s. T ax liab ilitie s or refun ds may al so die r from tho se antic ipate d, in par ticu lar as a re sult of c hang es in tax l aw , chan ges i n the interp retatio n of ta x law , or cl ari icati on of unc er tainti es in the a ppli catio n of tax l aw . The G roup c ontinue s to moni tor signi ic ant t ax reform p ropo sal s, mos t not ably th e OECD ’ s review into ‘ T ax Ch allen ges A risin g from Digi tali satio n’ as well as US t ax reform p ropo sal s. The G rou p may fac e dif i cul tie s ins urin g its b us ine ss His toric ally , th e Grou p has m aintai ned in suran ce at l evels deter mine d to be app ropria te in light of the c os t of cover an d the risk p roil e of the b usin es s. Howeve r , the G roup’s claim s expe rienc e and wi der ex tern al market forc es may lim it the sc op e of covera ge the G roup ca n obtai n and the G roup’s abilit y to obta in covera ge at reas ona ble rate s. O ther fo rces b eyond the G roup’s control, s uch a s terrori st at tack s or natura l dis aster s, may be u ninsu rable o r simp ly too exp ens ive to insure. I nad equ ate or ins u icie nt insura nce c arrie d by the Gro up, our owne rs or oth er pa rtn ers fo r dama ge, othe r pote ntial lo sse s or li abilitie s to third pa rtie s involvin g prop er ties that we own, m ana ge or fra nchis e co uld exp ose th e Group to l arge clai ms or c ould re sult in th e los s of ca pita l investe d in prop er ties . 9. Safe ty a nd se cu rity The G rou p is exp os ed to a vari ety o f risks a s soc iate d wit h safe ty, se curi ty an d cri sis m an age me nt The re is a co nst ant ne ed to prote ct the s afet y and s ecuri ty of o ur guests, emplo yees and assets agai nst nat ural and man-made threat s. Th es e inclu de, but a re not limite d to, exceptio nal event s suc h as extre me we ather , civil o r pol itica l unres t, vio lenc e and terrori sm, se riou s and org anis ed crim e, frau d, empl oyee dis hone st y , cybe r crim e, pand emic s or c onta giou s dise as es (in cludi ng but n ot limite d to Covid -19), ire, an d day-to -d ay acci dent s, inci dent s and pet t y crime w hich imp act th e gue st or e mploye e exper ienc e, co uld cau se lo ss of li fe, sick nes s or inj ury a nd res ult in co mpe ns ation cl aims, in es from re gulato ry b odi es, liti gation , and imp act re put ation. Ser ious in cide nts or a c omb inatio n of events c ould e sc alate into a cris is whic h, if man age d po orly , cou ld fur the r expos e the G roup and it s bran ds to signi ic ant rep utati onal d ama ge. 10. Envir onm ent al an d so cia l me gat ren ds The G rou p is exp os ed to t he ris k of event s or st akeh old er expect ations that adver sely imp act dome stic or internatio nal tra vel, including climate change The ro om rates a nd oc cup ancy leve ls of the G roup c ould b e adve rse ly impa cted by eve nts that re duc e dom esti c or intern ationa l travel, suc h as ac tual or th reaten ed ac ts of ter rorism o r war , p oliti cal or civ il unres t, ep idem ics a nd pan dem ics o r threats th ere of , travel- relate d acc ide nts or in dust rial ac tion, natu ral or m an- mad e dis aste rs, or oth er lo cal f actor s impa cting s pe ci ic co untries , citie s or ind ividu al hotel s, as we ll as inc reas ed tra nsp or tatio n and fue l cos ts. Ad dition ally , the G roup may be i mpac ted by inc reas ing sta kehold er an d soc ieta l expe ctati ons an d atti tude s in relati on to facto rs co ntributin g to climate c hang e inclu ding over travel a nd over touris m, and tho se lin ked direc tly to hotel s inclu ding wa ste, water , ene rgy , or i mpac t on lo cal c omm unitie s. A de crea se in th e dem and for b usin es s and/or lei sure hote l room s as a resu lt of suc h events o r attitu dinal a nd de man d shif ts m ay have an adver se imp act on the G roup’s oper ations o r grow th prosp ec ts an d in ancia l resul ts. In ad dition, i nad equ ate plann ing, pre paratio n, res pon se or re cover y in relati on to a majo r inci dent o r crisi s may cau se lo ss of l ife, prevent ope ration al co ntinuit y , o r resul t in in anci al los s, an d con se quentl y impa ct the va lue of ou r brand s and/or the rep utati on of the G roup. Domestic and int ernational envi ronmental law s and r egulations may ca us e us to in cu r sub st anti al co st s or su bje ct u s to potential lia bilities The G roup is exp os ed to ce r tain c ompl ianc e cos ts an d potenti al liabi lities u nde r variou s foreign an d US fe dera l, state an d loc al environ ment al, he alth and s afet y laws an d regul ation s. The se l aws and re gulatio ns gover n actio ns and re por tin g require ment s relatin g to mat ters in cludi ng air emi ss ions , the us e, storag e and di spo sal o f haz ardo us and toxic s ubst anc es, a nd was tewater dis pos al. T he Gro up’ s failure to c ompl y with suc h laws, in clud ing any requ ired p ermit s or lice nce s, c ould re sult in s ubst antial ine s or p oss ible revo catio n of our au thorit y to co nduc t som e of our o perati ons . We could a lso b e liab le und er su ch laws for th e co sts of inve stigati on, rem oval or reme diatio n of ha zardo us or toxic s ubst anc es at ou r currentl y or forme rly fran chis ed, m anag ed, own ed, l eas ed o r mana ged l ea se hotel s or at third -pa rt y lo catio ns in c onne ctio n with our wa ste dis pos al ope ration s, reg ardle ss of wh ethe r or not we k new of, or cau sed , the pres enc e or rel eas e of su ch sub sta nce s. Th e Group m ay also b e requi red to reme diate s uch su bst anc es or re move, abate o r mana ge asb es tos, mo uld, rad on ga s, le ad or oth er ha zard ous c onditi ons at our pro per tie s. Th e pres enc e or rel ea se of su ch toxic or ha za rdous sub stan ce s coul d resul t in third- par t y clai ms for p ers onal i njur y , prop er ty o r natural re sou rce dam age s, bu sine ss inte rruptio n or other l os ses . Suc h clai ms and th e ne ed to investi gate, rem ediate or othe r wise a ddres s ha zard ous, toxic o r uns afe con dition s cou ld adve rse ly ae ct the G roup’s operati ons, th e value o f any aec ted real p rope rt y , o r our ab ilit y to sell, le as e or as sign o ur rights i n any suc h prope r ty , or co uld oth er wise h arm our b usin es s or rep utati on. Environm enta l, hea lth and s afet y require ment s have als o be com e incre asin gly stri ngent , and ou r cos ts may in crea se as a re sult. New o r revise d laws a nd regul ation s or new inte rpret ations o f existi ng laws an d regul ations , suc h as tho se rela ted to clim ate cha nge, co uld a ect th e ope ration o f our prop er tie s or res ult in signi ic ant ad ditio nal exp ens e and re stricti ons on t he Grou p’ s business operations. The G rou p is exp os ed to ri sks re lati ng to ou r com mit me nts in re lati on to Cl imat e Cha ng e In lin e with our c ommi tment to re duce o ur en ergy us e and c arbo n emi ssio ns in lin e with cli mate sc ienc e, the G roup ha s imple me nted a 203 0 sci enc e -ba se d targe t to reduc e abs olute s cop e 1, 2, an d sc ope 3 gre enh ous e gas e mis sion s from fue l and e nergy- relate d activ ities a nd fran chis es by 4 6. 2% by 20 30 fro m a 2019 b as e year . This a mbitio n is ch allen ging to imp lem ent and w ill requ ire signi ic ant trans formati on acro ss I HG, hote l owner s and su pply c hain p ar tner s, incl uding inve stme nt in physic al as set s and o pera tional p roc edure s. If the se c hang es, m any of which a re outs ide of I HG ’s control, do no t oc cur , th e Grou p may have di icult y ac hieving i ts targ et. G roup i nform atio n c o ntin u e d Risk fact ors c o nti nu e d Addition al Information 236 IHG | Annua l Repo rt a nd Form 20 F 202 1 As at 2 1 Febru ary 2 02 2: (i) E xecu tive Dire ctors h ad the nu mbe r of be ne ici al interes ts in s hares ( inclu ding D irecto rs’ sh are awards und er IH G’s share p lans) set o ut in the t abl e on pag e 119; (ii) N on -E xec utive Dire ctor s had th e numb er of be ne ic ial intere sts in s hare s set o ut in the ta ble o n pag e 123; an d (iii) E xecutive C omm itte e mem ber s had th e numb er of b ene i cial inte rest s in sha res (inc ludin g memb er s’ share awards un der I HG ’s share pla ns) set out in th e tab le be low. Thes e sha rehol ding s indic ate all Dire ctor s’ or E xecuti ve Com mitte e me mbe rs’ be ne icia l interes ts an d thos e hel d by their s pou ses a nd othe r con nec ted p ers ons . As at 2 1 Februa ry 2 02 2, no D irec tor or E xecuti ve Co mmit tee me mbe r he ld more th an 1.0% of th e total i ssu ed s hare ca pita l. No ne of the D irec tors have a b ene ic ial intere st in th e share s of any sub sidia ry. Executive Com mittee member Nu mb er of s ha re s he ld ou tri ght APP d efe rre d sh are aw ard s LTIP s ha re awa rds (u nves ted ) Total n um be r of sh ar es h el d 21 Fe b 2022 31 D ec 2021 31 D ec 2020 21 Fe b 2022 31 D ec 2021 31 D ec 2020 21 Fe b 2022 31 D ec 2021 31 D ec 2020 21 Fe b 2022 31 D ec 2021 31 D ec 2020 Kei th B a rr 81,830 81,8 30 70,2 79 26 ,69 6 26,6 96 3 7, 7 0 5 143,231 14 3,2 31 119,2 2 7 2 51 ,7 57 2 51,7 5 7 2 2 7, 2 1 1 Paul Edgec lie- Johnson 5 8,7 2 3 58,723 5 3,3 76 1 9,1 3 7 1 9,1 3 7 26 ,7 51 95,95 9 95, 959 86 ,479 173,819 173,819 16 6,60 6 Elie Maalouf 74 , 6 9 8 74 , 6 9 8 67 ,428 19,6 25 19,625 25, 417 96, 790 96, 790 88,691 1 9 1 ,1 1 3 1 9 1 ,11 3 18 1,5 36 Claire Benn ett 2 2 ,04 5 2 2,0 4 5 1 6,52 1 1 3 ,14 4 1 3,1 4 4 14, 379 54,499 54,499 5 5,34 0 89, 688 89, 688 86, 240 Jolyon Bul ley 52 ,1 6 4 52, 16 4 5 7, 9 3 9 10, 21 9 10,219 11 ,78 7 53, 683 53, 683 51,624 11 6,0 6 6 116 ,06 6 121, 350 Y a smin Diamond 2,9 02 2,902 7, 5 8 1 8,557 8,557 11 ,01 6 3 7, 8 3 6 3 7, 8 3 6 36,887 49, 2 95 49, 2 95 5 5,48 4 Nicolet te He nfrey 1,801 1,801 4 ,528 3,594 3,594 6 ,621 38,996 38,99 6 32,939 44,39 1 44,39 1 4 4,0 8 8 Wayn e Ho are 2 ,7 14 2,7 14 0 1,867 1,86 7 4 ,666 38,9 45 38,94 5 22 ,65 3 43,526 43, 526 27 ,319 Ken ne th Macpherson 24 ,0 6 0 24,0 6 0 3 0,1 6 0 13 ,06 6 13,0 6 6 18,557 54,202 54,20 2 54, 789 91,328 91,3 28 10 3,506 George T urner 3 0,1 0 0 3 0,1 0 0 2 7, 9 5 1 12,920 12,920 18 ,1 5 1 55 ,070 55 ,070 5 5,84 8 98 ,0 90 98 ,09 0 10 1,950 All curre nt E xecutive D irecto rs have a rollin g ser vi ce co ntract w ith a notic e pe riod from th e Grou p of 12 month s. As a n altern ative, the G roup may , at i ts dis cretion , pay in lieu o f that noti ce. N eithe r notic e nor a p ayment i n lieu of n otice wi ll be give n in the event o f gross m isc ondu ct. Payme nt in lieu o f notice c oul d potenti ally inc lude u p to 12 months ’ sal ary a nd the c ash e quiva lent of 12 m onths ’ pen sion c ontrib ution s, and other c ontra ctual b en e its. W here p os sibl e, the Gro up will se ek to en sure th at, whe re a leaver m itigate s their l oss es by , for examp le, i nding new em ploym ent, th ere will b e a corre sp ondin g redu ction i n comp en satio n payable fo r los s of o ice . Visit www.ihgplc.com/ inv estors unde r Co rpo rate go vern anc e in the D ire ctor s’ Rem une rati on Pol icy s ect ion, fo r fur th er de tail s ab out th e dete rmin atio n of ter mina tion p ayme nts i n the D irec tors R emu ner ation P oli cy . Di r ect ors ’ and Ex ecu t iv e Comm itt ee member s’ sh ar ehold ings E x ecut iv e Dir e ct ors ’ benei ts upo n t erm ina t io n o f o ice 237 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Group i nformati on Fee s and c ha rge s payab le to a de po sit ar y Categ ory (as d ei ne d by SEC ) Depositary actions Ass ociate d fee Depositing or subs tituting th e underlying shares Ea ch p ers on to wh om AD Rs a re is sue d ag ains t de pos its o f sha res , inc ludi ng de pos its a nd is su anc es i n resp e ct of: • Share di stri buti ons , sto ck sp lits , righ ts, m erge rs • Exch ang e of se cur itie s or any oth er tr ans ac tion s or eve nt or oth er di stri buti on ae ctin g the A DS s or th e dep os ited s ec uriti es $5 fo r ea ch 10 0 AD Ss (or p or tion t here of ) Receiving or distributing dividen ds Distribut ion of stock d ividends $5 for e ac h 10 0 ADS s (or po rti on th ere of ) Di strib utio n of c ash $0.0 5 or l es s pe r ADS (or p or tio n the reof ) Sellin g or exerci sin g right s Di strib utio n or s ale o f se curi ties , the fe e be ing in a n amo unt e qua l to the fe e for th e execu tion a nd de live r y of AD Ss wh ich wo uld h ave be en ch arg ed as a res ult of th e de po sit of s uch s ec uriti es $5 fo r ea ch 10 0 AD Ss (or p or tion t here of ) Withdrawing an underlying sec urity Acc ept an ce of A DR s surre nde re d for wit hdraw al of de po site d se cur itie s $ 5 for e ach 1 00 A DS s (or por ti on the reo f ) T ra nsferring, split ting or gro upin g rec eip ts T rans fer s, co mbi ning o r grou ping o f de pos it ar y rec eipt s $1 .50 p er A DS General deposi tary ser vices, particularly tho se ch arge d on a n annual basis Oth er s er vic es p er fo rme d by the d epo sit ar y in a dmini ste ring th e AD Rs $0.0 5 pe r ADS (or p or tio n the reof ) n ot mo re tha n onc e ea ch c ale nda r yea r and p ayabl e at the s ole dis creti on of t he AD R De po sit ar y by bil ling A DR holders or b y deducti ng such charge from one or more cash dividends or other cash distri butions Expenses o f the d ep osi tar y E xpe ns es in curre d on b eh alf of A DR h old er s in co nne cti on wit h: • Complia nce with for eign e xchange contr ol regula tions or an y law or regu lation relati ng t o for eign i nvest ment • The AD R De po sit ar y ’s or its cu sto dian’s co mpl ianc e wit h app lic abl e laws , rules or regulations • Stock tr ans fer o r othe r taxe s and o the r gover nme nta l cha rges • Cable, telex, facsimile t ransmission/ de livery • T ran sfe r or re gis tratio n fee s in c onn ec tion w ith the d ep os it and w ithd rawal of deposited se curities • Exp en ses o f the A DR D ep osi tar y in c on nec tio n with th e co nvers ion o f forei gn curre ncy i nto US d olla rs (whi ch are p aid o ut of su ch fo reign c urre ncy) • Any other c harg e payab le by th e AD R De pos it ar y or it s age nts E xpe ns es p ayable a t the s ole d isc retio n of the A DR De po sit ar y by bill ing A DR ho ld ers o r by de duc ting charges f rom one or mor e cash div idends or o ther ca sh di stri buti ons a re $20 p er tr ans ac tion Fee s and c ha rge s payab le by a de po sita ry J.P . Mo rgan C has e Ban k N. A . (the ADR D ep osi tar y) is the de po sita ry for IH G’s AD R progra mme. T he AD R De pos itar y ’s princip al execu tive o ice is at : J.P . Mo rgan D epo sit ar y Rec eipts , 38 3 Ma diso n Avenue, Flo or 11, New York, N Y 10179. T he AD R De po sita ry h as agre ed to reimb urse c er tai n reas ona ble C omp any expen se s relate d to the Co mpany ’s ADR pro gramm e and inc urred by th e Com pany in con nec tion wi th the AD R progr amme. T he C omp any did not re ceive any payme nts from th e ADR D ep osi tar y durin g the year e nde d 31 D ec emb er 202 1 in re spe ct of l ega l, acc ounting a nd othe r fee s incu rred in c onne ctio n with the p repar ation of th e Annua l Repo rt and Form 2 0 F , o ngoin g SEC com plian ce an d listin g requi reme nts, investor re latio ns pro gramme s, an d adver tis ing an d publi c rel ation s exp end iture. Change in certifying accountant Followin g the aud it tend er pro ces s co mple ted by the C omp any in 201 9 and de sc ribe d in its 2 019 A nnual Re por t an d Form 20 F , on 7 May 20 21 th e Com pany ’s shareho lde rs app roved the ap poi ntment of P wC as th e Co mpany ’s statutor y au ditor for th e in ancia l year end ed 3 1 De cem ber 2 02 1. As co n irme d in the C omp any’s 2020 A nnual Re po rt an d Form 20 F , in co nne ction w ith the aud its of I HG ’s inanc ial st ateme nts for e ach of the t wo i sca l years e nde d 31 D ec emb er 20 20 (i) the re were no dis agree me nts with th e Com pany ’s previous s tatutor y au ditor , E Y , as that te rm is us ed in I tem 16 F(a ) (1)(iv) of Form 20 F , over any mat ters of ac counti ng prin ciple s or p ractic es , in ancia l state ment d iscl osure, or aud iting s cop e and pro ce dures , which i f not res olve d to EY ’s sati sfac tion woul d have cau se d EY to m ake referenc e to the mat ter in thei r repo rt a nd (ii) the re were no ‘repo rt abl e events’ a s that term is de scri be d in Item 16 F(a )(1)(v) of Form 20 F . Furthe r , in th e two isc al yea rs prio r to 31 De ce mbe r 2020, an d in the sub se que nt interim p erio d to 7 May 202 1, the C omp any did not con sult wi th Pw C reg arding the a ppli catio n of acc ountin g princ iple s to a spe ci ic c ompl eted or c ontem plate d trans ac tion or re gardin g the t ype of a udit o pinio n that might b e rend ered i n resp ec t of the Co mpany ’s cons olid ated inanc ial st atem ents o r the ee ctive nes s of intern al co ntrol over inanc ial rep or ting. Fur ther , P wC did n ot provid e any writte n or ora l advic e that wa s an imp or tant fa ctor con sid ered by th e Com pany in rea ching a d eci sion a s to any such acc ountin g, auditi ng or inan cial re por ting m atte r or any mat ter bei ng the su bjec t of dis agre eme nt or de in ed a s a repo rt abl e event or any othe r mat ter as d e ine d in Item 16 F(a )(1)(v) of Form 20 F . G roup i nform atio n c o ntin u e d Descr i p t ion o f se cu ri ti e s o t her t ha n equ i ty secur it ies Addition al Information 238 IHG | Annua l Repo rt a nd Form 20 F 202 1 The C omp any’s Ar ticle s of As so ciatio n (the Arti cle s) were irs t adop ted with e ect fro m 27 Ju ne 20 05 a nd were mo st rec ently a men ded a t the AGM h eld o n 7 May 20 20 and are avail able o n the C omp any’s webs ite at ww w .ihgplc.com/ inv estors under Corporate gov ernance. The fo llowing s umma rise s materi al rights o f hold ers o f the C ompa ny’s ordin ary s hare s unde r the ma terial p rovisio ns of the A rtic les a nd Engli sh law. This su mmar y is qu ali ie d in its e ntirety by refe renc e to the C ompa nies Ac t and th e Ar ticle s. The C omp any’s sha res may b e hel d in cer ti ic ated or u nce rti ic ated form. N o hol der of th e Co mpany ’s shares w ill be re quired to m ake addi tiona l contri butio ns of c apit al in res pec t of the C omp any’s sha res in the f uture. In the fo llowing d es criptio n, a ‘shareh olde r’ i s the pe rso n regi stere d in the C omp any’s regis ter of me mbe rs as th e hol der of th e relevant s hare. Princi pal objects The C omp any is inc orp orated u nde r the nam e Inter Co ntine ntal Hote ls Grou p PLC and is re giste red in En gland a nd Wale s with regis tered n umbe r 5134 42 0. The Ar tic les d o not res trict it s obje cts or pur poses. Directors Und er the A rti cle s, a Dire ctor may h ave an interest i n cer t ain mat ters (‘Pe rmit ted Inte rest ’ ) withou t the pri or app roval of the B oard, provi ded they have de cla red the n ature and ex tent of su ch Pe rmit ted Intere st at a me eting of th e Dire ctors o r in the ma nner s et out i n Sec tion 18 4 or Se ctio n 185 o f the C ompa nies Ac t. Any mat ter in whi ch a Dire ctor h as a mater ial intere st, an d whic h doe s not c ompr ise a Pe rmit ted Inte rest , must b e autho rise d by the Bo ard in ac corda nce w ith the pro ce dure and re quirem ent s cont aine d in the Ar tic les . In pa rtic ular , this in clud es the re quirem ent th at a Dire ctor may no t vote on a reso lutio n to authori se a ma tter i n which they are intere ste d, nor m ay they count i n the quo rum of the me eting at whi ch su ch bus ine ss is tra ns acte d. Furthe r , a D irecto r may not vote in res pe ct of any prop os al in whi ch they , o r any per son c onn ecte d with th em, ha s any materi al interes t other t han by vir tue of th eir inte rest s in se curitie s of, or other wis e in or throu gh, the C omp any , no r may they co unt in the q uorum o f the me eting at whi ch su ch bus ine ss is tra ns acte d. This i s subje ct to c er tain exceptio ns, in clud ing in rel ation to prop os als: (a) indem nif ying them i n resp ect o f oblig ation s incurre d on b eha lf of the C omp any; (b) inde mnif ying a th ird par t y in resp ec t of obli gation s of the C omp any for whic h the Di rector h as as sum ed re spo nsib ilit y unde r an ind emnit y or gu arantee ; ( c) relating to an o er of se curiti es in wh ich they wi ll be interes ted a s an und er writer ; (d) conc erni ng anoth er bo dy c orpo rate in whic h the Dire ctor i s ben e icia lly intere sted in l es s than on e pe r cent of the is su ed sh ares of a ny clas s of sh ares of s uch a b ody c orpo rate; (e ) relatin g to an empl oyee be ne it in wh ich the D irec tor will sh are equ ally with o ther e mploye es; an d (f) rel ating to liab ilit y insur ance that the C om pany is em powere d to purch ase fo r the be ne it of Dire ctors o f the Co mpa ny in resp ect of a ctio ns und er taken a s Dire ctors (or o ice rs) of the C ompa ny . The D irec tors have auth orit y und er the Ar tic les to s et thei r own remun eratio n (provi ded c er tai n criteri a are met). Whil e an agre eme nt to award remun eratio n to a Direc tor is an arr ange ment w ith the Co mpany tha t comp rise s a Perm itte d Intere st (and the refore do es not requi re authori sati on by the B oard in tha t resp ect), it i s never the les s a mat ter that wo uld be ex pec ted to give ri se to a co nlic t of intere st bet wee n the D irecto r con cern ed an d the C omp any , and s uch c on lict mus t be auth oris ed by a res oluti on of the B oard . The D irecto r that is intere sted i n such a m atte r may nei ther vote on th e res olutio n to autho rise s uch c on lict, n or co unt in the q uorum o f the me eting at whic h it was pa ss ed. Fur therm ore, as n oted ab ove, the intere sted Dire ctor is n ot pe rmitte d to vote in resp ec t of any prop os al in whic h they have any mate rial intere st (except in re spe ct of th e limite d exceptio ns ou tline d above) nor m ay they count i n the quo rum of the m eetin g at which s uch b usin es s is trans ac ted. As su ch, a Dire ctor h as no p ower , i n the ab sen ce of an in dep en dent quor um, to vote on co mpe nsa tion to the mse lves, b ut may vote on a reso lutio n (and may cou nt in the quo rum of the m eeti ng at whic h it was p ass ed ) to award com pen satio n to Direc tors p rovide d thos e arrang eme nts do n ot co nfer a be ne it s ole ly on the m. The D irec tors are em powere d to exercis e all the p owers of th e Co mpany to bo rrow mon ey , sub jec t to any limitatio n in the Ar tic les , unle ss s anc tione d by an ordin ar y reso lutio n of the C ompa ny . At the C ompa ny’s AGM on 7 M ay 202 1, share hol ders a pproved t he ame ndme nt of the b orrowing l imit in the A rti cle s from an am ount equ al to three tim es th e share c apit al an d con soli dated re se rve s, to $5 bil lion. Und er the A rti cle s, there a re no age - limit req uirem ents rel ating to a pe rso n’ s q uali ic ation to ho ld o ice a s a Dire ctor of th e Co mpany . Dire ctors a re not requ ired to ho ld any sha res of the C om pany by way of qualiication. The A rtic les re quire an nual retire ment a nd re - ele ction o f all Dire ctors at the AGM . Rig hts at tac hin g to sh are s Divi de nd rig hts a nd rig hts to s har e in the C om pa ny’s proit s Und er Eng lish l aw , divid end s are payable o n the C omp any’s ordina ry sha res onl y out of p roit s availabl e for dis tributi on, as d etermin ed in acc orda nce wi th acc ountin g princ iple s gen erall y acc epte d in the U K and by the C om panie s Act . No divi den d will be ar inte rest a s again st t h e C o m p a n y. Hol der s of the C omp any’s ordina ry s hare s are entitle d to rec eive suc h divid end s as may be d ecl ared by th e share hol ders i n gen eral me eting, rate ably a cc ording to the a mount s paid u p on suc h sha res, provid ed that th e divi dend c ann ot excee d the am ount recommended by the Dir ectors. The C omp any’s Bo ard of Dire ctor s may dec lare an d pay to sha rehol der s such i nterim div iden ds as a ppe ar to the m to be jus tii ed by the C ompa ny’s ina ncial p os ition. I f autho rise d by an ordin ar y reso lutio n of the sh areho lde rs, th e Boa rd of Dire ctors m ay also di rect payme nt of a divi den d in who le or in p ar t by the distr ibutio n of sp eci ic a sse ts (and in pa rti cular of p aid -up s hare s or deb enture s of any othe r comp any). Any divid end un clai med by a m emb er (or by a per son e ntitle d by vir tue of tran smis sio n on de ath or b ankrup tcy or othe rwi se by ope ration o f law) after s ix year s from the d ate the divi den d was dec lare d, or be ca me due fo r payme nt, will b e for feite d and will rever t to the Co mpa ny . V oting rights The h olde rs of o rdinar y sh ares are e ntitle d, in resp ec t of the ir hol dings o f such s hare s, to rece ive notic e of ge nera l mee tings an d to atten d, sp eak an d vote at suc h mee tings in a cco rdanc e with the Ar ticl es . Voting at any gene ral me eting of s hare hold ers i s by a show of h ands unle ss a p oll, whi ch is a wri tten vote, i s duly de man ded . On a sh ow of han ds, ever y s hareh old er who i s pres ent in p ers on or by prox y at a gen eral m eetin g has o ne vote reg ardles s of the n umbe r of sh ares hel d. Res oluti ons p ut to the me mbe rs at el ectro nic ge nera l mee tings sha ll be voted o n by a poll, w hich p oll votes m ay be ca st by suc h ele ctroni c mea ns as th e Bo ard in its s ole di screti on de ems app ropriate for th e purp os es of th e mee ting. On a p oll, ever y sh areho lde r who is p rese nt in pe rso n or by prox y has o ne vote for ever y sh are he ld by that sh areho lde r . A p oll m ay be de man ded by a ny of the followi ng: • the C hair of th e me eting; • at le ast ive sh areho lde rs pre sent i n per son o r by proxy an d entitle d to vote at the me eting; Ar ti c l e s o f As s o c iati o n 239 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Group i nformati on In the U K , many emp loyee s of Grou p comp anie s are covere d by the Working T ime Re gula tions w hich c ame into forc e on 1 Oc tobe r 19 98. The se re gulatio ns imp lem ented th e EU Workin g Time D irec tive and par ts of t he Y oung Worker s Direc tive, and l ay down right s and protec tions fo r emp loyees i n areas s uch a s maxim um worki ng hour s, minimu m rest tim e, minimu m days o an d paid l eave. Th e Working Tim e Regul ation s contin ue to app ly in the U K follow ing the U K’s exit from th e EU as reta ine d EU law und er the Euro pe an Unio n (W ithdr awal) Act 2 018, a s ame nde d. In the U K , there i s in pla ce a nati onal mi nimum wag e und er the Natio nal M inimum Wag e Act 19 98 , as am end ed. At 31 D ec emb er 20 21 , the mini mum wag e for indiv idua ls age d 18 to 20 wa s £6. 56 pe r hou r , age d 21 to 2 2 wa s £8. 36 p er ho ur and fo r thos e age d 23 or over wa s £8 .91 p er h our in e ach c ase, exclu ding ap prenti ces a ge d unde r 19 year s or , other wis e, in the irs t year of th eir app rentic esh ips. This p ar ticul arly imp act s busi nes se s in the ho spi talit y an d retailin g se ctors . Co mplia nce w ith the N ationa l Minimu m Wage Act i s bei ng moni tored by the Low P ay Com miss ion, an i nde pen dent s tatuto ry bo dy es tab lish ed by the U K Gove rnmen t. Non e of the G roup’s UK emp loyee s are covere d by coll ecti ve bargaining agree ments with trade unions . Co ntinual at tenti on is pa id to the ex ternal m arket in orde r to ens ure that term s of em ployme nt are app ropria te. The G roup be lieves th e Group c omp anie s will b e able to c ondu ct the ir relati ons hips wit h trade u nion s and em ployee s in a sati sfac tor y mann er . • any sh areho lde r or sh areho lder s pres ent in p ers on or by p roxy repre senti ng in the a ggreg ate not le ss th an one -te nth of the tot al voting right s of all sh areho lde rs enti tled to vote at the m eeti ng; or • any sh areho lde r or sh areho lder s pres ent in p ers on or by p roxy hol ding sh ares c onferr ing a right to vote at the m eetin g and o n whic h there have b een p aid up s ums in th e aggre gate at le ast equ al to one -te nth of the tot al sum p aid up on al l the sh ares confe rring that right. A proxy fo rm will be tre ated a s giving th e proxy th e autho rity to dem and a p oll, or to joi n other s in dem andin g one . The n ec es sar y quo rum for a ge ne ral me eting is t wo pe rso ns c arr ying a right to vote upo n the bu sine ss to b e trans acte d, whe ther p rese nt in pe rso n or by proxy. Mat ters a re trans acte d at gen eral m eetin gs of th e Com pany by the prop osin g and p ass ing of re solu tions , of which th ere are t wo kind s: • an o rdinar y res olutio n, whic h inclu de s reso lution s for the e lec tion of Dire ctor s, the ap proval of i nanc ial st ateme nts, th e cumul ative annu al payme nt of divi den ds, the a ppo intment o f the Audi tor , the inc reas e of sh are cap ital o r the grant o f autho rity to all ot shares; and • a sp eci al res olutio n, whic h inclu de s reso lution s ame nding th e Ar ticle s, dis app lying s tatuto ry p re- e mption ri ghts, m odif yin g the right s of any cla ss of th e Co mpany ’s shares at a m eeti ng of the ho lde rs of su ch cla ss o r relatin g to cer tai n mat ters c onc erning the C omp any’s windin g up or ch angin g the C ompa ny’s name. An ordin ar y reso lutio n require s the a irma tive vote of a majo rity o f the votes o f thos e per son s pres ent an d entitle d to vote at a me eting at whic h there is a q uorum . Spe cia l reso lution s requi re the a irmative vote of n ot les s tha n three - qua rte rs of the p er son s pres ent and e ntitle d to vote at a me eting at whi ch the re is a quo rum. AGM s must b e co nvened u pon a dvanc e writ ten noti ce of 2 1 days. Oth er me eting s mus t be co nvene d upon a dvanc e writ ten noti ce of 14 days. Th e days of de liver y or re cei pt of the noti ce are no t inclu ded . The n otice mu st sp ec if y the nature of th e bus ine ss to be tr ans acte d. The B oard of D irec tors may , if they ch oos e, make arra ngem ent s for sha rehol der s, who a re unabl e to atten d the pl ace o f the me eting, to par ticip ate at othe r plac es o r to allow for s hareh olde rs to at tend and p ar ticipa te in share hol der m eetin gs by ele ctroni c mea ns. V ariation of rights If, at any time, the C ompa ny’s share c apit al is div ide d into die rent cla ss es of sh ares , the right s att ache d to any cla ss may b e varie d, subj ect to th e provisi ons of th e Co mpani es Act , with the c ons ent in writin g of hol der s of three - qua rte rs in no minal va lue of the i ss ued sha res of that c las s or up on the a dopti on of a sp ec ial res olutio n pas se d at a se parate m eetin g of the ho lde rs of the s hare s of that cla ss. At eve ry s uch s epa rate mee ting, all of th e provis ions o f the Ar ticle s relati ng to proc ee ding s at a gen eral m eetin g appl y , exce pt that the q uorum i s to be the n umbe r of pe rso ns (which mu st be t wo or mo re) who hold o r repre sent by p roxy not l ess th an on e- third in nom inal valu e of the i ssu ed sh ares of t hat cla ss . Rig hts in a w indi ng -up E xcept as th e Co mpany ’s shareh old ers h ave agree d or may other wi se agre e, up on the C omp any’s windin g up, the ba lanc e of as set s availabl e for dis tributio n is to be di strib uted am ong th e hol der s of ordina ry s hare s acc ording to th e amou nts pai d up on the sh ares h eld by the m: • af ter the p ayme nt of all cre ditors in clud ing ce rt ain pre ferentia l cred itors, w hethe r sta tutorily pre ferred c redito rs or no rmal credit ors; and • sub jec t to any spe cial rig hts at tac hing to any cla ss of s hare s. This d istrib ution i s gen erally to b e mad e in ca sh. A li quidato r may , however , upo n the ad option o f a spe cial re sol ution of th e sha rehol der s, divid e amo ng the sh areh olde rs the w hole o r any par t of the Co mpany ’s asse ts in kin d. Limitat ions on v oting and shareholding The re are no limit ation s imp ose d by Engli sh law or th e Ar ticle s on the ri ght of non -re sid ents o r foreign p ers ons to h old or vote th e Co mpany ’s ordinar y sh ares or A DSs , other th an the li mitati ons tha t would g ene rally ap ply to all of th e Co mpany ’s shareh olde rs. G roup i nform atio n c o ntin u e d Art icles o f Associa t io n c onti nu e d W or ki ng Ti me R egula t io ns 1 9 98 Addition al Information 240 IH G | Annua l Repo rt a nd Form 20 F 202 1 The fo llowing c ontra cts h ave bee n entere d into other wi se than in the c ours e of ordin ar y busi nes s by mem ber s of the G roup: (i) in the t wo year s imme diatel y prec edi ng the date of t his do cume nt in the c ase o f contra cts w hich are o r may be mate rial; or (i i) that cont ain provi sion s und er whic h any Group m emb er ha s any obli gation o r entitl eme nt that is m aterial to th e Group a s at the date of thi s docu ment . T o th e extent th at the se agre em ents in clud e repre sent ation s, warranti es an d inde mnitie s, su ch provis ion s are con sid ered s tan dard in an a gree ment of th at nature, s ave to the exte nt identi ie d be low. Syndic ated F acility On 3 0 March 2 01 5, the C ompa ny signe d a ive -year $ 1. 