SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 20-F

Commission file number: 001-31653

MITCHELLS & BUTLERS PLC (Exact name of Registrant as specified in its charter)

England and Wales (Jurisdiction of incorporation or organization)

27 Fleet Street Birmingham B3 1JP

England (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: None

Securities registered or to be registered pursuant to Section 12(g) of the Act: Ordinary Shares of 7 1/12p each

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares of 7 1/12p each 500,438,040

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.

Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:

Yes No

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

Large accelerated filer Accelerated filer Non-accelerated filer

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

Item 17 Item 18

If this is an Annual Report, indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 or

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED OCTOBER 1, 2005 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

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TABLE OF CONTENTS

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Page Introduction 4 Cautionary Note Regarding Forward-Looking Statements 5

PART I Item 1. Identity of Directors, Senior Management and Advisors 6Item 2. Offer Statistics and Expected Timetable 6Item 3. Key Information 6 Selected Consolidated Financial Information 6 Risk Factors 11Item 4. Information on the Company 18 Summary 18 Acquisitions, Dispositions and Capital Expenditure 21 Segmental Information 22 Pubs & Bars 23 Restaurants 24 Standard Commercial Property Developments 25 Organizational Structure 25 Marketing 25 Geographical Analysis 26 Key Competitors 26 Key Supply Partners 27 Regulatory Environment 27 Environmental Policy 31 Trademarks 31 Property, Plants and Equipment 31Item 4A. Unresolved Staff Comments 31Item 5. Operating and Financial Review and Prospects 32 Introduction 32 Key Factors Affecting Results of Operations 33 Critical Accounting Estimates under UK GAAP and US GAAP 33 International Financial Reporting Standards 34 New Accounting Standards 38 Operating Results 38 Liquidity and Capital Resources 44 Material Trends And Uncertainties 46 Off Balance Sheet Arrangements 46 Tabular Disclosure of Contractual Obligations 47Item 6. Directors, Senior Management and Employees 48 Directors and Senior Management 48 Compensation 50 Board Practices 53 Employees 55 Share Ownership 56 Share Options 57 Employee Share Plans 59Item 7. Major Shareholders and Related Party Transactions 60 Major Shareholders 60 Related Party Transactions 60 Interests of Experts and Counsel 61Item 8. Financial Information 62 Financial Statements and Other Financial Information 62 Significant Changes 62

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Page Item 9. The Offer and Listing 63 Plan of Distribution 63 Markets 63 Selling Shareholders 64 Dilution 64 Expenses of the Issue 64 Item 10. Additional Information 65 Share Capital 65 Memorandum and Articles of Association 65 Material Contracts 65 Exchange Controls 66 Taxation 66 Statement of Experts 69 Documents on Display 69 Subsidiary Information 69 Item 11. Quantitative and Qualitative Disclosures about Market Risk 70 Item 12. Description of Securities other than Equity Securities 71 PART II Item 13. Defaults, Dividend Arrearages and Delinquencies 72 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 72 Item 15. Controls and Procedures 72 Item 16A. Audit Committee Financial Expert 72 Item 16B. Code of Ethics 72 Item 16C. Principal Accountant Fees and Services 73 Item 16D. Exemptions from the Listing Standards for Audit Committee 74 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 74 PART III Item 17. Financial Statements 75 Item 18. Financial Statements 75 Item 19. Exhibits 76

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INTRODUCTION

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

References in this document to the ‘Companies Act’ mean the Companies Act 1985, as amended, of Great Britain; references to the ‘EU’ mean the European Union; and references in this document to ‘UK’ mean the United Kingdom of Great Britain and Northern Ireland.

Where externally provided statistics are quoted, these are the most up-to-date available at the date of certifying this document.

Upon Separation, Mitchells & Butlers plc became the holding company for the Group. The retail operating company, Mitchells & Butlers Retail Limited, was known as Six Continents Retail Limited prior to Separation.

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• ‘Beer Orders’ refers to the Supply of Beer (Tied Estate) Order 1989 and the Supply of Beer (Loan Ties, Licensed Brewers and Wholesale Prices) Order 1989; • ‘Business Franchise’ refers to arrangements whereby the Company enters into a support agreement with a third party under which, for an annual fee, the Group provides goods and advice (including

IT systems, menu support, etc.); • ‘Britvic’ refers to Britannia Soft Drinks Limited; • ‘Buy-back’ refers to the £100 million program undertaken by the Company during fiscal 2005 to repurchase and cancel, or hold in treasury or the Employee Benefit Trust, its shares; • ‘Company’ or ‘M and B’ refers to Mitchells & Butlers plc; • ‘Directors’ or ‘Board’ refers to members of the board of directors of the Company either individually or collectively, as the context may require; • ‘Exchange Act’ means the Securities Exchange Act of 1934 as amended; • ‘InterContinental Group’ refers to InterContinental Hotels Group PLC and those companies that became its subsidiaries or its subsidiary undertakings upon completion of the Separation; • ‘M and B Group’ or ‘Group’ refers to the Company and, where appropriate, those companies that became its subsidiaries or its subsidiary undertakings upon completion of the Separation; • ‘ordinary share’ or ‘M and B share’ refer to the ordinary shares of 7 1/12p each of the Company following the share consolidation and to the ordinary shares of 5p each prior to the share

consolidation; • ‘SCPD’ refers to the Group’s property development business, which primarily comprises Standard Commercial Property Developments Ltd and Standard Commercial Property Securities Ltd; • ‘Securitization’ refers to the refinancing of the Group’s debt completed on November 13, 2003 through the issuance of £1,900 million of secured loan notes by a wholly-owned Group subsidiary,

Mitchells & Butlers Finance plc, which were secured against the majority of the Group’s UK pubs and pub-restaurants business; • ‘Senior Management Team’ refers to the Board and the other senior management listed in ‘Item 6. Directors, Senior Management and Employees – Directors and Senior Management’; • ‘Separation Transaction’ or ‘Separation’ refers to the transaction that separated Six Continents’ hotels business and soft drinks business from its retail business (herein referred to as ‘Retail’)

completed on April 15, 2003. The Separation resulted in two separately listed holding companies, (i) Mitchells & Butlers plc, which is the holding company for Retail and SCPD, and (ii) InterContinental Hotels Group PLC, which was the holding company for the hotels business and soft drinks business, of the Six Continents Group;

• ‘Share consolidation’ refers to the share consolidation which took place on December 2, 2003 where for every 12 shares of 5p each, 17 new ordinary shares of 7 1/12p each were issued; • ‘Six Continents’ refers to Six Continents PLC prior to Separation (formerly known as Bass PLC or ‘Bass’); • ‘Six Continents Group’ refers to Six Continents PLC and its subsidiaries prior to Separation; • ‘VAT’ refers to UK value added tax levied by HM Revenue & Customs on certain goods and services; and • ‘White Paper’ refers to an initial UK government or EU consultation document setting out proposed new legislation or directives.

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The Company’s consolidated financial statements appearing in this annual report are expressed in UK pounds sterling. In this document, references to ‘US dollars’, ‘US$’, ‘$’ or ‘¢’ are to United States (US) currency, references to ‘euro’ or ‘€’ are to the euro, the currency of the European Economic and Monetary Union, and references to ‘pounds sterling’, ‘sterling’, ‘£’, ‘pence’ or ‘p’ are to United Kingdom currency. Solely for convenience, this annual report contains translations of certain pounds sterling amounts into US dollars at specified rates. These translations should not be construed as representations that the pounds sterling amounts actually represent such US dollar amounts or could be converted into US dollars at the rates indicated. Unless otherwise indicated, the translations of pounds sterling into US dollars have been made at the rate of £1.00 = $1.77, the noon buying rate in The City of New York for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 2005 (the last available date in the fiscal year). On February 10, 2006 the noon buying rate was £1.00 = $1.75. For information regarding rates of exchange between pounds sterling and US dollars from fiscal 2000 to the present, see ‘Item 3. Key Information – Selected Consolidated Financial Information – Exchange Rates’.

The Company’s fiscal year ends on the Saturday directly preceding or directly after September 30 of each year. The Company’s fiscal years can therefore vary in length from 52 to 53 weeks. References in this document to a particular year are to the fiscal year unless otherwise indicated. For example, the Company refers to the 53 weeks ended October 1, 2005 as fiscal 2005, and other fiscal years in a similar manner as follows:

The Company’s consolidated financial statements are prepared on the basis of accounting principles generally accepted in the United Kingdom (‘UK GAAP’) which differ from those generally accepted in the United States (‘US GAAP’). The significant differences applicable to the M and B Group are explained in Note 31 of Notes to the Financial Statements.

On July 19, 2005, the Company voluntarily terminated its American Depositary Receipt (‘ADR’) program and on August 5, 2005, delisted from the New York Stock Exchange. The Directors decided to terminate the ADR program and delist because the listing was a legacy of the Separation and participation in the ADR program had reduced substantially since demerger, reflecting the fact that the Company does not operate in the US. Holders of ADRs were entitled to exchange their M and B American Depositary Shares (‘ADS’) by September 16, 2005 for the appropriate number of underlying M and B ordinary shares. On September 19, 2005, the Bank of New York, as depositary for the ADR program, sold the ordinary shares in respect of M and B ADSs not submitted for exchange by September 16, 2005.

In addition, in view of the significant and disproportionate costs to the Company of maintaining a US registration, the Company intends to examine ways in which it may terminate its Exchange Act registration in due course. On February 2, 2006, the Company’s shareholders approved an amendment to the Articles of Association that allows the Board of Directors to require certain US shareholders to sell their ordinary shares so that the Company may be certain that the number of US shareholders is below the appropriate threshold to enable the Company to deregister. The Board of Directors is currently considering the implementation of this provision and an announcement will be made promptly when a decision is taken to invoke it.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 20-F contains certain forward-looking statements as defined under US legislation (section 21E of the Securities Exchange Act of 1934) with respect to the financial condition, results of operations and business of the Group and certain of the plans and objectives of the board of directors with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use such words as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning. Such statements in the Form 20-F include, but are not limited to, statements under the following headings: (i) ‘Item 4. Information on the Company’; (ii) ‘Item 5. Operating and Financial Review and Prospects’; (iii) ‘Item 8. Financial Information’; and (iv) ‘Item 11. Quantitative and Qualitative Disclosures about Market Risk’. Specific risks faced by the Company are described under ‘Item 3. Key Information – Risk Factors’. These statements are based on assumptions and assessments made by the Group’s management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty, and the factors described in the context of such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. These factors include, but are not limited to: the future balance between supply and demand for the Group’s sites; the effect of economic conditions and unforeseen external events on the Group’s business; the availability of suitable properties and necessary licenses; consumer and business spending; changes in consumer tastes and preferences; levels of marketing and promotional expenditure by the Group and its competitors; changes in key personnel; changes in the cost and availability of supplies, and in supplier dynamics; significant fluctuations in exchange rates, interest rates and tax rates; the availability and effects of any future business combinations, acquisitions or dispositions; the impact of legal and regulatory actions or developments; the impact of the European Economic and Monetary Union; the ability of the Group to maintain appropriate levels of insurance; the maintenance of the Group’s IT structure; competition in markets in which the Group operates; political and economic developments and currency exchange fluctuations; economic recession; management of the Group’s indebtedness and capital resource requirements; material litigation against the Group; substantial trading activity in the Group’s shares; the reputation of the Group’s brands; the level of costs associated with leased properties; competition for high quality managers; declining sales of beer in pubs in the UK; food safety scares; funding liabilities in respect of the Group’s pension schemes; and the weather.

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Fiscal 2004 52 weeks ended September 25, 2004Fiscal 2003 52 weeks ended September 27, 2003Fiscal 2002 52 weeks ended September 28, 2002Fiscal 2001 52 weeks ended September 29, 2001

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PART I

Not applicable.

Not applicable.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected consolidated financial information set forth below at the end of fiscal 2005 and 2004 and for fiscal years 2005, 2004 and 2003 is derived from the audited Consolidated Financial Statements of the Group included elsewhere in this Annual Report. The selected consolidated financial information set forth below at the end of fiscal 2003 and 2002 and for fiscal years 2002 and 2001 is derived from the audited Consolidated Financial Statements of the Group included in the Annual Report on Form 20-F for the year ended September 27, 2003. The selected consolidated financial information set forth below at the end of fiscal 2001 is derived from the audited combined financial statements of the Group included in its Registration Statement on Form 20-F filed with the Securities and Exchange Commission on March 28, 2003. All of these audited financial statements have been audited by the Company’s registered independent public accounting firm, Ernst & Young LLP. The selected consolidated financial information set forth below, which has been restated where appropriate to accord with the Group’s current accounting policies and presentation, should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements and Notes thereto included elsewhere in this annual report.

Significant changes were made to M and B’s capital structure as a result of the Separation from Six Continents on April 15, 2003. The selected consolidated financial information below for periods prior to the Separation reflects the capital structure then in place, which was appropriate historically to Six Continents, and the capital position, interest charges and tax liabilities for those periods may not reflect M and B’s capital position, interest charges and tax liabilities had it been an independently financed and managed group during such periods, or for any future period.

The consolidated financial statements have been prepared in accordance with UK GAAP which differ in certain respects from US GAAP. A description of the significant differences and reconciliations of net income for fiscal 2005, 2004 and 2003 and shareholders’ equity at the end of fiscal 2005 and 2004 are set forth in Note 31 of Notes to the Financial Statements.

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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 3. KEY INFORMATION

Summary

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Consolidated Profit and Loss Account 2005(i)` 2005 2004

Restated (ii) 2003Restated (ii) 2002

Restated (ii) 2001

$ £ £ £ £ £ (in millions, except for ordinary share amounts)

Amounts in accordance with UK GAAP Turnover:

Pubs & Bars 1,694 957 913 873 863 828Restaurants 1,234 697 641 614 605 561Inns and other — — — — — 161

Retail 2,928 1,654 1,554 1,487 1,468 1,550SCPD 14 8 6 17 6 5

2,942 1,662 1,560 1,504 1,474 1,555 Total operating profit before operating exceptional items:

Pubs & Bars 319 180 173 172 184 187Restaurants 205 116 99 92 93 87Inns and other — — — — — 31

Retail 524 296 272 264 277 305SCPD 2 1 1 2 1 1

526 297 273 266 278 306 Operating exceptional items (iii) (8) (4) (2) (5) — — Total operating profit 518 293 271 261 278 306 Non-operating exceptional items 2 1 2 (42) (2) (36) Profit on ordinary activities before interest 520 294 273 219 276 270 Net interest payable and similar charges:

Interest on net debt (186) (105) (101) (55) (43) (58)Exceptional interest — — (2) (8) — —

Net finance income/(expense) in respect of pensions 6 3 1 (2) 6 — (180) (102) (102) (65) (37) (58) Profit on ordinary activities before taxation 340 192 171 154 239 212 Taxation (105) (59) (53) (37) (78) (82) Earnings available for shareholders 235 133 118 117 161 130 Per ordinary share: (iv) $ £ £ £ £ £

Basic 0.46 0.26 0.21 0.16 0.22 0.18Adjusted (v) 0.46 0.26 0.21 0.19 0.22 0.24Diluted 0.45 0.26 0.21 0.16 0.22 0.18

Amounts in accordance with US GAAP Net income 214 121 122 101 168 464 Per ordinary share (vi) $ £ £ £ £ £

Basic 0.42 0.24 0.23 0.19 0.32 0.90Diluted 0.41 0.23 0.23 0.19 0.32 0.90

All activities relate to continuing operations.

Footnotes on following page.

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Consolidated Balance Sheet Data

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2005 (i) 2005 2004

Restated (ii) 2003

Restated (ii) 2002

Restated (ii) 2001

Restated (ii)

$ £ £ £ £ £ (in millions)

Amounts in accordance with UK GAAP Intangible assets 18 10 10 11 11 11Tangible assets 6,223 3516 3,509 3,522 3,526 3,381Non-current assets — — — 11 — 13Current assets 558 315 350 138 149 157Total assets 6,799 3,841 3,869 3,682 3,686 3,562 Amounts due to Six Continents Group companies — — — — (831) (825)Other current liabilities (620) (350) (326) (508) (229) (256)Long-term debt (3,161) (1,786) (1,822) (1,001) (1) —Non-current liabilities (335) (189) (184) (178) (193) (173)Net pension liabilities (net of deferred tax) (175) (99) (114) (170) (139) —Shareholders’ funds/invested capital (2,508) (1,417) (1,423) (1,825) (2,293) (2,308) Number of ordinary shares (millions) (vii) 500 500 524 736 734 734 Amounts in accordance with US GAAP Intangible assets 380 215 220 221 200 202Tangible assets 4,664 2,635 2,620 2,621 2,624 2,475Current assets 563 318 353 139 150 158Non-current assets 76 43 37 30 19 20Total assets 5,683 3,211 3,230 3,011 2,993 2,855 Current liabilities (575) (325) (294) (479) (1,060) (1,081)Long-term debt (3,170) (1,791) (1,824) (1,001) (1) —Non-current liabilities (312) (176) (152) (118) (171) (154)Net pension liabilities (219) (124) (154) (212) — —Shareholders’ equity/invested capital (1,407) (795) (806) (1,201) (1,761) (1,620) Number of ordinary shares (millions) (vii) 500 500 524 520 518 518

(i) US dollar amounts have been translated at the noon buying rate on September 30, 2005 (the last available date in the fiscal year) of £1.00 = $1.77.(ii) Amounts in accordance with UK GAAP, with the exception of 2001 profit and loss account, are restated on the full adoption of FRS17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements). The results for fiscal 2001 have not been restated as necessary

data is not available; 2001 amounts are therefore disclosed under SSAP 24 ‘Accounting for Pension Costs’. Amounts in accordance with US GAAP are restated to (a) reclassify lease premiums paid in relation to operating leases from tangible fixed assets to current and non-current assets, and (b) reclassify computer software from tangible fixed assets to intangible fixed assets. These reclassifications arose in connection with preparing to convert the Group’s financial statements from UK GAAP to International Financial Reporting Standards. None of these restatements have an impact on previously reported net income or shareholders’ equity under US GAAP.

(iii) The operating exceptional items for fiscal 2005 can be allocated as £3 million to Pubs & Bars and £1 million to Restaurants. Due to the nature of the operating exceptional items relating to previous periods, it is not possible to provide a meaningful allocation of the costs to the operating segments.

(iv) Under UK GAAP, basic, adjusted and diluted per ordinary share amounts for fiscal 2002 and 2001 are based on 734 million shares, being the number of M and B shares outstanding on Separation.(v) Under UK GAAP, adjusted earnings per share are disclosed in order to show performance undistorted by exceptional items, see Note 12 of Notes to the Financial Statements.(vi) Under US GAAP, basic and diluted earnings per ordinary share and, prior to termination of the ADR program, American Depositary Share amounts, are based on share numbers that have been retrospectively adjusted to reflect the reduction in share numbers resulting

from the share consolidation that took place on December 2, 2003. Prior to termination of the ADR program, each American Depositary Share represented one ordinary share. See Note 31 of Notes to the Financial Statements. (vii) The number of ordinary shares represents the number of shares in issue and fully paid up at the balance sheet date. Of these, 4 million (2004 4 million, 2003 nil, 2002 nil, 2001 nil) were held in treasury (‘treasury shares’) and by employee share trusts. It has been

assumed for fiscal 2002 and 2001 that the number of ordinary shares in issue on April 15, 2003, following separation from Six Continents was the number of shares in issue prior to this date. On December 2, 2003, the Company’s ordinary share capital was consolidated on a 12 for 17 basis. 520 million new ordinary shares of 7 1/12p each were issued in exchange for 736 million existing ordinary shares of 5p each. For amounts in accordance with US GAAP, the numbers of ordinary shares outstanding at the balance sheet date for 2003, 2002 and 2001 have been adjusted to reflect the share consolidation. No such adjustment is made under UK GAAP.

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Dividends

M and B paid a final 2005 dividend of 7.55p on February 6, 2006. Together with the normal interim dividend of 3.20p paid on June 30, 2005, this made a total normal dividend for the year of 10.75p. Looking forward, M and B intends to pursue a progressive dividend policy to deliver real growth in dividends from the level established in 2004.

The table below sets out the amount of dividends declared per ordinary share since incorporation on October 2, 2002. The dividends paid per ADS, prior to termination of the ADR program, have been translated into US dollars at the noon buying rate on each of the respective dividend payment dates. As the ADR program terminated on July 19, 2005, no final 2005 dividend is payable on ADRs.

The special interim dividend for 2004 was paid based on the pre-share consolidation number of ordinary shares outstanding. All other dividends were paid based on the post share consolidation number of ordinary shares outstanding.

Exchange Rates

The following tables show, for the periods and dates indicated, certain information regarding the exchange rate for pounds sterling, based on the noon buying rate for pounds sterling expressed in US dollars per £1.00. The exchange rate on February 10, 2006 was £1.00 = US$1.75.

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Fiscal year

2006 2005 2004 2003

(pence)

Per ordinary share : Final for 2003 — — 5.65 — Special interim for 2004 — — 68.00 — Normal interim for 2004 — — 2.85 — Final for 2004 — 6.65 — — Interim for 2005 — 3.20 — — Final for 2005 7.55 — — —

(cents)

Per ADS: Final for 2003 — — 10.64 — Special interim for 2004 — — 117.51 — Normal interim for 2004 — — 5.17 — Final for 2004 — 12.50 — — Interim for 2005 — 5.76 — —

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Month’s Month’s highest lowest Month exchange rate exchange rate

August 2005 1.81 1.77 September 2005 1.84 1.76 October 2005 1.79 1.75 November 2005 1.78 1.71 December 2005 1.77 1.72 January 2006 1.79 1.74 February 2006 (through February 10, 2006) 1.78 1.74

Period Average Fiscal year end rate (i) High Low

2001 1.47 1.44 1.50 1.37 2002 1.57 1.48 1.58 1.41 2003 1.66 1.61 1.68 1.54 2004 1.80 1.79 1.90 1.66 2005 1.77 1.85 1.95 1.73

(i) The average of the noon buying rates on the last day of each full month during the period.

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RISK FACTORS

This section describes some of the risks that could materially affect the Group’s businesses. The risks listed below are not the only ones that the Group faces – some risks are not yet known to the Group and some that the Group does not currently believe to be material could later turn out to be material. All of these risks could materially affect the Group, its turnover, operating profit, earnings, net assets, liquidity and capital resources. In such case, the market price of the Ordinary Shares may decline and investors may lose part or all of their investment.

General Risks

The Group is exposed to the risks of economic downturn

The Group is exposed to the risks of an economic downturn in the United Kingdom and to a lesser extent in Germany. A downturn in either market could result in lower consumer expenditure and therefore lower revenues and reduced net income. The Group’s Alex sites in Germany have experienced lower revenues in previous years as a result of the current economic climate in Germany. In previous years, the Group’s sites in London also experienced lower revenues as a result of economic downturn, from decreased activity in the financial markets and from reduced tourist visits as a result of the terrorist attacks on September 11, 2001 in the United States, and also the ongoing conflict in the Middle East. The July, 2005 terrorist attacks in London also had an adverse impact on the Group’s London sites. The occurrence of similar events in the future or a future economic downturn (caused by increases in interest rates and falling property prices in the United Kingdom, for example) could have a similar impact on the Group’s business.

Changes to regulation may affect the cost base of the Group

Both in the United Kingdom and in Germany, the Group’s operations are subject to regulation, and further changes in regulation could adversely affect results of operations, including through higher costs. More restrictive regulations could also lead to increasing prices to consumers, which in turn may adversely affect demand and therefore revenues and profitability. See ‘Item 4. Information on the Company – Regulatory Environment’ for additional information on the regulation to which the Group is subject. In particular, some examples of the regulatory changes which could affect the Group’s cost base include:

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• additional EU or UK employment legislation, which could further increase labor costs. In particular, legislation related to the level of the national minimum wage is under annual review by the UK Low Pay Commission. The UK Trades Union Congress is seeking to raise the minimum wage, which is currently £5.05 per hour. Although the Government has effected increases in minimum wage materially above the rate of inflation and actual growth in labor productivity over the last four years, it is anticipated that the national minimum wage for adults will be raised by 30p to £5.35 per hour from October 2006. As over 50% of the Group’s retail employees are paid the minimum wage, an increase of this magnitude would materially increase the Group’s labor costs. Labor costs could further increase if the current legislation is changed regulating the maximum number of statutory holidays afforded to employees, the maximum number of hours an employee may be permitted to work and if the extent to which they may voluntarily opt-out is tightened by the European Union;

• competition, consumer protection and environmental law changes, which could require the way it currently operates, which could result in higher costs and/or lower revenues for the Group; • clarification from the courts as to what constitutes ‘reasonable adjustment’ to prevent disabled customers being placed at a substantial disadvantage in terms of access to premises under the

Disability Discrimination Act 1998, which may require further alteration and expenditure to that already made to certain of the Group’s sites; • the Licensing Act 2003, which became fully effective in November 2005. Responsibility for the administration of licensing now rests with local authorities, rather than magistrates. Pub operators

wishing to change the hours of opening of their premises have to apply to the local authority for permission, submitting an operating plan. Local residents, the police and other relevant agencies have the right to object to the application on certain defined grounds, in which case the local authority must hold a hearing and reach a determination. Although the vast majority of the Group’s sites have been successful in their initial applications to extend previous hours of opening, there is a risk that future applications may not succeed and therefore further changes to existing hours will not be permitted. This may mean that the Group might not be able to take advantage of longer trading hours in certain of its premises and, as a result, lose customers to competitor businesses, which may have successfully obtained longer opening hours;

• fees for license applications, which are determined by the Government, and were increased in January 2005 from the levels previously expected. An independent panel has been set up by the

Government to review the level of licensing fees, which is due to issue a report of its finding in late 2006. If the fee levels were to be increased further this would increase the costs that will be incurred by the Group. Also, additional or more stringent licensing requirements could be imposed on the Group’s operations in the future, which could further increase costs; and

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The Group’s sites must compete with other pubs and restaurants and consumption at home

The Group’s pubs and pub-restaurants compete for consumers with a wide variety of other branded and non-branded pubs and restaurants as well as off-licenses, supermarkets and takeaways, some of which may offer higher amenity levels or lower prices and be backed by greater financial and operational resources. The large supermarket groups, in particular, are often selling alcohol at greatly discounted prices as an element of their marketing strategy. The Group may be forced to decrease prices in its outlets in order to compete with such lower prices in both the off-trade and the on-trade. For example, in 1995, 73% of all alcohol by value was purchased in pubs, clubs and restaurants. By 2004, this had dropped to 70%. Some supermarkets have also been granted 24 hour licenses to sell alcohol. The Group’s pubs and pub-restaurants may not be successful in competing against any or all of these alternatives and a sustained loss of customers and/or skilled employees to other pubs or leisure activities or increased consumption at home could have a material adverse effect on the Group’s business operations and prospects.

Overcapacity in the high street sector

Around 20% (excluding London) of the Group’s sales are derived from outlets located on the high street (main street), which is a sector that has seen substantial growth in the United Kingdom over the last 10 years, as local planning and licensing authorities have allowed more city/town center properties to be used for licensed premises. As a result of this rapid expansion in the number of pubs and venues on the high street, there are considerably more outlets competing for the same number of customers, which typically leads to rival pub operators aggressively reducing prices to try and win more customers. Recently, the number of new outlets opening on the high street has been very limited, but if such market conditions were to reverse and pricing activity were to continue, this could have a material adverse effect on the Group’s business operations and prospects.

The Group’s activities are affected by a number of fiscal-related matters

The Group’s activities are affected by a number of fiscal-related matters. These matters include duty on alcoholic beverages, property rates, VAT, other business taxes and the availability of duty harmonization to travelers between EU countries. Changes in legislation which affect all or any of these matters may adversely affect the financial performance of the Group.

Changes in gaming regulations may affect the Group’s revenue

Changes to current gaming regulations will come into effect from September 2007 as a result of the Gambling Act 2005, which was passed on April 8, 2005. The new legislation will include changes to the operation of AWP machines (amusement machines with prizes, i.e. ‘fruit machines’) (‘AWPs’) in pubs. The main area of the current legislation that will change which could impact the Group is that play by under 18 year olds will be illegal except on low stake and prize machines (although the Group already complies with a voluntary code to this effect). Other changes in the Gambling Act 2005 relate to the ability for casino operators to develop larger, regional casinos (similar to those operating in Las Vegas). Currently, the UK Government proposes to license eight small, eight large and one regional casino which could have an adverse impact on the number of customers using the Group’s AWP machines. The number of regional casinos could possibly be increased (eight were originally proposed), but this is considered to be unlikely until after 2010. There will also be changes to the categories of machines permitted in casinos, licensed betting offices, bingo halls, amusement arcades, family entertainment centers and motorway service stations, some of which may increase the competitive threat to the Group in respect of gaming. There is also a risk that the legislation may not effectively safeguard pubs and tenpin bowls in retaining their existing rights in relation to the number of AWPs they are licensed for. However, the Government has confirmed that it is its intention that pubs and tenpin bowls will retain their existing rights. These new gaming laws could nevertheless reduce the Group’s income from AWPs and reduce the number of customers using the Group’s outlets.

Changes in drink driving laws may affect the Group’s revenue

If the Government were to carry out a review of the legal blood alcohol limit for drivers and opted to reduce the permitted legal blood alcohol limit, it could discourage customers from driving to pubs and restaurants. This change could adversely affect trading in the Group’s rural and suburban pub and pub-restaurant sites and the Group’s income.

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• in parallel with the recent reforms in England and Wales, the Scottish Parliament initiated a review of licensing law under the auspices of the Nicholson Committee. The Nicholson Committee’s Report was published in August 2003 and contained a number of proposals for the reform of licensing law in Scotland. Following a period of consultation. the Scottish Executive has published a draft Bill, which, if enacted in its present form, would substantially implement the recommendations of the Nicholson Committee. In the draft Bill, there is currently no provision which preserves a pub’s “grandfather” rights which could mean that the benefit of existing license extensions could be lost when a new application under the new licensing regime is submitted. This could result in a loss in revenue to some or all of the Group’s outlets in Scotland. Under the current legislative timetable, there will be an 18 month transition period commencing from February 2008 during which time licensees will have to submit applications for new premises and personal licenses which will be required from August 2009, when the new licensing regime becomes fully effective. It is too early to say precisely what impact the new regime could have on the Group’s business. However, it is likely that the Group will incur additional costs during the transitional period and more stringent licensing requirements could be imposed on the Group’s operations in the future, which could further increase costs.

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The EU noise directive may affect the Group’s revenue

The EU Physical Agents Directive 2001 (the ‘Directive’) is currently under discussion in the retail industry relating to the regulation of noise in the workplace. The Directive imposes reduced noise action thresholds on member states. The Government is required to introduce regulations in response to this Directive by February 2008 and has recently launched a consultation document to which the Company has responded. These regulations may discourage certain customers from patronizing those pubs whose current attraction is music or a less quiet environment. This could lead to a reduction in sales at some pubs and reduce the income received by the Group.

Legislation relating to smoking may affect the Group’s revenue

In November 2004, the Government issued a White Paper concerning smoking in public places in England and Wales for consultation. It proposed regulations prohibiting smoking in enclosed places including restaurants and pubs that prepare and serve food as from 2008. Under the White Paper, premises not preparing and selling food would be permitted to allow smoking, although smoking at the bar would be prohibited. In October 2005, the Government published the Health Bill, which provided that from Summer 2007, smoking would be prohibited in public places, including pubs and restaurants that serve food. However, in February 2006, faced with heavy criticism of its food based proposal, the Government gave Members of Parliament (‘MPs’) the chance to vote on whether to retain the food based ban, opt for a smoking ban in all pubs (except private members’ clubs) or opt for a total ban in all pubs and private members’ clubs. A majority of MPs voted to amend the Health Bill to legislate for an outright ban in all pubs and private members’ clubs, which is expected to come into effect in the summer of 2007 (or later if the Government chooses to give businesses more time to adapt).

Prior to the White Paper in 2004, the Group, together with other leading pub companies, had announced a voluntary initiative progressively to reduce the proportion of space in pubs in which smoking would be allowed to a maximum of 20% by 2009. Smoking at the bar would be prohibited altogether by the end of 2005. The Group engaged in the consultation following the White Paper, seeking to persuade the Government that its objective of reducing smoking would be more certainly achieved if the proposal concerning food was replaced by the industry voluntary initiative or a variation of it (for example, separate smoking rooms that are unmanned by staff). However, following the publication of the Health Bill in October 2005 and faced with the proposal of a food based smoking ban, the Group supported a complete ban on smoking in all licensed premises with no exemptions.

Assuming the proposals in the amended Health Bill remain unaltered and become legislation, smokers could be discouraged from visiting pubs and restaurants, preferring to drink, eat and smoke at home. When the legislation comes into force, the full ban on smoking in all pubs could have an adverse effect on the results of the Group’s business. In the meantime, the Group is continuing its implementation of the voluntary initiative and conducting trials of non-smoking pubs.

In Scotland, the Scottish Executive has decided to enact a complete ban on smoking in pubs, and this will take effect from March 2006. This could discourage customers who smoke from using pubs and this may have an adverse effect on the results of the Group’s businesses in Scotland which represent 5% of total Group sales. The Welsh Assembly may also seek to implement a complete ban on smoking. If implemented, this could have an adverse effect on the results of the Group’s businesses in Wales which represent 5% of total Group sales.

The Group may be adversely affected by changes in supplier dynamics and interruptions in supply or by circumstances adversely affecting business continuity

In recent years, there has been a consolidation in the brewing and distribution industry in the United Kingdom. This consolidation could have the effect of exposing the Group to reliance on a limited number of suppliers, and those suppliers may be able to exert pressures on the Group that could have the effect of raising the prices paid by the Group for goods bought or delivered, reducing margins and adversely affecting results of operations.

The Group has entered into agreements with all of its key suppliers. Termination of these agreements, variation of their terms or the failure of a party to comply with its obligations under these agreements could have a material adverse effect on the operations and financial performance of the Group.

The Group is contractually bound to use certain suppliers. As part of its acquisition of the 550 former Allied Domecq sites, the Group is contractually bound to purchase a fixed minimum volume of Carlsberg-Tetley products until December 12, 2007 (which in fiscal 2005, represented 8.5% (by value) of the Group’s alcoholic drink purchases). 74% of the Company’s soft drinks (by value) are supplied by Britvic. If the Group is unable to satisfy its minimum purchase volume obligations to a material extent under the Carlsberg-Tetley and Britvic agreements, it is obliged to pay liquidated damages, which if paid could have an adverse effect on the Group’s business.

The interruption or contamination of the supply of food and drink to the Group’s sites or loss of a key office or part of the Group’s IT infrastructure may also affect the Group’s ability to trade.

The Group is a large commercial user of gas and electricity and is therefore subject to fluctuations in utility costs (for example, both gas and electricity costs have risen sharply during the last 12 months), which could have an adverse effect on the financial performance of the Group.

Seasonality and weather may adversely affect the Group’s business

Attendance levels at the Group’s pubs and pub-restaurants are generally higher during holiday periods, such as Christmas and New Year, and over bank holidays. Frequenting of pubs and pub-restaurants is slightly lower during the winter months than in the summer. Attendance levels at the Group’s pubs and pub-restaurants may also be adversely affected by persistent rain or other inclement weather, especially during the summer months or over the Christmas period (which are peak trading times). Inclement weather could have a negative effect on turnover generated by the Group’s pubs and pub-restaurants and, in turn, could have a negative effect on the results of the Group’s operations.

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The pub industry is subject to varying consumer perceptions and public attitudes

In the United Kingdom, consumption of alcoholic beverages has become the subject of considerable social and political attention in recent years due to increasing Government concern over alcohol-related social problems including drink driving, underage drinking and adverse health consequences associated with the misuse of alcohol, including alcoholism. This heightened focus on alcohol and how it is retailed by the licensed trade (particularly in the high street and city centers), could result in measures being taken at a national or local level. Such measures could seek to restrict how the Group operates some of its venues (particularly pricing and promotional activity) and this could have a negative effect on the results of the Group’s operations. The Government in January 2005 published for consultation a report entitled ‘Drinking Responsibly’ setting out further proposals building on the new powers that will exist pursuant to licensing reform. New measures aimed at those who abuse the licensing laws include 24-hour bans for premises that repeatedly sell to underage drinkers, fixed penalty notices and banning orders for individual drinkers who behave in an anti-social manner and measures (for designated areas) aimed at recovering costs of policing, hospital treatment and street cleaning. Premises deemed to be contributing to anti-social drinking problems would be identified, given a period of time to tackle the problem, failing which they would be charged a contribution of the associated costs. Even well operated premises in such designated areas could however be required to contribute towards these costs. Currently, a bill giving effect to these proposals is before Parliament, which, if enacted in its current form, could have an adverse effect on the Group’s cost base.