27 5 billio n bank f acilit y ag reem ent (Syn dicate d Facilit y) with Ba nk of Ame ric a Me rrill L ynch I nternati onal L imited, B arcl ays Bank p lc, H SBC B ank PLC, Sun T r ust Ro bins on Hum phrey , T he B ank of T ok yo- M itsu bishi UF J, Ltd and Th e Royal Ban k of Sc otland p lc, all ac ting as j oint bo okrun ner s and Th e Ba nk of T o k yo- Mit subi shi U F J, Ltd as f acilit y age nt. Th e Com pany ha s exercise d its a bilit y to exten d the term of the Sy ndic ated Faci lity by t wo add itiona l peri ods o f 12 month s, and, in A pril 20 20, agree d a fur the r exte nsio n of the Sy ndic ated Facilit y tak ing it s term to Sep tembe r 202 3. Th e interes t margin payabl e on bo rrowings u nde r the Syn dic ated Facilit y is li nked to IH G’s con soli dated l everag e ratio. The m argin c an var y bet wee n LIB OR + 0. 90 % and L IBO R + 2.75% de pe nding o n the leve l of the ratio. Th e Syndi cate d Facilit y was un drawn as at 3 1 De cem ber 2 02 1. £3 b illi on Eur o Med ium Term Note p rogr amm e In 20 20, the Gro up upd ated it s Euro Me dium T erm No te program me (Progra mme) and is su ed a tran che of € 50 0 milli on 1.62 5% notes d ue 8 Oc tobe r 2024 (20 20 Euro I ssu anc e) and a tranch e of £ 40 0 millio n 3. 375% note s due 8 O ctob er 20 28 (20 20 GB P I ssu anc e) . On 14 Se ptemb er 20 20, an ame nde d and re st ated trus t de ed (Trust De ed ) was exec uted by Inte rC ontine ntal H otels G roup PLC as is sue r (Is sue r), Six Contin ents L imited a nd Inte rC ontine ntal H otels Limit ed as guar ant ors ( Guarant ors ) and HSBC Corporat e T rustee Co mpany (U K) L imite d as trus tee ( T ru ste e), pursua nt to which the trust d ee d date d 27 Nove mbe r 200 9, as su ppl eme nted by four supp lem ent al trust d ee ds date d 7 Jul y 2011, 9 N ovemb er 20 12, 16 Ju ne 20 15 and 11 Au gust 2 016 b et ween th e sam e par tie s relatin g to the Prog ramme, we re ame nde d and re state d. Un der th e T ru st De ed, th e Is sue r may iss ue note s (Note s) uncon dition ally an d irrevoc ably g uarante ed by the G uara ntors, up to a m aximum n omin al amou nt from time to tim e out stan ding of £ 3 bill ion (or its e quival ent in othe r curren cies). Note s are to be is sue d in s erie s (each a Se ries) in be arer for m. Ea ch Se ries m ay comp rise o ne or m ore tranc hes (each a T ranc he) issu ed o n diere nt is sue date s. A T ranc he of Note s may be is su ed on th e terms a nd co nditio ns se t out in a b ase pros pe ctus as a men ded a nd/or suppl eme nted by a do cum ent set ting o ut the inal ter ms (Fin al T e rms) of suc h T ra nche o r in a sep arate pro spe ctu s spe ci ic to suc h T ra nche . Und er the Trust De ed, e ach o f the Is sue r and th e Gua rantors h as given c er tain c ustom ar y coven ants in favou r of the T ruste e. The F inal Terms is sue d unde r ea ch of the 20 20 Euro I ssu anc e and the 20 20 GB P I ssu anc e provide th at the ho lde rs of the N otes h ave the right to re payme nt if the N otes (a ) be com e non -inves tment g rade within th e per iod c omme ncin g on the d ate of anno unce me nt of a cha nge of c ontrol an d endi ng 90 d ays afte r the ch ange o f control (Chan ge of C ontrol Pe riod ) and are n ot subs eq uently, within the Cha nge of C ontrol P erio d, reins tate d to investme nt grad e; (b) are downg rade d from a no n- investme nt grad e and are n ot reins tate d to its e arlie r credit r ating or b et ter within th e Cha nge of C ontrol P erio d; or (c ) are not cre dit rate d and do n ot be com e investm ent gra de cred it rated by the e nd of th e Cha nge of C ontrol Pe riod . On 14 Se ptemb er 20 20, the I ssu er an d the Gu arantor s entere d into an ame nde d and re st ated ag ency a greem ent (Ag ency Agre eme nt) with H SB C Ban k plc as p rincip al payi ng age nt and th e T ru stee, purs uant to whi ch the I ssu er an d the Gu arantor s app ointed p aying age nts an d calc ulatio n age nts in co nne ctio n with the Pro gramm e and th e Notes . Und er the Ag ency Ag reem ent, e ach of th e Is sue r and th e Guar antors has g iven a cus toma ry in dem nity i n favour of the p aying ag ents an d the c alcul ation ag ents . On 14 Se ptemb er 20 20, the I ssu er an d the Gu arantor s entere d into an ame nde d and re st ated de ale r agree ment (D ea ler Agre em ent) with H SB C Ban k plc as a rrange r and B arclays B ank P LC, Co mme rzb ank Ak tien ges ell sch aft , HS BC B ank pl c, Me rrill L ynch Intern ation al, MU FG Sec uritie s EME A p lc, T r uist S ecur ities , Inc. and Well s Fargo Sec uritie s Intern ationa l Limite d as de ale rs (De ale rs), purs uant to whi ch the D eal ers we re app ointed in c onn ecti on with the Pro gramm e and the N otes . Und er the D ea ler Agre eme nt, e ach of th e Is sue r and the G uara ntors has g iven cus toma ry war ranties a nd ind emni ties in favou r of the Dealers. £1 bi llio n Euro C om me rcia l Pap er Pro gra mm e In 20 20, the Gro up est abli she d a £1 b illion Eu ro Com merci al Pap er Progra mme (ECP) an d iss ued £ 60 0m o f com merci al pap er un der the J oint HM Treasur y and B ank o f Engla nd Cov id Co rpor ate Fin ancin g Facilit y . T he is suan ce wa s repai d on maturi ty in Ma rch 2 02 1. M ate ria l c o ntra ct s 241 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Group i nformati on The re are no res trictio ns on di vide nd paym ents to U S citize ns. Altho ugh the re are curren tly no U K foreign exch ange c ontrol restri ction s on the ex por t or im por t of c apit al or th e payme nt of divid end s on the o rdinar y sh ares o r the AD Ss, e con omic s anc tions which m ay be in forc e in the U K from time to tim e imp ose re stric tions on the p ayment o f divid end s to per son s resid ent (or treate d as so res ide nt) in or govern ment s of (or per son s exercisin g publi c func tions i n) cer tain c ountrie s. Oth er tha n eco nomi c san ction s whic h may be in forc e in the U K from time to tim e, the re are no res trictio ns und er the A rtic les o f As soc iation o r unde r Engli sh law th at limit the ri ght of no n-re sid ent or forei gn owne rs to hol d or vote the ordi nar y sh ares or th e ADS s. In ad dition, th e Ar ticle s co ntain c er tai n limita tions o n the voting an d other r ights of any ho lde r of ordin ar y share s who se ho lding m ay , in the op inion of t he Dire ctors , resul t in the lo ss or f ailure to se cure the reins tatem ent of any lic en ce or fra nchi se from any U S governm enta l age ncy he ld by Six C ontin ents H otels , Inc. or a ny subsi diar y the reof. Group c omp anie s have exte nsive o per ations in t he UK , as we ll as intern ationa lly , an d are involve d in a numb er of le gal c laim s and proc ee ding s incid ent al to thos e ope ration s. Th es e leg al clai ms and proc ee ding s are in variou s st age s and inc lude d isp utes rel ated to sp eci ic h otels wh ere the p otential m ateria lity i s not yet kn own. It i s the C omp any’s view that s uch p roce edi ngs, e ither i ndivi dually o r in the ag gregate, h ave not in the re cent p ast a nd are not l ikely to have a signi ic ant e ect o n the G roup’s inan cial p ositi on or pro it abilit y . Not with stan ding th e above, the C om pany note s the mat ters set o ut be low. Litigation i s inhe rently unp redic tab le an d, as of 21 Feb ruar y 20 2 2, unle ss s tate d other wi se, the o utcom e of the se matters cann ot be reasonably determined. A clai m was i led o n 5 July 2 016 by C PT S Hotel Le ss ee, L LC (CPTS) agai nst H olid ay Hos pita lity Franc hisin g, LLC (HH F). T he cla imant alle ges b reac h of the lic en ce agre eme nt and s ee ks a dec larator y judg eme nt from the c our t that i t has th e right to termin ate its lic enc e with H HF . HH F and I nterC onti nent al Hote ls Gro up Res ource s, Inc . il ed a cl aim ag ainst C P TS Hote l Les se e, LLC als o see king a dec larato ry ju dge ment a nd alle ging b reac h of contr act an d fraud. On 1 M ay 2018 , the co ur t granted I HG ’s motion for p relimin ar y injunc tion an d rule d that th e lice nse a gree ment at i ssu e is not termin able at w ill by CP TS. A s of 21 Fe bruar y 20 2 2, the likel ihoo d of a favourab le or un favourabl e resul t cann ot be re aso nabl y deter mine d and it i s not po ss ible to de termine w hethe r any los s is likely o r to estim ate the am ount of any lo ss . A clai m was i led o n 26 Jun e 2017 a gains t Inter Co ntinent al H otels Co rpor ation, Inte rC ontin ental H otel s Group Re so urces , Inc., an d Inter Co ntinent al H otels G roup (Can ada), Inc. s ee king cl as s actio n sta tus and al legi ng brea ch of iduc iar y dut y , n eglig enc e, bre ach of conidence, intrusion upon seclusion, br each of cont ract, breach of priva cy leg islati on, an d unjus t enric hment re gardin g an alle ge d dat a breac h. Th e claim wa s ame nde d in Ma rch 201 8 to name Six C ontine nts H otels, I nc. as th e sol e defe ndant . The c laima nt alle ges th at se curit y failu res allowe d cus tome rs’ i nanc ial infor mation to be co mprom ise d. As of 2 1 Febr uar y 202 2 , the likelih ood o f a favourab le or unf avourable re sult c ann ot be rea son ably d etermi ned and it i s not po ss ible to de termin e wheth er any los s is likel y or to estim ate the am ount of any lo ss . T wo cl aims we re ile d on 1 9 March 2 018 an d 6 De ce mbe r 2018 agai nst Si x Con tinent s Hotel s, Inc . and oth er hotel c omp anie s, alle ging vi olatio ns of anti -trus t regul ations . On e of the ma tter s is a cla ss ac tion, an d both s uits all ege t hat the d efend ant hote l comp anie s con spire d to elimi nate co mpeti tive bran ded key word se arch adve rti sing in th e hotel in dustr y , whic h raise d pric es fo r hotel roo ms in vio lation of a ppli cab le law. Thes e mat ters h ave now be en res olve d and th e claim s have be en dis mis se d with pre judic e. A clai m was i led o n 5 April 20 19 an d ame nde d on 16 D ec emb er 20 19 agai nst K impton s eek ing cl as s actio n statu s and all egin g harm relate d to the co mprom ise of p ers ona l informati on due to a d ata se curit y brea ch. T he alle gatio ns rel ate to a breac h of the res er vation system p reviou sly us ed by K impton. A s of 21 Fe bruar y 20 2 2, the likeliho od of a f avourabl e or unfavoura ble re sult c annot b e reas on ably deter mine d and it i s not po ssi ble to de termine w hethe r any los s is likely or to e stima te the amo unt of any los s. An arbi tration wa s ile d on 2 1 De ce mbe r 201 8 alle ging that I HG H otel s Limite d and I nterC ontin enta l Hotel s Group P LC misrep rese nted th e right of a third p ar ty to lic en se the C rowne Pla za b rand. T he cl aimant se eks mo net ary d ama ges fo r variou s alle ged l oss es . As of 21 Feb ruar y 20 2 2, the likel ihoo d of a favourab le or un favourabl e resul t can not be re aso nab ly dete rmine d and it i s not po ss ible to de termin e wheth er any lo ss is l ikely or to es timate the a mount o f any los s. G roup i nform atio n c o ntin u e d L e gal pr oce edi ngs E x change c on t r ols and r estr icti ons on pa yment of di vidends Addition al Information 242 IHG | Annua l Repo rt a nd Form 20 F 202 1 This s ec tion provi des a s ummar y of m aterial U S fed eral in com e tax and U K tax c on seq uen ces to th e US ho lde rs, de scr ibe d bel ow , of owning a nd dis pos ing of o rdinar y sh ares or A DS s of the C omp any . This s ec tion ad dres se s only th e tax p ositi on of a US h old er who hol ds ordin ar y share s or AD Ss a s capi tal a sse ts. T his se ctio n doe s not, h owever , di scu ss all o f the ta x con side ration s that m ay be relevant to a ny par ticula r US ho lder, such as th e provisi ons of th e Intern al Revenu e Co de of 19 86 , as ame nde d (IR C od e) known as the M edic are C ontribu tion t ax or t ax con se que nce s to US ho lde rs subj ect to s pec ial rul es, su ch as: • ce r tain inan cial in stituti ons; • insurance c ompanies; • de ale rs and tra der s in se curitie s who u se a ma rk -to -ma rket meth od of t ax acc ountin g; • pe rs ons ho lding o rdinar y s hares o r ADS s as p art o f a strad dle, conver sio n trans actio n, integr ated tran sac tion o r wash s ale, or pe rs ons en tering into a c ons tructive s ale w ith resp ec t to the ordi nar y sha res or A DSs; • pe rs ons wh ose f unctio nal cu rrency fo r US fed eral in com e tax purp ose s is no t the US d ollar; • pa rtn ers hips o r other e ntities c las si ie d as pa rtn ers hips fo r US fede ral in com e tax p urpo ses ; • pe rs ons lia ble for th e altern ative minim um tax ; • tax-ex empt or ganisati ons; • pe rs ons wh o acqu ired th e Com pany ’s ADSs or o rdinar y sh ares purs uant to the exerc ise of a ny employe e stock o ption o r other wi se in co nne ction w ith emp loyme nt; and • pe rs ons wh o, directly o r indire ctly, o wn ordin ar y sha res or A DSs repre senti ng 10% o r more of th e Co mpany ’s voting power o r value. This s ec tion do es no t gen erally d eal w ith the po sitio n of a US h olde r who is re sid ent in the U K for U K ta x purp ose s or wh o is subj ect to U K taxa tion on c apit al gai ns or in com e by vir tue of c arry ing on a tra de, profes sio n or voc ation i n the UK th rough a b ranch, a gen cy or pe rmane nt es tab lishm ent to whic h suc h ADS s or ordin ar y sha res are attr ibut able (‘ tradin g in the U K’). As us ed h erein, a ‘ US h old er ’ is a pe rso n who, for U S fede ral inc ome tax p urpo se s, is a b ene ic ial owne r of ordin ar y sha res or AD Ss an d is: (i) a citiz en or in dividu al res iden t of the US ; (ii) a co rporati on, or oth er entit y ta xable a s a cor porati on, cre ated or o rganis ed i n or und er the laws of th e US, any st ate