The Group may fail to evolve its brands, formats and offerings in line with changing consumer tastes and requirements

Changes in consumer tastes in both food and drink (for example, there is heightened awareness of healthy eating) and demographic trends over time may affect the appeal of the Group’s pubs and pub-restaurants to consumers, especially if the Group does not anticipate, identify and respond by evolving its brands, formats and offerings adequately and sufficiently promptly to reflect changes in consumer requirements and preferences, particularly the growth in the eating out market. This could have a negative impact on the Group’s financial performance.

Complaints or litigation from pub customers, employees and third parties may adversely affect the Group

The Group, or the licensed retailing industry, could be the subject of complaints or litigation from individuals or groups of pub customers and/or employees and/or class actions alleging illness or injury (such as from passive smoking or alcohol abuse) or raising other food quality, health or operational concerns, and from other third parties in nuisance and negligence. It may also incur additional liabilities as a freehold property owner (including environmental liabilities). These claims may also divert the Group’s financial and management resources from more beneficial uses. If the Group were to be found liable in respect of any complaint or litigation, this could adversely affect the Group’s results of operations, and also adversely affect the reputation of the Group or its brands.

The Group is exposed to fluctuations in the property market

Around 17% of the Group’s retail outlets are short leaseholds which are subject to periodic rent reviews and renegotiation of rents when leases are renewed. The property market may develop so that rentals may increase such that they affect the economic viability of one or more of such properties. Equally, a downturn in the UK property market may lead to a reduction in the Group’s freehold property values over time.

Competition for high quality managers

The Group hires pub managers to operate all of its managed outlets. The Group’s outlets compete with other managed pub companies to attract high quality managers and some of these companies may have greater financial and other resources than the Group. The Group’s major competitors include JD Wetherspoon, Wolverhampton & Dudley, Greene King, Punch and Whitbread. If the Group is unsuccessful in convincing both existing and prospective employees that the overall combination of its properties, services and employment terms are more favorable than that of its competitors, existing managers may choose to leave the Group and work for its competitors, and prospective employees may choose to work for other companies.

In addition, individuals seeking to enter the pub operating business have several alternatives to being employed managing a pub, any of which may prove to be more attractive depending on personal circumstances. These include acquiring a pub freehold outright or joining one of numerous independent leased or tenanted pub companies as a lessee or tenant. Licensed restaurants, cafés and bars can also offer attractive business opportunities for the type of employee that the Group generally employs. The Group may not be successful in convincing prospective employees of the benefits of managing its pubs and the Group may fail to hire or retain high quality employees as a result.

Declining sales of beer in pubs in Great Britain

A significant proportion of the Group’s turnover is derived from the sale of beer to its customers. In recent years, sales of all beer (by volume) in pubs in the United Kingdom have decreased, principally as a result of pub customers showing increased demand for non-beer products such as wine and other alcoholic beverages, and increased expenditure on food along with a decline in the number and proportion of male pub visitors. Growing health and drink driving concerns, as well as the ability to purchase canned or bottled beer at lower prices in many off-licenses and supermarkets, have also contributed to the downward trend in beer sales at pubs. Accordingly, the Group’s outlets do and will continue to offer a broad selection of non-beer alcoholic drinks, as well as soft drinks and a wide range of food, to continue to attract customers. If the Group is not able to grow successfully its other income streams for other products, a continued decline in the British beer market could have an adverse effect on the Group’s turnover and overall financial performance.

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National and international food safety scares and health issues

The Group is susceptible to localized national or international scares as a result of food contamination that can have an adverse impact on both the supply and demand of certain food products. For example, if there was an international food safety scare, there could be an adverse impact on food sales in the Group’s food-led outlets particularly in its Restaurant division. Similarly, if food supplies are interrupted, the Company may be forced to consider alternative suppliers or alternative products.

Other food hygiene issues may affect the Group, either on an outlet by outlet basis, by brand, or across the Group as a whole. Negative publicity and the cost of legal proceedings and/or fines relating to a hygiene incident in a brand or across the whole Group could have an adverse effect on the Group’s financial position.

The outbreak on a national or international level of illnesses that can be transmitted human to human (sometimes referred to as ‘epidemics’ or ‘pandemics’) may adversely affect the Group. Customer demand could fall as a result of large numbers of the population contracting the illness or being fearful of contracting the illness. Such outbreaks could also impact on the ability of the Group to have sufficient numbers of staff to operate some or all of its outlets and/or manage the Group's business at the corporate center. This could have an adverse effect on the Group’s turnover and overall financial performance.

IT infrastructure

The Group is reliant on its IT systems and maintains a program of developing its systems to suit its business requirements. However, there is a risk of systems failure centrally and at outlet level, either through intrinsic weakness in the systems themselves or through external power failures. Appropriate back-up systems are maintained, although it should be noted that it is not always practical or cost effective to cover every eventuality. A systems failure exceeding seven days (at outlet level) across all or a large number of outlets could require manual processes to be used for capturing sale transactions, which would mean that there would be no electronic transaction audit available after the seventh day. This could have an adverse impact on the financial performance of the Group.

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

The Group participates in defined benefit pension schemes (which were closed to new entrants during fiscal 2002). This gives rise to various funding risks for the Group. The main risks are:

The above risks are linked to the funding level of the schemes, which can be adversely affected by a number of factors including: (i) bond yields (low yields mean a pension obligation is assessed as having a high value); (ii) long and/or increasing life expectancy (which will make pensions payable for longer and therefore more expensive to provide); (iii) poor investment performance of pension fund investments; (iv) increased funding volatility as a result of a mismatch in the nature of the assets held when compared to the liability of the schemes; (v) adverse annuity rates (which tend in particular to depend on prevailing interest rates and life expectancy) as these will make it more expensive to secure pensions with an insurance company; (vi) clarification of the law that might require guaranteed minimum pensions relating to periods of service after May 17, 1990 and before April 6, 1997 to be equalized as between men and women; and (vii) other events occurring which make past service benefits more expensive than predicted in the actuarial assumptions by reference to which the Group’s past contributions were assessed.

Following the implementation of the Pension Protection Fund (‘PPF’) in April 2005, the Group is required to pay annual amounts in respect of the PPF levy. In the first year, the amount charged was based on flat rates per member and the total paid was £0.28 million. From April 2006, 80% of the PPF levy will be risk based, assessed on scheme-specific data. The details of the basis of calculation are not yet finalized, however, the basis of final consultation shows that the PPF levy for the year from April 2006 is currently projected to be approximately £0.25 million. The final determination will be announced in spring 2006.

An additional uncertainty is that changes to the statutory minimum funding requirement came into effect from November 2005, which may result in more onerous funding and contribution requirements for employers than those which currently apply, through a new ‘scheme-specific’ funding requirement. Recent legislation also means that the Pensions Regulator may be required to be notified of significant transactions in order to gain pre-clearance. Such clearance may include a requirement to increase the level of funding of the deficit in the short term.

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(a) an increase in the amount of contributions which are required to be paid to the schemes by the Group in order to account for past service benefit deficits and future service benefit accruals. Recent legislation allows the Pensions Regulator to challenge contribution strategies agreed as part of scheme specific funding discussions with trustees, which may mean the Group is required to shorten the period over which the deficit is funded;

(b) the schemes are wound up. New regulations require that participating employers would be required to contribute to a defined benefit scheme which winds up to a level sufficient to enable all

benefits to be secured through the purchase of annuity contracts; and (c) a material increase in the number of members in the defined benefit schemes. If the Group acquires new employees it would be possible for the Company to re-open the defined benefit schemes to

provide defined benefit pensions for new employees.

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As a result of the funding deficits in the schemes identified in the latest actuarial valuations as at March 31, 2004, the Company agreed to make additional contributions to the schemes of £40 million (£20 million of which was paid in December 2004, £10 million of which was paid in October 2005 and £10 million of which will be paid in fiscal year 2007). These contributions are in addition to those agreed at the time of the Securitization in November 2003, when a total of £55 million was committed (£35 million was paid in November 2003, £10 million was paid in October 2004 and £10 million was paid in October 2005).

Debt, Liquidity and Revenue Risks

The Group’s debt carries a number of restrictive covenants

In November 2003, the Group securitized the majority of its operations and raised £1,900 million through bonds to increase the efficiency of its balance sheet and to return surplus funds to shareholders. The bond terms include a number of financial and non-financial covenants relating to the Group’s business imposing restrictions on some of the Group’s ongoing operations.

Financial covenants establish minimum net worth and debt service levels within the securitized business and restrict payments to shareholders such as dividends if specified free cash flow to debt service levels are not satisfied. Non-financial covenants include restrictions on the disposal of mortgaged properties and related matters, the disposal of assets other than mortgaged properties, the acquisition and substitution of permitted businesses, capital expenditure, estate management transactions and further positive and negative covenants. Breach of these covenants by the Group would constitute ‘loan events of default’, which could result in the Group’s borrowings becoming immediately repayable.

If there were a significant deterioration in the Group’s trading activities or cash generation, the Group would have to service its debt in priority to its equity and there is a risk that it would not be able to make dividend payments.

The Group has a high proportion of fixed overheads and variable revenues

A high proportion of the Group’s operating overheads and certain other costs remain constant even if its revenues drop. The expenses of owning and operating a managed pub or pub-restaurant are not significantly reduced when circumstances such as market and economic factors and competition cause a reduction in revenues. Owners of leased and tenanted estates generally have a lower risk to revenue exposure compared with the Group because the tenant is obliged to pay the negotiated rent. In addition, owners of leased and tenanted estates typically have lower fixed costs at operating level and at a head office level than the Group.

Accordingly, a significant decline in the Group’s revenues would have a disproportionately adverse effect on its cash flow and ability to make interest and principal payments on its debt.

The Group may face increased costs in insuring its businesses

The Group’s insurance costs are largely driven by its claims history. A significant deterioration in its claims record is likely to impact premium rates available to the Group. This could adversely affect the Group by increasing costs or increasing its financial exposure to certain risks if a lower quality of cover is maintained.

Risks for US Shareholders

Shareholders may not be able to effect service of process in the United States upon the Group and certain individuals or enforce United States court judgements against the Group or some of the Group’s Directors and officers

The Company is organized under the laws of England and Wales and all of its Directors and executive officers are resident outside the United States. Additionally, all of the Group’s assets and substantially all of the assets of its Directors and executive officers are located outside the United States and it has no place of business in the United States. As a result, shareholders may not be able to effect service of process in the United States against the Group or the Group’s Directors or executive officers or enforce the judgement of a US court against the Group’s Directors or executive officers in any action, including those predicated upon civil liability provisions of the federal securities law of the United States, either inside or outside the United States. Further, it may not be possible for shareholders to bring original actions based upon US federal securities laws in the courts of England and Wales, and there may be doubt as to the enforceability against the Group, its Directors or its executive officers in the United Kingdom, whether in original actions or in actions for the enforcement of judgements of US courts, of civil liabilities predicated solely upon the laws of the United States, including federal securities laws.

The Company intends to terminate its Exchange Act registration

In view of the increasing significant and disproportionate costs to the Company, both in terms of external advisers’ fees and senior management time of maintaining a US registration and because the registration itself arose as a legacy from the separation from Six Continents, the Company intends to examine ways in which it may terminate its Exchange Act registration in due course. On July 19, 2005, the Company terminated its ADR program and on August 5, 2005, delisted from the New York Stock Exchange. Holders of ADRs were entitled to exchange their M and B ADSs by September 16, 2005 for the appropriate number of underlying M and B ordinary shares. On September 19, 2005, the Bank of New York, as depositary for the ADR program, sold the ordinary shares in respect of M and B ADSs not submitted for exchange by September 16.

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On February 2, 2006, the Company’s shareholders approved an amendment to its Articles of Association to allow the Board of Directors to require certain US shareholders to sell their ordinary shares so that the Company may be certain that the number of its US shareholders is below the appropriate threshold to enable it to deregister. The Board of Directors is currently considering the implementation of this provision and an announcement will be made promptly when a decision is taken to invoke it.

If the Company terminates its Exchange Act registration, it will no longer be obligated to file reports with or furnish reports to the SEC, including annual reports on Form 20-F or other reports on Form 6-K. In addition, it will not be required to disclose financial information in accordance with US GAAP. The Company will continue to provide information to its shareholders in accordance with the requirements applicable to it in the United Kingdom.

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ITEM 4. INFORMATION ON THE COMPANY

SUMMARY

M and B Business

The Group is the leading operator of managed pubs, bars and pub-restaurants in the United Kingdom. The Group’s high quality, predominantly freehold estate comprises approximately 2,000 sites throughout the United Kingdom and over 40 sites in Germany.

Mitchells & Butlers plc is a public limited company. It was incorporated in Great Britain on October 2, 2002 and is registered in, and operates under the laws of, England and Wales. Operations undertaken in countries other than England and Wales are under the laws of those countries in which they reside. M and B’s headquarters are in the United Kingdom and its registered address is:

27 Fleet Street Birmingham B3 1JP England Tel: + 44(0) 870 609 3000 Internet address: www.mbplc.com

The Group has a wide brand portfolio, with a number of segment-leading and well-established brands providing targeted offers for a variety of consumer groups, locations and occasions.

The following chart depicts how the Group’s UK pub and pub-restaurant brands are targeted by location or by primary occasion (drinks or food), together with the number of sites at October 1, 2005 for each:

The Group’s accommodation brands (Express by Holiday Inn (see page 61) and Innkeeper’s Lodge), the tenpin bowling operation (Hollywood Bowl) and the branded bar and brasserie chain in Germany (Alex) are not shown in the chart above, nor are the Group’s franchised pubs included in the numbers above.

Within each quadrant, the relevant brands target different consumer groups or occasions. For example, within residential, drinks-led sites, Ember Inns is for the quiet drink occasion; Sizzling Pub Co is focused on local drinking with ‘value for money’ pub food and Scream is aimed at students.

The Group also has over 600 formatted and unbranded pubs and pub-restaurants, which includes those trading under a Business Franchise.

The Group generated operating profits before operating exceptional items of £297 million (including £1 million of operating profit generated by SCPD) on revenues of £1,662 million (including £8 million of revenues from SCPD) in fiscal 2005, delivering a post-tax cash return on cash capital employed of over 10%.

History

Prior to 1989, the involvement of the Group (then part of Bass) in pubs was as part of a vertically integrated brewing and retailing company with regional operations covering both brewing and pubs. In 1989, Bass was reorganized and, in the process, created a drinks-led retail business with a managed and leased estate of over 7,000 sites. As a result of the Beer Orders, which restricted the number of pubs that brewers could tie to their products, Bass disposed of over 2,700 pubs by November 1, 1992.

Since 1992, the Group has undergone a major transformation in its operations, with a number of significant acquisitions and disposals during this period and focused investment to reposition its estate in terms of geography, sales mix and branding.

In realigning its estate, the Group retained the strongest sites from its former Bass estate (approximately 1,100 sites from around 7,400). In 1995, it acquired the Harvester chain from Forte plc. In 1997, it acquired the Browns chain of seven restaurants. In 1998, Hollywood Bowl was acquired from another Bass subsidiary. In 1998, the Group largely disposed of its leased pub business and acquired the Alex brand in Germany.

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Drinks-led Food-led

Residential Ember Inns (170) Vintage Inns (198) Sizzling Pub Co (169) Harvester (128) Scream (87) Toby Carvery (95) Arena (59) Pub Carveries (39)

City Center O’Neill’s (77) All Bar One (42) Goose (39) Browns (15) Edward’s (25) Flares (44)

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The Group also increased the size of its estate by acquiring 550 high-potential former Allied Domecq sites, out of approximately 3,500 sites, from Punch (ADR Joint Venture Company) Limited in 1999. In addition, during the last 10 years, it acquired over 350 carefully selected new sites and new builds. In 2001, it sold to Nomura International PLC an estate consisting of 988 smaller unbranded pubs with limited growth potential as managed pubs.

Over the 10-year period up to October 1, 2005, the Group has realized cash proceeds of over £1,600 million through disposals and has achieved a profit against book value of £152 million on disposals.

On July 19, 2005, the Company voluntarily terminated its ADR program and on August 5, 2005, it delisted from the New York Stock Exchange. The Directors decided to terminate the ADR program and delist because the listing was a legacy of the Separation and participation in the ADR program had reduced substantially since demerger reflecting the fact the Company does not operate in the US. Holders of ADRs were entitled to exchange their M and B ADSs by September 16, 2005 for the appropriate number of underlying M and B ordinary shares. On September 19, 2005, the Bank of New York, as depositary for the ADR program, sold the ordinary shares in respect of M and B ADSs not submitted for exchange by September 16.

In addition, in view of the significant and disproportionate costs to the Company of maintaining a US registration and because the registration itself arose as a legacy from the separation from Six Continents, the Company intends to examine ways in which it may terminate its Exchange Act registration in due course. On February 2, 2006, the Group’s shareholders approved an amendment to its Articles of Association that allows the Board of Directors to require certain US shareholders to sell their ordinary shares so that the Company may be certain that the number of its US shareholders is below the appropriate threshold to enable it to deregister. The Board of Directors is currently considering the implementation of this provision and an announcement will be made promptly when a decision is taken to invoke it.

Further details of the activities of the Group, including geographic and brand segmentation, are set out below.

The Group operates primarily in the UK pub sector, which is itself part of the wider drinking out and eating out market, which also includes restaurants, social clubs, nightclubs and fast food outlets.

The UK pub sector consists of some 60,000 pubs in total, which can be broadly categorized into three distinct business models: managed pubs (around 20% of sites), leased/tenanted pubs (around 50% of sites) and individual, independently owned pubs (around 30% of sites).

Of the Group’s sites, 94% are managed. Managed pubs are generally owned by a pub company, such as the Group, or brewer and operated by a salaried manager and staff employed by the owning company, which prescribes the product range and detail of service style. They tend to be larger than leased/tenanted pubs and individual, independently owned pubs and have a higher average weekly take, or AWT, which the Company estimates is around £12,000. The Group’s managed sites have an AWT of £16,400, significantly ahead of the typical managed pub AWT.

Leased/tenanted pubs tend to be smaller and are owned by a pub company or brewer but leased to, and therefore operated by, a third party tenant or lessee, who pays rent to the owner, is generally responsible for the maintenance of the pub, and is normally contracted to purchase from the owner the majority of drink products (in particular, beer) for resale. The Company estimates that these pubs have an AWT of around £3,000 to £4,000 and are typically more dependent than managed pubs on the sale of draught beer.

Individual pubs (sometimes known as freehouses) are independently owned and operated by a private individual, who is responsible for the maintenance of the pub and retains any profits after the expenses of running the pub. The owner is free to decide which products to sell.

UK Market Trends

The UK pub sector is influenced by trends for both eating out and drinking out. The value of annual sales in the drinking out sector is currently estimated at £28 billion, including VAT. Expenditure on drinking out has been growing steadily in line with inflation for the last 22 years, at an average rate of 5.5% per annum. The Company estimates that drink sales in pubs account for almost half of the overall drinking out sector, the balance being made up of drink sales in nightclubs, social clubs, hotels and restaurants.

Expenditure on eating out in the United Kingdom has been growing steadily ahead of inflation, at a rate of 9.6% per annum over the past 22 years. The annual sales value of the eating out sector is now estimated at £38 billion, including VAT.

Eating out in pubs has become increasingly popular. In 2003, total food sales by pubs accounted for approximately £6 billion and Mintel estimates that total food sales by pubs will grow to around £7 billion by 2006.

Historical market trends suggest that drinking out has been less responsive to changes in the overall economy than eating out, being more resilient in economic downturns than the eating out market, but with eating out showing greater growth during periods of high economic growth. However, the Company believes that during economic downturns, lower priced restaurants (including the Group’s pubs and pub-restaurants, where the average price of a main meal was £6) tend to be more resilient than higher priced restaurants, as customers trade down. Prices in the drinking out market are also now significantly ahead of equivalent prices in the off-trade (supermarkets and other liquor stores) and therefore drinking out may be more exposed to changes in the overall economy than in previous downturns. Frequenting of pubs and pub-restaurants is generally slightly lower during the winter months than in the summer. Attendance levels may also be adversely affected by inclement weather, especially during the summer or over the Christmas period, which are peak trading periods. Attendance levels are generally higher during holiday periods, such as Easter, Christmas, bank holidays and New Year.

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UK Market Overview UK Industry Background

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There are a number of key market drivers shaping the future of the UK drinking out and eating out market:

The Group’s strategy is to capitalize and build on its position as the leader in the managed pub and pub-restaurant sector in the UK, and to drive returns, cash generation and long-term earnings growth to create value for shareholders.

The Group intends to implement its strategy by aiming to:

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Key Drivers

• economic climate – overall economic growth or decline and, in particular, overall changes in the level of consumer expenditure; • changes in demographics – for example, over the next five years, the number of 18-24 year olds (who are a key consumer group for the drinking out market) is forecast to grow by 6% and the

number of persons aged 45 and above (who are a key consumer group for the pub-restaurant market) is forecast to grow by 7%; • broadened consumer appeal – an increase in the number of people visiting pubs from a wider selection of social and demographic groups (including women, families and older people) mitigating

against a decrease in the frequency of visits by traditional, blue collar male pub users; • growth in food sales in pubs – food sales are estimated to account for over 25% of industry sales, more than double the level of 20 years earlier; this is partly due to consumers’ increasing propensity

to eat out, a preference for informal dining and an improvement in the breadth and quality of the pub food offering; • product trends – sales of alcohol in pubs are rising (broadly in line with inflation) and there are continued shifts in demand in the beverages sector, with declining sales of draught beer in pubs being

offset by sales growth in wine, spirits, bottled lagers and soft drinks; • branding – the growth in branded and formatted sites aiming to provide consistency of standards and customer service, with a view to attracting new customers, driving customer loyalty and

increasing frequency of visits; • competition – the increased number of sites and higher levels of investment on the high street (main street) over the last seven to eight years has led to supply outgrowing demand. This, together

with the increased price sensitivity of consumers, continuing price competition amongst licensed retailers on the High Street, and the rising levels of home consumption (partly due to the widening gap between the on-trade and off-trade price of alcohol) has resulted in an overall increase in competition; and

• regulation – licensing reform in England and Wales (the Licensing Act 2003 which, since its implementation in November 2005, has resulted in slightly longer opening hours for many existing pubs

and may restrict the granting of new licenses, particularly in residential areas) and in Scotland (proposed by the Nicholson Committee in August 2003, the changes to licensing law may result in longer opening hours and restrictions on certain promotional activities), changes in employment legislation (including the level of the UK national minimum wage), changes in the gaming legislation, which may reduce income from the Group’s gaming machines, the forthcoming ban on smoking in enclosed public spaces (all pubs from summer 2007 in England and Wales and all pubs in Scotland from March 2006) and other regulation relevant to the Group’s business.

Group Strategy

• Provide the best value experience available in the informal eating and drinking-out markets through a combination of a wide range of food and drink, high-quality amenity, excellent service and good price value;

• Build on the active repositioning of the business over the past decade towards the faster growing eating-out market by pursuing strong growth in food sales and drinks market share gains; • Maximize returns from its £3.5 billion asset base by identifying the most appropriate brand or operating format that will generate the highest sales and profits from each trading property; • Continually evolve and develop its brands and formats in line with customer demand growth trends (particularly towards food, which now represents 31% of retail sales, compared with 11% a

decade ago) in order to attract a wide and growing customer base; and • Combine the productivity benefits of unit scale with the purchasing and support cost benefits of corporate scale.

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ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURE

During the past three fiscal years, the Group has:

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• invested cash capital expenditure of £167 million, £150 million and £151 million in 2005, 2004 and 2003, respectively. Of the £167 million spent in 2005, £61 million was invested in expansionary capital, over 89% of which was directed at pubs and pub-restaurants in residential locations; and

• realized property disposal proceeds of £57 million, £51 million and £48 million in 2005, 2004 and 2003, respectively. Disposal proceeds of £57 million were achieved from the opportunistic sale of

individual pubs or surplus pieces of land, taking advantage of the continued buoyancy in the property market.

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SEGMENTAL INFORMATION

The Group has two main retail operating segments: Pubs & Bars, focusing on drink and entertainment-led sites, and Restaurants, focusing on food and accommodation-led sites. The other Group activity is property development, which is undertaken by the SCPD operating segment.

Predominantly all of the Group’s turnover and profit arises from operations in the United Kingdom.

The following table shows turnover and operating profit, before operating exceptional items, by activity and percentage contribution of each activity for each of the last three fiscal years.

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Geographic Segmentation

Activity Segmentation

Fiscal Year Fiscal Year

2005

2004

2003 2005

2004

2003

(%) Turnover (£ million) Retail

57.6 58.5 58.1 Pubs & Bars 957 913 87341.9 41.1 40.8 Restaurants 697 641 614

99.5 99.6 98.9 1,654 1,554 1,4870.5 0.4 1.1 SCPD 8 6 17

100.0 100.0 100.0 Total 1,662 1,560 1,504

2005 2004 2003 2005 2004 2003 Restated Restated Restated Restated

(%)

Operating profit before operating exceptional items (i) (ii)

(£ million)

Retail

60.6 63.4 64.7 Pubs & Bars 180 173 172 39.1 36.2 34.5 Restaurants 116 99 92

99.7 99.6 99.2 296 272 264 0.3 0.4 0.8 SCPD 1 1 2

100.0 100.0 100.0 Total 297 273 266

(i) Operating profit before operating exceptional items for fiscal 2004 and 2003 has been restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements). (ii) Operating profit also excludes non-operating exceptional items (see Note 8 of Notes to the Financial Statements).

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PUBS & BARS

The Pubs & Bars division comprises the Group’s drinking out and entertainment-led sites. As at October 1, 2005, it had 1,267 managed sites, 695 of which were branded and 572 unbranded. The Pubs & Bars Division reported sales of £957 million and operating profit before operating exceptional items of £180 million in fiscal 2005.

The table below shows the number of the Group’s pubs and bars at the end of each of the last three fiscal years:

The Group’s Brands

The Group’s key brands in the Pubs & Bars division are:

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Overview

Fiscal Year

Pubs & Bars 2005 2004 2003

Ember Inns 170 170 159 Sizzling Pub Co 169 156 125 Scream 87 90 91 O’Neill’s (i) 77 81 86 Arena 59 61 57 Goose 39 39 41 Edward’s 25 28 35 Hollywood Bowl 25 24 23 Flares/Reflex 44 37 32 Total branded sites 695 686 649 Unbranded sites (managed) 572 631 738 Total managed sites 1,267 1,317 1,387 Business Franchise (ii) 104 75 18 Leased sites 11 12 12 Total 1,382 1,404 1,417

(i) Excludes four sites (2004 four, 2003 three) operating under franchise agreements.(ii) For a discussion of Business Franchise see ‘Item 4. Information on the Company – Pubs & Bars – Unbranded Pubs & Bars’ below.

Residential Ember Inns – Ember Inns are local pubs retaining their individual name, presented in a contemporary style and offering high quality drink, food and service. They are normally in prominent locations,

with extensive car parks, in residential areas, and target a wide range of adults. Sizzling Pub Co – Sizzling Pubs are also generally based in residential areas and aim to offer a great local drinking pub serving ‘value for money’ food on hot (sizzling) skillets. Sizzling Pubs target those

aged 25 and above and also cater for families. Scream – Scream is the leading student pub brand in the United Kingdom and is located on or near university campuses and lodgings. It offers students significant savings through a student discount card,

the Yellow Card. City/Town Center O’Neill’s – Management believes that O’Neill’s is the largest Irish bar brand in the world and aims to offer the lively and fun atmosphere of the ‘Craic’. It is located in city/town centers and also on

suburban high streets. O’Neill’s is targeted toward 18-35 year olds.

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Unbranded pubs and bars include individual ‘classic pubs’ distinct in their own right (i.e. due to architecture, history or being close to a tourist attraction), pubs grouped as a common operating format (which do not display a brand name, but have similar characteristics, e.g., menus and drinks stocking policy), individual nightclubs, gay pubs and other sites, which are well known locally due to their location or popularity. There are currently no plans to convert these sites, as the Company considers that they can achieve their maximum potential by remaining as unbranded sites. In addition, there are other unbranded pubs and bars which are being evaluated by management and which include sites currently identified for future conversion to the Group’s brands or formats.

The Group has developed a system of Business Franchises, whereby it enters into a support agreement with a third party under which, for an annual fee, the Group provides goods and services (such as IT systems, menu support, telephone helpdesk and the ability to participate in bulk purchasing carried on by the rest of its estate). Broadly these are divided into true franchises and unbranded business franchises run by individual entrepreneurs. The Group retains ownership of the property and leases it for commercial rent. As at October 1, 2005 there were 104 franchises in operation and the Group has plans to transfer a further 24 sites to Business Franchises in fiscal 2006.

The Group continues to lease to third parties a small number of pubs which it decided to retain on the disposal of its leased estate. These pubs may be converted to managed pubs or Business Franchises once the leases expire.

RESTAURANTS

Overview

The Restaurants division comprises the eating out and accommodation-led sites and includes 421 branded pub-restaurants such as Vintage Inns, Harvester and Toby Carvery, 71 unbranded pub-restaurants in residential areas and 57 brasserie restaurants in UK city/town centers under the brands of All Bar One and Browns. There are also 42 sites in Germany, all but one of which are under the Alex brand. Express by Holiday Inn and Innkeeper’s Lodge offer midscale/budget accommodation and are generally located adjacent to pub-restaurants. Management and financial reporting are integrated with the pub-restaurant.

In fiscal 2005, the Restaurants division reported sales of £697 million and an operating profit before operating exceptional items of £116 million.

The table below shows the number of the Group’s restaurants at the end of each of the last three fiscal years:

Accommodation is operated and managed by the associated restaurant. Accordingly, Express by Holiday Inn is no longer shown as a separate brand within Restaurants, and has been removed from the fiscal 2004 and 2003 comparatives to reflect this analysis. For the same reason, Innkeeper’s Lodge continues to be excluded from the table.

The Group’s Brands

The Group’s major UK restaurant brands are:

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Bowling Hollywood Bowl – Hollywood Bowl offers tenpin bowling, food, drink and amusement games facilities in a family-friendly environment. Hollywood Bowl’s target audience consists of families, young

people (aged 14-35), corporate groups and league bowling clubs. Unbranded Pubs & Bars

Business Franchises

Leased Sites

Restaurants 2005 2004 2003 Vintage Inns 198 206 203 Harvester 128 132 142 Toby Carvery 95 85 74 All Bar One 42 46 49 Browns 15 15 15 Alex (Germany) (i) 42 42 43 Branded 520 526 526 Unbranded (ii) 71 76 110 Total 591 602 636

(i) Includes one All Bar One in Cologne but does not include five franchised outlets of Alex. (ii) Includes Pub Carveries format.

Residential

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The Group has 108 sites which offer accommodation above or adjacent to the pub-restaurant or pub with around 4,000 rooms. The accommodation offer is branded as either Express by Holiday Inn or Innkeeper’s Lodge.

Unbranded Pub-Restaurants

There are currently 71 unbranded pub-restaurants, all of which are in residential areas. These are predominantly pub carveries and premium country dining sites.

Germany

The Group acquired the Alex business in 1998 (as an initial trial in transferring its branded chain licensed retail expertise to Germany, the European market most similar to the United Kingdom in terms of the drinking out sector) and has since expanded it to 41 managed sites. There are also five franchised sites. In addition, there is now one All Bar One site in Cologne. All the operations in Germany are conducted through the Group’s German subsidiary, Mitchells & Butlers Germany GmbH. Performance and returns have been lower than expected, primarily as a result of poor economic conditions in Germany, exacerbated by fixed property costs.

STANDARD COMMERCIAL PROPERTY DEVELOPMENTS

The other Group activity is property development, which for fiscal 2005 represented 0.5% of the Group’s turnover. In fiscal 2005, SCPD generated operating profit before operating exceptional items of £1 million on revenues of £8 million.

SCPD develops and sells land and properties in the United Kingdom on a limited scale. It has an existing development stock with a book value of around £17 million, including ex-brewery land, depots and former leisure retail sites. In addition, SCPD aims to pursue attractive opportunities that may arise to redevelop a small number of the Group’s sites.

ORGANIZATIONAL STRUCTURE

M and B is the beneficial owner of all of the equity share capital, either itself or through subsidiary undertakings, of the following companies, which are principal operating companies of the Group, all of which are incorporated in England and Wales, except Mitchells & Butlers Germany GmbH, which is incorporated in Germany:

MARKETING

The Group operates a portfolio of brands and formats, each of which has a distinct customer, service offer, product range and price point. The major marketing activities to drive sales therefore focus on:

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Vintage Inns – These are traditional food-led country pubs serving freshly cooked food and a range of high quality wines at reasonable prices. They display the individual pub name with subtle branding on menus and signage.

Harvester – Harvesters are pub-restaurants in suburban roadside locations, principally targeting families. They offer a ‘country’ setting and are well known for Spit Roast Chicken, Smoked Ribs and

Salad Cart. Toby Carvery – Toby Carvery is the leading brand in the UK carvery sector (in terms of number of sites and sales) and aims to offer a ‘good value’ varied menu of roasts and other traditional dishes. The

sites are generally in suburban roadside locations and are aimed at a wide range of age groups and Sunday lunch diners. City/Town Center All Bar One – Classic cosmopolitan bars serving food and drink in a clean, bright contemporary environment, positioned in city center locations (primarily in London). All Bar One’s target audience

consists of metropolitan professionals (especially women). Browns – The Group acquired the Browns chain of seven restaurants in 1997. Browns restaurants are located in city centers around the United Kingdom and aim to offer casual, elegant, brasserie dining

all day, often in landmark architectural buildings. The target audience consists of metropolitan professionals and tourists. Accommodation

Mitchells & Butlers Germany GmbH Mitchells & Butlers Leisure Retail Limited Mitchells & Butlers Retail Limited Mitchells & Butlers Retail (No. 2) Limited Mitchells & Butlers (Property) Limited Standard Commercial Property Developments Limited

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GEOGRAPHICAL ANALYSIS

The Group is well diversified geographically throughout the United Kingdom.

An approximate breakdown of the Group’s UK sales (as a percentage of total UK sales) based on regional sales figures in fiscal 2005 is set out below:

Historically, the Group was heavily concentrated in the main UK industrial areas of the North and Midlands. However, following a number of disposals and the acquisition of 550 former Allied Domecq sites in 1999 to reposition the estate, the Company believes that the Group now has a much more balanced presence across the United Kingdom.

The German business comprises the Alex brand and one All Bar One site (which opened in Cologne in fiscal 2002) and represented around 2% of the Group’s sales for fiscal 2005. Alex sites are located in many of the major cities in Germany.

KEY COMPETITORS

The Group’s pubs and pub-restaurants compete in a market that has been undergoing significant structural changes in recent years. Some brewers have exited from brewing activities altogether and sold off their leased and smaller managed pubs to focus on high margin branded assets or other interests, allowing new pub retailing companies to enter the market. In addition, financially leveraged companies have become more common in pub ownership; around 35% of pubs are now owned by financial institutions or highly leveraged companies, compared with only 2% in 1997.

Following this industry restructuring and consolidation, the Group’s key competitors (in the eating out and drinking out market) in the United Kingdom now include:

The Group’s pubs, bars and pub-restaurants also compete with home-based entertainment and the trend toward drinking at home.

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• maintaining the relevance of brands and formats through the evolution of the range of drinks, menus, pricing activity, design and service innovation;

• promoting brands and formats through national and local advertising (for example, Hollywood Bowl billboard posters), promotions (for example, ale festivals at Ember Inns, continental beer festivals at All Bar One) and public relations;

• developing new formats to serve new audiences and demand patterns. The Group applies a rigorous brand management structure to its branded business, allied to an investment in consumer insight; and

• developing controlled specific promotional and pricing initiatives targeting the most price-sensitive brands, products and occasions.

% South East 21Greater London 20West Midlands 16Yorkshire & Humberside 10North West 7South West 6Scotland 5East Midlands 5Northern 4Wales 5East Anglia 1 TOTAL (i) 100

(i) In fiscal 2005, sales in Northern Ireland accounted for approximately 0.1% of total sales.

• operators of managed sites, including Whitbread PLC, Punch Taverns plc, JD Wetherspoon plc, Wolverhampton & Dudley Breweries PLC, Greene King plc, Luminar plc Limited and R20 Ltd;

• lessees/tenants of leased pub estates, including those owned by Enterprise Inns plc and Punch Taverns PLC;

• smaller multiple and single pub operators and independently owned freehouses, clubs, nightclubs, wine bars, gastro pubs, restaurants, entertainment centers and other providers of leisure facilities; and

• independently operated, single or multiple owned restaurants as well as branded restaurant chains (e.g. Gondola Holdings plc and The Restaurant Group Plc).