the rein or th e Dis trict of C olum bia; (iii) a n est ate who se in com e is subj ect to U S fed eral in com e tax re gardle ss of its s ource ; or (iv) a trust , if a US c our t ca n exercise p rimar y sup er visi on over the tr ust ’s adminis tration a nd on e or more U S pe rso ns are auth oris ed to co ntrol all su bst antial d eci sion s of the trus t. This s ec tion is b ase d on th e IR C ode, i ts le gisl ative histo ry, e xis ting and p ropo sed re gulati ons, p ubli she d ruling s and c our t de cisi ons, and o n UK t ax laws an d the pu blis hed p racti ce of H M Revenue a nd Cus toms (H MR C), all as of the d ate here of. Thes e laws, an d that prac tice, a re subje ct to cha nge, p os sibly o n a retroac tive ba sis. This s ec tion is f urth er ba se d in par t up on the re pres enta tions of the AD R D epo sit ar y and as sum es that e ach o blig ation in th e dep osi t agree me nt and any rela ted agre em ent will b e per for med in ac corda nce w ith its ter ms. For U S fed eral in com e tax p urpo ses , an owne r of AD Rs evid enc ing AD Ss will g ene rally b e treated a s the owne r of the un derly ing sh ares rep res ented by tho se AD Ss . For UK tax p urpo se s, in pra ctic e, HM RC will al so reg ard hol der s of ADS s as the b en ei cial own ers o f the ordin ar y share s repre se nted by thos e ADS s (althoug h cas e law ha s ca st so me dou bt on this). The di scu ssi on be low as sum es that H M RC’s po sitio n is followe d. Ge nera lly , exch ange s of ordin ar y share s for AD Ss, a nd AD Ss for ordin ary s hare s, will no t be sub jec t to US fed eral in com e tax o r UK taxa tion on c apit al gai ns, alth ough U K st amp dut y or s tamp d uty rese r ve tax (SD RT ) may aris e as de sc ribe d be low. Investo rs sho uld c ons ult thei r own tax a dvis ers re gardin g the US fede ral, st ate and l oca l, the U K and othe r tax c on seq uen ces o f owning a nd dis pos ing of o rdinar y sh ares or A DS s in their particular circumst ances. The fo llowing d iscl osure s as sume th at the C omp any is not, a nd will not b eco me, a pa ss ive foreign i nvestme nt com pany (PFI C), except as de scr ibe d bel ow . T axation of divid ends UK taxation Und er cur rent UK t ax law, the Co mpany will n ot be re quire d to withh old t ax at so urce from di vide nd paym ents it m akes. A US ho lde r who is n ot resi dent fo r UK t ax purp os es in the U K an d who is n ot tradi ng in the U K will ge ner ally not b e liab le for U K taxati on on div iden ds rec eive d in res pec t of the A DSs o r ordina ry s hare s. US fe de ral in com e ta xatio n A US ho lde r is ge nera lly subj ect to U S fede ral inc om e taxati on on the gros s amo unt of any divi den d paid by th e Com pany out o f its current o r acc umula ted ea rnings a nd pro its (as de termin ed for US fe dera l inco me ta x purp ose s). Distrib ution s in exces s of the Co mpany ’s current and a ccu mulate d earni ngs an d pro its, a s deter mine d for US fe der al inc ome t ax purp os es, wil l be treate d as a return of c apit al to the ex tent of the U S hol der ’s basi s in the sh ares or AD Ss an d there af ter as c apit al gain . Be cau se the C om pany has not his toric ally ma intain ed, an d doe s not cu rrently m aintain , boo ks in ac corda nce w ith US t ax prin cipl es, th e Com pany do es not ex pec t to be in a p ositi on to deter mine wh ether a ny distrib ution wi ll be in exces s of the C omp any’s current a nd ac cumul ated e arning s and pro its a s comp uted fo r US fe deral i nco me ta x purp ose s. As a re sult , it is exp ecte d that am ount s distrib uted w ill be rep or ted to th e Intern al Revenu e Ser vi ce (IR S) as divid end s. Subj ect to ap plic abl e limit ations , divid end s paid to c er tain non - corp orate U S hol ders w ill be t axab le at the pre ferentia l rates app lica ble to lon g-te rm cap ital g ain if the d ivide nds c ons titute ‘ qualiied d ividend income’ . The Compan y expects t hat di vidends paid by th e Co mpany with re sp ect to th e ADS s will co nstitu te quali ie d dividend i ncome. Non-c orporat e US holders should consult their own ta x advi ser s to determi ne whe ther th ey are subje ct to any sp eci al rule s that limi t their a bilit y to be t axed at the se p referenti al rates . Divi den ds mus t be in clud ed in in com e whe n the US h old er , i n the ca se of sh ares , or the AD R D epo sit ary, in the cas e of AD Ss, ac tuall y or co nstr uctive ly rec eives th e divid end, a nd will n ot be el igibl e for the dividends-received deduct ion general ly al lowed t o US corpor ations in res pec t of divi den ds rec eive d from othe r US c orpo ration s. For foreig n tax cre dit limi tatio n purp ose s, divi den ds will g ene rally be in com e from so urces o uts ide the U S. The a mount of a ny divide nd pa id in po unds s terling w ill be th e US do llar val ue of the s terling p ayment s mad e, dete rmine d at the sp ot sterlin g/US d olla r rate on the d ate the divi den d distrib ution is inc ludib le in inc om e, regardl es s of whe ther th e payme nt is in fact c onver ted in to US doll ars . If the di vide nd is c onver ted into U S doll ars on th at date, a U S hold er sh ould n ot be re quired to re co gnise foreign c urrency g ain or l oss i n resp ec t of the divi den d inc ome. Ge nera lly , a ny gain or lo ss re sulting f rom curren cy exchang e lu ctuatio ns duri ng the p erio d from the da te the divi dend p ayme nt is inc ludib le in inc om e to the date the p ayment i s conver te d into US do llar s will be tre ated a s ordinar y in com e or lo ss from s ourc es within th e US. S ha re h o ld e r i nf o rm atio n Ta x a t i o n 24 3 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Shareholder i nfor mation T a xatio n of ca pit al ga ins UK taxation A US ho lde r who is n ot resi dent fo r UK t ax purp os es in the U K an d who is n ot tradi ng in the U K will not g ene rally b e liab le for U K taxati on on c apit al gain s, or el igibl e for relie f for allowab le lo ss es, re alise d or ac crue d on th e sal e or othe r disp os al of AD Ss or o rdinar y sh ares . A US ho lde r of ADS s or o rdinar y sh ares wh o is an in dividu al and who, bro adly , has te mpo rarily c eas ed to b e resid ent in th e UK or h as be com e temp orarily t reated a s non -re side nt for U K tax p urpo ses fo r a pe riod of n ot more th an ive ye ars an d who di spo se s of ordina ry sha res or A DSs d uring that p erio d may , for the yea r of as ses sm ent whe n that ind ividu al be com es re side nt aga in in the U K, b e liab le to UK t ax on c apit al gai ns (subje ct to any availabl e exemption o r relie f ), not withs tan ding the f act tha t such U S hol der wa s not treate d as resi dent in th e UK at th e time of th e sal e or othe r disp os al. US fe de ral in com e ta xatio n A US ho lde r who s ells o r other wi se dis pos es of o rdinar y sh ares o r ADS s will re cog nise a c apit al gai n or los s for U S fede ral inc om e tax purp ose s eq ual to the di eren ce b etwe en th e amount re alis ed an d its t ax ba sis in th e ordina ry s hare s or ADS s, e ach de termine d in U S doll ars. S uch c apit al gai n or lo ss will b e a lon g-ter m cap ital g ain or los s whe re the US h old er ha s a hold ing pe riod g reater th an one ye ar . Los se s may als o be treate d as lo ng- term ca pita l los se s to the exte nt of ce rt ain ‘extraord inar y divi den ds’ that q uali ie d for the p referenti al tax ra tes on qu ali ied d ivide nd in com e des crib ed ab ove. The c api tal gain o r los s will ge nera lly be in com e or lo ss fro m sourc es with in the US for fo reign t ax cred it limit ation p urpo ses . The d edu ctibil ity of cap ital l os ses i s subje ct to limi tatio ns. PFIC rules Ba se d on the m anne r in which th e Grou p ope rates it s bus ines s and e stima tes of the va lue of it s ass ets (whic h estim ates are b ase d, in par t, o n the ma rket value of th e Com pany ’s ADSs) the Co mpa ny be lieves th at it was not a P FIC fo r US fed eral in com e tax p urpo se s for its 2 02 1 taxa ble ye ar . H owever , the Co mpa ny’s PFIC s tatus i s an annu al factu al dete rminati on and th us may be s ubje ct to cha nge. If the C om pany were a PFI C for any ta xabl e year duri ng whic h a US hol der own ed o rdinar y sh ares or A DS s, gain re alis ed on th e sal e or other d isp ositi on of ordi nar y sha res or A DSs wo uld, in g ene ral, not be tre ated as c apit al gai n. Ins tead, g ain woul d be tre ated as if th e US ho lde r had re alis ed su ch gai n rateab ly over the h oldin g peri od for the o rdinar y sh ares o r ADS s and, to the ex tent all oc ated to the taxa ble ye ar of the s ale or o ther di spo sitio n and to any year b efore the C omp any bec ame a P FIC, wo uld b e taxed a s ordin ary i nco me. The a mount all oc ated to ea ch othe r tax able ye ar would b e ta xed at the hig hes t tax rate in e ec t (for indivi dual s or co rpor ations , as app lica ble) for ea ch suc h year to whi ch the ga in was all oca ted, toget her wi th an interes t cha rge in res pe ct of the t ax at tribut abl e to eac h suc h year . In ad dition, s imilar r ules wo uld ap ply to any ‘e xces s distri butio n’ rece ived on th e ordin ary s hare s or AD Ss (g ene rally , the exces s of dis tributi ons re ceive d on the o rdinar y s hares o r ADS s durin g the ta xabl e year over 12 5% of the avera ge amo unt of dis tributi ons rec eived d uring a sp ec ii ed pr ior pe riod ). The p referenti al rates fo r quali ie d divi den d inc ome de sc ribe d above wou ld not ap ply if th e Co mpany were a P FIC for t he tax able ye ar of the di strib ution o r the pre ce ding t axabl e year . 1 Ce rt ain el ecti ons m ay be availab le (inc ludin g a market-to- market ele ctio n) t o US h olde rs that wo uld res ult in alte rnative tre atment s of the o rdinar y sh ares or A DS s. If th e Com pany were a PF IC for a ny taxa ble ye ar in whic h a US ho lde r hel d ordina ry s hares o r ADS s, a U S hol der wou ld ge neral ly be re quired to ile I RS Form 86 21 w ith thei r annu al US fe dera l inco me ta x returns , subje ct to ce rt ain exce ptions . 1 Sub jec t to PF IC an al ysi s upo n rec ei pt of ina nc ial s tate me nts . Addition al tax cons ideratio ns UK inher itance ta x An ind ividu al who i s neith er do micile d no r dee me d domic ile d in the UK i s only ch arge able to U K inhe rita nce t ax to the ex tent the i ndivi dual owns a sse ts situ ated in th e UK . As a ma tter o f UK law, it is not c lear wheth er the s itus of a n ADS for U K inh erit ance t ax pu rpos es i s deter mine d by the pla ce wh ere the d epo sit ary i s es tabl ishe d and rec ords the e ntitle ment s of the de po sit ho lder s, or by the s itus of the un derly ing sh are which t he ADS re pres ent s, but H MR C may take the vie w that the A DSs , as well a s the ordin ar y sha res, are or repre sent U K-situs a ss ets. However, an individ ual who i s domi cile d in the U S (for the purp os es of the E state a nd Gif t T ax C onventio n (the Conventi on) ), and is n ot a UK n ationa l as de in ed in th e Co nvention, wil l not be s ubje ct to UK inhe rita nce t ax (to the extent U K inh erit ance t ax ap plie s) in respe ct of the o rdinar y sh ares or A DS s on the in divid ual’s de ath or on a tra nsfer of the o rdinar y sh ares or A DS s during th eir lifeti me, provid ed th at any appl icab le US fe de ral gif t or e state t ax is p aid, unl es s the ordin ar y sha res or A DSs a re par t of the b usin es s prope r ty of a U K pe rman ent est abl ishm ent or p er tai n to a UK ixed ba se of an in divid ual us ed for the p er forma nce of i nde pen dent p ers on al ser vi ces . Whe re the ordin ary s hare s or AD Ss have b een p lac ed in tru st by a se ttlo r , they may be s ubje ct to UK in herit anc e tax u nles s, wh en the tr ust wa s create d, the s ettl or was d omicil ed in th e US an d was not a U K natio nal. If no re lief is g iven und er the C onventi on, inh erit ance t ax may b e cha rged o n death a nd als o on the a mount by whi ch the val ue of an indiv idua l’s est ate is redu ce d as a res ult of any trans fer ma de by way of gif t or othe r und er value tra nsfer, broadly wi thin seven ye ars of de ath, and in c er tai n other c ircums tan ces . Whe re the ordin ar y sha res or A DSs a re subje ct to both U K inh erit ance t ax an d to US fed eral gif t or e state t ax, th e Co nvention ge ner ally provid es for e ithe r a cred it agai nst U S fede ral ta x liabil ities fo r UK inh erit anc e tax p aid or for a c redit a gains t UK in herit anc e tax l iabili ties for U S fed eral t ax paid , as the c ase m ay be. UK st am p dut y an d SDR T Ne ither s tam p duty n or St amp D ut y Rese r ve T ax (S DRT ) will g ene rally be p ayable in the U K on th e purch ase o r trans fer of an A DS, provi ded that the A DS an d any sep arate ins trume nt or writ ten ag reem ent of trans fer are exec uted an d remai n at all time s out side th e UK . UK l egis latio n doe s however p rovide for s tamp d uty (i n the ca se of trans fers) or S DRT to b e payable at th e rate of 1. 5% on the a mount o r value of th e co nsid eratio n ( or , in som e ca ses , the valu e of the ordin ar y sha res) where ord inar y sh ares are is su ed or tra nsfe rred to a pe rso n (or a nomin ee or a gent of a p er son) whos e bu sine ss is o r incl ude s is suing d epo sit ar y rece ipts or th e provis ion of c lear ance s er vic es . In ac cord anc e with the ter ms of the d epo sit a greem ent, a ny tax or dut y payabl e on de pos its of o rdinar y sh ares by the d epo sit ar y or by the cu stodi an of the d epo sit ary w ill ty pic ally be c harge d to the p art y to whom A DSs a re delive red ag ains t such d ep osit s. Followin g litigati on on the s ubje ct, H MR C has a cce pted th at it will no lo nger s ee k to appl y the 1. 5% SD RT cha rge whe n new sh ares are is sue d to a clea ranc e ser vic e or d epo sit ary re ce ipt system o n the bas is that th e cha rge is not c omp atible w ith EU law. HMR C’s publ ishe d prac tice s tates th at the di sap plic ation of th e 1.5% c harge o n the is sue of sh ares (and tran sfer s integral to th e raisi ng of ca pita l) into cle aran ce ser vi ces o r dep os itar y rec eipt sys tems i n acc ordan ce with th e relevant princ iple s of EU law wi ll remai n the po sitio n followin g the U K’ s exit from the EU u nles s the re levant U K statu tor y provisi ons are am end ed. In H MRC ’s view, the 1.5% S DRT o r stam p dut y charg e will co ntinue to appl y to transfe rs of sh ares into a c lea rance s er vic e or de po sita ry rec eipt syste m unle ss th ey are an integr al par t of an i ssu e of sh are cap ital . Spe ci ic profe ss iona l advic e sho uld b e sou ght befo re paying the 1. 5% SD RT or s tamp d uty c harge i n any circums tan ces . Shar eholde r in f orma t ion c o ntin u e d Ta x a t i o n c o ntin u e d Addition al Information 24 4 I HG | Annua l Repo rt a nd Form 20 F 202 1 A trans fer of the u nde rlying o rdinar y sh ares wi ll gen erally b e sub ject to sta mp dut y or SD RT , norm ally at th e rate of 0.5% of th e amou nt or valu e of the c onsi derati on (rounde d up to the nex t multi ple of £5 i n the ca se of s tamp d uty). A trans fer of ordi nar y sh ares from a nomi nee to it s be ne icia l owne r , inc ludin g the tran sfer of un der lying ordin ary s hare s from the d epo sit ar y to an ADS h olde r , un der w hich no be ne ic ial intere st pa ss es, wi ll not be s ubje ct to st amp dut y o r S D R T. US backup w ithholding and infor mation r eporting Payme nts of div iden ds an d sal es pro ce eds w ith resp ec t to ADS s and o rdinar y sh ares m ay be repo rte d to the I RS and to the U S hol der. Ba ckup with hol ding may ap ply to the se rep or tab le paym ents i f the US ho lde r fails to provi de an ac curate t axp ayer identi ic ation n umbe r or ce r tii catio n of exempt st atus or f ails to rep or t all intere st an d divid end s requi red to be s hown on i ts US fe der al inc ome t ax returns . Cer tain US holders (incl uding, among ot hers, corpora tions ) are not subj ect to info rmatio n repo rtin g and b ackup w ithho lding. The a mount of a ny backu p withho lding f rom a payme nt to a US hol der wi ll be all owed as a c redit a gains t the ho lde r’s US fed eral inc ome t ax liab ilit y and may e ntitle the h olde r to a refund , provide d that the re quire d inform ation is ti mely f urnish ed to th e IRS . US ho lde rs sh ould c ons ult the ir tax a dvis ers a s to their qu ali ic ation for exemptio n from ba ckup wi thhol ding an d the pro ce dure for obtaining an exemption. Ce rt ain U S hold ers w ho are indi vidu als (and ce rt ain sp ec ii ed en tities), may be re quire d to repor t info rmatio n relating to th eir own ers hip of non - US s ecur ities un les s the s ecuri ties are h eld in a cc ounts at in anci al ins titution s (in whic h ca se the a cco unts m ay be repo rt abl e if maint aine d by non - US inan cial in stituti ons). US ho lder s sho uld con sult th eir t ax advi ser s rega rding any rep or ting ob ligatio ns they may have with re spe ct to the C omp any’s ordin ar y share s or AD Ss. As of the e nd of th e peri od c overed by this re por t, th e Grou p carrie d out an eva luatio n unde r the sup er vis ion an d with the p ar ticip ation of the G roup’s manag eme nt, inc ludin g the Chi ef E xecutive O ice r and C hief F inanc ial O i cer , of the e ec tivene ss of th e de sign and o perati on of the G roup’s discl osure c ontrol s and pro ce dures (as de ine d in Rule s 13a –15 (e ) and 15 d–1 5(e ) of the S ecu rities E xchang e Act 19 34). The se are d e ine d as tho se co ntrols an d proc edu res de sign ed to ens ure that info rmatio n require d to be dis clo se d in rep or ts i led unde r the S ecuri ties E xcha nge Ac t 193 4 is rec orde d, proc es se d, summ aris ed an d repo rte d within th e spe ci ie d pe riods . Ba se d on that evalu ation, th e Chie f Exe cutive O i cer a nd Chi ef Fin anci al O ic er co nclu de d that the G roup’s discl osure c ontrols a nd proc edu res were e ec tive. Disclosur e cont r ols and p r oc edur e s 24 5 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Shareholder i nfor mation The G roup’s statem ent of c ompl ianc e with the p rincip le s and provis ions s pe ci ied in t he UK C orp orate G overnan ce C od e iss ued in Jul y 2018 by th e Fina ncial R epo rti ng Co uncil (the C od e) is set out on pa ges 1 26 and 12 7 . IH G has a lso a dopte d the co rpor ate governa nce re quirem ents of the U S Sarb ane s- Ox ley Act an d relate d rule s and of th e NYSE , to the exte nt that th ey are appli cab le to it as a fore ign private i ssu er . As a forei gn private is su er , I HG i s require d to dis clos e any signi ic ant ways in whic h its co rpo rate governa nce p ractic es di er fro m thos e followe d by US co mpa nies . The se are a s follows: Bas is of regulatio n The C od e cont ains a s erie s of prin cipl es an d provisi ons . Liste d com pani es are re quired to s tate how th ey have appli ed the C od e’s princ iple s and th e provis ions o per ate on a ‘comply o r expla in’ basi s, whe re any areas of n on -c omp lianc e sho uld b e disc los ed with a n explana tion f or the non-compliance. In co ntrast , US c ompa nies l iste d on the N YSE are req uired to ad opt and di scl ose c orp orate govern anc e guide line s ado pted by the N YSE . Independent Di rectors The C od e’s principl es rec omm end th at at le ast h alf the B oard, excludin g the Ch air , s houl d con sis t of inde pe nde nt non - executive direc tors. A s at 21 Fe bruar y 20 2 2, the B oard c ons iste d of the Ch air , inde pe nde nt at the time o f his ap pointm ent, thre e E xecuti ve Direc tors and e ight ind epe nde nt No n- E xecutive D irec tors. N YSE lis ting rul es app lica ble to US c omp anie s state th at com pani es mu st have a majo rity o f inde pe nden t directo rs. T he NYS E has s et out s ix bright line t e sts f or dir ector independence. The B oard ’s judge ment is that all of it s Non - Exe cutive D irecto rs are ind epe nde nt. H owever , it d id not expl icitly t ake into con side ration th e NYSE’s test s in rea ching this de termin ation. Chair and Chief Executive Oicer The C od e reco mme nds th at the Ch air an d Chief E xec utive O ic er sho uld not b e the s ame in divid ual to en sure that th ere is a cl ear divis ion of re sp onsi bilit y for the ru nning of th e Co mpany ’s busin es s. The re is no c orres pon ding re quirem ent for U S com pani es. T he role s of Ch air and C hief E xec utive O ic er were, a s at 21 Feb ru ar y 20 2 2 and throughout 2021, fulille d by separate individuals. Co mmit tee s The C omp any has a n umbe r of Bo ard Co mmit tee s which a re simila r in purp os e and c onsti tution to tho se re quired fo r dom esti c comp anie s unde r NYS E rule s. Th e NYSE re quire s US co mpan ies to have au dit, remun eratio n and no minatin g/corpor ate governa nce c ommit tee s com pos ed e ntirely of i nde pen dent di rector s, as d e ined u nde r the NYSE r ules . The C om pany ’ s No minatio n, Audit a nd Remu nerati on Co mmit tee s con sis t entirely o f Non - Exe cutive D irecto rs who are inde pe nde nt unde r the st and ards of th e Co de, whic h may not ne ces sa rily be th e sam e as the N YSE in dep end enc e sta ndard s. The n omin ating/governanc e co mmit tee is re sp onsi ble for i dentif yi ng indiv idua ls qual ii ed to be co me Bo ard me mbe rs and to re com men d to the Bo ard a set o f corp orate gove rnan ce prin cipl es. A s the C omp any is sub jec t to the Co de, the C om pany ’ s No minatio n Co mmit tee is resp on sible fo r nomi nating, fo r approval by th e Boa rd, can didate s for app ointm ent to the B oard, in cludi ng rec omme ndin g suitable can didate s for the ro le of Se nior I nde pen dent N on -E xec utive D irec tor. The C omp any’s No minatio n Co mmit tee c onsi sts of th e Ch air and independent Non-E xecut ive Directors. The C hair of th e Co mpany is n ot a mem be r of eithe r the Re mune ration or Audi t Co mmit tees . As se t out on p age 9 5, the Au dit C ommit tee i s chai red by an ind ep end ent No n- E xecuti ve Direc tor who, in th e Boa rd’s view, has the exp erie nc e and qu ali icati ons to s atisf y the c riterio n unde r US ru les fo r an ‘audit com mit tee inanc ial exp er t ’ . Non- Executive Director meetings NYSE r ules re quire th at non -m anag eme nt Dire ctors of U S co mpan ies mus t mee t on a regu lar ba sis wi thout m anag eme nt pre sent , and inde pe nde nt Dire ctors mu st me et s epar ately at le ast o nce p er ye ar . The C od e reco mme nds: (i ) the Bo ard Ch air to hol d mee tings wi th the N on- E xecu tive Dire ctors wi thout th e E xecutive D irecto rs pre sent ; and (ii) th e No n- E xecutive D irec tors to me et at le ast a nnuall y withou t the Ch air pre sent to a pprai se the C hair ’s per forma nce . The C omp any’s Non - E xecutive D irec tors have me t frequ ently with out E xecu tive Dire ctors b eing p res ent, an d intend to c ontinu e this pra ctic e, af ter ever y Bo ard me eting if p os sibl e. Shareholder approv al of equity compensation plans The N YSE rul es re quire that s hareh old ers mu st be g iven the opp or tunit y to vote on all e quit y com pen sati on pla ns and m ateria l revisi ons to tho se pl ans . The C omp any comp lie s with UK re quire ment s whic h are simil ar to the NYS E rule s. Th e Bo ard doe s not, h owever , explic itly ta ke into cons idera tion the N YSE’s detail ed d e inition o f ‘material revi sion s’ . Co de of C on duc t The N YSE re quires c omp anie s to adopt a c od e of bus ine ss co ndu ct and eth ics, a ppli cab le to Dire ctors , oi cer s and em ployee s. Any waive rs grante d to Direc tors or o ic ers u nde r such a c od e must b e prom ptly dis clos ed . As set o ut on pa ge s 37 and 3 8, IHG ’s Code o f Co nduc t is app lica ble to all D irecto rs, o ice rs an d emp loyees , and is avail able on the C omp any ’ s webs ite at ww w .ihgplc.com/ respon sible-business . No wai vers have b een g ranted un der th e Co de of C ond uct . Compliance certiication Ea ch chie f executive of a U S co mpany mu st ce rti fy to th e NYSE e ach year th at he or s he is no t aware of any viol ation by the C omp any of any NYSE c orp orate govern anc e listin g sta ndard . As the C omp any is a foreign p rivate is sue r , the C om pany ’ s Chie f E xecutive O icer i s not requi red to make this c er ti ica tion. H owever , h e is re quired to no tif y the NYS E prom ptly in writin g af ter any of the C omp any’s executive o ice rs be com e aware of any non - co mplia nce wi th thos e NYSE cor porate g overnan ce rul es ap plic able to th e Com pany . Shar eholde r in f orma t ion c o ntin u e d Summar y of s igniicant c orporat e gov e rnance di erences fr om NY S E list ing standar d s Addition al Information 246 IH G | Annua l Repo rt a nd Form 20 F 202 1 Sinc e Ma rch 200 3, the G roup h as returne d over £6 .6 billi on of fun ds to sha reho lder s by way of spe cial d ivide nds , cap ital retur ns and s hare repur chase pr ogrammes. Ret urn of f un ds p rog ram me Timing Total return Returne d to date £5 01m s pe cia l divi de nd a Pai d in De ce mb er 20 04 £ 501m £ 501m £250m share buyback Co mpl ete d in 20 04 £250m £250m £9 9 6m c apit al re turn a Pai d in Jul y 20 05 £9 96m £996m £250m share buyback Com ple ted i n 20 06 £250m £250m £4 97m sp ec ial d ivid en d a Pai d in Jun e 20 0 6 £4 9 7m £ 4 97m £250m share buyback Co mpl ete d in 20 07 £250m £250m £70 9m s pe cia l divi den d a Pai d in Jun e 20 07 £709 m £ 709 m £150m share buyback N /A b £150m £ 120m $5 00 m sp ec ial di vid end ac Pai d in Oc tob er 20 12 £315m d ($ 5 0 0m) £315m e ($ 5 0 5m) $500m share buyback Co mpl ete d in 20 14 £ 315m d ($ 5 0 0m) £315m ($ 5 0 0m) f $3 50 m sp ec ial di vid end Pai d in Oc tob er 20 13 £2 29m g ($ 3 5 0m) £2 28m ($ 3 5 5m) h $75 0m s pe cia l divi den d a Pai d in Jul y 20 14 £ 4 47m i ($ 75 0 m) £44 6m ($ 76 3 m) j $1, 50 0m s pe cia l divi de nd a Pai d in May 2 016 £1,03 8 m k ($ 1, 5 0 0 m) £1 ,03 8m ($ 1, 5 0 0 m) $4 0 0m s pe cial d ivid en d a Pai d in May 2 017 £309m l ($ 4 0 0 m) £310m ($404m ) $5 00 m sp ec ial di vid end a Pai d in Ja nuar y 2 019 £389m m ($ 5 0 0m) £388m ($ 51 0 m) To t a l £6,64 5m £6,613m a Accompanied by a share consolidation. b T hi s pro gram me wa s su per se de d by th e sha re bu yb ack p rog ram me an nou nc ed o n 7 Augu st 2 012 . c IH G ch ang ed t he re po rti ng cu rre ncy of i ts C on so lid ated F in anc ial S ta tem ent s from s ter lin g to US d oll ars e e cti ve from t he H alf-Y ea r Res ult s as at 3 0 Ju ne 20 0 8. d T he d ivi den d was ir st d eter min ed i n US do lla rs a nd co nver te d to ste rli ng im me dia tely b efo re an nou nc eme nt at t he rat e of $1 = £0 .63 , as s et ou t in th e circ ula r det ail ing t he sp ec ial div ide nd a nd sh are b uyb ac k pro gra mme p ub lis he d on 14 S epte mb er 2 012 . e Ste rli ng di vid en d tran sl ate d at $1 = £0. 624 . f Trans late d in to US d oll ars a t the ave rag e rate s of exc ha nge fo r the r ele vant ye ar s (20 14 $ 1= £ 0.6 1; 20 13 $1 = £0 .64 ; 20 12 $ 1 = £0.6 3). g T he d ivi den d was ir st d eter min ed i n US do lla rs a nd co nver te d to ste rli ng im me dia tely b efo re an nou nc eme nt at t he rat e of $1 = £0 .65 , as an no unc ed i n the H alf-Year Re sul ts to 30 J un e 201 3. h Ste rlin g div ide nd tr ans la ted at $ 1 = £0.6 4 4. i Th e div ide nd wa s i rs t dete rmi ne d in US d oll ar s and c onve r ted to s ter ling i mm edi ate ly be fore a nno unc em en t at the r ate tra ns late d at $ 1= £ 0.5 97. j Ste rli ng di vid en d tran sl ate d at $1 = £0. 58 4 5. k T he d ivi den d was ir st d eter min ed i n US do lla rs an d co nver te d to ste rli ng at th e rate o f $1 = £ 0.6 92 3, as a nno unc e d on 12 M ay 20 16 . l Th e div ide nd wa s i rs t dete rmi ne d in US d oll ar s and c onve r ted to s ter ling a t the r ate of $ 1 = £0.7 72 4, as a nno un ce d on 11 M ay 20 17. m T he di vid end w as irs t de term ine d in U S dol lar s an d co nver te d to ste rlin g at th e rate of £ 1 = $ 1. 28 60, a s ann oun ce d on 17 J anu ar y 20 19. Return of fun d s 247 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Shareholder i nfor mation Duri ng the inan cial yea r end ed 31 D e cemb er 2 02 1, no ordin ar y share s were pu rchas ed by the C om pany or the C om pany ’ s emp loyee sh are ownership trus t. T ot al nu mb er of s ha re s (o r uni ts) purchased Avera ge p ric e pa id pe r sh are (o r uni t) (£) T ot al nu mb er of s ha re s (o r uni ts) purchased as p ar t of pu bl icl y announced plans or programmes Ma xim um nu mb er o f sh are s (or u nit s) tha t may be pur chased un de r the p la ns o r programmes Mo nth 1 (no purc ha se s this m onth) nil nil nil 18, 265,631 a Mo nth 2 (no purc ha se s this m onth) nil nil nil 18, 265,631 a Mo nth 3 (no purc ha se s this m onth) nil nil nil 18, 265,631 a Mo nth 4 (no purc ha se s this m onth) nil nil nil 18, 265,631 a Mo nth 5 (no purc ha se s this m onth) nil nil nil 18,321,631 b Mo nth 6 (no purc ha se s this m onth) nil nil nil 18,321,631 b Mo nth 7 (no purc ha se s this m onth) nil nil nil 18,321,631 b Mo nth 8 (no purc ha se s this m onth) nil nil nil 18,321,631 b Mo nth 9 (no purc ha se s this m onth) nil nil nil 18,321,631 b Mo nth 10 (no p urch ase s thi s mont h) nil nil nil 18,321,631 b Mo nth 11 (no pu rcha se s this m onth) nil nil nil 18,321,631 b Mo nth 12 (no pu rcha se s this m onth) nil nil nil 18,321,631 b a Re l ec ts th e res ol utio n pa ss ed a t the C om pany ’s AGM h el d on 7 M ay 20 20. b R e le cts t he re so luti on p as se d at th e Co mpa ny’s AG M he ld on 7 M ay 20 21 . The t abl e bel ow sets fo rth th e amo unts of ordi nar y divi den ds on e ach ord inar y sh are and sp ec ial div iden ds, in re spe ct of e ach ina ncia l year indicated . Interim dividend Final dividend T otal dividend Spe cial dividend pence cents pence cen ts pence cen ts pence cents 2021 – – N /A a 85.9 N /A a 85.9 – – 2020 – – – – – – – – 2019 32.0 39. 9 – b – b 32.0 39. 9 – – 2018 2 7. 7 36.3 6 0.4 7 8 .1 8 8 .1 114 .4 20 3.8 ce 262. 1 ce 2017 24. 4 33.0 5 0.2 7 1.0 74 . 6 104 .0 156.4 c 202.5 c 2016 22 .6 30.0 49. 4 6 4.0 72 .0 9 4.0 43 8.2 c 632.9 c 2015 1 7. 7 2 7. 5 40.3 5 7. 5 58.0 8 5.0 – – 20 14 14. 8 25.0 33.8 52.0 48.6 7 7. 0 1 74 . 9 c 29 3.0 c 2013 1 5.1 23.0 2 8 .1 4 7. 0 4 3.2 70.0 8 7.1 133 .0 2012 13.5 21 .0 2 7. 7 43.0 41. 2 6 4 .0 10 8.4 c 172 .0 c 2011 9.8 16.0 24 .7 3 9.0 34.5 5 5.0 – – 2010 8.0 12.8 2 2 .0 35.2 3 0.0 48 .0 – – 2009 7. 3 12.2 1 8.7 29. 2 26.0 41 .4 – – 2008 c 6.4 12.2 20. 2 29. 2 2 6.6 41.4 – – 20 07 5.7 11.5 14 .9 29. 2 20.6 4 0.7 200 c – 2006 5 .1 9.6 13.3 25.9 18.4 35.5 11 8 c – a T he st erli ng am ou nt of th e i nal d ivi den d wil l be an no unc ed o n 27 A pril 2 02 2 u sin g the ave rag e of th e dai ly exc han ge ra tes fr om 2 2 Ap ril 20 2 2 to 26 Ap ril 2 02 2 in clu siv e. b T he B oa rd wit hdre w its r ec omm en dati on of a in al di vid en d in re sp ect o f 20 19 of 8 5. 