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KEY SUPPLY PARTNERS

Despite the relatively low number of suppliers, no one food or drink or leisure supplier to the Group represents more than 15% of the total value of goods supplied. The Group is also contractually bound to use certain suppliers: as a consequence of the disposal of Six Continents’ former brewing business to Interbrew UK Holdings Limited (and Interbrew’s subsequent part disposal to Coors), Retail entered into a Beer Supply Agreement in 2000 to purchase a minimum amount of certain specified products for a term of five years from that date; this Agreement expired in August 2005. Coors’ brands still represent approximately 20% of the Group’s alcoholic drink purchases although under new terms of supply. In addition, as part of the acquisition of the 550 former Allied Domecq Retailing Limited sites, the Group is contractually bound to purchase a fixed minimum volume of Carlsberg UK products until December 12, 2007 (which in fiscal 2005 represented 8.5% of the Group’s alcoholic drink purchases). The Group has a long-term supply agreement with Britvic ending in February 2008. Under the agreement, the Group has a minimum purchase obligation for Britvic soft drinks. In fiscal 2005 Britvic brands accounted for 74% of the Group’s soft drink purchases.

REGULATORY ENVIRONMENT

The sale of alcohol in the United Kingdom is a highly regulated industry governed by the licensing system. Licensing covers most premises where alcohol is sold, such as pubs, off-licenses, restaurants and supermarkets. This section refers to regulations in the United Kingdom and references herein to Government, Secretary of State, Department of Health, Parliament, or acts of Parliament and regulations are references to the Government, Secretary of State, Department of Health, or acts of Parliament or other regulations, of the United Kingdom.

Legislation – Licensing Reform

England and Wales

The retail sale of alcohol in England and Wales was, until November 2005, governed by a licensing system set out in the Licensing Act 1964. Pubs – part of the ‘on-trade’ business – generally required a full on-license in order to sell alcohol on the premises. The license was generally held by the manager or landlord. That person had to satisfy the licensing authorities that, among other things, he/she was a fit and proper individual to hold such a license. The license would not be approved if the prospective licensee would have been prevented by other commitments from properly discharging his/her functions as a licensee.

Under the former licensing regime, on-licenses were renewed every three years and could be revoked at any time for serious cause, including violation by the manager or landlord or his/her employees of any law or regulation, such as those regulating the minimum age of patrons or employees, pub advertising and inventory control.

On November 24, 2005, the Licensing Act 2003 became law. The key changes that have been implemented are:

Regulations determine many of the practical implications of the new legislation. Premises license fees are calculated by reference to the rateable value of the premises and the nature and location of the premises (large pubs in city centers, which are predominantly drinks, led pay the highest fees). The premises and personal license fees payable are designed to enable the full recovery of costs for local authorities.

Scotland

The retail sale of alcohol in Scotland is currently governed by a licensing system set out in the Licensing (Scotland) Act 1976, as amended, and is administered through local authority licensing boards. There are currently seven different types of liquor license in Scotland, depending broadly upon the category of premises from which the alcohol will be sold (public house, hotel, restricted hotel, off-sale, restaurant, refreshment and entertainment) in addition to a separate system for clubs. As in England and Wales, licenses must be renewed every three years and can be held by ‘non-natural persons’ such as limited companies, with an individual nominee named on the application who has day-to-day responsibility for the licensed premises. Current grounds for refusal of an application include that the applicant (or the person on whose behalf or for whose benefit the premises will be managed) is not a fit and proper person to be the holder of the license, that the premises are unsuitable or inconvenient for the sale of alcohol, that the sale of alcohol would create a public nuisance or that the license would lead to an over provision of licensed premises in the locality. Certain classes of persons may also submit objections to the application to the licensing board.

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• the transfer of the management and the licensing system from local magistrates courts to local authorities, i.e. from the legal system to the local government system. However, license holders retain the right of appeal to the magistrates court. While the new regime has not fundamentally changed the regulatory structure of the licensed sector, in practice there are visible changes because each pub that wishes to vary its hours now has to submit details of its operating plan and all pubs now face greater scrutiny from police, local residents and other relevant agencies;

• greater flexibility with respect to pub opening hours, as the former limits on late-night trading have been relaxed for some outlets, mainly for pubs in city and town centers away from residential areas, although generally to a very limited extent. While longer opening hours will undoubtedly have cost implications, the Group believes that this change may benefit pubs where there is a demand for an additional hour of trading in the evening, particularly at the weekends; and

• a dual system of longer-term premises licenses and personal licenses, which has replaced the previous supplementary licenses described above for entertainment or extra hours. The new type of premises and personal license are both required to enable the premises to trade.

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In parallel with reform in England and Wales, the Scottish Parliament has initiated a review of licensing law under the auspices of the Nicholson Committee. The Nicholson Committee’s Report was published in August 2003 and contained a number of proposals for the reform of licensing law in Scotland. Some of the key proposals are:

Consultation on the proposed changes to the licensing system has now taken place following the publication of a White Paper in May 2004, and the Licensing (Scotland) Bill was published in early 2005. Although the Bill will be enacted in early 2006, there will be an 18 month transition period that only commences in February 2008, during which time licensees will have to submit applications for new premises and personal licenses, ahead of the implementation of the new licensing regime in August 2009. In addition to the proposals set out above, the draft Bill currently contains no provisions under which existing pubs are guaranteed at least their existing license rights, which means the benefits of existing license extensions could be lost when an application for a new premises license is submitted. It is also expected that the Scottish Parliament will introduce a right for licensing boards to impose a minimum selling price for alcohol in the on-trade.

Gaming Regulations

In fiscal 2005, income from AWP machines represented around 3% of the Group’s turnover. The Gaming Act 1968, along with subsequent legislation remains the key source of current gaming machine legislation which impacts the Group. However, the Gambling Act 2005 was introduced in April 2005 and has an initial impact on gaming machines only. The new Act will become fully effective from September 2007.

Until November 2005, liquor licensed premises were allowed to deploy AWPs with the permission of local Licensing Magistrates, but now the grant of permissions has transferred to local authorities. The Group does not expect there to be any material impact on its business from this transfer of licensing authority. The current maximum level of stake and prize for a single game is 30p and £25 respectively. The new Gambling Act is expected to make it illegal from September 2007 for under 18 year olds to play £25 prize AWP machines (these machines will be known in the future at “Category C” machines), although since 1978 the Group already abides by a voluntary code to this effect.

Much of the necessary detail around the Gambling Act will be contained in secondary legislation, guidance notes and codes of practice which are being developed by the Government and a new Gambling Commission in consultation with stakeholders during 2006 and the Group is actively involved in this process. The Government confirmed that pubs and ten-pin bowls will retain existing gambling machine rights. New licensed premises will be entitled to two AWPs (currently pubs do not have an automatic right to any AWPs) with discretion for local authorities to increase such entitlement, based on national guidance. In addition, the Government has indicated in notes accompanying the Gambling Act 2005 that Category C machines will retain the existing maximum permissible £25 prize, until a review takes place and the maximum permissible stake will increase from 30p to 50p. The effective date of the stake increase is currently understood to be September 1, 2007, but the leisure industry is lobbying the Government for an earlier increase in both the stake and prize. Any further deregulation of game payment methods is not expected until September 2007.

The Group continues to believe the Gambling Act will not particularly impact on the business providing existing rights are, as the Government has promised, adequately protected in secondary legislation, guidance notes and codes of practice. The Group believes that, on balance, the ultimate effect will be broadly neutral.

Drink Driving

The European Commission recommended in the ‘White Paper on European transport policy for 2010: time to decide’ of October 2002 that all countries in the EU adopt the same drink and drive limit of 0.5mg/ml blood alcohol concentration. A lower level of 0.2mg/ml would be adopted for younger and inexperienced drivers. It is not known if or when an EU directive might come into force. The current legal limit in the United Kingdom is 0.8mg/ml (Road Traffic Act 1988, section 11(1) and (21)) and as car drivers and passengers account for 40% of pub visits, any such change to the legal limit may discourage customers who drive to pubs from visiting pubs. This change to the legislation could affect trading in the Group’s rural and suburban pub and pub-restaurant sites.

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(a) in line with the proposed English and Welsh reforms, the introduction of a dual system of premises licenses and personal licenses; (b) the continuation of premises licenses for an unlimited period of time until the premises cease to be used for the purpose for which the license was granted; (c) the abolition of the present system of statutorily permitted licensing hours for a system under which there will be no statutorily prohibited hours, the actual opening hours being authorized by the

licensing board based on individual circumstances and prescribed ‘licensing principles’; (d) the introduction of a condition attached to all premises licenses to prohibit promotional advertising or discounted pricing of alcohol which are aimed at encouraging excessive consumption of

alcohol; (e) the introduction of a statutory presumption that persons under the age of 18 have full right of entry into licensed premises, although this may be subject to specific restrictions in the premises license

or the applicant may opt out of the statutory presumption to prohibit persons under the age of 18 from accessing the premises. In addition, the Nicholson Committee recommended that the Scottish Executive should arrange for the introduction of national proof of age cards to facilitate enforcement of any license conditions.

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Employment Legislation

The Working Time Regulations 1998 (the ‘Regulations’) came into effect on October 1, 1998 and control the hours that employees are legally allowed to work. Under the Regulations, workers may only be required to work a maximum 48-hour week (although they can choose to opt out and work longer if they wish). The Regulations also lay down rights and protections in areas such as minimum rest periods, days off and paid leave. Many of the Group’s employees are covered by the Regulations and most of its licensed house managers have signed voluntary ‘opt outs’ which allow them to work longer than the average 48-hour week prescribed by the Regulations. Although the Government has successfully argued for the retention of the UK’s opt out in its current form for the next two to three years, in future, if the opt out remains at all, it is likely to be a much more restricted form and the conditions relating to the individual’s consent to opt out will be tightened.

Under the Part-Time Workers (Prevention of Less Favorable Treatment) Regulations 2000, part-time workers can claim the same rights as full-time workers. Similar provisions apply to employees employed under fixed-term contracts under the Fixed-term Employees (Prevention of Less Favorable Treatment) Regulations 2002. Employees engaged under fixed-term contracts can claim the same rights as employees engaged under permanent contracts.

Staff costs have increased in both pubs and pub-restaurants following the introduction of the National Minimum Wage of £3.60 per hour in 1999, which increased to £3.70 in 2000, to £4.10 in 2001, to £4.20 in 2002, to £4.50 in 2003, to £4.85 in 2004 and to £5.05 from October 1, 2005. The Low Pay Commission is due to recommend new pay levels to the Government in March 2006 for implementation in October 2006 and it is expected that it will recommend a further increase to £5.35 per hour. Historically, the Group has managed to partly offset increases in National Minimum Wage costs against increased labor productivity, i.e. through training, larger sites and more efficient staff rostering. The Group’s sales per staff hour have increased by some 14.5% during the past four years. However, further increases in productivity will be required to overcome further increases in National Minimum Wage

Food Regulation Standards

Regulations covering food hygiene have raised standards in the food retailing industry. The regulations have had their greatest effect on smaller, independent restaurant outlets that had to incur additional costs to comply with the new standards. Management believes that all of the Group’s sites comply with current and forthcoming UK Food Regulation Standards as a result of rigorous training, detailed manuals, full traceability and regular independent environmental health audits.

EU Noise Directive

The EU’s Physical Agents Directive 2001 (the ‘Directive’) is currently under discussion in the retail industry relating to the regulation of noise in the workplace; the current UK noise limit for workplaces is 90 decibels but if the Directive were to come into effect that limit would be reduced to 85 decibels, representing a significant change. The Group’s sites, especially those which play loud music and have other live entertainment, could be affected by this proposed change in the law. The noise levels from just conversation in a busy pub can reach 87 decibels. To legislate for the Directive, the Government recently introduced The Control of Noise at Work Regulations 2005, which will come into force on 6 April 2006 (April 2008 for the leisure/retail industry).

Legislation relating to smoking

In the UK, there is currently a charter on smoking in public places such as restaurants and pubs, which has been agreed between the Department of Health and leading hospitality industry groups. This charter, though not law, is supported by the Government which asked the licensed leisure industry to ensure that 50% of licensed premises were compliant with it by December 2002, and that 35% of those had either ‘no smoking’ areas or adequate mechanical ventilation.

The Group is in compliance with the Government’s request in respect of the charter. As part of its support for the charter, the Group has taken steps to ensure that:

Prior to the issue of the Government’s White Paper on public health, the subsequent Health Bill and the announcement of the Scottish Parliament concerning smoking, in autumn 2004 the Group announced its own policy on smoking as part of an industry-wide initiative to increase the prevalence of no smoking areas in the UK’s pubs. The aim was to transform pubs into primarily no-smoking venues, with restricted and progressively reducing smoking areas. Under the policy, smoking at the bar was banned with effect from December 2005, although the vast majority of the Group’s estate already had banned smoking at the bar prior to this. Also, the Group now operates a policy that a minimum of 50% of restaurant/dining area space is non-smoking. In addition, under the initiative, from December 2005, smoking areas were to be restricted to a maximum of 65% of trading floor space, reducing to 20% by December 2009.

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(a) investment schemes include requirements regarding charter compliance; (b) all new sites will be signed up to the charter; and (c) management training courses will cover the principles of the charter.

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In England and Wales, there has been a Governmental consultation exercise on legislation in respect of smoking in public places, which led to the publication of a White Paper on public health by the Government in November 2004. In October 2005, the Government published the Health Bill which stated that, from summer 2007, smoking would be banned in pubs in England and Wales that prepare and serve food. As food is prepared and served in the vast majority of the Group’s premises the ban (as originally proposed by the Government) would have applied to the vast majority of the Group’s estate, which may have discouraged smokers from using the Group’s pubs and pub-restaurants.

In response to the White Paper, there was widespread opposition to the Government’s proposals and popular support for an all out ban in all enclosed public places, in line with Scotland and various other countries in the world. The Group (amongst others in the industry) lobbied the Government to modify its proposals by either adopting the industry initiative or failing that dropping the use of food as the deciding factor in whether or not to allow smoking, and instead allow smoking in separate rooms with full ventilation. Once it was clear that the industry initiative did not find favor and that the Government was continuing to propose a food based ban as set out in the Health Bill put before Parliament, the Group publicly supported a complete ban on smoking in all licensed premises without exemptions in preference to the Government’s food based ban.

As expected, in the face of substantial political pressure, the Government gave MPs the chance to vote on whether to retain the food based ban, opt for a smoking ban in all pubs except private members’ clubs or opt for a total ban in all pubs and private members’ clubs. MPs voted in favor of an outright ban in all pubs and private members’ clubs in England. The Government originally indicated that the new legislation would come into effect in the summer of 2007, although this could be delayed until 2008 to give businesses more time to prepare for the ban. Given the experience of pub companies in other countries in which smoking in pubs and enclosed spaces has been banned, it may be some time following the implementation of any potential ban before the likely impact on the Group’s operations or financial condition can be properly assessed. In the meantime, the Company is currently implementing most aspects of the voluntary initiative outlined above. The Company has trialed no-smoking pubs in order to learn more about the impact on the business of a ban on smoking and is continuing to invest in the external areas of pubs in order to offer choice to customers who wish to smoke.

In Scotland, the Scottish Parliament announced in 2005 that it intends to legislate for a complete ban on smoking in all pubs, restaurants and work places (all confined public places). The legislation will be introduced in March 2006, using the Scottish Parliament’s devolved power to introduce its own laws on public health. Fines of up to £3,600 could be levied against infringers, namely pub customers and pub management. It is too early to say what the impact of such a ban could have on the Group’s outlets that are located in Scotland, which represent 5% of total Group sales. Whilst the Group is already preparing for the full ban in Scotland, there is still a risk of some loss of business, at least in the short term. As regards Wales, which represents 5% of total Group sales, the Welsh Assembly is expected to vote on whether smoking should be banned.

Alcohol Harm Reduction Strategy and the Government’s Proposals on Responsible Drinking

On March 15, 2004, the Government issued its National Alcohol Harm Reduction Strategy based on consultation carried out in 2003/04. The aim of this strategy is to prevent any further increase in alcohol-related harms in England and Wales and it contains a number of voluntary measures that aim to forge new partnerships between the health and police services, the drinks industry and local authorities and their communities. The strategy has included a campaign of test purchasing by the police and trading standards officers during summer 2004 to check whether both the on trade and the off trade were selling alcohol to those under 18 years of age. A further campaign of test purchasing also took place over the 2004 Christmas period. The Government proposes to take stock in 2007 of the effectiveness of the voluntary approach and may take additional steps, including legislation, if necessary. On January 21, 2005 the Government announced a further series of proposals to supplement the new powers that will exist under the new licensing regime and the National Alcohol Harm Reduction Strategy. The proposals aim to give both the police and local authorities greater powers to deal with excessive drinking and underage drinking. The proposals include tougher sanctions being imposed on individuals who commit alcohol and disorder related offences, 24-hour banning orders on premises selling alcohol where such premises repeatedly sell to underage drinkers, and powers for recovery of costs from pubs within areas of greatest disorder by introducing ‘Alcohol Disorder Zones’. The Government has supported the licensed trade to the pub industry and launching a code of practice aimed at banning irresponsible drinks promotions that encourage speed drinking and excessive consumption. The Group already has its own such Code of Practice in place. This Code of Practice is available on the Group’s website. The Government has produced a draft Bill giving effect to its proposals and this is currently before Parliament with possible implementation during the course of 2006. It is too early to assess the impact the Government’s proposals, if implemented in their current form, may have on the regulatory environment in which the business operates or the impact that, if implemented, they would have on the results of the Group’s operation or financial condition.

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ENVIRONMENTAL POLICY

The Group recognizes that it is part of a wider community of employees, shareholders, customers, suppliers and others and recognizes that it has a responsibility to act in a way that respects the social, economic and environmental wellbeing of the wider world. Its business conduct guidelines set out the standards of behavior expected from those working for the Group. The Group’s Environmental and Social Responsibility policy is available on the Group’s website.

It is not possible to forecast the overall Group expenditure to comply with environmental laws and regulations; this reflects the difficulty in assessing the changing nature of laws and regulations. The Group expects, however, in light of its control procedures backed by insurance cover currently available, that it should be in a position to restrict such expenditure so that, although it may be considerable, it will be unlikely to have a material adverse effect on the Group’s financial position or results of operations.

TRADEMARKS

The Group owns a substantial number of registered service marks covering various aspects of its brands. The Company believes that its significant service marks are protected in all material respects in the markets in which it currently operates.

PROPERTY, PLANTS AND EQUIPMENT

Group companies own and lease property primarily in the United Kingdom. Over 99% of the net book value of land and buildings at the end of fiscal 2005 was in the United Kingdom. Approximately 91% of the properties by value were directly owned, with 4% held under leases having a term of 50 years or longer.

Group properties include managed pubs, restaurants, leisure venues and its own corporate offices.

The Company believes that no single property is material to its operations or financial position.

In accordance with UK GAAP, properties are recorded in the balance sheet at cost or valuation less depreciation. Financial Reporting Standard 15 – ‘Tangible Fixed Assets’ was implemented by the Group with effect from October 1, 1999. The transitional rules of this standard have been followed permitting the carrying values of properties as at October 1, 1999 to be retained. The most recent valuation was undertaken in the year ended September 30, 1999 and covered all properties then owned by the Group, other than leasehold properties having an unexpired term of 50 years or less. The valuations were undertaken by external valuers and the basis of valuation was predominantly existing use value and had regard to trading potential. Revaluations would not be permitted under US GAAP.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Mitchells & Butlers is the leading operator of managed pubs and pub-restaurants, with an estate of approximately 2,000 sites at October 1, 2005. The assets are predominantly freehold properties with a total net book value of £3.5 billion. The managed estate, comprising 1,858 pubs, is biased towards residential locations (70% of the estate) with the remainder on the High Street. With approximately 3% of the pubs in the UK, the Group achieves around 10% of pub industry sales as it has average weekly sales per pub of £16,400, which is over three times the industry average.

The UK pub industry consists of some 60,000 pubs in total, which can be broadly categorized into three business models: managed pubs; leased/tenanted pubs; and individual pubs. Managed pubs are generally owned by a pub company or brewer, operated by a salaried manager and with staff employed by the pub company which generally also prescribes the product range and details of the service style. Managed pubs tend to be physically larger than leased/tenanted pubs or independently owned pubs and have higher average weekly sales.

The value of annual sales in the drinking-out sector in the UK is estimated at £28 billion, inclusive of VAT (Office for National Statistics), of which around half is derived from pubs. Over the past decade the market has seen a continued decline in draught beer sales but this has been offset by growth in wine and soft drinks sales, leaving the drinking-out market broadly flat in real terms. Conversely, the eating-out market in the UK has grown by a compound annual growth rate of 7% over the past decade to £38 billion, inclusive of VAT (Office for National Statistics), of which the pub market accounts for around £6 billion. This growth is being driven by fundamental lifestyle and demographic changes, including the increasing number of women in employment; the rise in single households; and the growing spending power of the over 50s age group.

Mitchells & Butlers’ business strategy is to:

Mitchells & Butlers aims to grow sales and profits, generate higher cash returns and, because pub assets are generally valued as a multiple of their cash flows, achieve asset appreciation over time.

Mitchells & Butlers’ financing approach is designed to support this growth strategy, combining an efficient balance sheet with appropriate flexibility to continue to develop the business in the best interest of shareholders.

Presentation of Financial Information

Until fiscal 2003, the Company did not constitute a separate legal entity but, instead, its businesses comprised part of the Six Continents Group. However, the Company’s consolidated financial statements have been prepared as though it had existed as a standalone group throughout the periods presented. While the Company believes that the financial information set out in its consolidated financial information for periods prior to Separation is an appropriate presentation, this financial information is not necessarily indicative of the financial results that might have occurred had it always been an independently financed and managed public entity. In particular, the Company’s businesses historically were funded by Six Continents. Upon completion of the Separation, the Company assumed standalone debt. Debt levels were increased further in fiscal 2004 on completion of the Securitization and the return of £501 million to shareholders.

The Company’s consolidated financial statements are prepared in accordance with UK GAAP. The financial statements also contain a description of how UK GAAP differs from US GAAP and a reconciliation of net income and shareholders’ equity from UK GAAP to US GAAP. This is set out in Note 31 of Notes to the Financial Statements.

The acquisition of Six Continents by the Company was accounted for as a group reconstruction in accordance with Schedule 4A to the Companies Act 1985 and Financial Reporting Standard 6 (‘FRS 6’ and, together, the ‘Relevant Provisions’) using merger accounting principles. The strict application of the merger accounting principles in the Relevant Provisions would have required the inclusion of the results of operations and cash flows of Six Continents as those of the M and B Group in these financial statements. However, Six Continents was a subsidiary undertaking of the Company for only three days to effect the Separation in an efficient manner. This application of the Relevant Provisions would, in the opinion of the board of directors, not have given a true and fair view because the financial statements would have been misleading. Accordingly, the financial statements for 2003 and earlier have been prepared as if M and B Group had been demerged from Six Continents and, in accordance with the principles of merger accounting, as if the businesses comprising M and B Group had been part of M and B Group for all periods presented or, where appropriate, from their date of acquisition or to the date of disposal by Six Continents.

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INTRODUCTION Overview

• Provide the best value experience available in the informal eating and drinking-out markets through a combination of a wide range of food and drink, high-quality amenity, excellent service and good price value;

• Build on the active repositioning of the business over the past decade towards the faster growing eating-out market by pursuing strong growth in food sales and drinks market share gains; • Maximize returns from its £3.5 billion asset base by identifying the most appropriate brand or operating format that will generate the highest sales and profits from each trading property; • Continually evolve and develop its brands and formats in line with customer demand growth trends (particularly towards food, which now represents 31% of retail sales, compared with 11% a

decade ago) in order to attract a wide and growing customer base; and • Combine the productivity benefits of unit scale with the purchasing and support cost benefits of corporate scale.

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KEY FACTORS AFFECTING RESULTS OF OPERATIONS

The turnover and results of the group are affected by the level of consumer confidence and expenditure. A downturn in the UK economy could result in lower consumer expenditure and therefore lower revenues and reduced net income.

The turnover and results of the group are affected by the strength of its brands, formats and offerings. Changes in consumer tastes and demographic trends over time may affect the appeal of the Group’s pubs and pub-restaurants to consumers, especially if the Group does not anticipate, identify and respond by evolving its brands, formats and offerings adequately and sufficiently promptly to reflect changes in consumer requirements and preferences, which could have a negative impact on the Group’s financial performance.

The Group’s operations are subject to regulation. Regulation may be direct, such as Licensing Regulation and national minimum wage levels, or indirect such as the proposed legislation on smoking. Further changes in regulation could adversely affect results of operations, including through higher costs. More restrictive regulations could also lead to increasing prices to consumers, which in turn may adversely affect demand and therefore revenues and profitability.

The results of the Group are affected by the cost of supplies received from third parties. Some costs, such as the Group’s energy supplies are linked to market movements outside of the control of the Group. Increasing costs from suppliers could have a negative effect on the results of the Group’s operations.

Attendance levels at the Group’s pubs and pub-restaurants are affected by the weather and the timing of major sporting events. Persistent rain or other inclement weather, especially during the summer months or over the Christmas period (which are peak trading times) could have a negative effect on turnover generated by the Group’s pubs and pub-restaurants and, in turn, could have a negative effect on the results of the Group’s operations. Major sporting events, especially those in which British teams are successful, can also impact turnover. The absence of major events, or the poor performance of a British team could have a negative impact on the Group’s results.

CRITICAL ACCOUNTING ESTIMATES UNDER UK GAAP AND US GAAP

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditure of the period. Management evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from those estimates.

The Company believes the following critical accounting policies require significant judgement and/or the greatest use of estimates.

Under UK GAAP, the Group has tangible fixed assets with a net book value of approximately £3.5 billion at the end of fiscal 2005. Under UK GAAP, these assets are held at cost or valuation less depreciation in accordance with the policy outlined in Note 1 of Notes to the Financial Statements. The last valuation of properties was undertaken in 1999 and those valuations have been retained in the financial statements in accordance with applicable UK accounting standards. The Group now has a policy of not revaluing tangible fixed assets. Under US GAAP, revaluations are not permitted. Under both UK GAAP and US GAAP, depreciation is calculated to write off the cost or valuation, less the estimated residual value, on a straight line basis. Changes to the Group’s policies relating to the revaluation of assets, estimation of useful lives, residual values or other policies could have a material effect on the presentation of the Group’s financial position and results of operations. In particular, it is estimated that a change of one year in the expected useful life of each category of the Group’s depreciable fixed assets would have an impact of approximately £12 million to £14 million on annual Group operating profit. Further information relating to the Group’s accounting for tangible fixed assets is provided in Notes 1 and 31 of Notes to the Financial Statements.

Under both UK GAAP and US GAAP, the carrying value of tangible assets is tested for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Under UK GAAP, where indicators of impairment exist, the carrying value of an income-generating unit (‘IGU’) is assessed by reference to value in use, which is defined as the higher of present value of discounted cashflows and net realizable value. Under US GAAP, the initial assessment of an asset’s carrying value is by reference to undiscounted cashflows. To the extent that undiscounted cashflows do not support the carrying value, the fair value of the asset must be calculated and the difference from the current carrying value charged to the profit and loss account. In the absence of a triggering event, the Group performs an impairment review exercise twice a year; the first at the time of the Group’s interim results and the second at the year end. To date, there have been no events or changes in circumstances that have required the Group to perform detailed impairment calculations under either UK GAAP or US GAAP.

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(i) Consumer expenditure

(ii) Brands, formats and offerings

(iii) Regulation

(iv) Supplier pricing

(v) Seasonality

(i) Tangible fixed assets

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Under UK GAAP, goodwill acquired since October 1, 1999 is capitalized and amortized over its useful economic life. Such goodwill is allocated to the IGUs and assessed for impairment as set out above. A decrease of one year in the useful economic life of goodwill would result in an additional charge of less than £1 million per annum.

For the purposes of US GAAP, the Group adopted Statement of Financial Accounting Standard (‘SFAS’) No. 142 ‘Goodwill and Intangible Assets’ with effect from October 1, 2002. In accordance with SFAS 142, goodwill is capitalized and not amortized, but tested for impairment on an annual basis or on an interim basis when a triggering event occurs. As explained in Note 31 of Notes to the Financial Statements, the Group performed an evaluation of its goodwill as at October 1, 2005, which has confirmed that an impairment charge is not required under SFAS 142.

Changes to the Group’s valuation methods and assumptions used for the purposes of impairment reviews could have a material effect on the presentation of the Group’s financial position and results of operations, particularly under US GAAP. In performing the SFAS 142 goodwill impairment exercise on its annual assessment, the Group applied a range of reasonably likely sensitivities to the valuation methods and assumptions. The resultant valuations confirmed that no impairment charge is required in respect of any of the Group’s reporting units.

For UK GAAP purposes, the Group adopted FRS 17 ‘Retirement Benefits’ for fiscal 2005, as explained in Notes 1, 3 and 7 of Notes to the Financial Statements. Under US GAAP, the Group applies SFAS 87 ‘Employers’ Accounting for Pensions’ as set out in Note 31 of Notes to the Financial Statements.

Under both UK GAAP and US GAAP, accounting for pensions involves judgement and assumptions to be made regarding uncertain events, including, but not limited to, future asset returns, rates of inflation, employee and pensioner demographics and discount rates. The Group has determined the assumptions it has adopted in discussion with its actuaries and believes that they are in line with practice generally. A list of the major assumptions used by the Group, many of which are inter-dependent, is set out in Notes 7 and 31 of the Notes to the Financial Statements. The use of different assumptions, and the outcome of events could have a material effect on the presentation of the Group’s financial position and results of operations. It would be impracticable to give the impact of the effect of changes in all of the assumptions used. However, and while it can be misleading to look at changes in assumptions in isolation, the following disclosures are provided to assist in an assessment of the impact of changes in the more critical assumptions.

The pensions cost in the profit and loss account is partly determined by assuming an estimated rate of return on assets held by the pension plans, most particularly equities. At October 1, 2005, it was assumed that equities would outperform fixed interest government bonds by 3.2 percentage points. A one percentage point change in this assumption would impact profit before tax by approximately £7 million under both FRS 17 and SFAS 87.

In assessing the liabilities of the pension plans, an assumption is made regarding future life expectancy. In respect of the Group’s plans at October 1, 2005, an increase of one year in this assumption would increase the balance sheet deficit by approximately £41 million and decrease profit before tax by approximately £3 million under FRS 17. Under SFAS 87, profit before tax would be reduced by approximately £5 million and the minimum pension liability recognized in other comprehensive income would be increased by approximately £40 million.

The rate used to discount the pension liabilities is determined by using the rate of return on high quality corporate bonds. As at October 1, 2005, a half percentage point decrease in the discount rate assumption would increase the balance sheet deficit by approximately £89 million and reduce profit before tax by approximately £2 million under FRS 17. Under SFAS 87, profit before tax would be lower by approximately £8 million and the minimum pension liability recognized in other comprehensive income would be approximately £87 million higher.

A half percentage point increase in the discount rate assumption would decrease the balance sheet deficit by approximately £79 million and increase profit before tax by approximately £2 million under FRS 17. Under SFAS 87 profit before tax would be higher by approximately £7 million and the minimum pension liability recognized in other comprehensive income would be approximately £77 million lower.

INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Group is required to produce its first set of audited financial statements in line with International Financial Reporting Standards (‘IFRS’) for the 52 weeks ending September 30, 2006. Historically, the Group financial statements have been prepared in accordance with UK GAAP. The Group is required to publish one year of comparative information, which results in a date of transition to IFRS of September 26, 2004.

The adoption of IFRS has no impact on the underlying operations, cash flows or debt covenants of the Group. However, the new regime may lead to some increased volatility in reported numbers, particularly net assets.

The IFRS information presented below has been prepared on the basis of current interpretations of all IFRS and International Financial Reporting Interpretation Committee (‘IFRIC’) interpretations published as at December 7, 2005. These are subject to ongoing amendment by the International Accounting Standards Board (‘IASB’) and subsequent endorsement by the European Commission. In addition, the Group may need to review accounting treatments as a result of emerging industry consensus on the practical application of IFRS and further technical opinion. It is possible, therefore, that the financial information presented below could be modified by the time the Group publishes is first complete set of audited IFRS financial statements for the 52 weeks ending September 30, 2006.

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(ii) Goodwill

(iii) Pensions

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IFRS 1 First-time Adoption Choices

IFRS 1, ‘First-time Adoption of International Financial Reporting Standards’ sets out the rules that the Group must follow when it adopts IFRS for the first time. Under this standard, the Group is required to establish its IFRS accounting policies as at October 2, 2005 and, in general, apply these retrospectively to determine the IFRS opening balance sheet at its date of transition, September 26, 2004.

A full set of the IFRS accounting policies that the Group intends to adopt can be found within the investors section of the Group’s website, at www.mbplc.com/ifrs.

IFRS 1 provides a number of optional exceptions to the general principle of retrospective application. Set out below is a description of the significant first time adoption choices made by the Group.

Business combinations (IFRS 3)

The Group has elected to apply IFRS 3 ‘Business Combinations’ prospectively from the date of transition to IFRS rather than to restate previous business combinations.

Valuation of properties (IAS 16)

Under IAS 16 ‘Property, Plant and Equipment’ an entity must adopt either a cost or valuation model for valuing its property, plant and equipment. Consistent with its approach under UK GAAP, the Group has decided to continue with a cost model and has elected to take the exemption available under IFRS 1 to use the previous revaluations of its properties as deemed cost at the transition date.

Share-based payments (IFRS 2)

The Group has elected to apply IFRS 2 ‘Share-based Payment’ only to those equity settled awards that were granted after November 7, 2002 but not vested at January 1, 2005.

Pensions (IAS 19)

The Group has elected to recognize all cumulative actuarial gains and losses in relation to its defined benefit pension arrangements at the date of transition. Actuarial gains and losses arising after the transition date are recognized in full in the period in which they occur in a statement of recognized income and expense in accordance with an Amendment to IAS 19. These accounting treatments mirror those of FRS 17, which the Group adopted for 2004/05 under UK GAAP.

Financial Instruments (IAS 32 and IAS 39)

The Group had appropriate hedging documentation in place at the date of transition to IFRS and has therefore opted to restate its results for the 53 weeks ended October 1, 2005 under IAS 32 and 39.

The European Commission has endorsed an amended version of IAS 39, ‘Financial Instruments : Recognition and Measurement’ rather than the full version as published by the IASB. As the Group is unaffected by the amendments, its adoption of IAS 39 complies with both versions.

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Summary of Financial Impacts

The table below sets out the impacts of IFRS on the Group results for the 53 weeks ended October 1, 2005 and Group net assets at October 1, 2005 and September 26, 2004.

Description of IFRS Adjustments

The above adjustments, which reconcile UK GAAP to IFRS, are explained as follows:

Share-based payments (IFRS 2)

IFRS 2 requires all share options and employee share awards to be expensed in the profit and loss account with the expense measured at fair value at date of grant and generally charged over the vesting period of the scheme. Under UK GAAP, SAYE schemes were exempt from a charge and the expense recognized in respect of other schemes was based on the intrinsic value at date of grant and charged over the performance period of the scheme.

The Group has used a combination of Black Scholes, Binomial and Monte Carlo simulation models to calculate fair values depending on the conditions attached to the particular share scheme.

The additional pre tax charge arising from the adoption of IFRS 2 is £2 million for the 53 weeks ended October 1, 2005.

Pensions (IAS 19)

The Group will account for pensions under IFRS in the same way as that already applied under UK GAAP (FRS 17). In particular, actuarial gains and losses are recognized in full in the statement of recognized income and expense. There is, however, a small difference in the valuation of pension scheme assets which are valued at bid price under IFRS rather than mid-market price under UK GAAP.

The impact of this difference is to increase the pension deficit recorded under IAS 19 by £3 million at both October 1, 2005 and September 26, 2004 with no material effect on the income statement for the 53 weeks ended October 1, 2005.

Dividends (IAS 10)

Under IAS 10 ‘Events after the Balance Sheet Date’, dividends declared after the balance sheet date are not recognized as a liability.