9¢ p er s ha re. c Accompanied by a share consolidat ion. d I H G cha nge d th e rep or tin g cur ren cy of it s Co ns oli dat ed F ina nci al St ate me nts f rom st erl ing to U S do lla rs e ec tive f rom th e Ha lf-Y e ar Re su lts a s at 3 0 Jun e 20 08 . St ar tin g with t he inte rim d ivi den d for 2 00 8, a ll div id end s have ir st b ee n dete rmi ne d in U S dol lar s and c onve r ted i nto ste rli ng pr ior to p aym ent . e Th is sp ec ial d ivi de nd wa s ann oun ce d on 1 9 Oc tob er 20 18 a nd pa id o n 29 J anu ar y 20 19. Shar eholde r in f orma t ion c o ntin u e d Pu r ch ases o f equ i ty secur it ies b y t he Compan y and ai lia t ed pur chaser Divi dend hist or y Addition al Information 248 I HG | Annua l Repo rt a nd Form 20 F 202 1 Sh are hol de r pro ile by t ype a s at 31 D ec em be r 202 1 Category of shareholder Number of shareholders Percenta ge of total shareholders Number of ordinary shares Percenta ge of issued share capital Private individuals 30, 23 1 94. 25% 7, 6 1 3 , 7 1 8 4.0 6% Nomine e companie s 1 ,1 2 3 3.50% 1 49, 895,212 79.8 5% Limited and public limited companies 593 1.85% 1 7, 7 1 7, 2 6 5 9 .4 4% Other corpor at e bod ies 116 0.36% 10,538,835 5. 61% Pension funds, insurance companies and banks 11 0.03% 1 ,9 52 ,69 0 1.0 4% To t a l 32 , 0 74 100% 1 8 7, 7 1 7, 7 2 0 100% Sh are hol de r pro ile by s ize as a t 31 De ce mb er 20 21 Range of shareholdings Number of shareholders Percenta ge of total shareholders Number of ordinary shares Percenta ge of issued share capital 11 9 9 2 2 ,08 6 68.86% 1,313,645 0 .70 % 200 499 5,510 1 7. 1 8 % 1,7 2 4 ,8 4 1 0. 92 % 500999 2 ,1 8 8 6. 82% 1 ,517 ,793 0. 81% 1, 000 4, 999 1,526 4 .76 % 3 ,0 03 ,0 49 1.60% 5, 000 9 ,999 190 0.5 9% 1,322,761 0.70 % 10 , 00049, 999 278 0. 87% 6,277 ,24 4 3.34% 50 , 00099,999 98 0. 31% 7, 2 3 5 , 7 5 8 3.8 5% 100 , 000499, 999 128 0.4 0% 30, 82 8, 476 16.42 % 500 , 000999, 999 37 0.1 2 % 2 5 , 5 4 2 ,1 6 8 13.6 1% 1, 000, 000 a nd abov e 33 0.1 0 % 10 8,951,9 85 58 .04% To t a l 32 , 0 74 100% 1 8 7, 7 1 7, 7 2 0 100% Sh are hol de r pro ile by g eog rap hic al lo ca tion a s at 31 D ec emb er 2 02 1 Country/ Jurisdiction Percenta ge of issued share capital UK 48.9% Res t of Euro pe 20. 2% US (including AD Rs) 2 7. 7 % Res t of wor ld 3.2% To t a l 100% The g eo graphi cal p roil e pres ented i s bas ed o n an ana lysis o f share hold ers ( by man ager) of 3 8,00 0 sha res or a bove whe re geo graph ical owne rship i s know n. This a nalys is onl y captu res 9 0% of tot al is sue d share c apit al. Th erefo re, the know n perc ent age dis tribu tions h ave bee n multip lied by 10 0/90.1 (1.110 ) to achi eve the ig ures s hown in the t abl e above. As of 2 1 Febru ar y 202 2, 8,0 54 ,722 AD Rs e quival ent to 8,05 4,72 2 ordin ary s hare s, or ap proximate ly 4.4% of th e total i ssu ed s hare ca pita l, were out st andin g and were h eld by 418 ho lde rs. S ince c er tai n ordina ry s hare s are regis tered i n the nam es of n omine es , the num ber of sha rehol der s on rec ord may not b e repre se ntative of th e numb er of b ene ic ial own ers . As of 2 1 Febru ar y 202 2, th ere were a tot al of 31,976 re cord ed ho lde rs of ordi nar y sha res, of w hom 24 3 ha d regis tered a ddres se s in the U S and h eld a tot al of 30 6,151 ordinar y s hares (0.16% of th e total is su ed sh are cap ital ). Shar e holder pr oile s 249 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Shareholder i nfor mation The fo llowing ex hibits a re ile d as p ar t of this An nual Re por t on For m 20 F with th e SEC, an d are publ icly availa ble thro ugh the S EC’s webs ite. Visit www .sec. gov an d se arch I nter Co ntin ent al H otel s Grou p PLC und er C omp any Fi ling s. Exhibit 1 a Ar ticl es o f Ass oc iati on of th e Co mpa ny date d 7 May 20 20 (i nco rp orate d by refe renc e to E xhib it 1 of th e Inte rC onti nen tal H otel s Gro up PLC An nual R ep or t on Form 2 0 F (F ile N o. 1104 09) d ate d 4 Marc h 20 21) Exhibit 2(d) D es cri ption o f Se curi tie s Regi ste red U nde r Se cti on 12 of th e E xcha nge Ac t E x hi bi t 4 (a) ( i) (a) a Ame nd ed an d res tate d tru st de e d date d 14 Se ptemb er 2 020 r elat ing to a £ 3 bil lion Eu ro Me dium Term N ote Pro gram me, am ong Inte rC onti nen tal H otel s Gro up PLC, S ix Co ntin ent s Limi ted, I nter Co ntin ent al Ho tels L imit ed an d HS BC C or por ate T rus tee C om pany (U K) L imite d (in cor por ated by re fere nc e to Ex hibi t 4(a)(i) (a) of the Inte rC on tine nta l Hote ls G roup PLC A nnu al Rep or t on Fo rm 20 F (Fil e No. 1 1040 9) da ted 4 M arch 2 02 1) Exhib it 4(a )(ii) a $ 1. 27 5 bill ion b ank fa cili ty a gree me nt date d 30 M arc h 20 15, am ong I nter Co ntin ent al Ho tels G rou p PLC and c er t ain of it s sub si diari es , and B an k of Ame ric a Me rril l L ync h Inter nati ona l Limi ted, B arc lays B ank P LC, Citi ban k, N . A . Lond on B ran ch, C omm er zba nk Ak tie nge se lls cha ft , Lon don B ran ch, D BS B an k Ltd., Lo ndo n Bra nch , HS BC B ank p lc, S un T rus t Ban k, T he B ank of Tok yo- M its ubis hi UFJ, Ltd., The R oyal B ank O f Sc otla nd pl c, U.S . Ban k Nat ion al As so ciat ion an d Well s Fargo B ank N . A ., Lond on B ran ch (in cor po rated by refe renc e to E xhib it 4 (a )(i ii) of th e Inte rC onti nen tal H otel s Gro up PLC An nua l Rep or t on For m 20 F (F ile N o. 1 – 10 40 9) date d 3 Ma rch 20 16) Exhib it 4(a )(iii) a Waive r and a men dme nt le tte r date d 20 Ap ril 20 20 re latin g to the $ 1. 27 5 bill ion b ank f acil ity a gre eme nt da ted 3 0 Ma rch 20 15 (inc or por ated by re fere nce to E x hibi t 4(a)(ii i) of the I nter C ontin ent al H otel s Grou p PLC Ann ual Re po rt o n Form 2 0 F (Fil e No. 1 1040 9) da ted 4 M arch 2 02 1) Exhibit 4 (a ) (iv) a E xte nsi on le tte r date d 27 A pril 2 020 re lati ng to the $ 1. 27 5 bi llio n ban k faci lit y agre em ent d ated 3 0 Ma rch 20 15 (i nc orp orate d by refe renc e to E xhib it 4 (a )(i v) of the I nter Co ntine nt al Hote ls G roup P LC Annu al Re por t o n Form 20 F (Fil e No. 1 1040 9) da ted 4 Ma rch 20 21) Exhibit 4 (a ) (v ) a Waive r and a men dme nt le tte r date d 4 De ce mb er 20 20 rel atin g to the $ 1. 27 5 bill ion b ank fa cili ty a gre eme nt date d 3 0 Marc h 20 15 (inc or por ated by re fere nce to E x hibi t 4(a)(v) of the I nter Co ntine nta l Hote ls G roup P LC Annu al Re por t o n Form 20 F (Fil e No. 110 40 9) date d 4 Ma rch 20 21) Exhibit 4 (a ) (vi) A men dme nt le tte r date d 16 J uly 20 21 re lat ing to th e $1. 2 75 bi llio n ban k fac ilit y agre em ent d ate d 30 M arch 20 15 Exhibit 4 (c ) (i) a Pa ul Edg ec lie -Joh nso n’s ser vic e co ntra ct date d 6 D ec emb er 2 013 , com me ncin g on 1 J anu ar y 2014 ( inc orp orate d by refe ren ce to E xhib it 4(c)(i ) of the I nter Co ntin ent al Ho tels G roup P LC Annu al Re po rt o n Form 20 F (Fil e No. 1 1040 9) da ted 26 Fe bru ar y 20 14) Exhib it 4(c )(ii) a Rule s of th e Inte rC onti nen tal H otel s Gro up Lon g T erm I nce ntive P lan a s app roved by s hare ho lde rs on 2 M ay 20 14 and a s am end ed on 14 Feb rua ry 2 01 9, 4 De ce mbe r 20 19 an d 7 May 20 20 (i nco rpo rate d by refe renc e to E xhib it 4 (c )(i i) of the I nter C ontin ent al H otel s Gro up PLC An nual R ep or t on Form 2 0 F (F ile N o. 1104 09) d ate d 4 Marc h 20 21) Exhib it 4(c )(iii) a Rule s of th e Inte rC onti nen tal H otel s Gro up Ann ual P er form anc e Pla n as am en de d (inc orp ora ted by ref eren ce to E xh ibit 4 (c)(iii) o f the Inte rC onti nen tal H otel s Gro up PLC An nua l Rep or t on For m 20 F (F ile N o. 1104 0 9) date d 4 Marc h 20 21) Exhibit 4 (c ) (iv) a Keith B arr ’s ser vic e co ntra ct date d 5 M ay 2017, comm en cing o n 1 Jul y 20 17 (inc orp ora ted by re fere nce to E xh ibit 4 (c)(v) of the Inte rC onti nen tal H otel s Gro up Ann ual R epo r t on Form 2 0 F (F ile N o.11040 9) date d 1 M arch 20 18) Exhibit 4 (c ) (v ) a Elie M aa lou f ’s ser vic e co ntrac t date d 19 O cto be r 2017, comm en cing o n 1 Ja nuar y 20 18 (i nc orp orate d by refe ren ce to E xhi bit 4 (c)(vi) of the I nter C ontin ent al H otel s Grou p Annu al Re po rt o n Form 20 F (Fi le No.1104 0 9) date d 1 Ma rch 20 18) Exhibit 8 L ist o f sub sidi arie s as a t 31 D ec emb er 20 2 1 (can be fo und o n pa ges 2 03 to 2 05) Exhibit 12(a) Ce r ti ica tion o f Keith B arr ile d pu rsu ant to 17 C FR 24 0.13a –14(a) Exhibit 12( b) C er ti i cati on of P aul Ed gec li e-Joh ns on ile d pur sua nt to 17 CF R 240.13 a–14 (a) Exhibit 13 (a ) Ce rt i ica tion o f Keith B arr an d Pau l Edge cl ie -John son f urni sh ed pu rsu ant to 17 C FR 24 0.13a –14( b) and 18 U .S.C .1350 Exhibit 15 (a ) (i) C on se nt of in dep en de nt regi ste red p ubli c ac cou nting irm , Pric ewate rho use C oo per s LL P Exhib it 15(a )(ii) C ons ent o f ind epe nd ent re gis tere d pub lic a cc ounti ng i rm, Ern st & Young L LP Exhibit 10 1.IN S Inli ne XB RL I ns tan ce D ocu men t Exhibit 10 1.SC H Inli ne XB RL Taxono my Ex te nsi on Sc he ma Do cu ment Exhibit 10 1.CAL I nlin e XB RL Taxono my Ex ten sio n Ca lcul atio n Lin kba se D oc ume nt Exhibit 10 1.DE F I nlin e XB RL Taxono my Ex ten sio n De i nitio n Lin kba se D oc ume nt Exhibit 10 1.L AB In line X BR L T axon omy E xte nsi on L ab el Li nkb ase D oc ume nt Exhibit 101.PRE In line X BR L T axon omy E xte ns ion Pr ese nt ation L ink bas e Do cum ent a In corp orate d by referen ce. E xhibit s Addition al Information 250 IHG | Annua l Repo rt a nd Form 20 F 202 1 The A nnual Re po rt an d Form 20 F 2 02 1 cont ains c er tai n for ward- loo king s tatem ents a s de in ed und er U S legi slati on (Sec tion 2 1E of the Se curiti es E xchan ge Act o f 193 4) with resp ec t to the i nanc ial con ditio n, resul ts of op eratio ns an d busi nes s of the G roup an d cer t ain pla ns and o bjec tives of t he Bo ard of Dire ctor s of Inter Co ntinen tal Hote ls Grou p PLC with res pec t there to. Such st atem ents in clud e, but are n ot limite d to, statem ents m ade in th e Ch air’s state ment and in th e Chie f Exe cutive O i cer ’s review . The se for ward -lo oki ng sta tement s ca n be ide nti ied by th e fact th at they do n ot relate on ly to histori cal o r current f acts . For ward- loo king s tatem ents of ten u se words su ch as ‘anticip ate’ , ‘t arget ’ , ‘expec t ’ , ‘estimate’ , ‘ intend ’ , ‘plan’ , ‘ goa l’ , ‘b eli eve’ , o r othe r words of si milar m eanin g. Th ese s tatem ents are ba sed o n as sumptio ns an d ass es sme nts m ade by the G roup’s man age ment in li ght of the ir expe rienc e and th eir p erce ption of histo rical t rends , current c ond itions , expe cted f uture devel opm ents and oth er fac tors th ey beli eve to be app ropriate. By the ir nature, for ward -lo oki ng st ateme nts are inh erently p redi ctive, sp ecul ative and invol ve risk an d unce r taint y . There a re a numbe r of facto rs that c ould c aus e actu al res ults an d develo pme nts to die r materi ally from th ose ex pres se d in, or imp lie d by , suc h for ward- loo king s tatem ents , inclu ding, b ut not lim ited to: the ri sks of p olitic al and e con omic d evelop ment s; the ri sks of overc apac ity i n the hotel indu str y; the Group b ein g subje ct to a co mpe titive and c hangi ng indu str y; the Group’s relian ce on th e repu tatio n of its exis ting br ands and exp osu re to inhere nt reput ation ri sks; the G roup’s expos ure to inhe rent unc er tainti es as so ciate d with bra nd deve lopm ent an d expan sion; t he Grou p’ s expo sure to a variet y of ris ks relate d to identif ying, securing an d retaining franchise and m anagem ent agre eme nts; the G roup’s requirem ent for th e right p eop le, sk ills and cap abili ty to ma nage g rowth a nd cha nge; th e risks a ss ocia ted with col lec tive barga ining ac tivit y whic h cou ld dis rupt op eratio ns, in crea se lab our co st s or inter fere wit h the abili ty of m ana gem ent to focu s on execu ting bu sine ss s trategie s; the G roup’s exposu re to the risks relate d to cybe rse curit y and d ata p rivacy; the G roup’s e xpo sure to incre asin g com petiti on from on line travel a gent s and inte rmed iarie s; the G roup’s exposure to inh erent ri sks in rel ation to ch angin g tech nolo gy an d system s; the Gro up’ s relia nce up on th e resili enc e of its re ser vatio n system a nd othe r key techno log y plat forms , and the ris ks that c ould di srupt th eir op erati on and/or integri ty; the Group’s expo sure to risks re lated to exec uting an d reali sing b ene i ts from strate gic tran sa ction s, inc luding a cqu isitio ns an d restru cturin g; the G roup’s depen den ce up on a wid e rang e of exte rnal st akeho lde rs and b usin es s par tne rs; the G roup’s exposu re to the risk of l itigatio n; the G roup’s r eq uireme nt to com ply with exi sting a nd cha nging regul ation s and ac t in acc orda nce wi th soc ieta l expe ctati ons a cros s nume rous c ountrie s, territo ries a nd juris dicti ons; th e Group’s expo sure to risk s ass oci ated with i ts intell ectu al prop er t y; the Group’s expo sure to a variet y of ris ks as soc iated w ith its inan cial sta bilit y and a bilit y to borrow an d sati sf y debt c ovena nts; the G roup’s operation s being dep ende nt on maintaining su icient liquidit y to mee t all fores ee abl e med ium- term requ ireme nts an d provide he adroo m again st unfo rese en ob ligati ons; th e Group’s expos ure to an imp airme nt of the c arr ying valu e of its b rand s, go odwill o r othe r tan gible a nd inta ngibl e as sets n eg atively a ectin g its c ons olid ated ope rating re sult s; the Gro up’ s expo sure to lu ctuati ons in exch ange rates, c urrency d evaluati ons o r restru cturin gs and to inte rest rate risk in re latio n to its bo rrowings ; the risk t hat the G roup may b e ae cted by cre dit ris k on trea sur y tran sac tions ; the ris k that the Group m ight be i mpac ted by ch ange s ae cting th e availabili ty of the Lo ndon I nterba nk O ered R ate (“LI BO R” ); the ri sk that th e Group’s in anci al pe rfo rmanc e may be a ec ted by cha nge s in tax laws; th e risks a sso ciate d with in suring th e Grou p’ s bus ines s; the Group’s expo sure to a variet y of ris ks as soc iated w ith safet y , sec urit y and cr isis m anag eme nt; th e Group’s expo sure to the ris k of events or st akeho lder ex pec tatio ns that a dver sely i mpac t dom esti c or intern ationa l travel, incl uding c limate ch ange ; the ris ks ass oci ated with do mes tic and i nternatio nal e nvironme ntal l aws and re gulatio ns that may c aus e us to incu r subs tanti al cos ts or s ubje ct us to p otential liabi lities ; and the G roup’s expos ure to risks rel ating to our com mitme nts in rel ation to cli mate cha nge. The m ain fac tors tha t coul d aec t the bu sine ss a nd i nanc ial res ults are de scrib ed in t he Strate gic Rep or t of the A nnual R epo rt a nd Form 20 F 2021. F or wa r d -looking stat e ments 251 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Forwar d-looking statemen ts The t abl e bel ow referen ces i nformati on in this d ocum ent th at will be in clud ed in th e Co mpany ’s Annual Re por t on For m 20 F for 2 02 1 ile d with the S EC. Item Form 20 F caption Loc ati on i n thi s do cu me nt Page 1 Identity of D irect ors, senior managemen t and advisers Not applicabl e – 2 Oer st atistics an d expected tim etable Not applicabl e – 3 Key information 3A – Se lec ted inanc ial dat a Shareholder i nfor mation: Dividend hist or y 24 8 3B – C apit alis ation a nd ind ebted nes s N ot applicable – 3C – Re aso n for the o er and u se of p roce ed s Not applicabl e – 3D – Ri sk fa ctors G roup inform ation: R isk fa ctors 231 236 4 Information on the Compan y 4A – Hi stor y and d evelo pme nt of the C omp any G roup info rmatio n: His tor y and deve lopm ent s 231 Sha rehol der in formatio n: Return of f unds 247 Us eful infor mation : Cont act s 259 4B – B usin es s over view Stra tegi c Report 2 7 7 Group i nformati on: Workin g Tim e Regul ation s 199 8 240 Group I nforma tion: Ri sk fac tors 231 236 4C – O rgani satio nal str ucture Group F inan cial S tatem ents : Note 3 4 – Group c omp anie s 203205 Group I nforma tion: Hi stor y and d evelo pme nts 231 4D – Pro per t y , p lant an d equip ment S trateg ic Rep or t: Key per forma nce in dic ators 5053 Directors ’ Report: Greenhouse gas (GHG) emissions 2 2 9 2 3 0 Group F inan cial S tatem ent s: Note 14 – Prop er ty, plant and e quip ment 17 7 178 4A Unresolv ed sta comments None – 5 Ope ratin g and ina nc ial rev iew an d pro sp ec ts 5A – Op erating re sult s Str ategic Re por t: Key pe rfo rmanc e indi cator s 505 3 Strategic Report: Per formance 55 7 7 Group F inan cial S tatem ent s: Acc ounting p olic ies 14 9 1 5 7 Group F inan cial S tatem ent s: New a cco unting st and ards 157 Viabilit y statem ent 48 49 5B – Li quidit y and c api tal res ourc es Strate gic Rep or t: Ou r Bus ines s Mo de l – Dis cipli ned a pproa ch to capital alloc ation and managing liquidity 12 Viabilit y statem ent 48 49 Strate gic Rep or t: Per for manc e – Sou rces of l iquidi ty 59 Group F inan cial S tatem ent s: Note 19 – C as h and c ash e quival ents 185 Group F inan cial S tatem ent s: Note 2 2 – Loa ns and o ther b orrowing s 186 187 Group F inan cial S tatem ent s: Note 24 – Fin anci al risk m ana gem ent and derivative inancial instruments 1 8 8 1 9 2 Group F inan cial S tatem ent s: Note 25 – C las si ic ation an d measurement of inan cial inst rumen ts 192 19 4 Group F inan cial S tatem ent s: Note 26 – Re con ciliati on of (l os s) /proit for the ye ar to cas h low f rom ope ration s befo re contra ct acquisition costs 195 5C – Res earc h and deve lopm ent ; intelle ctu al prop er ty Not applicabl e – 5D – T rend info rmatio n Strategic Repor t: Performance 55 7 7 5E – O-balan ce sheet arrangeme nts Stra tegic Repor t: Performance – O -balance she et arrangements 60 5G – Sa fe harb our Addit ional In format ion: F or ward-looking statements 2 51 Non- GAAP inancial measures Strategic Repor t: Performanc e 55 77 Oth er inanc ial info rmation 21 8 2 2 5 Group F inan cial S tatem ent s: Note 6 – E xcep tional i tems 165167 Group F inan cial S tatem ent s: Note 10 – (Lo ss)/ earni ngs pe r ordinar y share 1 74 Group F inan cial S tatem ent s: Note 23 – N et de bt 187 188 F or m 20 - F cr os s -r ef er ence gui de Addition al Information 252 I HG | Annua l Repo rt a nd Form 20 F 202 1 Item Form 20 F caption Loc ati on i n thi s do cu me nt Page 6 Directors, senior management and employ ee s 6A – Dire ctors a nd se nior m anag eme nt G overna nce : Our B oard of D irecto rs and O ur E xecuti ve Com mit tee 82 87 6B – C omp en satio n Directors’ Remunerat ion Report 1 0 41 2 5 Group F inan cial S tatem ent s: Note 27 – R etireme nt be ne its 195 197 Group F inan cial S tatem ent s: Note 32 – Re lated p ar ty d iscl osure s 202 Group F inan cial S tatem ent s: Note 28 – Sh are -b ase d paym ents 198199 6C – B oard p ractic es Gover nanc e struc ture and B oard a ctiviti es 889 2 E xecutive D irecto rs’ be ne it s upon te rminati on of o ice 237 6D – Em ployee s Gro up Fin ancia l Sta tement s: Note 4 – S ta c os ts and Directors ’ rem unerati on 163164 Group i nformati on: Workin g Tim e Regul ation s 199 8 240 Dire ctors’ R epo rt : Employe es an d Co de of C ondu ct 228 6E – S hare own ers hip Directors ’ Remu neration Report: Annual Report on Direct ors’ remun eratio n – Sch eme inte rest s awarde d during 2 020 an d 202 1 118 Directors ’ Remu neration Report: Annual Report on Direct ors’ remun eratio n – State ment o f Exe cutive D irector s’ sh areho lding s and shar e in ter ests 119 Group F inan cial S tatem ent s: Note 28 – Sh are -b ase d paym ents 198199 Group i nformati on: Dire ctor s’ and E xecu tive Co mmit tee members’ sharehold ings 237 7 M ajor shareholders and related party transactions 7 A – Major shareholders Directors ’ Report: Major instit utional shareholders 2 26 Shareholder i nfor mation: Shareholder proiles 24 9 7B – Re lated p ar ty tra nsa ction s Grou p Fina ncial S tate ment s: Note 16 – I nvestm ent in as so ciate s and jo int venture s 181182 Group F inan cial S tatem ent s: Note 32 – Re lated p ar ty d iscl osure s 202 7C – Interes ts of exp er ts an d cou nse l N ot applicable – 8 Financial Infor mation 8A – C on soli dated s tatem ent s and othe r inancial information Directors ’ Report: Dividends 2 26 Group Finan cial Statemen ts 12 8 2 0 5 Group i nformati on: Le gal pro ce edin gs 242 Oth er inanc ial info rmation 21 8 2 2 5 8B – S igni ica nt chan ges None – 9 The o er a nd li stin g 9A – Oe r and li sting d etail s Usef ul inform ation: T radin g markets 258 9B – P lan of di stribu tion Not applicable – 9C – M arkets U sefu l informati on: T rading m arkets 258 9D – S ellin g share hol der s Not applicabl e – 9E – D ilutio n Not applicabl e – 9F – E xp ens es of th e is sue Not applic able – 10 Additional inform ation 10A – Sha re capi tal Not applicabl e – 10 B – Mem oran dum and a rti cle s of as soc iation G roup info rmatio n: Ar ticle s of As so ciatio n 239 240 Group i nformati on: Right s att ach ing to sha res 2392 40 10 C – Materi al co ntract s Group i nformati on: Ma terial c ontrac ts 241 10D – Exchange contr ols G roup info rmatio n: Exch ang e control s and re stricti ons on paym ent of di vide nds 242 10 E – T ax ation Sha reholder in forma tion: T axation 24324 5 10 F – Divi den ds and p aying ag ents N ot applicable – 10 G – State ment by exp er ts Not applicable – 10 H – Doc ume nts on di spl ay Us eful info rmatio n: Investo r informati on – Do cum ents o n disp lay 258 10 I – Subs idiar y info rmatio n N ot applicable – 253 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Form 20 F c ross -refe renc e guid e Item Form 20 F caption Loc ati on i n thi s do cu me nt Page 11 Qua ntitative and qualitative discl osure s ab out m arket ris k Group F inan cial S tatem ent s: Note 24 – Fin anci al risk m ana gem ent and derivative inancial instruments 1 8 8 1 9 2 12 D es cri ptio n of se curi tie s othe r th an equit y sec urities 12A – D ebt s ec uritie s Not applicable – 12B – Warrant s and rig hts N ot applicable – 12C – O ther s ecu rities N ot applicable – 12D – Am eric an de po sita ry s hares Group info rmatio n: De scrip tion of s ecuri ties oth er tha n equit y se curiti es 238 13 D efaults , dividen d arrearage s and delinquenci es Not applicabl e – 14 M ateri al mo di ic ation s to th e right s of se cu rity h old er s and u se of p roc ee ds Not applicabl e – 15 Controls and P rocedures Shareholder i nfor mation: Disclosure contr ols and pr ocedures 24 5 St ateme nt of Dire ctors’ Re sp ons ibiliti es: M anag eme nt ’ s repo r t on intern al co ntrol over inan cial rep or ting 130 Independent Audi tor’ s US R eport 1 3 8 14 1 16 16A – Audi t com mitte e i nanc ial expe r t G overnan ce: Au dit Co mmit tee Re por t 959 9 Shareholder i nfor mation: Summary of s igniicant cor porate govern ance d iere nce s from NYS E listi ng st anda rds – Co mmit tee s 246 16 B – Co de of ethi cs Dire ctor s’ Rep or t: Empl oyees an d Co de of C ond uct 228 Strate gic Rep or t: How I HG d oe s bus ines s 3639 Shareholder i nfor mation: Summary of s igniicant cor porate govern ance d iere nce s from NYS E listi ng st anda rds 246 16C – P rincip al ac cou ntant fe es an d ser vi ces G overna nce : Audit C ommit tee R epo rt – E x terna l audito r 98 Gover nanc e: Audi t Com mitte e Rep or t – No n- audit s er vic es 97 Group F inan cial S tatem ent s: Note 5 – Aud itor’s remun eratio n 164 16 D – E xempti ons fro m the lis ting st anda rds for audit committe es Not applicabl e – 16 E – Pu rchas e of eq uit y sec uritie s by the is suer and aili ated pu rchasers Sha rehol der in formatio n: Purch ase s of eq uit y sec uritie s by the C ompa ny and a iliate d purcha se rs 248 16 F – C hang e in regi strant ’s cer tif ying accoun tant Gover nanc e: Audi t Com mitte e Rep or t – E xte rnal Audi tor 98 Group i nformati on: Ch ange i n cer tif yin g acc ount ant 238 16G – C orp orate G overnan ce Shareholder inf ormati on: Summary of signiicant corporat e govern ance d iere nce s from NYS E listi ng st anda rds 246 16 H – Mine s afet y dis clos ure Not applic able – 16 I – D iscl osu re regardin g foreign j urisd iction s that prev e nt inspections Not applicabl e – 17 Financial sta tements Not applicabl e – 18 Financial sta tements Group Finan cial Statemen ts 12 8 2 0 5 19 Exhib its Additi onal I nformati on: E xhibi ts 250 F or m 20 - F cr os s-r e f er ence g ui de c o nti nu e d Addition al Information 254 IHG | Annua l Repo rt a nd Form 20 F 202 1 ADR an Ame ric an De pos itar y Re cei pt, be ing a rec eipt evid enc ing title to an A DS. ADR Depos itary J.P . Mo rgan C has e Ban k N. A . ADS an Ame ric an De pos itar y S hare as evi den ce d by an AD R, b eing a re giste red ne gotia ble se curit y , li sted o n the N ew Y o rk Stoc k E xchang e, repre sentin g one o rdinar y sh are of 20 ⁄ pe nce e ach o f the C ompa ny . Annual Report the Ann ual Re por t an d Form 20 F in re lation to the year s endi ng 31 D ec emb er 20 20 or 202 1 as re levant. APP Annual Performanc e Plan. average daily rate room s revenue di vide d by the num ber of room n ights s old. capit al expend iture purchases of pr opert y , plant and equ ipment, intan gibl e ass ets, a ss oci ate and joi nt venture inv e stments , and o ther inan cial assets, plus contr act ac quis ition c ost s (key mon ey) . Capti v e the G roup’s captive ins uranc e com pany , SC H Ins uranc e Co mpany . Code IH G’s Co de of C ondu ct, o r the UK C orp orate Gover nanc e Co de is sue d in 20 18 by the Fin ancia l Repo rti ng Co uncil i n the U K. Colleague indiv idua ls who wo rk at IH G corp orate o ice s, res er vation c entres , mana ge d, owned, leased, managed lease a nd franchised hot els collectiv ely . Companie s Act the U K Co mpani es Act 2 00 6, a s amen de d from time to tim e. Company or Parent Company Inter Co ntinent al H otels G roup PLC. comparable Re vP AR a com pari son for a g roupin g of hotel s that have trade d in all m onths in ina ncia l years bei ng co mpare d. Prin cipa lly exclude s new hotel s, hotel s clo se d for majo r refurbi shm ent and h otels s old in e ither o f the two ye ars . Hote ls whic h have be en temp orari ly clo se d as a res ult of C ovid-19 a re not exclud ed from co mpa rable Rev P AR . ex ecutive oicers de ine d by the S EC as the pre side nt, any vic e presi dent in c harge o f a princ ipal bus ine ss unit , divi sion o r functi on (such a s sal es, a dminis tration o r in anc e), any oice r who p er forms a p olicy m akin g func tion, or any othe r per son w ho pe rfo rms si milar policy making functions. fee business IHG’s fr anchise and managed businesses combined. fran chised ho tels hotel s ope rated un der a n IH G brand l ice nse by a franc hise e. IH G rec eive s a ixe d pe rcent age of ro oms reve nue and n eith er owns, l eas es n or op erate s the prop er t y . fran chisee an owne r who u ses a b rand un der l icen ce from IH G. FRC UK F inan cial Re por ting C oun cil. Gro up or I HG the C omp any and its s ubsi diarie s. Gu e st L ove IH G’s gues t sati sfac tion me as ureme nt tool use d to me asure b rand pre ferenc e and gue st sa tisfa ction . Gu es t Res er vatio n Syste m or G RS our gl obal e lec tronic gu es t rese r vation sys tem. hedging the red uctio n of ris k, no rmall y in relatio n to forei gn cur renc y or inte res t rate move me nts, by maki ng os et ting co mmitm ents . hotel rev enue revenue fro m all revenu e- g ene rating ac tivit y unde r taken by ma nage d and ow ned , lea sed and m anag ed le as e hotel s, incl uding ro om nights , food a nd beve rage s ale s. IASB Intern ation al Acc ounting S tan dards B oa rd. IFRS International Financial Repor ting Standards as is sue d by the IAS B and a dopte d und er U K l a w. IH G PLC Inter Co ntinent al H otels G roup PLC. Co mp oun d Ann ual G row th Rate (CAGR) grow th over a pe riod of ye ars exp ress ed as the c ons tant ra te of growth th at would prod uce th e sam e grow th if compo unded annually . constant currenc y a prio r -ye ar value tr ansl ated us ing the current ye ar ’ s average exch ange r ates. cu rren cy swa p an exchan ge of a de po sit and a b orrowin g, eac h den omin ated in a di erent c urrency, for an ag reed p eri od of tim e. Deferred Compens ation Plan a US pl an that a llows for th e additi onal provis ion for retire ment w ithin a de dic ated trust , eith er throu gh emp loyee defe rral of sal ar y with matc hing co mpa ny contribu tions or throu gh direc t com pany co ntributi on. derivatives in anci al ins trume nts us ed to red uce ri sk , the pric e of whic h is de rived from a n unde rlyin g as set, i ndex or ra te. DR Po licy Directors ’ Remu neration Polic y . EMEA A Europe , Midd le Ea st, A sia an d Africa ( ex cludes Grea te r Ch ina ). Employ e e indiv idua ls direc tly emp loyed at I HG cor porate o ic es, re se rvatio n ce ntres and managed, o wned, leased and managed lease hotels. emplo y ee engagemen t su rve y our e mployee e nga gem ent sur vey , k nown as the C oll eag ue He ar tBe at, c ompl eted by IH G emp loyees o r thos e co llea gue s who are emp loyed at ma nag ed or m ana ged leased hotels. Ente rpri se co ntri buti on to reve nue the p erce ntag e of room reven ue bo oked through IHG manage d channels and sou rces: d irect v ia our we bsite s, app s and call c entre s; throug h our inter fac es w ith Glo bal D istrib ution S ystem s (GDS) an d agre eme nts with O nlin e T ravel Ag enci es (O T A s); other dis tributio n par tne rs dire ctly con nec ted to our re se rvati on syste m; and Glo bal S ale s O ic e busi nes s or I HG Reward mem ber s that b ook di rectly at a h otel. ERG employee resource group. Gl os s ar y 255 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Glossa ry Interna tional Sustainabili ty Standards Bo a rd (I SS B) forme d by the I FRS to crea te sust ainab ilit y- relate d dis clos ure sta ndard s that provi de inv e stors with consisten t and com parable information about companies’ sust ainability- relate d risks a nd op por tuniti es. liquidated damages payme nts re ceive d in res pe ct of the earl y termin ation of fra nchi se and managemen t agr eements. LT I P Long Term Ince ntive Pla n. managed hot els hotel s ope rated by I HG un der a man age ment a greem ent on b eh alf of the hotel ow ner . IH G gen erate s revenue th rough a ixe d perc ent age of th e total ho tel revenue and a p ropor tio n of hotel p roi t, and n eithe r lea se s nor own s the pro per t y . managed lease prop er ties w hich are h eld thro ugh a le ase but wi th the sa me ch aracte risti cs as managemen t agr eements. management agreement a contr act to op erate a ho tel on b ehal f of the ho tel owne r . mark et capitalisati on the valu e attrib uted to a li sted c omp any by multipl ying it s sha re price by th e numb er of sh ares in is su e. net r ooms supply net tot al numb er of I HG Sy stem ho tel room s. NYS E New York Stock E xch ange. occ upancy rate room s oc cupie d by hotel g ues ts, exp ress ed as a pe rce ntag e of room s that are availa ble. ordinary share ordin ary s hare s of 20 340 ⁄ 399 pence each in t h e C o m p a n y. owne d, l eas ed a nd m ana ge d le as e hote ls hotel s ope rated by I HG wh ere IH G is, or e ecti vely ac ts as, th e owne r , with responsibil ity for assets, emplo yees and runnin g cos ts. T he enti re revenue an d pro it of the h otels