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Profit beforetax and

exceptionalitems

Profit after taxand before

exceptionalitems

Profit aftertax and

exceptionalitems

Net assets

2005 2005 2005 2005 2004

(£ million)Under UK GAAP 195 133 133 1,417 1,423 Share-based payments (2 ) (2 ) (2 ) — —Leases — — — (3) (3 )Reversal of dividend accrual — — — 37 34 Holiday pay accrual — — — (6 ) (6 )Pensions — — — (3 ) (3 )Property, plant and equipment — — — (24 ) (24 )Derivatives — — — (35 ) (10 )Tax — 2 (1 ) (200 ) (231 ) Under IFRS 193 133 130 1,183 1,180 Balance sheet reclassifications :Property, plant and equipment (42 ) (37 )Intangible assets – computer software 16 19 Non current assets held for sale 9 —Non current pre-payments – lease premiums 16 17 Current pre-payments – lease premiums 1 1 Short term investments (70 ) (124 )Cash and cash equivalents 70 124

Earnings per share : UK GAAP IFRS (pence per share)

Basic 26.0 25.4 Basic before exceptional items 26.0 26.0 Diluted 25.6 25.1

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The effect of this change is to increase net assets by £37 million at October 1, 2005 and £34 million at September 26, 2004.

Holiday pay accrual (IAS 19)

As a result of the specific guidance in IAS 19, the Group has recognized an additional accrual for holiday pay.

The impact is to reduce net assets by £6 million at both October 1, 2005 and September 26, 2004 with no material effect on the income statement for the 53 weeks to October 1, 2005.

Property, plant and equipment (IAS 16)

Under IFRS, the Group will cease to capitalize certain low value short lived assets.

The effect is to reduce net assets by £24 million at both October 1, 2005 and September 26, 2004 with no material effect on the income statement for the 53 weeks to October 1, 2005.

Financial instruments (IAS 39 and IAS 21)

IAS 39 ‘Financial Instruments: Recognition and Measurement’ requires all derivative financial instruments to be included on the balance sheet at fair value and contains provisions that restrict the use of hedge accounting. If hedge accounting cannot be applied, any changes in fair value are reported in the profit and loss account. There are no equivalent provisions in UK GAAP.

The Group uses interest rate and currency swaps to fix the interest rate payable on the floating rate tranches of its secured loan notes. These derivatives have qualified for cash flow hedge accounting since IFRS transition so that changes in fair value are recognized in equity in a ‘hedging reserve’ until such point as the transactions which are being hedged are reflected in the profit and loss account. As these hedging relationships have been highly effective, cash flow hedge accounting has avoided earnings volatility in the 53 weeks to October 1, 2005 and is expected to do so going forward. However, the value of the Group’s net assets at each reporting date is impacted by the changes in the fair value of the derivatives recorded in the hedging reserve. As a consequence, the Group’s net assets have been reduced by £35 million and £10 million at October 1, 2005 and September 26, 2004, respectively.

Under IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ the Group’s US dollar denominated secured loan notes are translated at period end exchange rates with exchange differences passing through the profit and loss account. However, as the Group has been able to apply hedge accounting, there is an equal and opposite transfer from the hedging reserve that removes the earnings volatility that would otherwise result. Under UK GAAP, the US dollar denominated secured loan notes were translated at the contracted exchange rates implicit in the underlying hedging arrangements.

Leases (IAS 17)

The Group holds a number of properties under operating leases. In accordance with IAS 17 ‘Leases’, lease premium payments made on entering into the leases, previously included in fixed assets under UK GAAP, have been reclassified as current and non current prepayments and amortized over the life of the lease. Amounts reclassified at October 1, 2005 and September 26, 2004 were £17 million and £18 million respectively. In the income statement for the 53 weeks ended October 1, 2005, depreciation of £1 million has been reclassified as lease amortization with no overall impact on reported profits. In addition, the revaluation previously attributed to the amount included in fixed assets has been reversed. This has reduced net assets by £3 million at both October 1, 2005 and September 26, 2004.

IAS 17 requires that the buildings element of leases on land and buildings is considered separately for the purpose of determining whether the lease is a finance or operating lease. IAS 17 also requires lease incentives to be spread over the full lease term rather than the period to the first rent review. In response to these requirements, the Group has undertaken a review of its leased property portfolio and concluded that no adjustments are required on transition to IFRS.

Computer software (IAS 38)

Computer software, which is not an integral part of a related item of hardware, is required under IFRS to be treated as an intangible asset. Under UK GAAP, all such software was included in tangible fixed assets.

The amounts reclassified to intangible assets are £16 million at October 1, 2005 and £19 million at September 26, 2004. In the income statement for the 53 weeks ended October 1, 2005, depreciation of £5 million has been reclassified as intangibles amortization with no overall impact on reported profits.

Assets held for sale (IFRS 5)

IFRS 5 requires that where the value of an asset will be recovered through a sale transaction rather than continuing use the asset is classified as held for sale. Assets held for sale are valued at the lower of book value and fair value less costs to sell and are no longer depreciated. Under UK GAAP there was no held for sale classification.

IFRS 5 has been adopted prospectively from September 26, 2004 resulting in a balance sheet reclassification of £9 million at October 1, 2005. There is no effect on the income statement for the 53 weeks to October 1, 2005.

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Deferred tax (IAS 12)

IAS 12 ‘Income Taxes’ requires deferred tax to be provided on temporary differences between the tax base and carrying value of assets and liabilities rather than just taxable timing differences under UK GAAP. As a result, the Group’s opening IFRS balance sheet at September 26, 2004 includes an additional deferred tax liability of £242 million relating to the revaluation of properties and gains previously rolled over into replacement assets. The equivalent additional liability was £223 million at October 1, 2005.

In addition, the tax effects of the other IFRS adjustments have resulted in a reduction in the overall deferred tax liability of £11 million at September 26, 2004 and £23 million at October 1, 2005.

Exceptional items (IAS 1)

IAS 1 ‘Presentation of Financial Statements’ does not contain an equivalent classification for the FRS 3 non-operating exceptional items that were shown below operating profit under UK GAAP. Such items, which do not relate to the underlying business performance of the Group and include profits and losses on the disposal of properties, will now be reported in operating profit, but shown as operating exceptional items. The Group will continue to highlight exceptional items by way of a columnar presentation on the face of the Group income statement. Exceptional items are those items which are separately identified by virtue of their size or incidence to allow a full understanding of the underlying performance of the Group.

Earnings per share (IAS 33)

While the denominator for basic EPS purposes is calculated in the same way as under UK GAAP, the denominator for diluted EPS purposes is different under IFRS due to the treatment of contingently issuable shares and the effects of IFRS 2.

For the 53 weeks ended October 1, 2005, under IFRS, the basic and diluted EPS denominators are 511 million shares and 518 million shares respectively. Under UK GAAP, the equivalent figures were 511 million and 520 million shares respectively.

Cash and cash equivalents (IAS 7)

IAS 7 ‘Cash flow statements’ changes the definition of cash used for the preparation of the cash flow statement. Under IFRS, cash and cash equivalents include cash at bank and other short term deposits and investments with an original maturity at acquisition of up to three months. Under UK GAAP, cash was restricted to deposits and investments repayable on demand.

NEW ACCOUNTING STANDARDS ADOPTED IN 2005

In fiscal 2005 under UK GAAP, the Group has adopted FRS 17 ‘Retirement Benefits’ in full for the first time. In prior years, the Group complied with the transitional disclosure requirements of this standard. FRS 17 has been adopted in full in light of the introduction of International Financial Reporting Standards; the measurement principles in the equivalent international accounting standard are similar to those in FRS 17. The change in accounting policy therefore provides investors with greater clarity of earnings and net assets going forward.

The full adoption of FRS 17 has resulted in a change in the accounting treatment of the Group’s defined benefit arrangements. In particular, the net liabilities of the pension schemes are included on the balance sheet, current service costs and net financial returns are included in the profit and loss account and actuarial gains and losses are recognized in the statement of total recognized group gains and losses. Further information on FRS 17 is provided in Notes 1 and 7 of the Notes to the Financial Statements. Previous accounting under SSAP 24 ‘Accounting for Pension Costs’ required the charging of regular costs and variations from regular cost in the profit and loss account with the difference between the cumulative amounts charged and the payments made to the pension schemes shown as either a prepayment or creditor on the balance sheet.

This change in accounting policy has been accounted for as a prior year adjustment and previously reported figures have been restated accordingly. In particular, restated earnings for fiscal 2004 of £118 million are £7 million lower than previously reported and restated shareholder funds at September 26, 2004 of £1,423 million are £219 million lower than previously reported. Further details of the restatements are provided in Note 3 of Notes to the Financial Statements.

The total pension cost of £14 million included within operating profit for fiscal 2005 compares to £45 million which would have been incurred under SSAP 24. The SSAP 24 cost would have been higher in fiscal 2005 than in fiscal 2004 reflecting the impact of the full actuarial valuations of the pension schemes at March 31, 2004. If FRS 17 had not been adopted, shareholders’ funds would have been £200 million higher at October 1, 2005 under SSAP 24.

OPERATING RESULTS

Fiscal 2005 Compared with Fiscal 2004

Accounting period

The 2005 financial year comprises 53 weeks. The comparator year, 2004, comprises 52 weeks. Unless stated otherwise, all information quoted is on a 53 versus 52 week statutory basis with the exception of like-for-like management trading information which is presented on a comparative 52 week basis, eliminating the results of the “extra” week in the 2005 financial year. The figures for 2004 have been restated in line with pensions accounting under FRS 17 which was adopted by the group in 2005.

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Group

Total sales for the year of £1,662 million were up 6.5% on last year including the benefit of the 53rd week and operating profit before operating exceptional items was up 8.8% . Like-for-like sales were strong in both the Residential and High Street businesses, reflecting continued market share gains.

Consistent with the Group’s overall strategy, management (and the retail industry in general) considers sales growth and ‘same outlet like-for-like sales growth’ to be key operational measures of performance. Same outlet like-for-like sales compares the sales reported by outlets fully operational in both of the fiscal years being compared on a 52 week basis, eliminating the results of the “extra” week in the 2005 financial year. Effectively the ‘same outlet’ measure removes the impact of acquisitions and disposals. The performance of uninvested outlets (removing those where expansionary investment of more than £30,000 has been spent in the current or previous year) is also analyzed by management as follows:

Same outlet like-for-like sales increases were driven by the success of ongoing sales and marketing activities. Food and drink volumes were up 9% and 4% respectively, on a same outlet 52 week basis, with average retail prices unchanged.

SCPD turnover was £8 million against £6 million in fiscal 2004 primarily through the sale of two developments in Burton-on-Trent and Bournemouth.

Total operating costs and overheads, excluding operating exceptional items, were £1,365 million in fiscal 2005, on a 53 week basis, compared with £1,287 million in fiscal 2004. Despite the much faster growth of the lower-margin food and wine categories, the overall percentage gross margin was broadly maintained, with additional purchasing gains being achieved. With strong volume performance and further cost efficiencies, the net retail operating margin was 0.4 percentage points higher than last year, having absorbed £17 million of regulatory and energy cost increases. As a result, total operating profit before operating exceptional items in fiscal 2005, on a 53 week basis amounted to £297 million, compared with £273 million in fiscal 2004. Operating profit from the retail estate at £296 million was up 8.8% on fiscal 2004 representing an increased net operating margin from 17.5% to 17.9% and the 53rd week. SCPD operating profit for the year was level at £1 million compared with the previous fiscal year.

Exceptional operating costs of £4 million were incurred during the year relating to the one-off costs of obtaining new licenses for all of the Group’s pubs and pub-restaurants as required by the Licensing Act 2003. The non-operating exceptional profit of £1 million arose on the disposal of pubs, often for alternative use.

The organic sales growth in the estate was supported by an investment programme of £167 million in the year. £106 million was invested to maintain the high levels of amenity in the pubs and the continuing evolution of the Group’s brands and formats. The balance of £61 million was spent on expansionary capital projects. During the year, six new pubs were opened and 80 existing pubs were converted to one of the Group’s brands or formats to uplift their sales and profits. In addition, 13 Innkeeper’s Lodges were developed on land adjacent to existing pubs.

Net capital investment during the year was £110 million as disposal proceeds of £57 million were achieved from the opportunistic sale of individual pubs or surplus pieces of land, taking advantage of the continued buoyancy in the property market.

Net Interest Payable and Similar Items

Net interest payable and similar items in fiscal 2005 was £102 million compared with £102 million in fiscal 2004.

The interest on net debt in fiscal 2005 was £105 million compared with £101 million (before exceptional interest) in fiscal 2004. The composition of the charge was interest payable of £116 million (2004 £100 million) in respect of the Group’s securitised debt, less £11 million (2004 £9 million) of interest income earned on surplus cash. During the early part of fiscal 2004, the Group also incurred an interest charge of £10 million in relation to the floating rate borrowings that were in place before the Securitization. As required by the terms of the Securitization, interest payable on the securitised debt is totally fixed through the use of interest rate and currency swaps.

Following the adoption of FRS 17, the Group has reported net finance income in respect of pensions of £3 million (2004 £1 million) representing the excess of the expected return on the scheme assets over the interest cost of the scheme liabilities.

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Same outlet like-for-

like sales growth* Uninvested like-for-like sales growth*

Residential Pubs 5.7% 3.6% High Street Pubs 3.3% 2.3% Total 4.8% 3.0%

* 52 week basis Note: Uninvested and same outlet like-for-like sales account for 89% and 96% of the estate respectively.

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Taxation

The 53 week tax charge in fiscal 2005 represented an effective rate of 30.7% which compares with 31.0% in fiscal 2004.

The tax charge of £62 million before exceptional items represents an effective tax rate of 32.0%, which is higher than the UK statutory rate of 30% due to non-allowable items, in particular the depreciation of properties.

Earnings per share

In fiscal 2005, earnings totaled £133 million compared with £118 million in fiscal 2004. Basic earnings per share were 26.0 pence, compared with 21.1 pence in fiscal 2004. Diluted earnings per share, which reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding under the Group’s share option schemes, were 25.6 pence in fiscal 2005 compared with 21.0 pence in fiscal 2004. The increase in adjusted earnings per share was 24.4% . In addition to the growth in operating profit, earnings per share have benefited from the share consolidation accompanying the return of funds to shareholders in 2003, the share buy-back programme during the current year, and the 53rd week.

Cash flow and capital expenditure

Net cash inflow from operating activities of £400 million was £22 million higher than in fiscal 2004. This increase was due to increased earnings before interest, taxation, depreciation, amortization and exceptional items of £32 million, a reduction in working capital inflows of £21 million and a reduction in exceptional expenditure and pension contributions of £11 million. Interest payments of £102 million were higher than the prior year due to a full year of the increased level of debt in place since completion of the refinancing and the return of funds to shareholders in December 2003. Net tax payments of £43 million were £9 million higher due to the receipt in fiscal 2004 of a refund from HM Revenue & Customs in respect of prior years. The net cash inflow for the year was £10 million, after expenditure of £101 million on share repurchases and cash receipts of £14 million in connection with the exercise of share options. This compared with a net cash outflow of £423 million in fiscal 2004, which was after the payment of the special dividend of £501 million. Net debt was £1,625 million at October 1, 2005.

Pensions

On an FRS 17 basis, the Group’s pensions schemes showed a deficit of £148 million at October 1, 2005 compared with £173 million at 25 September 2004. The reduction in the deficit reflects the benefit of £30 million of additional pension contributions paid in the year and improved investment returns, offset by an increase in liabilities following a reduction in the corporate bond rate used for discounting purposes. Full actuarial valuations of the Group’s pension schemes as at March 31, 2004 were finalised during the year. As a result, regular annual contributions to the schemes increased by £3 million during 2005. In addition, the Company has continued to make additional contributions to the schemes which amounted to £30 million during the year. A contribution of £20 million was paid shortly after the year end on October 21, 2005, representing the total commitment for additional contributions for the 2006 financial year. For 2007, a further contribution of £10 million is committed under the present agreement with the Trustees. The next actuarial valuation is planned to take place in line with the normal triennial cycle in 2007.

Retail

At the end of fiscal 2005 Retail’s estate consisted of 1,973 outlets of which 1,858 were managed. Of these, 1,215 were branded outlets, with 1,173 outlets across residential and city center locations throughout the United Kingdom and 42 sites in Germany.

Pubs & Bars

Turnover. At the end of fiscal 2005, the Pubs & Bars estate consisted of 1,382 outlets, of which 695 were branded outlets compared with the end of fiscal 2004 when the estate consisted of 1,404 outlets, of which 686 were branded outlets. Turnover in 2005 grew by 4.8% including the 53rd week. Same outlet like-for-like sales growth in the division was 3.4% and uninvested like-for-like sales growth was 2.1%, both on a 52 week basis. Drinks sales showed good growth despite a further 3.6% volume decline in the on-trade beer market over the last year and ongoing price competition from supermarkets. The emphasis has been on continuing to develop the range of products and price points that the Group offers, particularly in draught lager and speciality beers.

The branded local pubs in residential areas with strong food offers performed very well, as did the pubs in Central London overall, although their sales suffered since July, as a consequence of the terrorist attacks. By contrast, the unbranded local pubs with a lower food sales mix were more exposed to the beer market declines and our High Street circuit bars continue to face intense competitive conditions.

The number of managed units in Pubs & Bars reduced to 1,267 after 30 pubs were sold and 21 were transferred to operate under franchise agreements. There were on average 1,262 trading outlets during the year. A total of 45 conversions were completed, predominantly to residential brands and formats such as Sizzling Pub Co., Ember Inns and the Metro Professionals format. In addition, a new Ember Inn was opened, marking the first new site acquisition for this brand.

Operating Profit. Operating profit in Pubs & Bars before exceptional items was £180 million, 4.0% up on 2004 including the 53rd week. Despite continuing pressure on employment and energy costs, the net margin was 18.8% compared with 18.9% last year.

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Turnover. At the end of fiscal 2005, the Restaurants estate consisted of 591 outlets, compared with the end of fiscal 2004, when the estate consisted of 602 outlets. Turnover of £697 million in 2005 was up by 8.7% on the prior year, including the 53rd week. Same outlet like-for-like sales growth in the division of 6.9% and uninvested like-for-like sales growth of 4.4%, both on a 52 week basis, reflect excellent results, driven by the strength of the Group's brands, value offers and operating skills. By increasing the variety of dishes and extending the range of tastes being catered for, the Group has improved choice and attracted a wider customer base. This, combined with drinks value and range enhancements, has stimulated higher footfall and food volumes with the average pub-restaurant now selling over 1,800 main meals per week.

During the year, three new Vintage Inns and two Toby restaurants were opened. In addition, 35 pubs were converted to existing brands as well as the Company’s more recent offer developments in the Premium Country Dining market segment and the Pub Carvery format. Eight sites were sold and a further eight transferred to operate under franchise agreements. There were on average 584 trading outlets during the year.

Operating Profit. Operating profit before exceptional items for the Restaurants Division of £116 million was 17.2% up on 2004. This was due to the positive combination in Restaurants of strong volume performance, productivity improvements, the 53rd week and good cost control, with a corresponding increase in the net operating margin from 15.4% to 16.6% .

SCPD aims to maximize the value of the Group’s surplus properties which are suitable for development. Turnover of £8 million (2004 £6 million) and operating profit of £1 million (2004 £1 million) were generated during the year, primarily through the sale of two developments in Burton-on-Trent and Bournemouth.

In 2005, the Group changed its accounting policy to account for pensions in line with FRS 17. Results for fiscal 2004 and fiscal 2003 have been restated accordingly.

Total sales for fiscal 2004 were £1,560 million, 3.7% ahead of 2003. Sales growth continued to be particularly strong in the residential sectors of the market, led by strong food sales growth, with total managed pub food volumes up 8% for the year. The high street businesses continue to gain market share in a competitive market.

Consistent with the Group’s overall strategy, management, and the retail industry in general, considers sales growth and ‘same outlet like-for-like sales growth’ to be key operational measures of performance. Same outlet like-for-like sales compares the sales reported by outlets fully operational in both of the fiscal years being compared. It removes the effect of acquisitions and disposals. The performance of uninvested outlets (removing those where development capital has been spent in the current or previous year) is also analyzed by management as follows:

Same outlet like-for-like sales were up 6.6% in the 70% of the Group’s pubs in residential areas. This growth was driven by five key brands in this area: Harvester, Toby Carvery and Vintage Inns in pub-restaurants, and Ember Inns and Sizzling Pub Co which are high quality local pubs with significant food sales. In the 30% of the estate in the high street, the increases of 3.4% in same outlet like-for-like sales resulted from three key factors; the customer differentiation of our brands such as All Bar One, Flares and O’Neill’s, a clear pricing strategy of every day good value; and recovery in the central London market in the second half of fiscal 2004.

SCPD turnover was £6 million against £17 million in fiscal 2003 due to fewer development projects being completed in the year.

The Group is contractually obligated to purchase minimum quantities of beer from its tied beer supply contracts as a result of previous demerger and acquisition arrangements. As these minimum purchase levels continued to fall in the year the Group has been able to increase its drinks range and sales volumes. Beer volumes were up 4%, underpinned by improvements in the range of premium, often imported, lagers and a widening of the regional cask ale range. Non-beer drinks volumes have grown by 10%. In wine, volume growth has been accelerated by the development of own label wines directly sourced from the vineyards, while soft drinks growth reflects the expansion of the fresh fruit juice range.

Management recognizes the need for effective promotional activity to maintain sales growth, but also monitors the impact on margins. By focusing promotional activity on those products that offer attractive margins, the benefit of mix improvements has helped to offset the margin investment, and more importantly, further increased cash gross profit.

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Restaurants

SCPD

Fiscal 2004 Compared with Fiscal 2003

Same outlet like-for- like sales

Uninvested like- for-like sales

Residential Pubs 6.6% 4.8% High Street Pubs 3.4% 1.5% Total 5.6% 3.8%

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Total operating costs and overheads less other income, excluding operating exceptional items, were £1,287 million in fiscal 2004 compared with £1,238 million in fiscal 2003. Gross margins remained broadly in line with last year. Selective price reductions and increased promotional activity continued and the average price of food and drink reduced by approximately 2%. The profit impact of this reduction was offset by managing the product mix to maximize volume and overall profit contribution, and through the negotiation of improved terms from suppliers. In addition, the Group continued to deliver cost efficiencies to help offset increasing regulatory and other externally driven cost increases. Management maintained outlet employment costs at 24% of sales despite a 7% increase in the National Minimum Wage and has benefited from support cost savings following actions put in place during fiscal 2003.

Total operating profit before operating exceptional items in fiscal 2004 amounted to £273 million, compared with £266 million in fiscal 2003. Operating profit from the ongoing Retail estate at £272 million was up 3.0% on fiscal 2003 primarily as a result of the additional sales volumes and improvements in cost efficiencies more than compensating for the regulatory and other external cost increases noted earlier. SCPD operating profit for the year was down £1 million on the previous fiscal year at £1 million due to the completion of fewer development contracts in the year.

Exceptional operating costs of £2 million were incurred during the year relating to the Securitization of the business which was completed on November 13, 2003. The non-operating exceptional profit of £2 million arose on the disposal of pubs, often for alternative use.

A total of £150 million of capital was invested in fiscal 2004. Nine new pubs were opened during the year, all in the Restaurant division. In addition, one new Hollywood Bowl opened. 95 pubs were converted to a new brand or format, principally our residential brands of Sizzling Pub Co and Ember Inns and the Metropolitan Professionals format. This expansionary capital accounted for £57 million of the gross capital invested and the balance of £93 million was invested in maintaining the amenity of the pubs and continuing to evolve the brands and formats. The Group achieved proceeds of £51 million from disposals of pubs or surplus pieces of land during the year, often for re-development.

Net interest payable and similar items in fiscal 2004 was £102 million compared with £65 million in fiscal 2003.

The interest on net debt before exceptional costs of £2 million (2003 £8 million), was £101 million in fiscal 2004 (2003 £55 million), reflecting the fixed rate interest payable and amortization of deferred issue costs arising from the £1,900 million of secured loan notes issued on Securitization in November 2003, net of interest income earned on surplus cash. Prior to November 2003, the Group had floating rate borrowings of around £1,300 million under a syndicated loan facility. In fiscal 2003 the net interest payable of £55 million, before exceptional costs of £8 million comprised net external interest of £32 million and net amounts payable to Six Continents Group of £23 million.

The change in the interest cost profile is directly linked to the restructuring and Securitization of the Group. In fiscal 2003, prior to Separation, the Group was principally funded by inter-company loans from Six Continents PLC that bore interest at commercial rates. On Separation, the inter-company debt was repaid and replaced with external debt of around £1,300 million under a syndicated loan facility agreement. In fiscal 2004 the Group’s Securitization was completed and approximately £1,900 million of secured loan notes issued to replace the loan facility and to facilitate a return of £501 million to shareholders. In 2004, an exceptional interest charge of £2 million (2003 £8 million) arose from accelerated amortization of the facility fee in respect of the syndicated loan facility put in place at the time of Separation and repaid on Securitization.

Following the adoption of FRS 17, the Group has reported net finance income in respect of pensions of £1 million (2003 cost of £2 million) representing the excess of the expected return on the scheme costs over the interest cost of the scheme liabilities.

The tax charge in fiscal 2004 represented an effective rate of 31.0% compared with 24.0% in fiscal 2003. The increase in the year reflects the one-off benefit in fiscal 2003 of group relief from the Six Continents Group.

Excluding the effect of exceptional items, the tax rate in fiscal 2004 was 32.4%, compared with 30.3% the rate nominally applicable in the United Kingdom. The difference arises primarily as a result of permanent differences, mainly depreciation on assets not qualifying for tax depreciation.

In fiscal 2004, earnings totaled £118 million (2003 £117 million). Basic earnings per share were 21.1 pence, compared with 15.9 pence in fiscal 2003. After eliminating the effect of the exceptional items the adjusted earnings per share for fiscal 2004 were 20.9 pence, compared with 19.2 pence in fiscal 2003. Diluted earnings per share, which reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding under the Group’s share option schemes, were 21.0 pence in fiscal 2004 compared with 15.9 pence in fiscal 2003. Earnings per share increased in fiscal 2004 as a result of the reduction of the weighted average number of ordinary shares in issue during the year to 559 million (2003 735 million) as a result of the share consolidation approved by the shareholders at an Extraordinary General Meeting held on December 1, 2003.

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Net Interest Payable and Similar Items

Taxation

Earnings per share

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Significant changes were made to the financing structure of the Group on Separation which resulted in the replacement of inter-company balances owed to Six Continents with external debt. In addition, the Group no longer benefits from the Six Continents tax arrangements that were in place prior to Separation. Therefore, in order to provide an indication of the underlying performance of the Group, underlying earnings per share are presented below, which are calculated to exclude exceptional items and on the basis that the post Separation financing and taxation structure had been in place since October 1, 2002. This non-UK GAAP information was presented to UK shareholders and management considers it important that US shareholders are provided with the same information.

Net cash inflow from operating activities of £378 million was £72 million higher than in fiscal 2003. This increase was due to increased earnings before interest, taxation, depreciation, amortization and exceptional items of £16 million, a reduction in working capital outflows of £23 million and exceptional expenditure and Separation costs reduced by £33 million. Net interest cash outflows, including issue costs and facility fees, increased from £65 million in fiscal 2003 to £120 million in fiscal 2004 primarily due to the refinancing of the Group and the return of £501 million to shareholders in December 2003. Taxation cash outflows in fiscal 2004 reduced to £34 million primarily as a result of a prior year tax refund. Capital expenditure remained broadly level at £150 million in fiscal 2004 compared with the prior year of £151 million, while income from the sale of assets rose slightly to £51 million compared with £48 million in fiscal 2003.

On November 13, 2003, the Group completed a securitization of the majority of its pubs, raising a total of £1,900 million through the issue of secured loan notes. The proceeds from Securitization were used to repay the Group’s outstanding borrowings of £1,243 million under its syndicated loan facility, meet the costs of the refinancing, make special additional contributions to the pension schemes and return surplus funds of £501 million to shareholders by way of a special dividend of 68p per share accompanied by a 12 for 17 consolidation of the number of shares in issue.

The Group had net debt of £1,228 million at the end of fiscal 2003. This increased to £1,632 million at the end of fiscal 2004 as a result of the Securitization and associated return of funds, resulting in a balance sheet gearing ratio of 115%.

At the end of fiscal 2004 Retail’s estate consisted of 2,006 outlets of which 1,919 were managed. Of these, 1,229 were branded outlets, with 1,187 outlets across residential and city center locations throughout the United Kingdom and 42 sites in Germany.

Turnover. At the end of fiscal 2004, the Pubs & Bars estate consisted of 1,404 outlets, of which 686 were branded outlets, compared with the end of fiscal 2003 when the estate consisted of 1,417 outlets, of which 649 were branded outlets. Turnover in 2004 grew by 4.6% to £913 million. Same outlet like-for-like sales growth in the division was 4.6% and uninvested like-for-like sales growth was 2.3% . Sales growth has remained strongest in the residential segment with Sizzling Pub Co and Ember Inns, the two drinks-led brands with distinct food offers, showing a particularly strong performance. Despite a very competitive market, the drinks-led offers on the high street have continued to perform well, assisted by a recovery in central London in the second half.

Conversions of 78 existing pubs were completed during the year. The number of managed pubs and bars reduced to 1,317 following a number of disposals and transfers to Business Franchises net of transfers in from the Restaurant Division.

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Fiscal 2004 Fiscal 2003

restated for FRS 17)

(restated for FRS 17)

As reported Adjustments Underlying As reported Adjustments Underlying

(£ million)

Profit before interest 273 — 273 219 (i) 47 266 Interest (102 ) (i) 2 (100 ) (65 ) (ii) (13 ) (78 )Tax (53 ) (i) (3 ) (56 ) (37 ) (iii) (24 ) (61 )

Earnings available for shareholders 118 (1 ) 117 117 10 127

Basic earnings per share (iv) 21.1 p (0.2 )p 20.9 p 15.9 p 1.4 p 17.3 p

(i) This adjustment adds back exceptional items (excluding exceptional interest and tax costs in fiscal 2003) as explained in Note 8 of Notes to the Financial Statements.(ii) The interest adjustment has been calculated by reference to the average indebtedness that would have arisen from the post Separation capital structure using the interest rates that would have applied in the relevant periods under the Group’s post Separation external

borrowings arrangements.(iii) The tax adjustment has been calculated to reflect the underlying interest charge and excludes the benefits arising from the tax arrangements of the Six Continents Group. The effective tax rate implied by the underlying tax charge is 32.4% (2003 32.4%) .(iv) Calculated by dividing earnings available for shareholders by 559 million (2003 735 million) shares, being the weighted average number of ordinary shares in issue during the year.

Cash Flow and Capital Expenditure

Retail

Pubs & Bars

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The Group has been developing a Business Franchise model for smaller properties that can benefit from entrepreneurial freedom supported by Mitchells & Butlers systems and purchasing scale in return for a fixed rent and turnover related franchise fee. At the end of fiscal 2004 there were 75 Business Franchises in operation (2003 18).

Operating Profit. Operating profit before exceptional items of £173 million was 0.6% up on 2003. Despite the increase in external costs during 2004 and the Group’s sales activity, which was biased towards Pubs & Bars, net operating margins were only 0.8% points below 2003.

Restaurants

Turnover. At the end of fiscal 2004, the Restaurants estate consisted of 602 outlets, of which 543 were branded outlets, compared with the end of fiscal 2003, when the estate consisted of 636 outlets, of which 550 were branded outlets. Turnover of £641 million in 2004 was up by 4.4% on the prior year. Same outlet like-for-like sales growth in the division of 7.0% and uninvested like-for-like sales growth of 5.9% reflect particularly strong trading by the pub-restaurant brands Toby Carvery, Vintage Inns and Harvester, which are increasing their share of the growth in the eating out market. The lower rate of total sales growth reflects 17 transfers to Pubs & Bars during the year, where the demographics around the pub mean that it is now better suited to a more drinks led offer, as well as a number of transfers to Business Franchise.

A total of nine new pubs were opened during the year, eight Vintage Inns and one Toby Carvery. 17 pubs were converted, ten to Toby Carvery and five trial sites trading under a new suburban pub dining format which the Group is developing jointly as managed pubs with an entrepreneur.

Operating Profit. Operating profit before exceptional items for the Restaurants Division of £99 million was 7.6% up on 2003. Strong sales growth in food, drinks and accommodation, together with further progress on staff productivity, an operational measure used by management to compare sales less staff costs with staff hours worked, enabled the division to more than offset external cost pressures and improve net operating margins by 0.5% points.

SCPD

SCPD aims to maximize the value of the Group’s surplus properties which are suitable for development. Turnover of £6 million (2003 £17 million) and operating profit of £1 million (2003 £2 million) were generated during the year, primarily from the sale of a retail development in Bournemouth on the site of a former pub. The change in the year reflects the timing of the completion of development projects.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

Following separation from Six Continents in April 2003, the Group’s sources of liquidity consisted of cash generated from operations and available financing facilities of £1,500 million.

On November 13, 2003, the Group refinanced its debt through the completion of an offering of debt secured against the majority of its UK pubs and pub-restaurants business. The refinancing was effected through the issuance of £1,900 million of secured loan notes by a wholly-owned Group company, Mitchells & Butlers Finance plc. The funds raised were used to repay the existing amounts outstanding under the facility agreement of £1,243 million, meet the refinancing costs, make special contributions to the pension schemes and return surplus funds of £501 million to shareholders by way of a special dividend of 68p per share, paid on December 8, 2003.

The terms of the key contracts for the Securitization arrangements are summarized in ‘Item 10, Additional Information – Material Contracts’.

The Securitization provides the Group with long-term financing at a cash interest cost of 6% through a range of fixed rate notes and floating rate notes that have been swapped into fixed rate sterling using interest rate and currency swaps. More detail on these arrangements, including details of the note interest rates and the principal and interest flows, is provided in ‘Item 11, Quantative and Qualitative Disclosures about Market Risk’.

Following completion of the Securitization transaction and repayment of outstanding borrowings, the Group’s £1,500 million syndicated financing facility was canceled.

The Group also benefits from a £60 million working capital facility, provided by The Royal Bank of Scotland.

Net operating cashflow in the financial year before exceptional items and after capital expenditure and disposals in fiscal 2005 was £294 million (2004 £284 million). Taking into account the anticipated levels of internal cash generation and available facilities, the Group is satisfied that it has sufficient resources to meet its operating requirements and to fund expected capital expenditure for fiscal 2006.

The Group has established policies in respect of its investment of surplus funds. Credit risk on treasury transactions is reduced by restricting investment to counterparties with a minimum credit rating of A, utilizing pre-authorized Board limits for each counterparty.

Exchange and Interest Rate Risk and Financial Instruments

The Group’s treasury policy is to manage financial risks that arise in relation to underlying business needs. Current policy in respect of interest rate risk is to fix the cost on all Group debt. All treasury activities are governed by Board Treasury

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Policy Guidelines and the treasury department is subject to regular review by the internal audit department. Authorized treasury instruments for the management of risk are interest rate swaps, interest rate options, forward rate agreements and currency swaps.

Further qualitative and quantitative information on treasury management and interest rate risk is disclosed in ‘Item 11. Quantitative and Qualitative Disclosures about Market Risk’.

Material Commitments for Capital Expenditure

As at the end of fiscal 2005 the Group had committed contractual capital expenditure of £28 million. Contracts for expenditure on fixed assets are not authorized by the Directors on an annual basis, as divisional capital expenditure is controlled by cash flow budgets. Authorization of major projects occurs shortly before contracts are placed.

The Company intends to invest gross capital expenditure in fiscal 2006 at a similar level as that made in fiscal 2005. This level of capital expenditure is reviewed regularly during the year and may be increased or decreased in the light of prevailing economic and market conditions and other financial considerations. Individual asset capital plans are also reviewed to assess the appropriateness of the projects and their timing.

The total cash capital expenditure by the Group in fiscal 2005, 2004 and 2003 was £167 million, £150 million, and £151 million, respectively.

Pension Plan Commitments

As part of the Separation from Six Continents PLC, the Company became the sponsoring employer for the Six Continents Pension Plan and the Six Continents Executive Pension Plan, subsequently renamed the Mitchells & Butlers Pension Plan and the Mitchells & Butlers Executive Pension Plan respectively (the ‘Plans’) following the transfer of approximately 30% of the assets and liabilities of the Six Continents Plans to the new InterContinental Group Plans and the Britvic Group Plans with effect from April 1, 2003. The Group continues to be exposed to the funding risks in relation to the defined benefit sections of the Plans as explained in ‘Item 3. Key Information – Risk Factors’.

Both of these Plans were last formally valued as at March 31, 2004. The results of the valuation showed the staff plan’s and executive plan’s defined benefits to be funded at 130% and 120% respectively on the statutory minimum funding requirement basis. On an ongoing basis the funding levels are 84% (i.e. £129 million deficit) for the staff plan and 85% (i.e. £39 million deficit) for the executive plan. These calculations do not account for additional contributions of £50 million already made (£10 million in October 2004, £20 million in December 2004 and £20 million in October 2005) and commitments of £10 million for fiscal 2007. The actuary has further recommended, in relation to the staff plan defined benefits, that for future service accrual, employers contribute at a rate of 16.5% . The corresponding recommended percentage in relation to the executive plan is 34%. These rates became effective on October 1, 2004. The next formal actuarial valuation is planned for March 2007.

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MATERIAL TRENDS AND UNCERTAINTIES

The Group operates in a regulated industry and changes to applicable regulations are the primary source of material uncertainties for the Group. The Government published the Health Bill on October 27, 2005 announcing its proposal to prohibit smoking in pubs where food is prepared and sold as from the summer of 2007 in England and Wales. On February 14, 2006, MPs amended the Health Bill to prohibit smoking in all pubs and private members' clubs. The Government originally indicated that the new legislation will come into effect in the summer of 2007, although this could be delayed until 2008 by the Government to give businesses more time to prepare for the ban. Given the experience of pub companies in other countries in which smoking in pubs and enclosed spaces has been banned, it may be some time following the implementation of any potential ban before the likely impact on the Group’s operations or financial condition can be properly assessed. In the meantime, the Company is currently implementing most aspects of its voluntary initiative. The Company has trialed no-smoking pubs in order to learn more about the impact on the business of a ban on smoking and is continuing to invest in the external areas of pubs in order to offer choice to customers who wish to smoke. As regards Wales, the Welsh Assembly is expected to vote on whether smoking in pubs shuld be banned.

On October 1, 2005 the adult national minimum wage increased by 4.1% to £5.05 per hour and will increase to £5.35 from October 2006.

The Company expects total regulatory and energy costs to increase during the 2006 financial year, as a result of changes to existing regulations and increases in energy costs resulting from rises in worldwide oil and gas prices. These costs in fiscal 2006 are expected to increase by approximately £25 million.

Current Trading in Fiscal 2006

The Group’s strategy has continued to drive strong market share gains and to deliver good sales growth amidst more difficult trading conditions. In the first 16 weeks of fiscal 2006, same outlet like-for-like sales were 4.0% ahead of the comparable period last year. Sales growth benefited particularly from strong trading in the week before, and the week after, Christmas as well as a modest uplift from the introduction of extra licensed trading hours. Overall trading is in line with the Board’s expectations.

In residential areas, which account for 70% of the business, same outlet like-for-like sales were up 4.7%, 2.5% on an uninvested basis. Same outlet like-for-like sales on the high street which account for 30% of the business were up 2.8%, 2.2% on an uninvested basis. Overall, uninvested like-for-like sales were up 2.3% .

Total retail sales were 3% ahead of last year, led by strong growth in food sales, up 5%. Drinks sales performed well in a weak on-trade beer market and were up 2%.

The average price of food and drink during the period was up by approximately 1% compared to last year. Gross margins were slightly reduced primarily as a result of the faster growth in the lower margin product categories of food and wine which now account for approximately 40% of sales. This trend, together with the estimated regulatory and energy cost increases of some £25 million this year will continue to put pressure on net operating margins.

The Group has been preparing for legislation on smoking, banning it at the bar, reducing the smoking areas available and improving its food offers and the attractiveness of its outside trading areas. On February 14, 2006, MPs voted in favor of an amendment to the Health Bill to secure an outright ban on smoking in all pubs and private members’ clubs.

The Group believes that it is well positioned competitively to overcome the impact of the legislation, after the inevitable, initial period of disruption, and maximise the opportunity of attracting new, eating-out customers to its pubs.

Cash generation from the business remains strong and the Group is intent on continuing to deploy its cash resources in the best interests of shareholders, through reinvestment for high returns, value creative acquisitions or return by way of dividend and share buy-back. The Board remains committed to the maintenance of an efficient balance sheet. The buy-back programme of £100 million announced in November is underway with £18 million of shares repurchased as at February 2, 2006. The additional pension contribution of £20 million committed for the current year has been made.

The Board remains cautious on the outlook for consumer spending but is confident that the Group can make further market share gains through focusing on offering value and choice for customers, together with high levels of amenity and service. The Board believes that this strategy, combined with economies of scale and the continued investment to develop the estate, will help the Group to mitigate the external cost pressures that the business faces and generate further growth in earnings and cash returns as the year progresses.

OFF BALANCE SHEET ARRANGEMENTS

The Group has no off balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Group’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or capital resources.

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CONTRACTUAL OBLIGATIONS

Contractual obligations at October 1, 2005 were as follows:

The Group has also agreed pension plan commitments as described above under ‘Liquidity and Capital Resources – Pension Plan Commitments’.

Short-term and long-term debt obligations represent scheduled repayments of principal assuming that the Group’s class A1 and A3 secured loan notes will be repaid at the margin step-up dates in December 2010.

Fixed interest payments are those payable in respect of the Group’s secured loan notes after taking account of the interest rate and currency swaps that fix the interest payable on the variable rate class A1 and A3 notes and assuming that these notes will be repaid on the margin step-up dates in December 2010.

Purchase obligations relate to the minimum volumes that the Group is required to purchase under its supply agreements with Carlsberg UK and Britvic. See ‘Item 4. Information on the Company – Key Supply Partners’ for further information. For the purposes of the table above, the minimum volumes have been valued in relation to the current mix of products purchased.

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Payments due by period Total Less than 1 year 1-3 years 3-5 years More than 5 years

(£ million)

Short-term debt 40 40 — — — Long-term debt 1,801 — 82 90 1,629 Fixed interest payments 1,372 107 207 196 862 Operating leases 819 48 82 77 612 Capital expenditure contracted 28 28 — — — Purchase obligations 82 35 47 — — 4,142 258 418 363 3,103

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DIRECTORS AND SENIOR MANAGEMENT

Overall strategic direction of the Company is provided by the board of directors, comprising Executive and Non-Executive directors, and the other senior management members of the Executive Committee.

Bill Scobie, Deputy Finance Director and member of the Senior Management Team, retired on December 31, 2004.

Directors

Mike Bramley, aged 54, Managing Director, Pubs & Bars

Mike Bramley is the Managing Director of the Pubs & Bars division. Having been a director of Six Continents Retail, he became a Director of the Company upon Separation. He has been Managing Director, Pubs & Bars since September 2002. In over 20 years with Bass/Six Continents, he worked in a variety of roles in the pubs and brewing businesses. In 1995, he became Commercial Director of Bass Taverns and in 1998 was appointed HR and Commercial Director of Bass Leisure Retail (later Six Continents Retail). He is a director of the British Beer & Pub Association.

Roger Carr, aged 59, Non-Executive Chairman

Roger Carr is the Chairman of the Company. He became Chairman at the time of the Separation, having been the senior independent non-executive director of Six Continents PLC. He is Chairman of Centrica plc and Deputy Chairman of Cadbury Schweppes plc. He is senior adviser to Kohlberg Kravis Roberts Co. Ltd.

Tim Clarke, aged 48, Chief Executive

Tim Clarke is the Chief Executive. He has been the Chief Executive since the Separation, having previously held the same role in Six Continents PLC since October 2000. He chairs the Executive Committee. He joined Bass in 1990, initially responsible for planning in the retail division. He was subsequently Director of Strategy for Bass PLC and Managing Director of Bass’ European Hotels between 1992 and 1995. Between 1995 and 2000 he was Chief Executive of Bass Retail, which now constitutes the business of Mitchells & Butlers plc. He is a director of the British Beer & Pub Association, having been chairman in 2002, and is a non-executive director of Associated British Foods plc.

George Fairweather, aged 48, Non-Executive Director

George Fairweather is a Non-Executive Director of M and B. Appointed a Non-Executive Director in April 2003, he chairs the Audit Committee. He is group finance director of Alliance UniChem Plc.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Date of next

Initially reappointment

appointed by Name Title to the Board shareholders

DirectorsMike Bramley (i) Managing Director, Pubs & Bars 2003 2008 Roger Carr (ii) Non-Executive Chairman 2003 2008 Tim Clarke (i) (ii) (iv) Chief Executive 2003 2009 George Fairweather (ii) (iii) (iv) Non-Executive Director 2003 2009 Drummond Hall (ii) (iii) Non-Executive Director 2004 2008 Tony Hughes (i) (iv) Managing Director, Restaurants 2003 2009 Sir Tim Lankester (ii) (iii) Non-Executive Director 2003 2007 Karim Naffah (i) Finance Director 2003 2007 Sara Weller (ii) (iii) Senior Independent Non-Executive Director 2003 2007

(i) A member of the Executive Committee (ii) A member of the Nomination Committee(iii) A member of the Audit and Remuneration Committees(iv) Tim Clarke, George Fairweather and Tony Hughes were all re-appointed at the Annual General Meeting in 2006.

Senior Management TeamJohn Butterfield Strategy DirectorBronagh Kennedy Company Secretary, HR Director and General CounselAdam Martin Marketing DirectorRichard Pratt Commercial DirectorAlison Wheaton Property and IT DirectorJeremy Townsend Deputy Finance DirectorAdam Fowle Business Development Director

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Drummond Hall, aged 56, Non-Executive Director

Drummond Hall is a Non-Executive Director of M and B having been appointed in July 2004. He is Chief Executive of Dairy Crest Group plc.

Tony Hughes, aged 57, Managing Director, Restaurants

Tony Hughes is the Managing Director of the Restaurants division. Having been a Director of Six Continents Retail, he became a Director of the Company on Separation in April 2003. He has been Managing Director, Restaurants since 2000 having joined Bass in 1995. In 2002 he was voted Retailers’ Retailer Individual of the Year by the pub and restaurant industry and in 2001 he received the Hotel and Caterer ‘Catey’ for the Pub Industry Award.

Sir Tim Lankester, aged 63, Non-Executive Director

Sir Tim Lankester is a Non-Executive Director of M and B. Appointed a Non-Executive Director in May 2003, he is President of Corpus Christi College, Oxford. He is a member of the Board of ACTIS Capital.

Karim Naffah, aged 42, Finance Director

Karim Naffah is the Finance Director. Having been Strategy Director of Six Continents PLC, he became Finance Director of the Company upon Separation. In 1991 he joined Bass, becoming its Director of Strategic Planning in 1992. In 2000, he became Strategy Director for that group and a member of the Strategic Business Committee and the executive committees of the Hotels and Retail divisions. He also held responsibility for the property development and IT functions.

Sara Weller, aged 44, Non-Executive Director

Sara Weller is a Non-Executive Director of M and B. Appointed a Non-Executive Director in April 2003, she chairs the Remuneration Committee and is the Senior Independent Non-Executive Director. She is Managing Director of Argos Ltd.

Senior Management, Members of the Executive Committee

The following senior management, together with the Executive Directors, are responsible for reviewing the Group’s strategy and policy and for monitoring their implementation:

John Butterfield, Strategy Director

John Butterfield, aged 41, is M and B’s Strategy Director. He joined Bass in February 1999 and transferred to the retail business in May 2000 to take up the position of Director of Strategic Planning. He was previously employed by Bain & Company (management consulting) and Standard Chartered/WestLB (investment banking).

Adam Fowle, Business Development Director

Adam Fowle, aged 47, joined the Company from J Sainsbury plc on March 14, 2005 and is M and B’s Business Development Director. Previously, he was employed as Managing Director, Pubs & Bars of Six Continents Retail.

Bronagh Kennedy, Company Secretary, HR Director and General Counsel

Bronagh Kennedy, aged 42, is M and B’s Company Secretary, Human Resources Director and General Counsel. She is a qualified solicitor and joined the Bass retail business in April 1995. She became the Director of Legal Affairs for the retail business in 2000 and in 2002, she was appointed Human Resources Director and General Counsel for the retail business. Previously, she was employed with Allen & Overy LLP.

Adam Martin, Marketing Director

Adam Martin, aged 42, is M and B’s Marketing Director. He joined the Bass Group in 1996 and became Marketing Director of the retail business in 1999, with responsibility for all aspects of marketing and promotion. He was previously employed at Gemini Consulting and Cadbury Limited.

Richard Pratt, Commercial Director

Richard Pratt, aged 50, is M and B’s Commercial Director with responsibility for Supply Chain and Electronic Leisure. He joined the Bass retail business in 1994 in the position of Catering Retail Director, having previously worked for Diageo plc.

Jeremy Townsend, Deputy Finance Director

Appointed in June 20, 2005, Jeremy Townsend aged 42, is Mitchells & Butlers’ Deputy Finance Director. He has previously worked for J Sainsbury plc and Ernst & Young LLP.

Alison Wheaton, Property and IT Director

Alison Wheaton, aged 42, is M and B’s Property and IT Director. She joined the Bass retail business in 1997 as Director of Strategic Planning, then became Operations Director for London and Venues, and was appointed to Six Continents’ retail business as Portfolio Director with responsibility for Estates, Acquisitions, Construction and Portfolio Planning in 2002. She was previously employed with Pepsi Cola, Lever Brothers and Morgan Stanley.

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COMPENSATION

In fiscal 2005, M and B paid aggregate compensation, including pension contributions, bonuses and awards under the long-term incentive plans, to the Directors of M and B and other members of the Senior Management Team of £6,578,000. The aggregate amount set aside or accrued by M and B Group in fiscal 2005 to provide pension retirement or similar benefits for those individuals was £700,000. An amount of £2,432,000 was charged in fiscal 2005 in respect of bonuses payable to them under performance related cash bonus schemes and long-term incentive plans.

Directors’ Emoluments

‘Benefits’ incorporate all benefits arising from employment with the Company which relate in the main to the provision of a company car and healthcare cover.

The figures above represent emoluments earned during the periods shown. There were no payments for loss of office.

Total remuneration earned by those members of the Executive Committee who were employed in the Group at year end and who were not main Board directors is shown in the bands below:

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Total emoluments Basic Annual (excluding pensions)

salaries performance 53 weeks 52 weeks

and fees bonus (i) Benefits 2005 2004 (iii)

(£ 000) Executive Directors Mike Bramley 356 177 16 549 550 Tim Clarke 528 289 25 842 913 Tony Hughes 356 194 25 575 606 Karim Naffah 376 205 14 595 641 Non-Executive Directors Roger Carr 203 — — 203 207 George Fairweather 50 — — 50 49 Drummond Hall (ii) 43 — — 43 7 Sir Tim Lankester 43 — — 43 42 Sara Weller 50 — — 50 49 Total 2005 2,005 865 80 2,950 — Total 2004 1,882 1,105 77 — 3,064

(i) At the discretion of the Remuneration Committee, the annual performance bonuses as described above for 2005, in respect of Mr Bramley and Mr Hughes, were wholly deferred into shares under the terms of the Short Term Deferred Incentive Plan and, in respect of Mr Clarke and Mr Naffah, were 50% deferred. The annual performance bonuses for 2004 were wholly deferred.

(ii) Appointed July 30, 2004, his fees are paid to Dairy Crest Group plc, his employer.(iii) The prior year is restated to remove the value of shares awarded under the Share Incentive Plan.

No. of Executives £000

2 0 – 250* 2 251– 300 3 301– 350 * Executives in this category were employed for a part year only.

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During the year, the Remuneration Committee reviewed Executive Director remuneration with a view to:

Following approval by shareholders at the Annual General Meeting on 2 February 2006, the following changes to the Company’s share schemes were made:

The following are details of the principal employee share schemes in which the Company’s Directors and members of the Executive Committee participated during fiscal 2005.

This Scheme has been discontinued in respect of future grants. Executive Directors may, subject to achievement of the performance condition and the rules of the Plan continue to exercise share options already granted until the expiry of the existing grants. These grants will lapse, under normal conditions, at various dates up until 2015.

A performance condition, set by the Remuneration Committee, has to be met before options can be exercised. For options granted in 2005, the performance measure is that the Company’s earnings per share growth (‘eps’) over the three-year period must increase by at least 9 percentage points per annum on average over the growth in the UK Retail Prices Index (‘RPI’) before options can be exercised in full and reduced exercises will be permitted for lower levels of eps growth, as follows:

If eps growth over the performance period exceeds the growth in RPI by 4 percentage points per annum on average over the performance period, one-third of the ordinary shares under option will become exercisable. There is straight line vesting between these two points.

If these performance targets are not met, the relevant option will lapse; otherwise the options will normally lapse ten years after the date of grant. Retesting is not permitted for options granted from 2004 onwards.

Executive share options are not pensionable.

At the discretion of the Remuneration Committee, the Executive Directors may receive all or part of their annual performance bonus in the Company’s shares. An award of bonus shares earned in fiscal 2005 will be deferred for three years and, if the Executive Director is in the Company’s employment at the end of that period, the Company will provide matching shares on a 1:1 basis. Vesting of matching shares takes place subject to the achievement of a three year performance condition, as approved by shareholders at the AGM in 2005. There is no retesting of the performance condition. For awards of matching shares in respect of the financial year 2004/05, the performance condition is based on growth in eps. The vesting of matching shares will be on a sliding scale according to the level of eps growth.

Following the approval by shareholders at the 2006 AGM, the STDIP has been altered to increase the percentage available for a bonus award from 80% of basic salary to 100% of basic salary, together with the introduction of Dividend Accrued Shares as described above. The requirement to defer the bonus award into bonus shares has been reduced from a 100% requirement to a 50% requirement.

The performance condition for awards in relation to fiscal 2006 is expected to be based on eps growth. There will be no retesting of the performance measure.

STDIP benefits are not pensionable.

The PRSP allows Executive Directors and eligible senior employees to receive awards of shares or cash subject to the satisfaction of a performance condition, set by the Remuneration Committee, which is measured over a three-year period.

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Company Share Schemes

• Simplifying the remuneration package; • Making the package a little less reliant on deferred remuneration; and • More closely aligning Directors’ interests with those of shareholders.

• The Executive Share Option Plan was discontinued; • “Dividend Accrued Shares” are to be awarded to Executive Directors to a value not exceeding the value of dividends paid during the performance period in respect of those shares which vest under

the Short Term Deferred Incentive Plan (“STDIP”) and the Performance Restricted Share Plan (“PRSP”); • The rules of the STDIP were amended so that the individual limit in respect of the bonus award was increased from 80% to 100% of basic annual salary; and • The limit of the annual award under the PRSP was increased from 90% to 177% of annual basic salary.

Executive Share Option Schemes (‘EXSOP’)

Short Term Deferred Incentive Plan (‘STDIP’)

Performance Restricted Share Plan (‘PRSP’)

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Shareholders approved an amendment to the Scheme approving an increase in the percentage of basic salary which may be awarded from 90% to 177% together with the introduction of Dividend Accrued Shares as described above.

For each cycle, 50% of the award is measured by reference to TSR performance against a comparator group of other companies.

For the cycle of September 2005, the Company had to finish in first to sixth position for an award to vest graded between 100% of the TSR element of the award for first or second to 20% for sixth position. Below sixth position, the award relating to TSR lapses. The Company finished in ninth position, so no award vested. For the cycles to September 2006 and September 2007, the Company has to finish in first to fifth position for an award to vest. Below fifth position, the award relating to TSR lapses.

The vesting of the other 50% of the award will be based on the average amount by which the Company’s cash return on capital employed (‘CROCE’) exceeds its weighted average cost of capital (‘WACC’) over the performance period. The award for this element of the performance measure is graded so that, for cycles to September 2005 and September 2006, if the amount by which the CROCE exceeds the WACC over the performance period is at least 4.5 percentage points, 100% of the CROCE element of the award will vest, whereas if the excess is 3 percentage points, 20% of the award will vest. In between 3 and 4.5 percentage points, the award will be graded on a straight line basis. Below 3 percentage points there will be no award in respect of this element. The excess of CROCE and WACC for the cycle to September 2005 was 4.2 percentage points, therefore 84% of this element of the award vested.

For the cycle to September 2007, the vesting of the other 50% is based on the excess of CROCE and WACC as described above, except that if the amount by which the CROCE exceeds WACC over the performance period is at least 5 percentage points, 100% of the CROCE element of the award will vest, whereas, if the excess is 3.5 percentage points, 20% will vest.

TSR was chosen as a measurement because the Company believes it aligns the interest of management with that of shareholders. The CROCE/WACC measure was chosen to motivate the Executive Directors to increase the cash returns generated by the business and to reduce the overall cost of funding the Company, thereby maximizing the spread between the two and increasing shareholder value.

Benefits under PRSP are not pensionable.

On Separation, the Group’s executives, including the Executive Directors, with outstanding options under the Six Continents Executive Share Option Schemes were permitted to roll over those options into options of equivalent value over the Company’s shares. The performance conditions ceased to apply to these options on Separation.

Executive Directors may participate in the all-employee plans, the Sharesave Plan and the Share Incentive Plan. Performance targets do not apply to such plans.

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Rolled Over Options

Other Share Plans

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BOARD PRACTICES

General

The Board is committed to compliance with the principles of good corporate governance as set out in the Combined Code on Corporate Governance of the UK Listing Authority (‘the Combined Code’) as revised in November 2003. It also monitors new developments in the United Kingdom, the rest of Europe and the United States in order to maintain continuing compliance with best practice international corporate governance standards. The Board considers that as at October 1, 2005, it was fully compliant with the Combined Code and remains so.

The Board has responsibility to the shareholders for the strategic direction, development and control of the Group and it meets regularly. All the Directors have access to the advice and services of the Company Secretary and are able to gain access to external independent advice should they wish to do so.

An appropriate balance of executive and non-executive members of the Board is maintained and the Board is supplied with regular and timely information concerning the activities of the Group in order to enable it to exercise its responsibilities and control functions in a proper and effective manner.

The Company maintains an active investor relations program.

Board Committees

M and B has four main formally constituted committees to carry out work on behalf of the Board: an Audit Committee and a Remuneration Committee, both of which comprise Non-Executive Directors only; a Nomination Committee which comprises Non-Executive Directors and an Executive Director; and an Executive Committee which comprises Executive Directors and senior management. The Committees each have written terms of reference approved by the Board which are on the Company’s website.

The Audit Committee is chaired by George Fairweather and consists of George Fairweather, Drummond Hall, Sir Tim Lankester and Sara Weller. The Committee’s principal responsibilities are to:

The Committee regularly invites the auditors to attend its meetings, along with the Finance Director and the Director of Group Assurance, who has direct access to the Chairman of the Audit Committee. Discussions are, however, held in private where appropriate. The Chairman of the Board attends at the invitation of the Committee’s Chairman.

The Audit Committee meets at least four times a year.

The Remuneration Committee consists of George Fairweather, Drummond Hall, Sir Tim Lankester and Sara Weller and is chaired by Sara Weller. The Remuneration Committee meets at least three times a year. The Chairman of the Board attends by invitation of the Remuneration Committee’s Chairman. The Chief Executive also attends by invitation, but not on matters related to his own remuneration. The Remuneration Committee advises the Board on overall remuneration policy as well as succession planning, management and development. The Remuneration Committee also determines, on behalf of the

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(i) Audit Committee

• review the Company’s public statements on internal control and corporate governance compliance prior to their consideration by the Board; • review the Company’s processes for detecting fraud, misconduct and control weaknesses and to consider the Company’s response to any such occurrence; • review management’s evaluation of any change in internal controls over financial reporting; • review with management and the external auditors any financial statements required under UK or US legislation before submission to the Board; • establish, review and maintain the role and effectiveness of the Group Assurance function; • assume direct responsibility for the appointment, compensation, resignation, dismissal and the overseeing of the external auditors, including review of the external audit, its cost and effectiveness; • pre-approve non-audit work to be carried out by the external auditors and the fees to be paid for that work along with the monitoring of the external auditors’ independence; • oversee the process for dealing with complaints received by the Group regarding accounting, internal accounting controls or auditing matters and the confidential anonymous submission by

employees of concerns regarding questionable accounting or auditing matters; and • adopt and oversee a specific Code of Ethics for the Chief Executive, the Finance Director, the Deputy Finance Director and all other members of the Executive Committee which is consistent with

the Company’s overall statement of business ethics.

(ii) Remuneration Committee

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Board, and with the benefit of advice from external consultants and the HR Director and Head of Reward, the remuneration packages of the Executive Directors. The remuneration of the Non-Executive Directors is determined by the Board.

The Nomination Committee is chaired by Roger Carr, the Chairman of the Board, and comprises Roger Carr, George Fairweather, Drummond Hall, Sir Tim Lankester, Sara Weller and Tim Clarke. This committee carries out the selection process for the appointment of Executive and Non-Executive Directors to the Board and proposes names for approval by the Board. It also considers succession planning.

The Executive Committee, chaired by the Chief Executive, Tim Clarke, consists of the Executive Directors (Mike Bramley, Tim Clarke, Tony Hughes and Karim Naffah), and senior management of the Company (John Butterfield, Bronagh Kennedy, Adam Martin, Richard Pratt, Jeremy Townsend, Adam Fowle and Alison Wheaton). It meets every four weeks and has everyday responsibility for the running of the Group’s business. It develops the Group’s strategy and revenue and capital budgets for Board approval. It reviews and recommends to the Board any significant investment proposals. It considers employment issues and ensures that the Group has an appropriate pool of talent and develops senior management succession plans.

Service Agreements

It is the Company’s normal policy to provide Executive Directors with rolling 12-month contracts, which provide for 12 months notice from the Company and six months notice from the Director. Service contracts provide for summary termination in the event of gross misconduct. In other circumstances any severance payment would normally be based on a valuation of net pay and benefits for any unexpired notice period on the expectation that the Director had made reasonable attempts to mitigate his loss. Benefits normally include membership of a pension scheme and a healthcare scheme and use of a company car. It has been decided to introduce, for new appointees, phased compensation payments on loss of office.

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(iii) Nomination Committee

(iv) Executive Committee

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EMPLOYEES

The Group employed an average of 37,411 people worldwide in fiscal 2005. Of these, approximately 43% were employed on a full-time basis (24% in Germany) and 57% were employed on a part-time basis (76% in Germany).

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

Less than 1% of the Group’s UK employees are covered by collective bargaining agreements with trade unions, under which wages are negotiated annually or through procedural agreements. The Group believes that it will be able to continue to conduct its relationships with employees and trade unions in a satisfactory manner.

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United

Kingdom Rest of Europe Total

Average number of employees during fiscal 2005: Retail 35,920 1,487 37,407 SCPD 4 — 4

Total 35,924 1,487 37,411

Average number of employees during fiscal 2004: Retail 35,638 1,562 37,200 SCPD 7 — 7

Total 35,645 1,562 37,207

Average number of employees during fiscal 2003: Retail 35,900 1,649 37,549 SCPD 7 — 7

Total 35,907 1,649 37,556

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SHARE OWNERSHIP

The following table shows the Directors’ and senior managers’ holdings of M and B 7 1/12p ordinary shares as at February 10, 2006.

The above shareholdings are all beneficial interests and include shares held on behalf of Executive Directors by the trustees of the Mitchells & Butlers Share Incentive Plan. None of the Directors holds 1% or more of the outstanding M and B 7 1/12p ordinary shares. None of the Directors has a beneficial interest in the shares of any subsidiary.

As at January 31, 2006 the Executive Directors’ technical interest in unallocated Mitchells & Butlers ordinary shares held by the trustees of the Mitchells & Butlers Share Incentive Plan and the Mitchells & Butlers Employee Benefit Trust was 47,729 and 337,141 shares respectively.

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Number of 7 1/12 p

ordinary shares

Directors Mike Bramley 115,124Roger Carr 11,067Tim Clarke 556,586George Fairweather 2,000Drummond Hall 2,500Tony Hughes 133,215Sir Tim Lankester 1,227Karim Naffah 246,873Sara Weller 3,325Senior Management John Butterfield 3,053Adam Fowle 5,897Bronagh Kennedy 36,444Adam Martin 117,367Richard Pratt 30,159Jeremy Townsend —Alison Wheaton 2,315

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SHARE OPTIONS

The interests of the Company’s Directors and the members of the Executive Committee in options over M and B of 71/12p ordinary shares at February 10, 2006 were as follows:

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Share Options (i) (ii) Name Date of grant Exercise price (p) No of shares Expiry date

Mike Bramley May 28, 2003 219.00 296,800 May 28, 2013 May 24, 2004 252.50 265,346 May 24, 2014 March 1, 2001 259.73 101,044 March 1, 2011 May 28, 2002 266.74 131,942 May 28, 2012 February 25,1999 286.68 69,311 February 25, 2009 February 18, 1997 305.90 1,948 February 18, 2007 May 24, 2005 326.10 214,658 May 24, 2015 March 2, 1998 364.46 4,732 March 2, 2008 December 3, 2004 Nil 98,822 December, 2009 December 5, 2003 Nil 134,298 December, 2008 February 6, 2006 Nil 160,100 December, 2010 Tim Clarke June 27, 2003 169.00 9,423 March 31, 2009 May 28, 2003 219.00 456,620 May 28, 2013 May 24, 2004 252.50 403,960 May 24, 2014 March 1, 2001 259.73 377,177 March 1, 2011 February 25, 1999 286.68 64,857 February 25, 2009 February 18, 1997 305.90 53,445 February 18, 2007 May 24, 2005 326.10 318,920 May 24, 2015 March 2, 1998 364.46 50,383 March 2, 2008 December 3, 2004 Nil 146,822 December, 2009 December 5, 2003 Nil 204,454 December, 2008 February 6, 2006 Nil 235,702 December, 2010 Tony Hughes June 27, 2003 169.00 5,473 March 31, 2007 May 28, 2003 219.00 296,800 May 28, 2013 May 24, 2004 252.50 265,346 May 24, 2014 March 1, 2001 259.73 120,251 March 1, 2011 May 28, 2002 266.74 154,489 May 28, 2012 February 25, 1999 286.68 34,516 February 25, 2009 February 18, 1997 305.90 34,795 February 18, 2007 May 24, 2005 326.10 214,658 May 24, 2015 March 2, 1998 364.46 43,145 March 2, 2008 December 3, 2004 Nil 98,822 December, 2009 December 5, 2003 Nil 134,298 December, 2008 February 6, 2006 Nil 160,100 December, 2010 Karim Naffah June 28, 2004 209.00 4,509 March 31, 2008 May 28, 2003 219.00 319,630 May 28, 2013 May 24, 2004 252.50 285,148 May 24, 2014 March 1, 2001 259.73 158,665 March 1, 2011 February 25, 1999 286.68 23,382 February 25, 2009 February 18, 1997 305.90 83,508 February 18, 2007 May 24, 2005 326.10 226,924 May 24, 2015 March 2, 1998 364.46 9,185 March 2, 2008 December 3, 2004 Nil 104,470 December, 2009 December 5, 2003 Nil 144,320 December, 2008 February 6, 2006 Nil 168,994 December, 2010 Roger Carr — — George Fairweather — — Drummond Hall — — Sara Weller — — Sir Tim Lankester — —

Footnotes on page 58.

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58

Name Date of grant Exercise price (p) No of shares Expiry date

John Butterfield May 28, 2003 219.00 94,170 May 28, 2013 May 24, 2004 252.50 92,574 May 24, 2014 February 25, 1999 286.68 25,886 February 25, 2009 May 24, 2005 326.10 73,788 May 24, 2015 December 3, 2004 Nil 49,410 December, 2009 December 5, 2003 Nil 68,150 December, 2008 May 23, 2003 Nil 25,772 December, 2007] February 6, 2006 Nil 67,838 December, 2010 Bronagh Kennedy June 28, 2004 209.00 2,254 March 31, 2008 May 28, 2003 219.00 131,840 May 28, 2013 May 24, 2004 252.50 114,356 May 24, 2014 May 28, 2002 266.74 79,889 May 28, 2012 February 25, 1999 286.68 10,856 February 25, 2009 September 4, 1996 291.71 14,752 September 4, 2006 February 18, 1997 305.90 15,866 February 18, 2007 May 24, 2005 326.10 91,076 May 24, 2015 March 2, 1998 364.46 19,485 March 2, 2008 December 3, 2004 Nil 60,988 December, 2009 December 5, 2003 Nil 84,186 December, 2008 February 6, 2006 Nil 83,668 December, 2010 Adam Martin June 27, 2003 169.00 5,473 March 31, 2007 May 28, 2003 219.00 114,260 May 28, 2013 May 24, 2004 252.50 108,910 May 24, 2014 May 24, 2005 326.10 86,859 May 24, 2015 March 2, 1998 364.46 21,433 March 2, 2008 December 3, 2004 Nil 58,164 December, 2009 December 5, 2003 Nil 76,168 December, 2008 February 6, 2006 Nil 79,898 December, 2010 Richard Pratt June 27, 2003 169.00 9,423 March 31, 2009 May 28, 2003 219.00 106,730 May 28, 2013 May 24, 2004 252.50 92,574 May 24, 2014 March 1, 2001 259.73 47,877 March 1, 2011 February 25, 1999 286.68 29,784 February 25, 2009 February 18, 1997 305.90 15,865 February 18, 2007 May 24, 2005 326.10 73,788 May 24, 2015 March 2, 1998 364.46 17,536 March 2, 2008 December 3, 2004 Nil 49,410 December, 2009 December 5, 2003 Nil 68,150 December, 2008 February 6, 2006 Nil 67,838 December, 2010 Alison Wheaton May 27, 2003 169.00 5,473 March 31, 2007 May 28, 2003 219.00 106,730 May 28, 2013 May 24, 2004 252.50 100,742 May 24, 2014 March 1, 2001 259.73 49,826 March 1, 2011 May 28, 2002 266.74 64,579 May 28, 2012 February 25, 1999 286.68 25,330 February 25, 2009 February 3, 1998 364.46 16,701 February 3, 2008 May 24, 2005 326.10 80,113 May 24, 2015 December 3, 2004 Nil 53,646 December, 2009 December 5, 2003 Nil 68,150 December, 2008 May 23, 2003 Nil 29,208 December, 2007 February 6, 2006 Nil 73,492 December, 2010 Jeremy Townsend June 23, 2005 330.50 83,207 June 23, 2015 June 21, 2005 Nil 41,620 December, 2009 February 6, 2006 Nil 75,376 December 2010 Adam Fowle May 24, 2005 326.10 120,971 May 24, 2015 May 20, 2005 Nil 66,590 December, 2009 February 6, 2006 Nil 110,276 December, 2010

(i) Share options are granted under the Company’s Executive Share Option Plan and the Sharesave Plan. In addition, participation in the PRSP is by means of an option, which is exercisable for nominal consideration of £1 per award, once the performance conditions have

been satisfied.(ii) No changes were made to the shares under option in any of the Group’s option plans as a result of the consolidation of the Company’s share capital on December 2, 2003.

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EMPLOYEE SHARE PLANS

M and B Group’s remuneration policy is designed to attract the best employees; provide appropriate executive retention strength against competitive attempts to recruit its executives; require Directors to build and maintain a significant level of M and B share ownership to further align their interests with those of shareholders; and recognize that M and B is a UK listed company owned predominantly by UK-based investors. As a result, management believes that incentive arrangements comply, as far as is practicable, with the basic tenet of UK investor guidelines that share incentives should be linked to performance criteria.

A minimum level of M and B share ownership has been set for the Executive Directors. The Chief Executive should own shares valued at three times his salary and other Executive Directors at two times their salary. It is expected that the Directors will satisfy this requirement within five years from April 2003, the date of admission of M and B shares to the London Stock Exchange, although this timeframe may be reviewed. Until the minimum level of M and B share ownership is satisfied, the Directors may not sell any M and B shares including any M and B shares acquired via any employee share plans (other than to finance the cost of exercising options and any tax and social security liabilities arising from the employee share plans or in exceptional circumstances, for example financial hardship). Messrs Clarke and Naffah have both met their minimum holding requirements. For any future Executive Director appointment, it is proposed to reduce the mandatory shareholding requirements to one times salary, subject to this continuing to be reflective of market practice at that time. M and B shares acquired through certain awards programs will count towards the minimum level once the awards vest or are made, depending on the program.

The Company has established the following employee share plans (together the ‘Employee Share Plans’):

The M and B Sharesave Plan (‘Sharesave’);

The M and B Share Incentive Plan (‘SIP’);

The M and B Executive Share Option Schemes (‘EXSOP’);

The M and B Performance Restricted Share Plan (‘PRSP’);

The M and B Short Term Deferred Incentive Plan (‘STDIP’); and

The M and B Employee Benefit Trust.

In addition to the executive share plans described above in ‘Item 6. Directors, Senior Management and Employees – Compensation’, the principal terms of the Employee Share Plans are set out below. M and B shares may also be issued in respect of options granted in exchange for options under the Six Continents Executive Share Option Scheme 1995.

Key decisions regarding the EXSOP, the PRSP and the STDIP and all decisions relating to Executive Directors are made by the Company’s Remuneration Committee.

Sharesave is available to all eligible employees and provides for the grant of options to subscribe for M and B shares at the higher of the nominal value and not less than 80% of the market value of the shares (determined over the three days prior to the invitation date). Options normally become exercisable for six months from the end of the savings contract, which may be of three or five years’ duration. In June 2005, options were granted to 1,382 employees over 1,162,897 shares at 258.5p per share.