are re cord ed in I HG ’s inancial statements. owne r the own er of a hote l prop er ty. pipeline hotel s/rooms du e to enter the I HG S ystem at a future d ate. A hotel e nters th e pipe line onc e a contr act h as be en si gne d and appropr iat e fees pai d. ppt a pe rcent age p oint is th e unit for th e arithm etic di erenc e of t wo perc enta ges . reimbursable re venues reimbur sements fr om managed and franc hise d hote ls for c ost s incurre d by IH G, for examp le the c ost of I HG e mploye es workin g in managed hotels. The relat ed revenue s and c ost s are pre sente d gros s in the G roup inc ome s tatem ent an d there is no impact to pr oit. re venu e managemen t the em ploym ent of pri cing an d se gment strate gies to op timis e the revenu e gene rated from the s ale of ro om night s. revenu e pe r availa bl e room o r RevPAR room s revenue di vide d by the num ber of room n ights th at are availab le (can be mathematically derived from occupancy rate multip lied by avera ge dai ly rate). roo m cou nt numb er of ro oms fra nchis ed, m ana ged, owne d, le ase d or ma nage d le ase by I HG. room s rev enu e revenue g ene rated fro m the sa le of room nights. roya lt ie s fee s, ba sed o n room s revenue, th at a franc hise e pays to the G roup. science-based targe ts ( SBT s) measurable , actiona ble and time-bound carb on re ducti on ta rgets, b as ed on th e be st avaliabl e sci enc e and in lin e with the s ca le of redu ction s requi red to keep gl oba l warming be low 2 °C or 1 .5°C f rom pre -in dustri al level s. Sc ien ce B as ed Target s initi ative (SB Ti) help s bu sine ss es co mmit to an d mee t SBTs by independently assessing and a ppro ving any targets that are set. SEC US S ecuri ties an d E xchang e Com mis sion . subsidiar y a com pany over whi ch the G roup exerci se s c ontro l. Syste m hotel s/rooms op eratin g unde r franc his e and managemen t agr eements toget her w ith IHG owne d, le ase d and m anag ed le as e hotel s/ room s, glo bally (the I HG Sy stem) or on a regio nal b asis , as the c ontex t require s. Sys tem Fund o r Fund as ses sm ent fee s and c ontrib ution s col lec ted from h otels wi thin the I HG Sy stem whic h fund ac tivitie s that dri ve revenue to our ho tels inc ludin g marketing, t he IH G Rewards l oyalty p rogramm e and o ur distr ibution channels. T a sk Fo rce on C lim ate -re late d Fin an cia l Disclosure (TCF D ) create d by the Fin anc ial St abilit y B oard to improve and i ncrea se rep or ting of clim ate- relate d i nanc ial inform ation an d to help i nform inves tors an d other s abou t the risks th ey face re late d to climate ch ange . technology fee income inc ome re ceive d from ho tels un der fra nchi se and m anag eme nt agre eme nts for th e use of IH G’s Gue st Re ser vatio n Syste m. T ot al S har eho lde r Retu rn or TS R the the oretic al grow th in valu e of a sha rehol ding over a p erio d, by referen ce to the b eginn ing and e ndin g share p rice, an d assum ing that dividends, in cluding spe cial dividends, are rein vested to purc hase addi tiona l units of t he eq uity. US 401(k) Plan the D e ine d Contr ibutio n 40 1(k ) plan . workfor ce IHG emplo yees. work ing capital the sum o f inventorie s, rec eivab les a nd payabl es of a tra ding natu re, excluding in anci ng and t axatio n items . For th e de i nitio ns of o ur Key pe rfo rma nc e measures (includ ing Non-GAAP measures) se e pa ges 7 3 to 7 7 . Glo s s ar y c onti nu e d Addition al Information 256 IHG | Annua l Repo rt a nd Form 20 F 202 1 Website and electronic communication As pa rt of I HG ’s commitm ent to red uce th e cos t and e nvironme ntal impa ct of pro duc ing and d istrib uting pr inted do cume nts in l arge quanti ties, th is Annu al Rep or t and Form 2 0 F 202 1 ha s be en mad e availabl e to share hol der s through o ur webs ite at ww w .ihgplc.com/ inv e stors under Annual Report. Sha rehol der s may ele ctroni call y appo int a proxy to vote on th eir be half at th e 202 2 AGM . Sh areho lde rs who h old th eir sh ares thro ugh CR EST may ap point p roxies throu gh the C REST e le ctronic p roxy app ointme nt ser vi ce, by usi ng the pro ce dures d es cribe d in the CREST Manu al. Shareholder hot el disco unt IH G oer s dis counte d hotel s tays (subje ct to availab ilit y) for register ed shareholders only , through a contr olled-acces s websit e. This is no t av ailable to shar eholders who hold shar es thr ough nomi nee c omp anie s, ISA s or AD Rs. For fu rth er de tails p lea se cont act t he Co mpa ny Secret ar y ’ s o ice (se e page 2 59). Responsible Business R eport In lin e with our c ommi tment to res po nsib le bu sine ss p ractic es, th is year we h ave produc ed a Re sp onsi ble B usin es s Rep or t showc asin g our appr o ach t o r esponsible business a nd progr e ss against our Responsible Business T argets. Visit www.ihgplc. com/ responsible-business for fu rther infor mation. Registrar For inform ation on a r ange of s hare hold er se r vice s, inc ludin g enq uirie s con cerni ng indi vidua l share hol dings , noti ic ation of a sha rehol der ’s chang e of add ress a nd ama lgam ation of s hareh old er acc ount s (in orde r to avoid dupli cate ma iling of s hareh olde r communicat ions ), shar eholders should contact the Company’ s Regi strar , Equini ti, on +4 4 (0) 371 3 84 2 132 a . Dividen d servic es Divi de nd Rei nvest me nt Pla n (DRIP) The C omp any oer s a DR IP for s hareh old ers to pu rchas e addi tiona l IH G share s with the ir ca sh div iden ds. Fo r fur ther inform ation ab out th e DRI P , pl eas e co ntac t our Re gistra r help line on +4 4 (0) 371 3 84 2 132 a . Visit w w w. s h a r ev i ew. c o. u k / i nf o/d r ip for a D RI P app lic atio n form and in format ion booklet. Bank mandate We enc ourag e share hol der s to have their div ide nds p aid dire ctly into their U K ba nk or bu ilding s oci ety a cc ounts , to ensu re ei cient payme nt and c lear ance o f fund s on the p ayment d ate. For fur the r inform ation, p lea se co ntac t our Re gistr ar (see pa ge 25 9). Overseas payment service It is al so p oss ible fo r sha rehol der s to have their di vide nds p aid direc tly to their b ank a cco unts in a lo ca l curren cy . C harge s are payabl e for this s er vic e. Visit w w w. s h a r ev i ew. c o .u k / i n fo /op s for f urther inf ormation . Out -of -date/ unclaimed div idends If you thin k that you have ou t-of-d ate divid end c heq ues o r uncl aime d divi den d payme nts, pl eas e co ntac t our Re gistra r (see pa ge 25 9). Ind ivid ual S avin gs Ac cou nt (ISA) Equini ti oer s a Stocks a nd Sh ares I SA that c an invest in I HG s hare s. For fur the r informati on, pl eas e cont ac t Equiniti o n +4 4 (0) 34 5 30 0 04 30 a . Share-dealing services Equini ti oer s the follow ing sh are -d ealin g facil ities . Postal dealing 037 1 38 4 2 132 from th e UK a +4 4 121 41 5 7034 f rom overs eas a T elephone dealing For more info rmatio n, cal l +44 (0) 34 5 60 3 7037 b Internet dealing Visit ww w. s h a r ev i e w.c o. u k for mor e inf ormat ion. Ch ang es to t he b ase c os t of IH G sh are s Det ails o f all the ch ange s to the ba se c ost of I HG s hare s hel d from April 2 00 4 to Janu ary 2 019, for U K C apit al Gain s T a x purp ose s, may be fou nd on o ur webs ite at ww w .ihgplc.com/ inv estors under Sha rehol der c entre in th e T ax i nformati on se ction . ‘Gone a wa y’ shareholders Working w ith ProS earc h (an asse t reuni ic ation c omp any ), we conti nue to lo ok for sh areh olde rs wh o have not kept the ir con tac t det ails up to date . We have funds wai ting to be c laime d and a re com mit ted to doin g what we c an to pay the se to the ir right ful owne rs. Pl eas e co ntac t ProS earch o n +4 4 (0) 371 38 4 273 5 c or vis it ww w .prosearchassets.com for further details. a L ine s are o pe n from 0 8: 30 to 17:3 0 Mo nd ay to Friday, exclu din g UK p ubl ic ho lid ays . b L in es ar e ope n fro m 08 :0 0 to 18: 0 0 Mon day to Fri day, exclu ding U K p ubli c ho lid ays. c Lin es a re op en f rom 0 9: 00 to 17:0 0 M ond ay to Frid ay , excl udi ng U K pub lic h oli days . U s e ful inform ati o n In v est or in f orma t ion 257 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Us eful infor mation U s efu l inform atio n c o nti nu e d In v est or in f orma t ion Financial c alen dars Dividends 2021 202 1 In terim d ivi den d Ex-dividend da te N /A Rec ord d ate N /A Payment dat e N /A 2022 202 1 F inal d ivid en d of 8 5.9 ¢ pe r ordi nar y sh are a Ex-dividend da te 31 M arch Rec ord d ate 1 Ap ril Payment dat e 17 M ay a The s ter lin g amo unt of t he ina l div ide nd w ill b e ann oun ce d on 2 7 Apr il 20 2 2 usi ng th e aver age o f the d ail y exch ang e rate s fro m 22 A pri l 202 2 to 2 6 Apr il 20 2 2 inc lus ive . Sha rehold er se curity Many c ompa nies h ave bec ome awa re that the ir share hol der s have received u nsolicited telephone calls or corr espondence concerning investm ent mat ter s. Th ese a re typ ical ly from ‘bro kers’ who t arget U K sha rehol der s, oe ring to se ll them w hat of ten turn o ut to be wor thl es s or high -ri sk sh ares in U S or U K investm ents . The se op erati ons are com monl y known a s ‘boil er roo ms’ . More de tail ed info rmation o n this or sim ilar ac tivit y ca n be foun d at ww w .f ca.org.uk/ con sumers on the Fin ancia l Con duc t Authori ty we bsite. Det ails o f any share de alin g facili ties tha t the Co mpa ny endo rse s will be in clud ed in C omp any mailin gs. T rading markets The p rincip al trad ing mar ket for the Co mpa ny’s ordinar y sh ares is the Lo ndo n Stoc k Exch ange (L SE ). The ordi nar y sha res are al so liste d on the N YSE , tradin g in the form of A DS s evide nce d by AD Rs. Ea ch ADS re pres ent s one ord inar y sh are. The C om pany has a sp ons ored A DR fac ilit y with J. P . M organ C has e Ban k, N . A ., as AD R De po sita ry. Ot her d ate s 2021 Fin anc ial ye ar en d 31 December 2022 Ann oun cem ent o f Prel imin ar y Res ult s for 20 21 2 2 Fe br ua ry Announcemen t of 2022 First Quarter T ra ding Update 6 May Annual General Me eting 6 M ay Ann oun cem ent o f Ha lf- Y e ar Re su lts fo r 202 2 9 August Ann oun cem ent o f 202 2 T hird Q uar te r T ra ding Update 21 O cto be r Fin anc ial ye ar en d 31 December 2023 Ann oun cem ent o f Prel imin ar y Res ult s for 20 2 2 Fe br ua ry Ameri can Deposi tary R eceip ts ( ADRs ) The C omp any’s sha res are lis ted on t he NYS E in the form of Ame rica n Dep os itar y Sh ares, ev ide nce d by ADR s and tra ded unde r the sym bol ‘ IH G’ . Ea ch AD R repre sent s one o rdinar y sh are. All en quirie s rega rding AD R hol der a cco unts an d payme nt of divid end s sho uld be d irecte d to J.P . Mo rgan C has e Ban k, N . A., o ur AD R Dep os itar y ba nk (conta ct det ails s hown on th e opp osi te page). Documents on displa y Do cume nts refe rred to in this A nnual R epo rt a nd Form 20 F that are il ed wi th the SEC c an be fou nd at the S EC’s publi c referen ce room l oc ated at 10 0 F Stre et, N E Washin gton, D C 205 4 9. For fur ther inform ation an d copy ch arge s ple ase c all the S EC at 18 00 S EC0 33 0. The S EC maint ains a web site th at cont ains re por ts , proxy an d inform ation st ateme nts, a nd othe r inform ation reg arding i ssu ers th at il e ele ctroni cally a nd the C omp any’s SEC i lings s ince 2 2 M ay 200 2 are als o publ icly availa ble thro ugh the S EC’s webs ite at www .sec . go v Co pie s of the C ompa ny’s Arti cle s of Ass oc iation c an be o btai ned via the we bsi te at ww w .ihgplc.com/inv estors under Corporate govern ance o r from the C o mp any ’s re g is ter ed o i ce on re qu es t. Addition al Information 258 IHG | Annua l Repo rt a nd Form 20 F 202 1 Contacts Regi ster ed o ice Broa dwater P ark, D enh am, B ucki ngham shire, U B9 5 HR , United King dom T elephone: +4 4 (0) 189 5 512 00 0 ww w .ihgplc.com For gen eral in formatio n abo ut the G roup’s busin ess , ple ase c ont act the C orpo rate Aair s dep ar tment a t the above a ddres s. For a ll other enq uirie s, ple ase c ont act th e Com pany Se cret ar y’s oi ce at the ab ove add res s. Registrar Equini ti, Asp ect H ous e, Sp enc er Roa d, La ncin g, West Su ss ex, BN99 6D A, Un it ed Kin gd om T elephone: +4 4 (0) 371 38 4 2 132 w w w. s h a r e v ie w. c o . u k ADR Depos itary Sha reowne r Se rvi ce s, PO B ox 64 50 4, St . Paul, M N 5516 4 05 04, Unite d St ates of Am eric a T elephone: +1 80 0 99 0 1135 ( US ca lls) (t oll -free) +1 651 4 53 2 128 (non -U S ca lls) Enquiries: ww w . shareowneronline. com under con tact us www .adr .c om Audito r Pricew ater houseC oopers LLP Inv estment bank ers BofA Securities Goldman Sachs Solicitors F reshields Bruckhaus Deringer LLP Stockbrok ers BofA Securities IHG ® Reward s If you wi sh to en quire abo ut, o r join, I HG Reward s, vis it ww w.ihg .com/ ihgrewa rds or telephone: +80 0 2222 71 72 b (Austri a, Be lgium, D en mark , Finl and, Franc e, Germany , Hungar y , Ireland, Is rael, Italy , Luxembourg, Netherlands, Nor way , P or tugal, Ru ss ia, Sp ain, Swe den, S wit zerla nd, and U K ) +4 4 19 50 49 9 00 4 c (all other c ountrie s/region s in Europe a nd Afric a) 1 88 8 211 9 87 4 (US an d Can ada) 00 1 80 0 27 2 9273 c (M e x ic o) +1 801 97 5 30 13 c (Span ish) (Central a nd So uth Ame ric a) +1 801 97 5 30 6 3 c (Engli sh) (Central an d Sou th Ame rica) +973 6 5 00 9 2 96 a (Mid dle E ast) +80 0 2222 71 72 b (Austr alia, J apan, Kore a, Mal aysia, N ew Zeal and, Philippine s, Singapore and Th ailand) 80 0 83 0 1128 a or 021 203 34848 a (Mainland C hina) 80 0 9 65 2 2 2 (Ho ng Kong SAR) 08 00 7 28 (Ma cau SA R) 00 80 1 86 3 36 6 ( T a iwan, Chi na) +6 32 8 85 7 8788 c (all other c ountrie s/region s in Asia P aci ic) + D e note s inte rn atio nal a cc es s co de . 00 o r 011 i n mo st co unt rie s. a Tol l charges apply . b U niversal international fr eephone number. c International calling rat es may apply . 259 Additional Information IHG | Annua l Repo rt a nd Form 20 F 202 1 Us eful infor mation De sign ed an d produ ce d by Superunion , London. ww w .supe runion.com Printe d by Park Co mmuni catio ns on FS C® c er ti ie d pap er . Park wor ks to the EMAS s tan dard and i ts Environ ment al Man age ment S ystem i s cer ti ie d to ISO 14 00 1. This p ublic atio n has b ee n manuf acture d usin g 100 % o sho re wind e lec tricit y so urce d from UK w ind. 10 0% of th e inks us ed are ve geta ble oil b as ed, 9 5% of pre ss che mic als are recyc led fo r fur ther u se an d, on averag e 99 % of any waste a ss ocia ted with thi s produ ctio n will be re cycle d and th e remain ing 1% us ed to ge nerate e nerg y . This d ocum ent is p rinted o n Revive 10 0 Silk , a white tri ple co ated sh eet th at is ma nufac tured from F SC ® Recycl ed c er ti ied ib re derive d from 10 0 % pre and p ost- con sume r waste pap er cont ainin g 100 % recycl ed ibre. T he FSC ® la bel o n this pro duc t ens ures re spo nsib le us e of the worl d’s forest re so urces . 260 IH G | Annua l Repo rt a nd Form 20 F 202 1 Ba ck cove r mid dle i ma ge: Kim pton® F it zroy , Lo ndo n, U K Hotel Indigo® Miami Brick ell, US IHG i s pro ud of it s pe op le an d th e care sh own for t he co mmu niti es i n whic h it op erate s . We are ple as ed to f eatu re ph otos of so me of o ur pe op le, a s well a s so me of our community activi ties throughou t this Annual Report and For m 20-F . InterC ontinent al Hotels Gro up PLC Broadwater Park, Denham Buck inghamshire U B9 5HR United King dom T e l +4 4 (0) 189 5 512 00 0 ww w .ihgplc.com Make a b ook ing at www .ih g. co m
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