The SIP allows eligible employees to participate in awards of M and B shares under a HM Revenue and Customs (‘HMRC’) approved share incentive plan. Awards of M and B shares under the SIP are not pensionable. All employees and Executive Directors of the Company and any participating subsidiaries may participate in the SIP. When the SIP is operated, all eligible employees must be invited to participate. In 2005, 309,993 shares were allocated by the SIP trustee as free shares to 7,917 employees.

The M and B Employee Benefit Trust may acquire M and B shares and hold them for the benefit of employees and former employees of the Group and their spouses and children. The Trust may be used to provide M and B shares to employees under some or all of the Employee Share Plans.

During the year, the Employee Benefit Trust acquired 1 million shares and allocated 3,453,846 shares to employees under the terms of the employee share plans.

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The M and B Sharesave Plan

The M and B Share Incentive Plan

M and B Employee Benefit Trust

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MAJOR SHAREHOLDERS

As far as is known to management, M and B is not directly or indirectly owned or controlled by another corporation or by any government or any other person. Based on the current notification to M and B under the provisions of Section 198 of the Companies Act, M and B has been advised of the following substantial interests (3% or more) in its shares as at February 10, 2006:

M and B does not know of any arrangements the operation of which may result in a change in its control.

No shareholder has voting rights different to those of any other shareholder.

As of January 31, 2006, there was a total of 78,813 recorded holders of ordinary shares of whom 214 had registered addresses in the United States and held a total of 110,230 ordinary shares (0.02% of the total shares issued). Since certain ordinary shares are registered in the names of nominees, the number of shareholders of record may not be representative of the number of beneficial owners.

RELATED PARTY TRANSACTIONS

Other than as herein described, the Group has entered into no related party transactions or loans.

During part of fiscal 2003, the Group was within the Six Continents Group, and as a result the agreements entered into in connection with the Separation were with a related party at that time.

Under the M and B Group Transfer SPA, which was entered into between the Group and the Six Continents Group after M and B became the holding company of the Six Continents Group, Six Continents PLC transferred at book value the whole of the issued share capital of various retail companies, namely Six Continents Retail Limited and Six Continents Retail Germany GmbH, and their respective subsidiaries and subsidiary undertakings, and SCPD to the Group (the ‘M and B Group Transfer’).

Under the M and B Group Transfer SPA, the Six Continents Group gave no warranties (other than as to ownership of the shares in the companies being transferred) and agreed to give certain limited indemnities to M and B.

These indemnities were given to protect M and B Group against liabilities which the M and B Group may incur and which relate exclusively or predominantly to the InterContinental Group entities. In addition, InterContinental Group indemnified the Group in respect of 50% of certain contingent liabilities which do not relate exclusively or predominantly to either M and B Group or the InterContinental Group entities. These shared liabilities relate primarily to businesses which have been disposed of by the Six Continents Group or its subsidiaries in the past and where warranties or indemnities were given to third parties.

The M and B Group Transfer SPA also contained provisions relating to the allocation of tax liabilities and the conduct of the tax affairs of M and B Group and the InterContinental Group relating to periods beginning before the separation was effected.

Following the M and B Group Transfer, an agreement was entered into between InterContinental Group and the M and B Group under which M and B Group agreed to transfer on the Separation date the whole of the issued share capital of the Six Continents Group (which at that point only owned the hotels business and soft drinks business) to InterContinental Group in consideration for which InterContinental Group allotted and issued InterContinental Group shares to the holders of M and B shares (the ‘Separation Agreement’). Each shareholder, on the register of members of M and B, immediately before the transfer of the Six Continents PLC shares, received one InterContinental Hotels Group PLC share for every M and B share they held at that time. The holders of M and B ADRs on the ADR register maintained by the Depositary received one InterContinental Group ADS for every M and B ADS. A shareholder or ADR holder of M and B was not required to make any payment for the InterContinental Group shares or ADSs. The Separation did not affect the number of issued M and B shares or M and B ADSs.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

January 31, 2005 February 14, 2006 Shareholder Shares % Shares %

Aviva plc 16,697,560 3.2 20,612,762 4.1AXA S.A. —* —* 81,781,009 16.5Barclays PLC —* —* 15,031,620 3.0Deutsche Bank —* —* 15,865,788 3.2Legal & General 25,602,956 3.5 25,602,956 3.5Lone Pine Capital LLC —* —* 15,090,182 3.0Standard Life 15,771,452 3.0 —* —*

* These Shareholders may have had a non disclosable interest (less than 3% of the issued share capital) on the above dates.

Summary of Main Agreements Relating to the Separation Share Purchase Agreement to effect the M and B Group Transfer (the ‘M and B Group Transfer SPA’)

Separation Agreement

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All InterContinental Group shares received by M and B shareholders (including the Depositary) in connection with the Separation were credited as fully paid.

Under the Separation Agreement, M and B Group gave no warranties (other than as to ownership of the shares in Six Continents PLC as at Separation) and agreed to give certain limited indemnities to InterContinental Group. These indemnities were given to protect InterContinental Group against liabilities which InterContinental Group may incur but which relate exclusively or predominantly to Retail or SCPD. In addition, M and B Group indemnified InterContinental Group in respect of 50% of certain contingent liabilities which do not relate exclusively or predominantly to the retail business and SCPD or to the hotels business and soft drinks business. These shared contingent liabilities relate primarily to businesses which have been disposed of by the Six Continents Group or its subsidiaries in the past and where warranties and indemnities were given.

Following the Separation, M and B and InterContinental Hotels Group PLC each operate as separate listed companies. There are no cross-directorships between M and B and InterContinental Hotels Group PLC. The Transitional Services Agreement put in place on Separation expired as of December 31, 2003, with no ongoing obligations.

Prior to Separation, a franchise agreement on arm’s length terms was entered into between an InterContinental Group company (the ‘Licensor’) and a Group company (the ‘Licensee’), pursuant to which the Licensor granted the Licensee the right to operate Express by Holiday Inn hotels operated by the Licensee. This license includes the rights to use the reservations and other systems of the Licensor, the trademarks and service marks and such other elements as designated from time to time by the Licensor, designed to identify ‘Express by Holiday Inn’ hotels. In return, the Licensee pays a royalty to the Licensor, which is a pre-determined percentage of room revenues together with certain other fees as specified in the agreement. Each hotel has its own license agreement, which is typically for a ten-year period from the date of opening. The earliest license will expire in July 2006.

On February 7, 2003, the Group and Britvic extended the terms of an existing Britvic supply agreement for five years from that date. Under the agreement, the Group has a minimum purchase obligation for Britvic soft drinks across its estate which is well within the Group’s actual usage levels.

INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

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Relationship with InterContinental Group

Franchise Agreement for Express by Holiday Inn

Britvic Supply Agreement

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FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION

For details of the Group’s audited financial statements, and the related report of the independent registered public accounting firm filed as part of this annual report, which commence on page F-1, see ‘Item 18. Financial Statements’.

Neither the Company nor any member of the Group is or has been involved in any legal or arbitration proceedings which may have, or have had during the 12 months preceding the date of this document, a significant effect on the financial position or results of operations of the Group nor, so far as the Group is aware, are any such proceedings pending or threatened by or against the Company or any member of the Group.

See ‘Item 3. Key Information – Selected Consolidated Financial Information – Dividends’.

SIGNIFICANT CHANGES

No significant change has occurred to the Company’s financial position since October 1, 2005, the date of the most recent financial statements included in this annual report.

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ITEM 8. FINANCIAL INFORMATION

Financial Statements

Legal Proceedings

Dividends

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The principal trading market for the Company’s ordinary shares is the London Stock Exchange on which they have been traded since Separation on April 15, 2003. On April 13, 2005, the Company announced its intention to terminate the ADR program and delist from the New York Stock Exchange. On July 19, 2005, the ADR program was terminated. The Company was delisted from the NYSE on August 5, 2005.

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

PLAN OF DISTRIBUTION

Not applicable.

MARKETS

The principal market for trading in the ordinary shares is the London Stock Exchange. Trading on the London Stock Exchange commenced for regular trading on April 15, 2003 under the symbol MAB.

On July 19, 2005, the Group voluntarily terminated its ADR program and on August 5, 2005, it delisted from the New York Stock Exchange. The Group decided to terminate the ADR program and delist because, given the relatively low participation in the ADR program, it did not believe that the benefits of maintaining the program and listing justified the additional administration. Holders of ADRs were entitled to exchange their M and B ADSs by September 16, 2005 for the appropriate number of underlying M and B ordinary shares. On September 19, 2005, the Bank of New York, as depositary for the ADR program, sold the ordinary shares in respect of M and B ADSs not submitted for exchange by September 16.

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ITEM 9. THE OFFER AND LISTING

£ per

ordinary share $ per ADS*

High Low High Low

Fiscal 2005Annual high and low 3.90 2.58 6.67 5.04 First quarter 3.40 2.58 6.53 5.04 Second quarter 3.47 3.21 6.67 6.05 Third quarter 3.55 2.99 6.63 5.56 Fourth quarter 3.90 3.35 6.07 5.78 Fiscal 2004Annual high and low 2.84 2.22 5.48 3.70 First quarter 2.40 2.22 4.35 3.70 Second quarter 2.63 2.25 4.97 4.05 Third quarter 2.80 2.44 5.19 4.35 Fourth quarter 2.84 2.47 5.48 4.50 Month endAugust 2005 3.67 3.54 — — September 2005 3.90 3.65 — — October 2005 3.70 3.45 — — November 2005 3.89 3.63 — — December 2005 4.27 3.82 — — January 2006 4.20 3.93 — — February 2006 (through February 10, 2006) 4.06 3.95 — —

* Until termination of the ADR programme on July 19, 2005

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SELLING SHAREHOLDERS

Not applicable.

DILUTION

Not applicable.

EXPENSES OF THE ISSUE

Not applicable.

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SHARE CAPITAL

Not applicable.

MEMORANDUM AND ARTICLES OF ASSOCIATION

A description of the Company’s Memorandum and Articles of Association is incorporated herein by reference to Item 10 of the Company’s registration statement on Form 20-F filed March 23, 2003 (file no. 001-31653).

In addition, on February 2, 2006, the Company’s shareholders approved amendments to its Articles of Association including one that would allow the Board of Directors to require certain US shareholders to sell their ordinary shares so that the Group may be certain that the number of its US shareholders is below the appropriate threshold to enable it to deregister. Under the provision, the Directors can compel persons holding or having an interest in the Company’s shares to provide information, to the extent known, relating to the ownership of the shares. Shareholders and certain other interest persons are required to notify the Directors if the shares in which they are interested are held by or for US holders, and the Directors will maintain a register of US holders. The Directors may, at their discretion and without limit in time, require shares held by or for US holders to be sold to non-US holders. If a US holder does not sell the shares within 21 days of notice by the Directors, the Directors may sell those shares on behalf of that person, who will receive payment for the sale only upon surrender of the relevant share certificates.

Although US holders who hold or are interested in more than 20,000 shares are excluded from the register of US holders and from the compulsory transfer requirements of this provision, the 20,000 share threshold can be amended by an ordinary resolution of shareholders.

The redeemable deferred shares and the redeemable preference shares have been converted into ordinary shares. The Articles relating to these shares have been removed from the Articles of Association, as have the summary provisions relating to the rights and qualifications of these shares. In addition, Article 163, continuing certain provisions relating to historical demerger arrangements, has been removed and is no longer part of the Articles of Association.

MATERIAL CONTRACTS

The Separation agreements summarized in ‘Item 7. Major Shareholders and Related Party Transactions – Related Party Transactions – Summary of Main Agreements Relating to the Separation’ are material contracts of the Group. In addition, the following contracts have been entered into otherwise than in the course of ordinary business by members of the Group either (i) in the two years immediately preceding the date of this document in the case of contracts which are or may be material or (ii) which contain provisions under which any Group member has any obligation or entitlement which is material to the Group as at the date of this document. To the extent that these agreements include representations, warranties and indemnities, such provisions are considered standard in an agreement of that nature, save to the extent identified below.

On November 13, 2003, the Group refinanced its debt by raising £1,900 million through a securitization of the majority of its UK pubs and pub-restaurants business.

As part of the transaction, Mitchells & Butlers Finance plc (‘M and B Finance’), a wholly-owned subsidiary, issued the following six tranches or classes of secured loan notes to third-party investors (the ‘Notes’):

Class A1 for £200,000,000 secured floating rate notes due 2030;

Class A2 for £550,000,000 secured 5.574% notes due 2030;

Class A3 for $418,750,000 secured floating rate notes due 2030;

Class B1 for £350,000,000 secured 5.965% notes due 2025;

Class B2 for £350,000,000 secured 6.013% notes due 2030; and

Class C for £200,000,000 secured 6.469% notes due 2032.

Under a secured facility agreement dated November 13, 2003 (the ‘Secured Facility Agreement’), the Group’s principal operating subsidiary, Mitchells & Butlers Retail Limited (‘M and B Retail’), and other subsidiaries borrowed from M and B Finance the proceeds of the sale of the Notes. The amounts and terms of the Notes are linked to the term facilities covered by the Secured Facility Agreement. These borrowings are effectively secured by the majority of the UK pub and pub-restaurant assets and mirror the six classes of the Notes.

Interest to be paid on each tranche is linked to the interest rate payable on the relevant class of secured notes. Interest on the Class A1 Notes is payable at three month LIBOR plus a margin of 0.45%, stepping up to LIBOR plus 0.90% in December 2010. The Class A3 Notes attract interest payable at three month US dollar LIBOR plus a margin of 0.45%, stepping up to LIBOR plus 0.90% in December 2010. It was a condition precedent to the Secured Facility Agreement that M and B Finance entered into hedging arrangements to mitigate the interest rate movement risk inherent in the A1 and A3 floating rate notes. (See Item 11. Quantitative and Qualitative Disclosures on Market Risk).

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ITEM 10. ADDITIONAL INFORMATION

Securitization Issuer/Borrower Facility Agreement

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Further borrowings under the Secured Facility Agreement may be agreed. Each new tranche would be financed by the issue of new secured notes by M and B Finance. The Secured Facility Agreement includes provisions for the prepayment, in whole or in part, of the borrowings, subject to the observance of certain conditions. There is a deemed prepayment of such amount of the borrowings as is represented by any market purchases of Notes that M and B Retail makes.

The Secured Facility Agreement also includes customary covenants, warranties and events of default. The Secured Facility Agreement sets a minimum free cash flow to debt service coverage ratio of no less than 1.10:1 as measured on any financial quarter date, in respect of the most recent relevant period or the most recent relevant year. M and B Retail and other wholly-owned subsidiaries that borrow under the Facility (the ‘Borrowers’) must also maintain an aggregate consolidated net worth of at least £300,000,000 at the end of each fiscal year. The Borrower is restricted in its ability to: (a) make any payments or other disposal of cash or other funds to an excluded Group entity (including payment of dividends, payment of interest, distributions, repayment of loans, capital contributions, etc.), except for any payment specifically permitted (such as payment to the intra group services companies) unless (i) all payments due and payable under the Working Capital Facility (as described below) have been made, (ii) no event of default has occurred and is continuing or would occur as a result of the making of such payment, and (iii) certain minimum free cash flow to debt service ratios (at least 1.3:1) and EBITDA to debt service payments ratios (at least 1.7:1) are met; (b) sell, lease, transfer or dispose of any secured properties under the Secured Facility Agreement without the consent of the security trustee, and proceeds from these permitted disposals shall be deposited into a secured account with restrictions on the use of such funds (disposal of assets other than secured properties are also subject to certain conditions); (c) acquire or substitute any business over which security is granted, or would be granted; or (d) incur more than £7,500,000 in permitted encumbrances or more than £7,500,000 in permitted indebtedness. The Company is required to incur or reserve for each fiscal year a required maintenance amount equal to 6.4% of the actual aggregate turnover in respect of the preceding fiscal year of the secured properties.

Under the terms of the Secured Facility Agreement, the termination in whole or in part of an intra group supply agreement and/or a management services agreement (both put in place pursuant to the Securitization) between the securitized group and the Group companies outside the securitized group will be events of default if such termination would be reasonably expected to have a material adverse effect on the securitized group. The occurrence of any of the events of default will cause the outstanding borrowings to become immediately due and payable.

As part of the Securitization, under a Guarantee and Reimbursement Agreement, Ambac Assurance UK Limited, a financial guarantee insurance company (‘Ambac’), agreed to act as guarantor of M and B Retail’s financial obligations to M and B Finance under the Secured Facility Agreement. Ambac’s guarantee of M and B Finance’s obligations to repay interest and principal on the Notes in the event that M and B Finance is unable to pay such amounts is limited to the Class A noteholders only. In the event that Ambac has to make such a payment in respect of the guaranteed amounts, Ambac automatically becomes subrogated to the rights of the Class A noteholders.

Certain subsidiaries, including M and B Retail, entered into a £60 million revolving credit facility (the ‘Working Capital Facility’) on November 13, 2003 for a term of five years. The Borrower will be entitled to use the Working Capital Facility for working capital purposes, ongoing operational expenses and other general corporate purposes not otherwise met out of available cashflows from time to time. The Working Capital Facility must be fully repaid for at least two days in each fiscal securitization year. The covenants, warranties and events of default contained within this facility effectively mirror those which govern the Issuer/Borrower Facility Agreement.

EXCHANGE CONTROLS

There are no restrictions on dividend payments to US citizens and there are no UK restrictions on the import or export of capital which may affect the availability of cash and cash equivalents for use by the Group.

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

There are no restrictions under the articles of association or under English law that limit the right of non-resident or foreign owners to hold or vote the ordinary shares. However, under current English law, ordinary shares may not be owned by a Prohibited Person.

TAXATION

This section provides a summary of the material US federal income tax and UK tax consequences to US holders, as defined below, of owning and disposing of shares of the Company. This section addresses only the tax position of a US holder who holds shares as capital assets. It does not purport to be a comprehensive description of all the tax considerations that may be relevant to an investment decision regarding the shares. In particular, this section does not discuss the tax consequences of members of special classes of holders subject to special rules including, without limitation, the following: (a) certain financial institutions; (b) insurance companies; (c) dealers or traders in securities or currencies; (d) tax-exempt entities; (e) persons that hold shares as part of a ‘hedging’ or ‘conversion’ transaction or as a position in a ‘straddle’ or as part of a ‘synthetic security’ or other integrated transaction for US federal income tax purposes; (f) persons that have a functional currency other than the US dollar; (g) persons that own (or are deemed to own) 10% or more (by voting power) of the Company’s share capital; (h) regulated investment companies; (i) real estate and investment trusts; and (j) S corporations. This section does not generally

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Working Capital Facility Agreement

Taxation of US Holders

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deal with the position of a US holder who is resident or ordinarily resident in the UK for UK tax purposes or who is subject to UK taxation on capital gains or income by virtue of carrying on a trade, profession or vocation in the UK through a branch, agency or permanent establishment in the UK. If a partnership holds shares, the consequences to a partner will generally depend upon the status of that partner and the activities of the partnership. A partner of a partnership holding shares should consult its own tax advisor.

A US holder is a beneficial owner of shares that is for US federal income tax purposes (i) a citizen or resident of the US, (ii) a US domestic corporation, (iii) an estate whose income is subject to US federal income tax regardless of its source, or (iv) a trust if a US court can exercise primary supervision over the trust’s administration and one or more US persons are authorized to control all substantial decisions of the trust.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, and on UK tax laws and the published practice of the HMRC, all as currently in effect, and on the Double Taxation Convention between the US and the UK that was ratified in March 2003 (the ‘Treaty’). These laws are subject to change, possibly on a retroactive basis.

Investors should consult their own tax advisor regarding the US federal, state and local, the UK and other tax consequences of owning and disposing of shares in their particular circumstances, and in particular whether they are eligible for the benefits of the Treaty.

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

Under the Treaty a US holder is not entitled to a tax credit from HMRC, and dividends received by the US holder from the Company will not, under current UK tax law, be subject to withholding tax by the UK.

Subject to the passive foreign investment company, or PFIC rules discussed below, a US holder is subject to US federal income taxation on the gross amount of any dividend paid by the Company out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). The Company does not maintain calculations of its earnings and profits under US federal income tax principles. Therefore, a US holder should expect that a distribution will generally be treated as a dividend for US federal income tax purposes. Dividends paid to a non-corporate US holder in taxable years beginning before January 1, 2009 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15%, provided that the holder has a holding period of the shares of more than 60 days during the 120-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. Dividends paid by the Company with respect to the shares will be qualified dividend income.

A US holder that is eligible for the benefits of the Treaty will not be entitled to a UK tax credit, but will also not be subject to UK withholding tax. The US holder will include in gross income for US federal income tax purposes only the amount of the dividend actually received from the Company and the receipt of a dividend will not entitle the US holder to a foreign tax credit.

Dividends must be included in income when the US holder actually or constructively receives the dividend, and will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations. Dividends will be income from sources outside the US for the purposes of calculating a holder’s foreign tax credit limitations. The rules relating to foreign tax credits and the timing thereof are complex. US holders should consult their own tax advisors regarding the application of the foreign tax credit limitation to their particular circumstances.

The amount of the dividend distribution will be the US dollar value of the pound sterling payments made, determined at the spot pound sterling/US dollar rate on the date the dividend distribution is includible in income, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in income to the date the payment is converted into US dollars will be treated as ordinary income or loss and, for foreign tax credit limitation purposes, from sources within the US.

A US holder who is not resident or ordinarily resident for UK tax purposes in the UK will not be liable for UK taxation on capital gains realized or accrued on the sale or other disposal of shares unless, at the time of the sale or other disposal, the US holder carries on a trade, profession or vocation in the UK through a branch, agency or permanent establishment and such shares are or have been used, held or acquired for the purposes of such trade, profession or vocation, or such branch, agency or permanent establishment.

A US holder of ordinary shares who is an individual and who has ceased to be resident or ordinarily resident in the UK for UK tax purposes for a period of less than five years and who disposes of the shares during that period may be liable on his return to the UK to tax on any capital gain realized (subject to any available exemption or relief).

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Taxation of Dividends

US Federal Income Taxation

Taxation of Capital Gains

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Subject to the PFIC rules discussed below, a US holder that sells or otherwise disposes of shares will recognize a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realized and its tax basis, determined in US dollars, in the shares. Generally, a capital gain of a non-corporate US holder that is recognized before January 1, 2009 is taxed at a maximum rate of 15% where the holder has a holding period greater than one year. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes. The deductibility of losses is subject to limitations.

A US holder that receives foreign currency on the sale or other disposition of the shares will realize an amount equal to the US dollar value of the foreign currency on the date of sale (or, in the case of a cash basis and electing accrual basis taxpayer, the US dollar value of the foreign currency on the settlement date). If a US holder receives foreign currency on the sale or other disposition of shares , the gain or loss, if any, recognized on a subsequent sale, conversion or disposition of such foreign currency will be ordinary income or loss and will generally be income or loss from sources within the US for foreign tax credit limitation purposes. However, if such foreign currency is converted into US dollars on the date received by the US holder, a cash basis and electing accrual basis US holder should not recognize any gain or loss on such conversion.

The Company believes that it is not, and it does not expect to become, a PFIC, for US federal income tax purposes. However, because this is a factual determination made annually at the end of the taxable year, there can be no assurance that the Company will not be considered a PFIC for any future taxable year. If the Company were a PFIC in any year, special, possibly materially adverse, consequences would result for US holders.

A corporation organized outside the US generally will be classified as a PFIC for US federal income tax purposes in any taxable year in which either: (a) at least 75% of its gross income is ‘passive income’, or (b) on average at least 50% of the gross value of its assets is attributable to assets that produce ‘passive income’ or are held for the production of passive income. Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions. In determining whether it is a PFIC a foreign corporation is required to take into account a pro rata portion of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest.

If the Company is regarded as a PFIC in any year during which a US holder owns shares , the US holder will be subject to additional taxes on any excess distributions received from the Company and any gain realized from the sale or other disposition of shares (whether or not the Company continues to be a PFIC). A US holder has an excess distribution to the extent that distributions on the shares , as the case may be, during a taxable year exceed 125% of the average amount received during the three preceding taxable years (or, if shorter, the US holder’s holding period). To compute the tax on the excess distributions or any gain, (i) the excess distribution or the gain is allocated ratably over the US holder’s holding period, (ii) the amount allocated to the current taxable year and any year before the Company became a PFIC is taxed as ordinary income in the current year, and (iii) the amount allocated to other taxable years is taxed at the highest applicable marginal rate in effect for each year and an interest charge is imposed to recover the deemed benefit from the deferred payment of the tax attributable to each year.

Some of the rules with respect to distributions and dispositions described above may be avoided if a US holder makes a valid ‘mark-to-market’ election (in which case, subject to certain limitations, the US holder would essentially be required to take into account the difference, if any, between the fair market value and the adjusted tax basis of its shares at the end of a taxable year as ordinary income (or, subject to certain limitations, ordinary loss), in calculating its income for such year). In addition, gains from an actual sale or other disposition of shares , as the case may be, will be treated as ordinary income, and any losses will be treated as ordinary losses, to the extent of any ‘mark-to-market’ gains for prior years. A ‘mark-to-market’ election is only available to US holders in any tax year that the PFIC stock is considered ‘regularly traded’ on a ‘qualified exchange’ within the meaning of applicable US Treasury regulations. US holders should consult their own tax advisors as to whether the shares would qualify for the mark-to-market election. Once made, such election cannot be revoked without the consent of the US Internal Revenue Service unless the shares cease to be marketable.

Some of the above rules may also be avoided if a US holder is eligible for and timely makes a valid ‘QEF election’ (in which case the US holder generally would be required to include in income on a current basis its pro rata share of the ordinary income and net capital gains of the PFIC). In order to be able to make the QEF election, the Company would be required to provide a US holder with certain information. The Company does not at present intend to provide the required information.

If the Company is regarded as a PFIC, each US holder of shares must make an annual return on US Internal Revenue Service Form 8621, reporting distributions received and gains realized with respect to each PFIC in which it holds a direct or indirect interest. The reduced tax rate for dividend income, as discussed above under ‘Taxation of Dividends’, is not applicable to dividends paid by a PFIC.

US holders are urged to consult their own tax advisors regarding whether an investment in the shares will be treated as an investment in PFIC stock and the consequences of an investment in a PFIC.

Backup withholding and information reporting requirements may apply to certain payments to US holders of dividends on shares and to the proceeds of a sale or other disposition of shares. The Company, its agent, a broker, or any paying agent, as the case may be, may be required to withhold tax from any payment that is subject to backup withholding at a rate of 28% (which rate may be subject to change in the future) of such payment if the US holder fails (a) to furnish its taxpayer identification number, (b) to certify that such US holder is not subject to backup withholding, or (c) to otherwise comply with the applicable requirements of the backup withholding rules. Certain US holders (including, among others,

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United States Federal Income Taxation

PFIC Rules

Backup Withholding and Information Reporting

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corporations) are not subject to backup withholding and information reporting requirements. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a US holder generally may be claimed as a credit against such US holder’s US federal income tax liability, provided that the required information is furnished to the US Internal Revenue Service.

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

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

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

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

Stamp duty, or SDRT, is generally payable upon the transfer or issue of ordinary shares to, or to a nominee or, in some cases, agent of, a person whose business is or includes issuing depositary receipts or the provision of clearance services. For these purposes, the current rate of stamp duty and SDRT is usually 1.5% (rounded up, in the case of stamp duty, to the nearest £5). The rate is applied, in each case, to the amount or value of the consideration or, in some circumstances, to the value or the issue price of the ordinary shares.

STATEMENT OF EXPERTS

Not applicable.

DOCUMENTS ON DISPLAY

It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC’s public reference room located at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The Company’s SEC filings are also publicly available through the SEC’s website located at http://www.sec.gov.

SUBSIDIARY INFORMATION

Not applicable.

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Additional Tax Considerations United Kingdom Inheritance Tax

United Kingdom Stamp Duty and Stamp Duty Reserve Tax (‘SDRT’)

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Qualitative information on treasury management and exchange rate and interest rate risk is disclosed in ‘Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources’.

The Group’s treasury policy is to manage financial risks that arise in relation to underlying business needs. Current policy in respect of interest rate risk is to fix the cost on all Group debt. All treasury activities are governed by Board Treasury Policy Guidelines and the treasury department is subject to regular review by the internal audit department. Authorized treasury instruments for the management of risk are interest rate swaps, interest rate options, forward rate agreements and currency swaps.

At October 1, 2005 the Group had the following outstanding derivative or financial instruments that are sensitive to changes in interest rates.

The Group entered into hedging transactions in connection with the Securitization transaction completed on November 13, 2003, which comprised the following tranches of Notes:

All note tranches, other than A1 and A3, were issued at fixed rates, and the expected future weighted average lives are based on the amortization profiles of the individual note tranches and assumed refinancing of the A1 and A3 notes on the margin step-up date seven years after issuance, at which time the floating rate margins of 0.45% increase to 0.90% . For further details see ‘Item 10. Material Contracts – Securitization Issuer/Borrower Facility Agreement.’

The Fair values of each note tranche as at February 10, 2006 are noted below. The mid-price in the market for each tranche is used for the calculation and the figure effectively represents the net present value of the expected cash flows discounted at current market rates of interest.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative Information about Market Risk

Interest Rate Sensitivity

Tranche Amount of Issue

Amount Outstanding at October 1

2005 Amount of Rate

Expected Future

Weighted Average Life

A1 £ 200m £ 200m £ LIBOR + 0.45% 5 years A2 £ 550m £ 506.8m 5.574% 11 years A3 $ 418.75m $ 418.75m $ LIBOR + 0.45% 5 years B1 £ 350m £ 330.0m 5.965% 9 years B2 £ 350m £ 350m 6.013% 19 years C £ 200m £ 200m 6.469% 24 years

Tranche Amount Fair Value

A1 £ 200m £ 200m A2 £ 500.7m £ 542.3m A3 $ 418.75m $ 418.75m B1 £ 327.0m £ 352.7m B2 £ 350m £ 405.8m C £ 200m £ 235.9m

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The floating rate notes (tranches A1 and A3) are fully hedged using interest rate swaps and currency swaps, whereby all principal and interest liabilities are swapped into sterling, providing an initial sterling equivalent of £250 million in respect of the A3 notes and fixed interest payable. Further details are provided below.

The Fair values in respect of the above swap arrangements represent the net present value of the expected cash flows discounted at current market rates of interest and utilize a US dollar/sterling exchange rate of 1.7436 as at February 10, 2006.

No impact will arise from movements in interest rates as all flows have been swapped into a fixed rate sterling basis, utilizing the transactions described above.

The overall cash interest payable on the loan notes is 6% after taking account of interest rate hedging and the cost of the provision of the financial guarantee by Ambac as summarized in ‘Item 10. Material Contracts – Securitization Issuer/Borrower Facility Agreement’.

Although the Group has limited operations in Germany, virtually all of the Group’s turnover, costs, assets and liabilities are sterling based. Consequently, no foreign exchange hedging transactions have been entered into, other than the currency swaps as part of the Securitization.

Not applicable.

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Interest Rate Swaps

a) In respect of A1 notes: Notional Amount £ 200m Floating Rate Receivable £ LIBOR Fixed Rate Payable 5.1805% Fair Value (£18.5m) b) In respect of A3 notes: Notional Amount £250m Floating Rate Receivable £ LIBOR Fixed Rate Payable 5.1805% Fair Value (£23.1m) Currency Swap (in respect of A3 notes)

a) Initial and Final Principal Exchange:

US Dollar Amount $418.75m Exchange Rate 1.6750 Sterling Amount £250m b) Interest Flows: Floating Rate Receivable $ LIBOR + 0.45% Floating Rate Payable £ LIBOR + 0.499% c) Fair Value (£13.2m)

Exchange Rate Sensitivity

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

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PART II

None.

None.

As at the end of the period covered by this report, the Chief Executive and the Finance Director carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. These are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within specified time periods. As of the date of the evaluation, the Chief Executive and the Finance Director concluded that the design and operation of these disclosure controls and procedures were effective.

The Board of Directors considers George Fairweather to be the Audit Committee Financial Expert. Mr. Fairweather, who chairs the Audit Committee, is a Non-Executive Director and is considered by the Board to be independent of management.

The Company recognizes that its businesses have responsibilities within the communities in which they operate. The Company has a Code of Ethics for Senior Executives and Financial Officers (‘Ethics Code’) and Business Conduct guidelines describing the standards of behavior expected from all company employees, including directors and senior management.

The Company has published its Ethics Code and its Business Conduct guidelines within the investor section of its website, www.mbplc.com. The Senior Executive and Financial Officers covered by the Ethics Code are the Chief Executive, Finance Director, Deputy Finance Director and all other members of the Company’s Executive Committee (or any persons performing similar roles).

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ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

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

ITEM 15. CONTROLS AND PROCEDURES

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

ITEM 16B. CODE OF ETHICS

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At the Annual General Meeting held on February 2, 2006, the shareholders reappointed Ernst & Young LLP as auditors of the Company. The following fees were billed to the Group by Ernst & Young LLP for professional services in each of the last two fiscal years:

Audit fees consists of fees billed for professional services rendered by Ernst & Young LLP for the audit of the Group’s consolidated financial statements and the review of the Group’s interim consolidated financial statements.

Audit-related fees consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Group’s financial statements and are not reported under Audit fees. In fiscal 2005, these services arose from Ernst & Young’s reviews of our preparations towards reporting in respect of our internal financial controls and procedures under Section 404 of the Sarbanes-Oxley Act. In fiscal 2004 these services arose from accounting reviews in connection with the Group’s Securitization on November 13, 2003.

Tax fees (less than £100,000 in each of fiscal years 2004 and 2005) consists of fees billed for professional services in respect of tax compliance for the Group’s German operations.

The Audit Committee has adopted policies to ensure that the independence of the External Auditor is not impaired. The Audit Committee is directly responsible for the appointment, compensation, resignation, dismissal and the overseeing of the External Auditor and approves the scope of the external audit. The Audit Committee’s policy on the use of the External Auditor for non-audit services is as follows:

The External Auditor may only provide services to the Group where the Auditor:

Non-audit services may be provided by the External Auditor, pre-approved by the Audit Committee, subject to the following conditions:

Any other non-audit services may only be carried out by the External Auditor if permitted by UK and US law and if specifically approved by either the Audit Committee or the Chairman of the Audit Committee.

No portion of the services described above were approved by the Audit Committee pursuant to the de minimis exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fiscal year

2005

2004

(£ million)

Audit fees 0.5 0.4 Audit-related fees

Securitization — 0.2 Section 404 of the Sarbanes-Oxley Act 0.1 —

Total Audit-Related 0.1 0.2

Tax fees — — Total fees 0.6 0.6

Audit Committee’s Policy on Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Auditor

• does not function in the role of management; • does not audit his or her own work; and • does not serve in an advocacy role for the Group.

• the service must be included on a list of services pre-considered by the Audit Committee in light of applicable laws and UK best practice and including certain Audit Related Services, Tax Services and Other Services;

• the total fee for each individual non-audit service shall not exceed half the forecast audit fee for the year; • the aggregate fees paid in a fiscal year for pre-approved non-audit services shall not exceed the audit fee; and • any proposed work must be checked against this policy and a report of all non-audit services carried out under the pre-approval procedures shall be submitted to each scheduled Audit Committee

meeting.

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ITEM 16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE

Not applicable.

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

At the AGM on January 26, 2005 the Company’s shareholders gave authority for the Company to buy its own shares subject to certain conditions. Pursuant to the authority conferred by Article 11 of the Company’s Articles of Association, the shareholders approved a resolution which permitted the Company to buy back up to 5% of paid-up capital during the period from January 26, 2005 to the earlier of April 26, 2006 or the date of the next AGM, at a price per share ranging from a minimum of 7 1/12 p per share to a maximum of 105% of the average of the middle market quotations for ordinary shares as derived from the London Stock Exchange Daily Official List for the five business days before the relevant ordinary shares are contracted to be purchased. The maximum number of shares authorised to be purchased under the buy-back program was 52,389,740.

Pursuant to the buy-back program, in the course of fiscal year 2005, the Company purchased shares as follows:

All purchases were made in market transactions effected on the London Stock Exchange. During the year, the Company requested that the independent Employee Benefit Trust purchase 1,000,000 shares funded through the share buy-back program, to satisfy share awards to the Company's employees. The Employee Benefit Trust purchased 1,000,000 shares at a price of £3.16 each in December 2004. No purchases were made by the Company other than in accordance with the buy-back program.

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PeriodTotal number of

sharesAverage price paid

per share (£)

Total number of shares purchased as

part of publicly announced program

Total number of

shares that may yet be purchased under the

program

December 6, 2004 to December 16, 2004 2,350,000 3.16 2,350,000 50,039,740June 6, 2005 to June 31, 2005 3,720,000 3.29 6,070,000 46,319,740February 1, 2005 to February 28, 2005 4,025,000 3.39 10,095,000 42,294,740March 1, 2005 to March 30, 2005 4,020,000 3.36 14,115,000 38,274,740April 1, 2005 to April 4, 2005 355,000 3.44 14,470,000 37,919,740May 24, 2005 to May 31, 2005 1,100,000 3.25 15,570,000 36,619,740June 1, 2005 to June 30, 2005 4,190,000 3.26 19,760,000 32,629,740July 1, 2005 to July 29, 2005 3,600,000 3.41 23,360,000 29,029,740August 1, 2005 to August 31, 2005 4,535,000 3.59 27,895,000 24,494,740September 1, 2005 to September 2, 2005 631,000 3.73 28,526,000 23,863,740

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PART III

ITEM 17. FINANCIAL STATEMENTS

See ‘Item 18. Financial Statements’.

ITEM 18. FINANCIAL STATEMENTS

The following consolidated financial statements and related schedules, together with the report thereon of Ernst & Young LLP, are filed as part of this annual report:

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Page

Report and Consent of Independent Registered Public Accounting Firm F-1Financial Statements Consolidated Profit and Loss Account for fiscal years 2005, 2004 and 2003 F-2 Consolidated Balance Sheet at fiscal year ends 2005 and 2004 F-4 Consolidated Statement of Changes in Shareholders’ Funds/Invested Capital for the fiscal years 2005, 2004 and 2003 F-5 Consolidated Statement of Cash Flows for the fiscal years 2005, 2004 and 2003 F-7 Notes to the Financial Statements F-8Schedules Schedule I – Condensed Financial information of Registrant at fiscal year ends 2005 and 2004 and for fiscal years 2005, 2004 and 2003 SH1-1 Schedule II – Valuation and Qualifying Accounts for the fiscal years 2005, 2004 and 2003 SH2-1

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ITEM 19. EXHIBITS

The following exhibits are to be filed as part of this annual report:

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Exhibit 1 Memorandum and Articles of Association of Mitchells & Butlers plcExhibit 2(b)(i) Secured Facility Agreement, dated November 13, 2003, between Mitchells & Butlers Finance plc and subsidiaries of Mitchell & Butlers plc (the ‘Secured Facility Agreement’)

(incorporated by reference to exhibit 2(b)(i) of Mitchells & Butlers plc’s Annual Report on Form 20-F (file no. 001-31653) dated as of March 16, 2004)Exhibit 4(a)(i) Separation Agreement, dated April 15, 2003, between InterContinental Hotels Group PLC and the Six Continents Group (the ‘Separation Agreement’) (incorporated by reference

to Exhibit 4(a)(i) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (File No. 001-31653), dated March 28, 2003)Exhibit 4(a)(ii) M and B Group Transfer Share Purchase Agreement, dated April 15, 2003, between Mitchells & Butlers plc and Six Continents PLC (incorporated by reference to Exhibit 4(a)(ii)

of Mitchells & Butlers plc’s Registration Statement on Form 20-F (File No. 001-31653), dated March 28, 2003) (the ‘M and B Group Transfer SPA’)Exhibit 4(a)(iii) Working Capital Facility, dated November 13, 2003, between Mitchells & Butlers Retail Limited, the Royal Bank of Scotland plc and HSBC Trustee (C.I.) Limited (the ‘Working

Capital Facility’) (incorporated by reference to exhibit 4(a)(iii) of Mitchells & Butlers plc’s Annual Report on Form 20-F (file no. 001-31653) dated as of March 16, 2004)Exhibit 4(a)(iv) Bede Acquisition Agreement: Sale and Purchase Agreement in respect of Bede Leisure Retail Limited, West Midlands Taverns (Holdings) Limited and Quayside Caterers

Limited, dated February 14, 2001, among Bass Taverns Limited, Bede Retail Investments Limited and Bede Acquisition Company Limited (incorporated by reference to Exhibit 4(a)(v) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (File No. 001-31653), dated March 28, 2003)

Exhibit 4(a)(v) Securitization Issuer/Borrower Agreement dated November 13, 2003 between Mitchells & Butlers Retail Ltd and other subsidiaries and Mitchells & Butlers Finance plc (incorporated by reference to Exhibit 4(a)(v) of Mitchells & Butlers Annual Report on Form 20-F (File no. 001-31653) dated as of February 24, 2005)

Exhibit 4(c)(i) Tim Clarke’s service contract, dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(i) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (File No. 001-31653), dated March 28, 2003)

Exhibit 4(c)(ii) Karim Naffah’s service contract, dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(ii) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (File No. 001-31653), dated March 28, 2003)

Exhibit 4(c)(iii) Mike Bramley’s service contract, dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(iii) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (File No. 001-31653), dated March 28, 2003)

Exhibit 4(c)(iv) Tony Hughes’ service contract, dated February 12, 2003 (incorporated by reference to Exhibit 4(c)(iv) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (File No. 001-31653), dated March 28, 2003)

Exhibit 8 SubsidiariesExhibit 12.1 Certification of Tim Clarke filed pursuant to Rule 13a – 14(a) under the Securities Exchange Act of 1934Exhibit 12.2 Certification of Karim Naffah filed pursuant to Rule 13a – 14(a) under the Securities Exchange Act of 1934Exhibit 13.1 Certification of Tim Clarke and Karim Naffah furnished pursuant to Rule 13a – 14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350Exhibit 14(a) Consent of Ernst & Young LLP (included on page F-1)

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MITCHELLS & BUTLERS PLC

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors Mitchells & Butlers plc

We have audited the accompanying consolidated balance sheets of Mitchells & Butlers plc as of October 1, 2005 and September 25, 2004, and the related consolidated profit and loss accounts and consolidated statements of changes in shareholders’ funds/invested capital and cash flows for each of the three years in the period ended October 1, 2005. Our audits also included the financial statement schedules listed in the Index at Item 18. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with United Kingdom auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mitchells & Butlers plc at October 1, 2005 and September 25, 2004, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended October 1, 2005 in conformity with accounting principlesgenerally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see Note 31 of Notes to the Financial Statements). Also, in our opinion, the relatedfinancial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

London, England November 29, 2005

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333 -104742) pertaining to the Six Continents Executive Share Option Scheme 1995, of the reference to our firm in Item 3 – Key Information and of our report dated November 29, 2005, on the consolidated financial statements and schedules of Mitchells & Butlers plc, both included in the Form 20-F of Mitchells & Butlers plc for the period ended October 1, 2005.

ERNST & YOUNG LLP

London, England February 28, 2006

F-1

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MITCHELLS & BUTLERS PLC

CONSOLIDATED PROFIT AND LOSS ACCOUNT

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

F-2

53 weeks ended 52 weeks ended

October 1, 2005 September 25, 2004 restated* September 27, 2003 restated*

Before

Exceptional

Before

Exceptional

Before

Exceptional

exceptional items exceptional items exceptional items

items (Note 8) Total items (Note 8) Total items (Note 8) Total

(£ million, except per ordinary share amounts)

Turnover – (Note 4) 1,662 — 1,662 1,560 — 1,560 1,504 — 1,504Costs and overheads – (Note 5) (1,365) (4) (1,369) (1,287) (2) (1,289) (1,238) (5) (1,243) Operating profit – (Note 4) 297 (4) 293 273 (2) 271 266 (5) 261Profit on disposal of fixed assets – (Note 8) — 1 1 — 2 2 — — —Separation costs – (Note 8) — — — — — — — (42) (42) Profit on ordinary activities before interest 297 (3) 294 273 — 273 266 (47) 219Interest on net debt (105) — (105) (101) (2) (103) (55) (8) (63)Net finance income/(expense) in respect of pensions – (Note 7) 3 — 3 1 — 1 (2) — (2) Profit on ordinary activities before taxation 195 (3) 192 173 (2) 171 209 (55) 154Tax on profit on ordinary activities – (Note 10) (62) 3 (59) (56) 3 (53) (68) 31 (37) Earnings available for shareholders (i) 133 — 133 117 1 118 141 (24) 117Dividends on equity shares – (Note 11) (53) — (53) (550) — (550) (29) — (29) Retained profit/(loss) for the financial year 80 — 80 (433) 1 (432) 112 (24) 88 Earnings per ordinary share – (Note 12): Basic — — 26.0p — — 21.1p — — 15.9pDiluted — — 25.6p — — 21.0p — — 15.9pAdjusted 26.0p — — 20.9p — — 19.2p — —

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

All activities relate to continuing operations. (i) A summary of the significant adjustments to earnings available for shareholders that would be required had United States generally accepted accounting principles been applied instead of those generally accepted in the United Kingdom is set out in Note 31 of Notes to

the Financial Statements.

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MITCHELLS & BUTLERS PLC

CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES

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

F-3

53 weeks ended 52 weeks ended

October 1,

2005September 25, 2004 restated*

September 27, 2003 restated*

(£ million) Earnings available for shareholders 133 118 117Actuarial (loss)/gain on pension schemes (7) 39 (71)Deferred tax relating to actuarial (loss)/gain 2 (12) 22Exchange differences arising on foreign currency net investments — (1) 7 Total recognized gains for the year 128 144 75 Prior year adjustment on the full adoption of FRS 17 (219) Total recognized losses since previous year end (91)

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

(i) The statement of comprehensive income required under United States generally accepted accounting principles is set out in Note 31 of Notes to the Financial Statements.

Note of historical cost Group profits and losses

53 weeks ended

52 weeks ended

October 1,

2005 September 25, 2004restated* September 27, 2003

restated*

(£ million) Reported profit on ordinary activities before taxation 192 171 154 Realization of revaluation gains of previous periods 4 2 1 Historical cost profit on ordinary activities before taxation 196 173 155 Historical cost profit/(loss) retained for the financial year 84 (430) 89

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

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MITCHELLS & BUTLERS PLC

CONSOLIDATED BALANCE SHEET

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

F-4

October 1, 2005 September 25,

2004 restated*

(£ million)Fixed assets Intangible assets – (Note 13) 10 10Tangible assets – (Note 14) 3,516 3,509

3,526 3,519Current assets Stocks – (Note 15) 39 43Debtors – (Note 16) 76 82Investments 71 144Cash at bank and in hand 129 81

315 350Creditors: amounts falling due within one year – (Note 17) (350) (326)

Net current (liabilities)/assets (35) 24

Total assets less current liabilities 3,491 3,543 Creditors: amounts falling due after one year – (Note 18) (1,786) (1,822)Provisions for liabilities and charges

Deferred tax – (Note 21) (185) (182)Other provisions – (Note 22) (4) (2)

Net assets before net pension liabilities 1,516 1,537 Net pension liabilities – (Note 7) (99) (114)

Net assets 1,417 1,423 Capital and reserves Called up share capital 35 37Share premium account 14 12Capital redemption reserve 2 —Revaluation reserve 335 339Profit and loss account reserve 1,031 1,035

Equity shareholders’ funds (i) 1,417 1,423

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

(i) A summary of the significant adjustments to shareholders’ funds that would be required had United States generally accepted accounting principles been applied instead of those generally accepted in the United Kingdom is set out in Note 31 of Notes to the Financial

Statements.

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MITCHELLS & BUTLERS PLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ FUNDS/INVESTED CAPITAL

Footnotes are set out on pages F-6 and F-7.

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

F-5

Share Capital Retained earnings and other reserves

Profit and loss account

Number of ordinary

shares (i)

Ordinary shares

(i)

Share premium

account (ii)

Capital redemption

reserve (ii) (iii)

Revaluation reserve

(ii)Own shares

(ii) (iv) Other (iii) (v) TotalInvested capital

Total share- holders’ funds/

invested capital

(millions) (£ million)

At September 28, 2002 (vi): As previously reported — — — — — — — — 2,475 2,475 Adoption of FRS 17 — — — — — — — — (182) (182)

As restated* — — — — — — — — 2,293 2,293 Pre separation actuarial loss on pension

schemes — — — — — — — — (86) (86)Pre separation deferred tax relating to

actuarial loss — — — — — — — — 27 27 Pre separation retained income* — — — — — — — — 58 58 Pre separation exchange differences — — — — — — — — 6 6 Funding with Six Continents Group — — — — — — — — 184 184 Arising from separation transaction* 734 37 — — 341 — 1,402 1,402 (2,482) (702)Allotment of ordinary shares 2 — 4 — — — — — — 4 Post separation actuarial gain on pension

schemes — — — — — — 15 15 — 15 Post separation deferred tax relating to

actuarial gain — — — — — — (5) (5) — (5)Post separation retained income* — — — — — — 30 30 — 30Post separation exchange differences — — — — — — 1 1 — 1 At September 27, 2003 (vi)* 736 37 4 — 341 — 1,443 1,443 — 1,825 Share consolidation (216) — — — — — — — — —Allotment of ordinary shares 4 — 8 — — — — — — 8 Purchase of own shares by employee

share trusts — — — — — (12) — (12) — (12)Release of own shares by employee

shares trusts — — — — — 1 — 1 — 1Credit in respect of employee share

schemes — — — — — — 7 7 — 7 Actuarial gain on pension schemes — — — — — — 39 39 — 39 Deferred tax relating to actuarial gain — — — — — — (12) (12) — (12)Revaluation surplus realized on disposals — — — — (2) — 2 2 — —Retained loss* — — — — — — (432) (432) — (432)Exchange differences — — — — — — (1) (1) — (1) At September 25, 2004 (vi)* 524 37 12 — 339 (11) 1,046 1,035 — 1,423 Allotment of ordinary shares 1 — 2 — — — — — — 2Purchase of own shares (25) (2) — 2 — (18) (83) (101) — (101)Release of own shares held — — — — — 17 (3) 14 — 14Credit in respect of employee share

schemes — — — — — — 4 4 — 4 Actuarial loss on pension schemes — — — — — — (7) (7) — (7)Deferred tax relating to actuarial loss — — — — — — 2 2 — 2 Revaluation surplus realized on disposals — — — — (4) — 4 4 — — Retained profit — — — — — — 80 80 — 80 At October 1, 2005 (vi) 500 35 14 2 335 (12) 1,043 1,031 — 1,417

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

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MITCHELLS & BUTLERS PLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ FUNDS/INVESTED CAPITAL (Continued)

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

F-6

(i) On incorporation, on October 2, 2002, the Company had an authorized share capital of £50,000, divided into 50,000 ordinary shares of £1 each, of which two were issued for cash at £1 per share. On February 6, 2003: • the entire authorized ordinary share capital of £50,000 was sub-divided into 5,000,000 ordinary shares of 1p each. This resulted in the issued share capital at this date consisting of 200 ordinary

shares of 1p each. • the authorized share capital was then increased to £10,000,050,000 by the creation of 999,994,999,998 additional ordinary shares of 1p each, two redeemable deferred shares of 1p each and one

redeemable preference share of £50,000; and • the two redeemable deferred shares and the redeemable preference share created were allotted and treated as paid up in full.On April 9, 2003, the authorized share capital of the Company was increased to £10,000,088,384 by the creation of 3,838,402 further ordinary shares of 1p each and an additional 4,000 ordinary shares of 1p each were issued. On the same day a 1 for 420 share consolidation took place leaving an authorized share capital of 2,380,961,520 ordinary shares of £4.20 each, two redeemable deferred shares of 1p each and one redeemable preference share of £50,000. As a result of this change the issued share capital of the Company became 10 ordinary shares of £4.20 each, two redeemable deferred shares of 1p each and one redeemable preference share of £50,000.On April 11, 2003, 866,665,032 ordinary shares of £4.20 each were issued to the shareholders of Six Continents PLC. The consideration for the shares issued was £3,640 million.On April 13, 2003, the authorized ordinary share capital was sub-divided into ordinary shares of 0.1p each and a 1 for 4,956 share consolidation took place leaving an authorized ordinary share capital of 2,017,764,000 shares of £4.956 each, two redeemable deferred shares of 1p each and one redeemable preference share of £50,000. The net effect was a 50 for 59 share consolidation of the Company’s ordinary share capital. The resulting issued ordinary share capital was 734,461,900 shares of £4.956 each, two redeemable deferred shares of 1p and one redeemable preference share of £50,000.On April 15, 2003, the Court approved a reduction in the nominal share capital from £4.956 per share to 5p per share. Of the total amount reduced of £3,603 million, an amount equivalent to the market value of Six Continents PLC of £3,078 million was returned to shareholders by the transfer of Six Continents PLC to the InterContinental Hotels Group PLC and the issue by that company of ordinaryshares to the Company’s shareholders and the remainder was credited to distributable reserves. The reduction in the nominal share capital from £4.956 per share to 5p per share resulted in a fall in the total authorized share capital from £10,000,088,384 to £100,938,200. On May 17, 2003, the redeemable deferred shares and redeemable preference share were redeemed at par value.During the year ended September 27, 2003, after separation from Six Continents, the Company issued 1,761,879 ordinary shares of 5p each under employee share schemes for an aggregate consideration of £4 million. On December 2, 2003, the Company’s ordinary share capital was consolidated on a 12 for 17 basis in connection with the payment of a special dividend (see Note 11 of Notes to the Financial Statements).The share consolidation resulted in the issue of 519,739,246 new ordinary shares of 7 1/12p each in replacement for 736,297,265 existing ordinary shares of 5p each. During the year ended September 25, 2004, the Company issued 73,486 ordinary shares of 5p each and 4,053,298 ordinary shares of 7 1/12p each under employee share schemes for an aggregate consideration of £8 million. During the year ended October 1, 2005, the Company issued 881,496 ordinary shares of 7 1/12p each under employee share schemes for an aggregate consideration of £2m. In the year ended October 1, 2005, the Company also repurchased 29,755,080 shares at a cost of £101 million. Of these shares 24,236,000 were canceled, 1,229,080 shares were purchased for the Employee Benefit Trusts (further details of the Employee Share Trusts are set out in Note 24 of Notes to the Financial Statements) and the remaining 4,290,000 were purchased as treasury shares. At October 1, 2005 and September 25, 2004 the authorized share capital of the Company was £100,938,200, comprising 1,424,304,000 ordinary shares of 7 1/12p each, one redeemable preference share of£50,000 and two redeemable deferred shares of 1p each.

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MITCHELLS & BUTLERS PLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ FUNDS/INVESTED CAPITAL (Continued)

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

F-7

(ii) The share premium account, capital redemption reserve and revaluation reserve are not distributable. The profit and loss account reserve is wholly distributable after the deduction for own shares. (iii) The 24,236,000 ordinary shares canceled during the year were repurchased at a cost of £83 million, including expenses. The cost has been charged against distributable profits and the nominal value of

the share capital canceled of £2 million has been transferred to the capital redemption reserve. (iv) The deduction for own shares within the profit and loss account reserve which was created on adoption of UITF 38 represents the shares in the Company held by the Group’s employee share trusts and

shares held in treasury (‘treasury shares’). During 2005, the trusts acquired 1,229,080 (2004 4,584,826) shares at a cost of £4 million (2004 £12 million). 3,453,846 (2004 509,388) shares were released on the exercise of share options for a consideration of £8 million (2004 £1 million) and for the satisfaction of awards accrued under the Six Continents Deferred Incentive Plan, the Short Term Deferred Incentive Plan and the Share Incentive Plan. The 2,139,879 shares held by the trusts at October 1, 2005 had a market value of £7.8 million (2004 4,364,645 shares held had a market value of £11.3 million). During 2005, 4,290,000 treasury shares were acquired at a cost of £14 million and, of these, 2,182,102 shares were subsequently released to employees on the exercise of share options for a total consideration of £6 million. The 2,107,898 shares held in treasury at October 1, 2005 had a market value of £7.7 million.

(v) Included in the profit and loss account reserve is a pension reserve of £99 million (2004 £114 million, 2003 £170 million) which equates to the net pension liabilities under FRS 17). (vi) Retained earnings and other reserves at October 1, 2005 included cumulative exchange adjustments of £6 million (2004 £6 million; 2003 £7 million, invested capital 2002 nil). (vii) Goodwill eliminated against shareholders’ funds was £50 million at September 28, 2002, September 27, 2003, September 25, 2004 and October 1, 2005. (viii) At the Annual General Meeting on February 2, 2006 authority was given to the Company to purchase up to 49,840,680 of its own shares until the Annual General Meeting in 2007.

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MITCHELLS & BUTLERS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

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

F-8

53 weeks ended

52 weeks ended

October 1, 2005

September 25, 2004

September 27, 2003

(£ million)

Operating activities - (Note 25) 400 378 306

Interest paid (113) (107) (51)Issue costs in respect of the securitized debt — (22) (1)Facility fees paid — — (15)Interest received 11 9 2

Returns on investments and servicing of finance (102) (120) (65)

Taxation United Kingdom corporation tax paid (43) (34) (44)

Purchase of tangible fixed assets (167) (150) (151)Sale of tangible fixed assets 57 51 48

Capital expenditure (110) (99) (103)

Equity dividends paid Final dividend for 2002/03 — (29) —Normal interim dividend for 2003/04 — (15) —Special interim dividend for 2003/04 — (501) —Final dividend for 2003/04 (34) — —Normal interim dividend for 2004/05 (16) — —

(50) (545) —

Net cash inflow/(outflow) before management of liquid resources and financing 95 (420) 94

Management of liquid resources Decrease/(increase) in short-term deposits and investments 73 (141) (1)

Financing Issue of ordinary share capital 2 8 4Purchase of own shares (101) (12) —Proceeds on release of own shares held 14 1 —Proceeds from issue of securitized debt — 1,900 —Repayments of principal in respect of securitized debt (35) (28) —Borrowings drawn down under syndicated loan facility — 25 1,350Borrowings repaid in respect of syndicated loan facility — (1,243) (132)Repayment of amounts due to Six Continents group — — (831)Net funding flows with Six Continents group — — 193Cash payment to former Six Continents PLC shareholders — — (702)

(120) 651 (118)

Increase/(decrease) in cash and overdrafts – (Note 27) 48 90 (25)

(i) The significant differences between the cash flow statement presented above and that required under United States generally accepted accounting principles are described in Note 31 of Notes to the Financial Statements.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS

Note 1 – Accounting Policies

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain tangible fixed assets. They comply with applicable accounting standards in the United Kingdom, including FRS 17 ‘Retirement Benefits’ which has been applied in full for the first time this year. Further details regarding the adoption of FRS 17 are provided in Note 3 of Notes to the Financial Statements.

The Group’s financial statements include the results of Mitchells & Butlers plc and all of its subsidiaries for the 53 week period ended October 1, 2005. The prior periods are for the 52 week periods ended September 25, 2004 and September 27, 2003. The respective balance sheets have been drawn up to October 1, 2005 and September 25, 2004.

Mitchells & Butlers plc was incorporated on October 2, 2002. On April 15, 2003, its ordinary shares were listed on the official list of the UK Listing Authority and admitted to trading on the London Stock Exchange following the separation of the Group’s leisure retailing activities from Six Continents PLC. In order to present the results of the Group on a meaningful basis, the financial statements for the 52 weeks ended September 27, 2003 were prepared under merger accounting principles to include the results and cash flows of those companies that comprised the Mitchells & Butlers group following separation as if theGroup had been in existence since October 1, 2001.

Turnover represents sales (excluding VAT and similar taxes, coupons and staff discounts) of goods and services, provided in the normal course of business.

Turnover primarily comprises food and beverage sales which are normally recognized and settled at the time of sale.

i) Goodwill

F-9

Basis of Accounting

Basis of consolidation

Merger accounting

Turnover

Fixed assets and depreciation

Any excess of purchase consideration for an acquired business over the fair value attributed to its separately identifiable assets and liabilities represents goodwill. Goodwill is capitalized as an intangible asset. Goodwill arising on acquisitions prior to September 30, 1998 was eliminated against invested capital. To the extent that goodwill denominated in foreign currencies continues to have value, it is translated into sterling at each balance sheet date and any movements are accounted for as set out under ‘foreign currencies’. On disposal of a business, any goodwill relating to the business and previously eliminated against invested capital, is taken into account in determining the profit or loss on disposal.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 1– Accounting Policies – (Continued)

ii) Tangible assets

iii) Revaluation

iv) Impairment

v) Depreciation and amortization

Deferred tax assets and liabilities are recognized, subject to certain exceptions, in respect of all material timing differences between the recognition of gains and losses in the financial statements and for tax purposes. Those timing differences recognized include accelerated capital allowances and short-term timing differences. Timing differences not recognized include those relating to the revaluation of fixed assets in the absence of a commitment to sell the assets, the gain on sale of assets rolled into replacement assets and the distribution of profits from overseas companies in the absence of any commitment by theCompany to make the distribution.

Deferred tax assets are recognized to the extent that it is regarded as more likely than not that they will be recovered.

Deferred tax is calculated on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

F-10

Properties are stated at cost, or valuation, less depreciation. All other fixed assets are stated at cost less depreciation. When implementing FRS 15 ‘Tangible Fixed Assets’ in the year to September 30, 2000, the Group did not adopt a policy of revaluing properties. The transitional rules of FRS 15 were applied so

that the carrying values of properties include an element resulting from previous valuations.

Surpluses or deficits arising from previous professional valuations of properties, realized on the disposal of an asset, are transferred from the revaluation reserve to the profit and loss account reserve.

Any impairment arising on an income-generating unit, other than an impairment which represents a consumption of economic benefits, is eliminated against any specific revaluation reserve relating to the impaired asset in that income-generating unit with any excess being charged to the profit and loss account. An income-generating unit is impaired if its carrying value exceeds its recoverable amount.

Goodwill and other intangible assets are amortized over their estimated useful lives, generally 20 years. Freehold land is not depreciated. Freehold and long leasehold properties are depreciated over 50 years from the date of acquisition to their estimated residual value. Leasehold properties are depreciated over the unexpired term of

the lease when less than 50 years. The cost of plant, machinery, fixtures, fittings, and equipment (owned or leased) is spread by equal installments over the estimated useful lives of the relevant assets, namely: Equipment in retail outlets 3-20 years Information technology equipment 3-7 years Vehicles 4-5 years Plant and machinery 4-20 years All depreciation and amortization is charged on a straight line basis. Deferred taxation

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 1 – Accounting Policies – (Continued)

Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership have passed to the Group, are capitalized in the balance sheet and depreciated on a straight line basis over their useful lives. The capital elements of future obligations under leases are included as liabilities in the balance sheet. The interest elements of the rental obligations are charged in the profit and lossaccount over the term of the lease.

Operating lease rentals are charged to the profit and loss account on a straight-line basis over the term of the lease.

For the Group’s defined benefit arrangements, the current service cost of providing pension benefits to employees, together with the cost of any benefits relating to past service, is charged to operating profit and included in staff costs. The interest cost and the expected return on assets are shown as a net amount of finance cost or income adjacent to interest. Actuarial gains and losses are recognizedimmediately in the statement of total recognized group gains and losses. The difference between the market value of the pension scheme assets and the present value of accrued pension liabilities is shownseparately as an asset or liability on the balance sheet, net of related deferred tax.

For the Group’s defined contribution arrangements, the charge against profit is equal to the amount of contributions payable.

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

Transactions in foreign currencies are recorded at the exchange rates ruling on the dates of the transactions, adjusted for the effects of any hedging arrangements. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the relevant rates of exchange ruling at the balance sheet date or, where appropriate, the rates of exchange fixed under the terms of the relevanttransactions.

The results of overseas operations are translated into sterling at weighted average rates of exchange for the period. Exchange differences arising from the translation of the results and the retranslation of opening net assets denominated in foreign currencies and foreign currency borrowings used to hedge those assets are taken directly to reserves. All other exchange differences are taken to the profit and lossaccount.

Debt instruments, such as secured loan notes, are stated initially at the amount of the proceeds, net of issue costs. Finance costs, which are the difference between the net proceeds and the total amount of payments to be made in respect of the instruments, are allocated to periods over the term of the debt at a constant rate on the carrying amount. The amount is increased by the finance cost in respect of thereporting period and reduced by payments made in respect of the debt in that period.

Amounts payable and receivable in respect of derivative financial instruments that hedge the interest rate exposures attached to the debt are accounted for on an accruals basis and treated as part of the finance cost.

F-11

Leases

Pensions

Stocks

Foreign currencies

Debt instruments and derivatives

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 1– Accounting Policies – (Continued)

The cost of share awards, being the difference between the market value of the shares on the date of grant of the award and the amount of consideration the participants may be required to pay for the shares, is charged to the profit and loss account over the performance period attached to the award. As permitted by UITF 17 ‘Employee Share Schemes’, no charge is made in respect of the Company’s Sharesave plan. The credit entry for the charge to the profit and loss account is reported in the reconciliation of movement in shareholders’ funds.

The cost of own shares held in treasury (‘treasury shares’) or by the Company’s employee share trusts for the purpose of fulfilling obligations in respect of the Group’s employee share plans are deducted from shareholders’ funds in the consolidated balance sheet.

Exceptional items are those which fall within the ordinary activities of the Group and which need to be disclosed by virtue of their size or incidence. Such items are included within operating profit, or interest payable, unless they represent profits or losses on the sale or termination of an operation, costs of a fundamental reorganization or restructuring (separation costs) or profits or losses on the disposal offixed assets, other than marginal adjustments to depreciation previously charged. In these cases, disclosure is made on the face of the profit and loss account after operating profit. Exceptional items and the taxthereon are excluded from the calculation of adjusted earnings per share.

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Estimates are used when accounting for items such as depreciation and amortization, asset impairments and pensions.

These financial statements do not comprise the Company’s ‘statutory accounts’ within the meaning of section 240 of the Companies Act 1985 of Great Britain. Statutory accounts for the 53 weeks ended October 1, 2005 and the 52 weeks ended September 25, 2004 have been delivered to the Registrar of Companies for England and Wales. The auditors’ reports on those accounts were unqualified.

The results of overseas operations have been translated into sterling at the weighted average rate of exchange for the year of £1 = €1.45 (2004 £1 = €1.48, 2003 £1 = €1.48) and euro denominated assets and liabilities have been translated into sterling at the rate of exchange at the balance sheet date of £1 = €1.47 (2004 £1 = €1.47, 2003 £1 = €1.44) .

F-12

Share-based compensation

Exceptional items

Use of estimates

Companies Act 1985

Note 2 – Exchange Rates

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

The Group has adopted FRS 17 ‘Retirement Benefits’ in full with effect from September 26, 2004. In prior years, the Group has complied with the transitional disclosure requirements of this standard.FRS 17 has been adopted in full in light of the introduction of International Financial Reporting Standards from January 1, 2005; the measurement principles in the equivalent international accounting standardare similar to those in FRS 17. The change in accounting policy therefore provides investors with greater clarity of earnings and net assets going forward.

The full adoption of FRS 17 has resulted in a change in the accounting treatment of the Group’s defined benefit arrangements. In particular, the net liabilities of the pension schemes are included on the balance sheet, current service costs and net financial returns are included in the profit and loss account and actuarial gains and losses are recognized in the statement of total recognized group gains and losses.Further information on FRS 17, including the impact on fiscal 2005, is provided in Notes 1 and 7 of Notes to the Financial Statements. Previous accounting under SSAP 24 ‘Accounting for Pension Costs’required the charging of regular costs and variations from regular cost in the profit and loss account with the difference between the cumulative amounts charged and the payments made to the pension schemesshown as either a prepayment or creditor on the balance sheet. This change in accounting policy has been accounted for as a prior year adjustment and previously reported figures have been restated accordingly,as follows:

The restated earnings have resulted in restated earnings per share numbers; basic, diluted and adjusted earnings per share have decreased by 1.3p, 1.2p and 1.3p from 22.4p, 22.2p and 22.2p to 21.1p, 21.0p and 20.9p respectively.

The restated earnings have resulted in restated earnings per share numbers; basic, diluted and adjusted earnings per share have decreased by 1.1p, 1.1p and 1.1p from 17.0p, 17.0p and 20.3p to 15.9p, 15.9p and 19.2p respectively.

F-13

Note 3 – Change in accounting policy

Group profit and loss account

52 weeks to September 25, 2004

Profit before

interest Interest Tax Earnings

(£ million)

As previously reported 285 (103) (57) 125Adoption of FRS 17 (12) 1 4 (7)

As restated 273 (102) (53) 118

Group balance sheet

September 25, 2004

Debtors Deferred taxation

Net pension liabilities

Equity shareholders'

funds

(£ million)

As previously reported 222 (217) — 1,642Adoption of FRS 17 (140) 35 (114) (219)

As restated 82 (182) (114) 1,423

Group profit and loss account

52 weeks to September 27, 2003

Profit before

interest Interest Tax Earnings

(£ million)

As previously reported 228 (63) (40) 125Adoption of FRS 17 (9) (2) 3 (8)

As restated 219 (65) (37) 117

Group balance sheet

September 27, 2003

Debtors Deferred taxation

Net pension liabilities

Equity shareholders’

funds

(£ million)

As previously reported 197 (203) — 2,064Adoption of FRS 17 (98) 29 (170) (239) As restated 99 (174) (170) 1,825

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 4 – Segment Analysis

The Group has two main retail operating segments: Pubs & Bars, focusing on drink and entertainment-led sites, and Restaurants, focusing on food and accommodation-led sites. The other Group activity is property development which is undertaken by SCPD.

Predominantly all of the Group’s turnover arises in the United Kingdom.

The segmental profit above has been shown before charging the exceptional items described in Note 8 of Notes to the Financial Statements.

F-14

Turnover

53 weeks ended 52 weeks ended

October 1,

2005 September 25,

2004 September 27,

2003

(£ million)

Pubs & Bars 957 913 873 Restaurants 697 641 614

Retail 1,654 1,554 1,487 SCPD 8 6 17

1,662 1,560 1,504

Profit

53 weeks ended 52 weeks ended

October 1,

2005

September 25, 2004

restated*

September 27, 2003

restated*

(£ million)

Pubs & Bars 180 173 172Restaurants 116 99 92

Retail 296 272 264SCPD 1 1 2

297 273 266

Exceptional items (i) (3) (2) (55)Interest on net debt (excluding exceptional interest charge in 2004 and 2003) (105) (101) (55)Net finance income/(expense) in respect of pensions 3 1 (2)

Profit before taxation 192 171 154

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

(i) The allocation of the 2005 exceptional items, which is a profit on disposal of fixed assets of £1 million and licensing costs of £4 million, is Pubs & Bars £2 million and Restaurants £1 million. Included within the 2004 exceptional items is a profit on the disposal of fixed assets of £2 million, all of which relates to Pubs & Bars. After allocating licensing costs and profits on disposal of fixed assets, segmental profits are Pubs & Bars £178 million (2004 £175 million, 2003 £172 million), Restaurants £115 million (2004 £99 million, 2003 £92 million) and SCPD £1 million (2004 £1 million, 2003 £2 million). Due to the nature of the other exceptional items, in 2004 and 2003, it is not possible to provide a meaningful allocation of the costs to the operating segments. See Note 8 of Notes to the Financial Statements.

Predominantly all of the Group’s profits arise in the United Kingdom.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 4 – Segment Analysis – (Continued)

Long-lived assets comprise tangible fixed assets and intangible fixed assets after depreciation and amortization respectively.

Other Segmental Information

F-15

Assets

October 1, 2005 September 25, 2004

Total Net

Operating Total

restated*

Net Operating restated*

(£ million)

Pubs & Bars 2,311 2,067 2,364 2,106 Restaurants 1,511 1,339 1,481 1,320

Retail 3,822 3,406 3,845 3,426 SCPD 19 17 24 19

3,841 3,423 3,869 3,445

Geographical analysisUnited Kingdom 3,795 3,385 3,821 3,405 Rest of Europe 46 38 48 40

3,841 3,423 3,869 3,445

Net operating assets reconciliationNet assets 1,417 1,423 Net debt 1,625 1,632 Corporate taxation 60 59 Deferred taxation 185 182 Net pension liabilities 99 114 Proposed dividend 37 34 Balances relating to exceptional items — 1

3,423 3,445

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (See Note 3 of Notes to the Financial Statements).

October 1,

2005 September 25,

2004 (£ million)

Long-lived assetsUnited Kingdom 3,487 3,479 Rest of Europe 39 40

3,526 3,519

53 weeks ended 52 weeks ended

October 1,

2005 September 25,

2004 September 27,

2003

(£ million)

Depreciation and amortizationPubs & Bars 66 61 55 Restaurants (i) 50 47 44

Retail 116 108 99 SCPD — — —

116 108 99

(i) Includes amortization of £nil (2004 £1 million, 2003 £1 million).

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 4 – Segment Analysis – (Continued)

Note 5 – Costs and Overheads

Note 6 – Auditors’ remuneration

Auditors’ remuneration paid to Ernst & Young LLP was:

Substantially all remuneration was paid in the United Kingdom. The fees paid in respect of the securitization have been accounted for as issue costs of the secured loan notes described in Note 19 of Notes to the Financial Statements. The separation and bid defense costs were recharged from Six Continents PLC during 2003 and charged to exceptional items (see Note 8 of Notes to the Financial Statements).

F-16

53 weeks ended 52 weeks ended

October 1, 2005 September 25,

2004 September 27, 2003

(£ million)

Capital expenditure Pubs & Bars 78 77 92Restaurants 91 73 56 Retail 169 150 148SCPD — — —

169 150 148

53 weeks ended 52 weeks ended

October 1, 2005 September 25,

2004 restated* September 27, 2003 restated*

(£ million)

Raw materials and consumables 438 406 385Changes in stocks of finished goods and work in progress 4 — 6Staff costs – (Note 7) 432 414 394Depreciation of tangible fixed assets 116 107 98Amortization of goodwill — 1 1Hire of plant and machinery 35 31 31Property rentals 47 45 45Other external charges (i) (ii) (iii) 297 285 283 1,369 1,289 1,243

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements). (i) Operating exceptional costs of £4 million (2004 £2 million, 2003 £5 million) are included in ‘Other external charges’.(ii) Repairs and maintenance costs are expensed when incurred as ‘Other external charges’. Repairs and maintenance costs for 2005 were £38 million (2004 £38 million, 2003 £36 million).(iii) Advertising costs are expensed when incurred as ‘Other external charges’. Advertising costs for 2005 were £3 million (2004 £3 million, 2003 £3 million).

53 weeks ended 52 weeks ended

October 1, 2005 September 25,

2004 September 27, 2003

(£ million)

Audit fees 0.5 0.4 0.4Audit related fees – securitization — 0.2 0.1 – separation and bid defense — — 3.4 – Sarbanes-Oxley 0.1 — —Tax services — — 0.1

0.6 0.6 4.0

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Employee numbers

Average number of employees, including part-time employees:

Pensions

Retirement and death benefits are provided for eligible employees in the United Kingdom principally by the Mitchells & Butlers Pension Plan (“MABPP”) and the Mitchells & Butlers Executive Pension Plan (“MABEPP”). The defined benefit sections of the plans closed to new entrants during 2002 with new members provided with defined contribution arrangements. The assets of the plans are held in self-administered trust funds separate from the Company’s assets.

The Group has adopted FRS 17 ‘Retirement Benefits’ in full for the 53 weeks ended October 1, 2005 and prior year amounts have been restated accordingly. See Note 3 of Notes to the FinancialStatements for further details. In previous years, the Group accounted for pensions under SSAP 24 and gave disclosures under the transitional arrangements of FRS 17.

Pension costs are assessed in accordance with the advice of independent qualified actuaries. The Group’s total pension cost included within operating profit for the 53 weeks ended October 1, 2005 underFRS 17 was £14 million (2004 £15 million, 2003 £14 million), comprising £13 million (2004 £14 million, 2003 £14 million) in respect of the defined benefit pension arrangements and £1 million (2004 £1 million, 2003 £nil) in respect of the defined contribution arrangements.

The total pension cost for the 53 weeks ended October 1, 2005 included within operating profit compares to £45 million (2004 £3 million, 2003 £5 million) which would have been incurred under SSAP 24. The SSAP 24 cost would have been higher this year reflecting the impact of the full actuarial variations of the pension schemes at March 31, 2004. If FRS 17 had not been adopted, the net assets of theGroup would have been £200 million higher at October 1, 2005 under SSAP 24.

Had SSAP 24 been applied in fiscal 2005 profit on ordinary activities before taxation, earnings available for shareholders, basic earnings per share, diluted earnings per share and adjusted earnings per share would decrease by £34 million, £24 million, 4.7p, 4.6p and 4.7p from £192 million, £133 million, 26.0p, 25.6p and 26.0p to £158 million, £109 million, 21.3p, 21.0p and 21.3p respectively.

F-17

Note 7 – Staff Costs

53 weeks ended 52 weeks ended

October 1, 2005

September 25, 2004

restated*

September 27, 2003

restated*

(£ million)

Wages and salaries 388 370 353 Social security costs 30 29 27 Pensions 14 15 14

432 414 394

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

53 weeks ended 52 weeks ended

October 1, 2005

September 25, 2004

September 27, 2003

(Number)

Retail 37,407 37,200 37,549 SCPD 4 7 7 Continuing operations 37,411 37,207 37,556

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Pensions – (Continued)

In the 53 weeks ended October 1, 2005, the Group paid regular contributions to the pension plans of £12 million in respect of the defined benefit arrangements and additional contributions of £30 million. In 2004, the regular contributions were £4 million with an additional £5 million having been prepaid in 2003 and additional contributions were £40 million. In 2003, the regular contributions were £10 million, including £5 million prepaid for the 52 weeks ended September 25, 2004, and additional contributions of £27 million were paid. Employer contribution rates to the defined benefit arrangements for 2005/06 are 16.5% for the MABPP and 34.0% for the MABEPP, which are expected to result in cash payments of £11 million in 2005/06. It has also been agreed that further additional contributions of £30 million will be paid over the next two years, of which £10 million relates to the agreement reached at the time of the securitization. £20 million of these additional contributions were paid on October 21, 2005.

The Group also paid £1 million (2004 £1 million, 2003 £nil) in respect of the defined contribution arrangements.

The valuations used for FRS 17 purposes are based on the results of the full actuarial valuations carried out at March 31, 2004 updated by the independent qualified actuaries to October 1, 2005. Scheme assets are stated at market value at October 1, 2005 and the liabilities of the schemes have been assessed as at the same date using the projected unit method. As the defined benefit sections of the pension plans are now closed to new members, the current service cost as calculated under the projected unit method will increase as members approach retirement. The principal financial assumptions used by the actuaries atthe balance sheet date were:

The combined assets of the MABPP and MABEPP, their expected rates of return and the value of the pension scheme assets and liabilities at the balance sheet date can be summarized as follows:

F-18

October 1, 2005

September 25, 2004

September 27, 2003

Wages and salaries increases 4.3% 4.3% 4.2% Pensions increases 2.8% 2.8% 2.7% Discount rate 5.0% 5.5% 5.3% Inflation rate 2.8% 2.8% 2.7%

Long-term rates of return

expected October 1,

2005

Value at October 1,

2005

Long-term rates of return

expected September 25,

2004

Value at September 25,

2004

Long-term rates of return

expected September 27,

2003

Value at September 27,

2003

(%) (£ million) (%) (£ million) (%) (£ million)

Equities 7.5 564 8.0 460 8.0 396Bonds 4.6 428 4.9 373 4.9 355Property 7.5 90 8.0 82 8.0 74 Total market value of assets 1,082 915 825Present value of scheme liabilities (1,230) (1,088) (1,068) Deficit in the schemes (148) (173) (243)Related deferred tax asset 49 59 73 Net pension liabilities (99) (114) (170)

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

The expected long term rates of return for various asset classes have been determined by reference to the yields available on long term fixed interest gilts (UK Government bonds). To reflect the additional risks associated with each asset class, risk premia relative to government bonds are assigned. These risk premia are set after taking actuarial advice and are long term assumptions. The risk premium appropriateto holdings in equities is 3.2% per year as at October 1, 2005 (2004 3.2%, 2003 3.3%).

The Group’s investment strategy for its defined benefit pension arrangements is decided by the trustees of the plans, following consultation with the Company. The objective of the investment strategy is to achieve a target rate of return that, alongside additional company contributions, will return the plans to a fully funded basis over the medium term.

This objective is achieved by taking an acceptable amount of risk relative to the liabilities, implemented by using specified allocations to a variety of asset classes that are expected over the long term to deliver the target rate of return. Volatility of return is further mitigated through diversification across a number of asset classes (equities, bonds, property), geographical investment markets (United Kingdom,United States, continental Europe, Asia-Pacific) and investment styles (mix between active and passive management). The current strategy is to target approximately 50% in equities, 42% in bonds and 8% in property.

F-19

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

The following amounts relating to the Group’s defined benefit arrangements have been recognized in the Group profit and loss account and statement of total recognized group gains and losses:

There are no material post-retirement obligations other than pensions.

F-20

53 weeks ended 52 weeks ended

October 1, 2005

September 25, 2004

September 27, 2003

(£ million, except percentages)Group profit and loss accountOperating profit:Current service cost (12) (14) (13)Past service cost (1) — (1) Charge to operating profit (13) (14) (14)Interest:Expected return on pension scheme assets 62 57 48Interest on pension scheme liabilities (59) (56) (50) Net finance income/(expense) in respect of pensions 3 1 (2) Net pension cost before taxation (10) (13) (16) Statement of total recognized group gains and lossesActual return less expected return on pension scheme assets 100 27 39Experience gains and losses arising on the scheme liabilities — 20 (11)Changes in assumptions underlying the present value of the scheme liabilities (107) (8) (99) Actuarial (loss)/gain recognized (7) 39 (71) Movement in the combined MABPP and MABEPP deficit is analyzed as follows: Deficit at September 26 (173) (243) (198)Operating profit charge (13) (14) (14)Net finance income 3 1 (2)Contributions paid 42 44 42Actuarial (loss)/gain recognized (7) 39 (71) Deficit at October 1 (148) (173) (243) History of experience gains and lossesDifference between the expected and actual return on scheme assets

Amount 100 27 39Percentage of scheme assets 9% 3% 5%

Experience gains and losses on scheme liabilitiesAmount — 20 (11)Percentage of the present value of the scheme liabilities — 2% (1%)

Total amount recognized in the STRGLAmount (7) 39 (71)Percentage of the present value of the scheme liabilities (1%) 4% (7%)

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Remuneration policy for Executive Directors

The following overall policy has applied throughout fiscal 2005 and will apply for fiscal 2006. This policy continues to apply notwithstanding the proposed amendments to elements of the Executive Directors’ remuneration packages. For subsequent years, the Committee will review the policy and recommend changes as appropriate.

The Committee is considering the impact of the transition to IFRS on its incentive schemes and will make adjustments to ensure that measurement of achievement against the performance conditions remain fair, reasonable and consistent.

Policy on Non-Executive Directors

Non-Executive Directors are paid a basic fee with additional fees for membership of the Remuneration and Audit Committees and for chairing those committees. The fees are approved by the Board onthe recommendation of the Executive Directors, based on a review of the fees paid in other companies of a similar size. It is intended to carry out a review of these fees in April 2006 as they have remainedunchanged since demerger. Non-Executive Directors do not participate in the Company’s share schemes.

Components of remuneration packages

F-21

• Remuneration packages are designed to attract, retain and motivate Executive Directors of the highest caliber. • The packages will be competitive within the leisure retailing industry and in those markets from which the organization recruits. • In fixing remuneration, note will be taken of reward levels in the wider community and of the remuneration structure throughout the organization. • There will be an appropriate balance between fixed and variable risk reward. The latter will be linked to the performance of the individual and of the Group. • Basic salary will normally be set at median market level when compared with an appropriate comparator group. • Using target or projected value calculations, performance-related incentives for Executive Directors will equate to approximately 60% of total remuneration. • Share and cash incentives will be designed so as to align the interests of Executive Directors with those of shareholders. Shares arising from share schemes should not normally be sold until the

minimum level of ownership has been satisfied.

(i) Basic salary The policy is to set salary broadly in line with median market levels and it is based on individual performance and on information from independent professional sources on the salary levels for

similar jobs in comparator companies. In setting salaries, salary levels in the Group and in the wider employment market are taken into account. The proportion of the Group’s basic salary bill attributable to the Directors and other members of the Executive Committee was 0.8% (2004 0.8%).

The average basic salary and short-term bonus of the Executive Directors during the year was £621,394 (2004 £660,055) and the average per non-Board employee was £13,320 (2004 £13,700); the ratio is therefore 1:47 (2004 1:48). The Board and the Remuneration Committee do not have a policy on this ratio, but aim to reward all employees fairly according to the nature of their role, their performance and market forces.

In the year under review, the average basic salary increase for members of the Executive Committee, which includes the Executive Directors, was 2.9% (2004 2.7%), whereas the average increase

for other employees was 3.8% (2004 3.5%). Of the components of the remuneration package, only basic salary is pensionable.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Performance Restricted Share Plan (“PRSP”)

The PRSP allows Executive Directors to receive cash or nominal cost options over shares subject to the satisfaction of a performance condition set by the Committee which is measured over a three year period.

Currently, three cycles are being operated, with performance conditions based on total shareholder return (“TSR”) and cash return on capital employed (“CROCE”) exceeding the weighted average cost of capital (“WACC”) as described below.

For each cycle 50% of the award is measured by reference to TSR performance against a comparator group of other companies.

For the cycle to September 2005 the Company has to finish in first to sixth position for an award to vest, graded between 100% of the TSR element of the award for first or second to 20% for sixth position. Below sixth position, the award relating to TSR lapses. The Company finished in ninth position, so no award will vest. For the cycles to September 2006 and September 2007, the Company has tofinish in first to fifth position for an award to vest, graded between 100% of the TSR element of the award for first to 20% for fifth position. Below fifth position the award relating to TSR lapses.

The vesting of the other 50% of the award is based on the average amount by which the Company’s CROCE exceeds WACC over the performance period. The award for this element of the performancemeasure is graded so that, for the cycles to September 2005 and September 2006, if the amount by which the CROCE exceeds WACC over the performance period is at least 4.5 percentage points, 100% of theCROCE element of the award will vest. If the excess is 3 percentage points, 20% of the award will vest. In between 3 and 4.5 percentage points, the award will be graded on a straight line basis. Below 3percentage points, there will be no award in respect of this element. The excess of CROCE over WACC for the cycle to September 2005 was 4.2 percentage points, therefore 84% of this element of the awardwill vest.

For the cycle to September 2007, the vesting of the other 50% is based on the excess of CROCE over WACC as described above, except that if the amount by which the CROCE exceeds WACC over the performance period is at least 5 percentage points, 100% of the CROCE element of the award will vest, whereas, if the excess is 3.5 percentage points, 20% will vest.

TSR was chosen as a measure because it aligns the interest of management with that of shareholders. The CROCE versus WACC measure was chosen to incentivize the Executive Directors to increase the cash returns generated by the business and to reduce the overall cost of funding to the Company, thereby maximizing the spread between the two and increasing shareholder value.

The Company’s auditors review the achievement of the performance condition under PRSP.

F-22

(ii) Annual performance bonus Challenging performance goals are set which must be achieved before a bonus becomes payable. Up to fiscal 2005, the maximum bonus opportunity has been 80% of salary. For the year to October 1,

2005, 60% (2003/4 50%) was linked to earnings per share (“eps”) and 20% (2003/4 30%) to personal and Group business objectives as set out on page F-26. At the Remuneration Committee’s discretion, the bonus is payable either in cash or in shares under the Short Term Deferred Incentive Plan as set out below. (iii) Short Term Deferred Incentive Plan (“STDIP”) Under the STDIP, an award of bonus shares earned in fiscal 2005 will be deferred for three years and, if the Executive Director is in the Company’s employment at the end of that period, the Company

will provide matching shares on a 1:1 basis. Vesting of matching shares takes place subject to the achievement of a three year performance condition, as approved by shareholders at the 2005 AGM. There is no retesting of the performance condition.

For awards of matching shares in respect of fiscal 2005, the performance condition is based on growth in eps as described under the Executive Share Option Plan below. Eps has been applied because it is a measure which reflects movement in shareholder value and the target, if met, would represent a significant and challenging improvement in the Company’s

performance. The Company’s auditors will review performance against the target.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Executive Share Option Plan (“EXSOP”)

Grants of EXSOP options have been made annually. Grants have been made at the discretion of the Committee according to seniority, the maximum value in any one year being two times salary. In determining the level of grant, the Company has taken into account the level of awards made under the Performance Restricted Share Plan. The grant of options has been restricted so that in each year theaggregate of (i) 25% of the market value of the ordinary shares over which an option has been granted under EXSOP and (ii) 33% of the market value of the ordinary shares over which an award has been madeunder the Performance Restricted Share Plan, has not exceeded 80% of an employee’s salary, taking the market value in each case as at the date of grant. These limits can only be exceeded in special circumstances. A performance condition, set by the Committee, has to be met before the options may be exercised. The performance condition for the grant made in May 2003 was based on the cumulativegrowth of the Company’s eps over the three year performance period exceeding the UK Retail Prices Index (“RPI”) by 12 percentage points. As this performance condition has been achieved, 100% of the options will become exercisable in May 2006. For options granted in 2004, the performance measure is that cumulative eps over the three year performance period must increase by at least 18 percentage pointsover the growth in RPI before the options can be exercised in full. For options granted in 2005, the performance measure is that the Company’s cumulative eps over the three year performance period must increase by at least 27 percentage points over the growth in RPI before options can be exercised in full. In measuring eps growth to determine whether the performance condition has been satisfied, theCommittee uses adjusted/pro forma eps as reported in the year. The Company’s auditors review the achievement of the performance measure under EXSOP. If these performance targets are not met in full, some or all of the options will lapse. Retesting is not permitted for options granted in 2004 and 2005.

Following shareholder approval to amend the rules of the STDIP and PRSP at the 2006 AGM, no further awards are intended to be made under the EXSOP.

Rolled-over options

On demerger from Six Continents, the Group’s executives, including the Executive Directors, with outstanding options under the Six Continents Executive Share Option Schemes, were permitted to roll over those options into options of equivalent value over the Company’s shares. The performance conditions ceased to apply to those options on demerger.

Other share plans

Executive Directors may participate in the all employee Sharesave Plan and Share Incentive Plan; performance targets do not apply to such plans.

Headroom limits

During the year, the Company has remained within its headroom limits for the issue of new shares for share plans as set out in the rules of the plans. At October 1, 2005, the position under both the ‘5% in 10 years’ limit for discretionary plans and the ‘10% in 10 years’ limit for all share plans was that shares equivalent to 1.9% of the ordinary share capital had been allocated.

F-23

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Companies used for comparison

In assessing overall levels of pay and benefits, the Committee takes into account the packages offered by comparator companies. These companies are chosen by the Committee following advice from independent external consultants, having regard to:

Directors’ contracts

It is the Company’s normal policy to provide Executive Directors with rolling 12 month contracts, which provide for 12 months notice from the Company and six months notice from the Director. Service contracts provide for summary termination in the event of gross misconduct. In other circumstances, any severance payment would normally be based on a valuation of net pay and benefits for any unexpirednotice period in the expectation that the Director had made reasonable attempts to mitigate his loss. Benefits normally include membership of a pension scheme and a healthcare scheme and use of a companycar. The Remuneration Committee has decided to introduce, for new appointees to the Board, phased compensation payments on loss of office. This reflects emerging best practice.

Non-Executive Directors do not have service contracts, but operate under a letter of appointment which provides for their tenure of office to be reviewed when they are about to stand for re-election, which is every three years. In any event, Non-Executive Directors may not serve after the AGM following their 67th birthday. There is no notice period and no provision for termination payments. The dates ofappointment of Non-Executive Directors are set out on page 48.

Policy regarding pensions

UK-based Executive Directors and senior employees participate with other members in the Mitchells & Butlers Executive Pension Plan and, if appropriate, the Mitchells & Butlers Executive Top-Up Scheme. Executives in Germany, who do not participate in these plans, are entitled to participate in relevant local plans. The Remuneration Committee is considering the Company’s current policy of using the Executive Pension Plan and the Executive Top-Up Scheme to provide pension and related benefits in a tax efficient way in light of the new legislation being introduced in April 2006.

F-24

(i) industry sector to include direct competitors and the wider retail sector;(ii) size – turnover, profits, margins and the number of people employed; and(iii) structure and complexity of the business.

Contract start date

Unexpired term (i)

Notice period

Compensation payable on

early termination

(ii) Director Mike Bramley 04.15.03 Indefinite 12 months n/a Tim Clarke 04.15.03 Indefinite 12 months n/a Tony Hughes 04.15.03 Indefinite 12 months n/a Karim Naffah 04.15.03 Indefinite 12 months n/a

(i) To normal retirement age (60).(ii) No payments should normally be payable on termination, other than the salary and benefits due for the notice period and, subject to the discretion of the Remuneration Committee, such entitlements under incentive plans that are consistent with the terms of such plans.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Policy on external appointments

The Company recognizes that its Directors may be invited to become non-executive directors of other listed companies and that such duties can broaden experience and knowledge, which will benefit theCompany. Executive Directors are therefore allowed to accept one non-executive appointment with the Company’s prior approval and as long as this is not likely to lead to conflict of interest. Fees received may be retained by the Director. Tim Clarke was appointed a non-executive director of Associated British Foods plc during the year, and received £34,090 during the year for that appointment.

Directors’ emoluments

Directors’ emoluments from Mitchells & Butlers plc since April 15, 2003:

The figures above represent emoluments earned during the periods shown. There were no payments for loss of office.

‘Benefits’ incorporate the value of all benefits arising from employment with the Company, which primarily relate to the provision of a company car and healthcare cover.

F-25

Total emoluments excluding pensions

Annual performance

bonus(i)Salaries and fees

2005 53 weeks

2004 (iv) 52 weeks

2003 (iv) 52 weeksBenefits

(£ thousand) Executive DirectorsMike Bramley 356 177 16 549 550 243Tim Clarke 528 289 25 842 913 368Tony Hughes 356 194 25 575 606 239Karim Naffah 376 205 14 595 641 254 Non-Executive DirectorsRoger Carr 203 — — 203 207 97George Fairweather 50 — — 50 49 23Drummond Hall (ii) 43 — — 43 7 —Sir Tim Lankester (iii) 43 — — 43 42 16Sara Weller 50 — — 50 49 23 Total 2005 2,005 865 80 2,950 Total 2004 (iv) 1,882 1,105 77 3,064 Total 2003 (iv) (v) 848 379 36 1,263

(i) Annual performance bonuses as described above for 2004 and 2003 were wholly deferred into shares under the terms of the STDIP.(ii) Appointed July 30, 2004, Drummond Hall’s fees are paid to Dairy Crest Group plc, his employer.(iii) Appointed May 16, 2003.(iv) The prior years are restated to remove the value of shares awarded under the Share Incentive Plan, shown on page F-28.(v) For 2003, the year of the Company’s separation from Six Continents PLC, emoluments cover the period from appointment to the Board of Mitchells & Butlers plc. Roger Carr and Tim Clarke, who were directors of Six Continents PLC for part of that year, received

emoluments, not included above, of £56,000 and £363,000 respectively from that company.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Salary

As at October 1, 2005 and November 29, 2005, the basic annual salaries of the Executive Directors were as shown below. The normal salary review date has been changed with respect from 2005/06 onwards from October 1 to January 1.

Annual performance bonus

The bonus for each Executive Director for 2004/05 was as follows:

To achieve maximum bonus, Directors had to meet targets to support the Company’s strategy related to the Company’s earnings per share performance, and Group and personal business objectives.

F-26

October 1,

2005 and

November 29,2005

(£ thousand) Executive Director Mike Bramley 350Tim Clarke 520Tony Hughes 350Karim Naffah 370

Gross

Maximum Gross value value of Group & Net value ofbonus of bonus bonus personal bonus

achievable awarded (i) deferred Eps target objectives awarded (ii) (£ thousand)

Executive DirectorMike Bramley 280 177 177 145 32 104 Tim Clarke 416 289 145 216 73 171 Tony Hughes 280 194 194 145 49 114 Karim Naffah 296 205 103 153 52 121

(i) The Committee exercised its discretion to defer 100% of bonus in respect of Mike Bramley and Tony Hughes and 50% of bonus in respect of Tim Clarke and Karim Naffah into shares under the STDIP. Tim Clarke and Karim Naffah received the balance of their award

in cash as both have achieved their mandatory stockholding requirement by December 31, 2005. (ii) Assuming income tax at 40% and NI at 1%.

• Group and personal business objectives related to: – like-for-like sales; – staff productivity; – guest satisfaction; – effective purchasing; – return on investment; and – asset management.

• Personal business objectives related to the financial performance in the business areas for which the Director was responsible.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Short Term Deferred Incentive Plan

In respect of fiscal 2003 and 2004, all of the Directors’ bonus awards were deferred into shares. The table below shows the maximum matching shares received or receivable. These include those shares in respect of fiscal 2004 which were awarded in December 2004.

As part of the terms of demerger, the Company provided 17,371 shares in December 2004 to Tim Clarke to meet entitlements he had accrued under the Six Continents Special Deferred Incentive Plan for fiscal 2003 to the date of demerger.

Performance Restricted Share Plan (“PRSP”)

The PRSP was introduced on demerger, initially to replace the Six Continents Long Term Incentive Plan for Mitchells & Butlers’ executives. Participation in the PRSP is by means of an option which is exercisable for nominal consideration, once the performance condition has been satisfied.

In fiscal 2005, there were three cycles of the plan in operation as outlined below.

F-27

2005

Number of

shares Value of Number of Value of Value of awarded shares shares shares Total Total

Number of shares as in 2004/05 awarded vested in vested in number of value as at Earliestshares as at 09.26.04 (v) (vi) in the year the year the year shares at 10.01.05 vesting

at 09.26.04 (i) (vii) (ii) (vi) (iii) 10.01.05 (iv) date (£ thousand) (£ thousand) (£ thousand) (£ thousand)

Director Mike Bramley 17,343 45 31,463 101 5,781 18 43,025 157 12.07.05 Tim Clarke 26,682 69 59,874 193 8,894 28 77,662 284 12.07.05 Tony Hughes 17,343 45 39,329 127 5,781 18 50,891 186 12.07.05 Karim Naffah 18,678 48 42,264 136 6,226 20 54,716 200 12.07.05

(i) based on share price on September 25, 2004 – 259p(ii) based on share price on December 7, 2004, the date of award – 322.25p(iii) based on share price on December 9, 2004, the date of vesting – 316.5p(iv) based on share price on October 1, 2005 – 365.25p(v) these shares relate to the bonus award in respect of fiscal 2004(vi) no performance condition attached to these matching shares under the rules of the STDIP as approved by shareholders on demerger. All future awards of matching shares have a performance condition. Shares vest subject to tax and NI(vii) the weighted average grant date fair value per bonus or matching share awarded was 301.6p

(i) A 30-month performance period to September 2005. The combined award, which vests on December 1, 2005, from the two measures (TSR and excess of CROCE over WACC as described on page F-22) is equivalent to 37.8% of basic salary at the date of the award.

(ii) A 36-month performance period to September 2006. The combined maximum award from the two measures is equivalent to 90% of basic salary at the date of the award. (iii) A 36-month performance period to September 2007. The combined maximum award is also equivalent to 90% of basic salary at the date of the award.

Details of the performance measures are set out on page F-22.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

The maximum number of shares available as at the year end in respect of all three cycles as described above, and assuming all performance targets are achieved, is:

The awards which vested in 2003, were paid in cash on December 10, 2003. The gross amounts were: Mike Bramley – £98,000; Tim Clarke – £150,000; Tony Hughes – £98,000 and Karim Naffah –£105,000.

In respect of the all employee SIP, as described on page F-23, the Executive Directors had the following conditional entitlements as at October 1, 2005, subject to the rules of the plan:

The following information relates to the pension arrangements provided for Mike Bramley, Tim Clarke, Tony Hughes and Karim Naffah under the Defined Benefit Section of the Mitchells & Butlers Executive Pension Plan (“the Plan”), and in the cases of Tim Clarke, Tony Hughes and Karim Naffah under the unfunded Executive Top-up Scheme (“MABETUS”).

The Plan is a funded, Inland Revenue approved, occupational pension scheme with a final salary section of which these Directors are members. All Plan benefits are subject to Inland Revenue limits. Where such limitation is due to the earnings ‘cap’, MABETUS is used to provide pension and death benefits to the level that would otherwise have applied. The Plan’s main features applicable to the Executive Directors are:

F-28

Maximum potential shares as at 09.26.04

Shares lapsed in year (i)

Shares granted in year (ii)

Maximum potential shares as at 10.01.05

Maximum potential award as at 10.01.05

(iii)Earliest vesting date

(iv)

(£ thousand)

Executive Director Mike Bramley 355,888 88,636 98,822 366,074 1,337 12.01.05 Tim Clarke 545,361 136,363 146,822 555,820 2,030 12.01.05 Tony Hughes 355,888 88,636 98,822 366,074 1,337 12.01.05 Karim Naffah 382,954 95,454 104,470 391,970 1,432 12.01.05

(i) no awards vested during fiscal 2005(ii) the share price on December 3, 2004, the date of award, was 321.50p(iii) based on the share price on October 1, 2005 – 365.25p(iv) shares vest subject to tax and NI

Share Incentive plan (“SIP”)

Free shares awarded on 06.30.03 at

232.5p (i) which vest on 06.30.06

Free shares awarded on 06.28.04 at

271.75p (i) which vest on 06.28.07

Free shares awarded on

06.30.05 at 330p (i) which vest on 06.30.08 (ii) Total shares

DirectorMike Bramley 692 1,044 872 2,608 Tim Clarke 910 1,103 909 2,922 Tony Hughes 756 1,044 872 2,672 Karim Naffah 834 1,103 909 2,846

(i) the mid market share price on the day before the award, which is used to determine the number of shares to be allocated to each director(ii) the share price on June 30, 2005, the date of award, was 334.25p

Directors’ pensions

(i) a normal pension age of 60; (ii) pension accrual of one-thirtieth of final pensionable salary for each year of pensionable service subject to a cap of two-thirds of final pensionable salary; (iii) life assurance cover of four times pensionable salary; (iv) pensions payable in the event of ill health; and (v) spouse’s and dependants’ pensions on death.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Members of the Plan have the option to pay Additional Voluntary Contributions, subject to Inland Revenue limits, but members of MABETUS are unlikely to benefit by doing so; neither any such contributions, nor the resulting benefits, are included in the above table.

Transfer values have been calculated in a manner consistent with the Retirement Benefits Schemes –Transfer Values (GN11) published by the Institute of Actuaries and the Faculty of Actuaries.

The following is additional information relating to Directors’ pensions under the Plan and MABETUS.

F-29

Directors’ pension benefits

Years of pensionable

Age at October 1,

Directors’ Contribution

Transfer value of accrued pension

Increase in transfer value over year less

Directors’

Increase in accrued pension

Increase in accrued pension

Accrued pension at October 1,

service 2005 (i) 09.25.04 10.01.05 contributions (ii) (iii) 2005 (iv)

(£) (£pa) (£) Director Mike Bramley 25 54 17,200 2,609,000 3,270,000 643,800 20,600 14,900 216,500Tim Clarke 15 48 15,500 2,368,900 2,976,600 592,200 19,900 13,000 256,600Tony Hughes 10 57 15,500 1,426,900 1,877,300 434,900 16,000 13,300 108,500Karim Naffah 14 42 15,500 944,800 1,262,700 302,400 16,000 12,300 141,600

(i) Contributions paid in the year by the Directors under the terms of the plans.(ii) The absolute increase in accrued pension during the year including any increase for inflation.(iii) The increase in accrued pension during the year excluding any increase for inflation.(iv) Accrued pension is that which would be paid annually on retirement at 60, based on service to October 1, 2005.

Additional pension information

(i) Dependants’ pensions On the death of a Director before his normal pension age, a widow’s pension equal to one-third of his own pension is payable; a child’s pension of one-sixth of his pension is payable for each of a maximum of two eligible children. On the death of a Director after payment of his pension commences, a widow’s pension of two-thirds of the Director’s full pension entitlement is payable; in addition, a child’s pension of one-sixth of his full pension entitlement is payable for each of a maximum of two eligible children.

(ii) Early retirement rights After leaving the service of the Company, the member currently has the right to draw his accrued pension at any time after his 50th birthday, subject to a discount for early payment.

(iii) Pension increases All pensions in excess of Guaranteed Minimum Pensions are subject to contractual annual increases in line with the annual rise in the RPI, subject to a maximum of 5% per annum. In addition, it is the Company’s present aim to pay additional increases based on two-thirds of any rise in the RPI above 5% per annum.

(iv) Other discretionary benefits Other than the discretionary pension increases mentioned in (iii), there are no discretionary practices which are taken into account in calculating transfer values on leaving service.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 7 – Staff – (Continued)

Except as detailed in the PRSP table, no Directors’ options over Mitchells & Butlers plc shares lapsed during the year. No price was paid for the grant of any of the options.

Options granted during the year are exercisable under the Executive Share Option Plan (the performance condition for which is set out on page F-23).

Options granted under the Executive Share Option Plan are exercisable between May 27, 2006 and May 23, 2015 subject to the achievement of performance conditions. Rolled-over options became exercisable on demerger from Six Continents in April 2003 and, if not exercised, will lapse on various dates up to October 2012. Rolled-over options ceased to be subject to performance conditions on demerger. Sharesave options are exercisable between October 1, 2006 and March 31, 2011.

Shares under option at October 1, 2005 are designated as:

The market price per share on October 1, 2005 was 365.25p and the range during the year to October 1, 2005 was 257.5p to 389.75p per share.

The above table excludes potential awards under the Performance Restricted Share Plan, which are shown on page F-28.

F-30

Directors’ share options

Ordinary shares under option

Weighted average

option price Option price

Earliest exercise

date

Last expiry date 09.25.04 Granted Exercised 10.01.05

Director Mike Bramley A 97,704 97,704 346,277 272.93p 214.47p 05.27.12 B 346,277 C 562,146 214,658 776,804 260.04p 05.27.06 05.23.15 Total 1,006,127 214,658 97,704 1,123,081 264.01p Tim Clarke A 250,245 244,400 727,074 280.76p 214.47p 02.28.11 5,845 181.42p B 727,074 C 870,003 318,920 1,188,923 258.71p 05.27.06 05.23.15 Total 1,847,322 318,920 250,245 1,915,997 267.08p Tony Hughes A 144,189 144,189 409,127 280.07p 214.47p 05.27.12 B 409,127 C 567,619 214,658 782,277 259.40p 05.27.06 05.23.15 Total 1,120,935 214,658 144,189 1,191,404 266.50p Karim Naffah A 437,302 2,783 394,712 261.19p 181.42p 02.28.11 321,784 189.50p B 281,977 C 609,287 226,924 836,211 259.43p 05.27.06 05.23.15 Total 1,328,566 226,924 324,567 1,230,923 260.00p

A Where the options are exercisable and the market price per share was above the option price at October 1, 2005; B Where the options are exercisable, but the market price per share at October 1, 2005 was below the option price; and C Where the options are not yet exercisable and the market price was above the option price on October 1, 2005.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

The above shareholdings are all beneficial interests and include shares held on behalf of the Executive Directors by the Trustee of the Company’s Share Incentive Plan which are detailed on page F-28. None of the Directors has a beneficial interest in the shares of any subsidiary or in debenture stocks of the Company or any subsidiary.

At October 1, 2005, the Executive Directors, as potential beneficiaries under the Company’s Employee Benefit Trust (“the Trust”) were technically deemed to be interested in 1,303,068 (2004 3,736,671, 2003 nil) Mitchells & Butlers ordinary shares held in the Trust.

The Company’s Register of Directors’ Interests, which is open to inspection at the registered office, contains full details of Directors’ shareholdings and share options.

Note 8 – Exceptional Items

All exceptional items relate to continuing operations.

Total exceptional items after tax are excluded from the calculation of adjusted earnings per share (see Note 12 of Notes to the Financial Statements).

F-31

Note 7 – Staff – (Continued) Ordinary shares of 7 1/12p 10.01.05 09.25.04

(number) Directors’ shareholdings Executive Directors Mike Bramley 47,926 18,176 Tim Clarke 427,978 352,960 Tony Hughes 62,793 24,164 Karim Naffah 144,380 48,627 Non-Executive Directors Roger Carr 11,067 1,067 George Fairweather — — Drummond Hall 2,500 — Sir Tim Lankester — — Sara Weller 2,200 2,200

53 weeks ended 52 weeks ended

October 1,

2005 September 25,

2004 September 27,

2003 (£ million)

Operating exceptional items Licensing costs (i) 4 — —Securitization costs (ii) — 2 4Abortive acquisition costs (iii) — — 1 Total operating exceptional items 4 2 5 Non-operating exceptional items Profit on disposal of fixed assets (1) (2) —Separation costs (iv) — — 42 Total non-operating exceptional items (1) (2) 42 Exceptional interest charge (v) — 2 8 Total exceptional items before tax 3 2 55Tax credit on above items (3) (3) (9) Exceptional tax credit (vi) — — (22) Total exceptional items after tax — (1) 24

(i) Licensing costs are those incurred in relation to obtaining new licenses for the Group’s pubs and pub restaurants as required by the Licensing Act 2003.(ii) Securitization costs related to operating expenses incurred in relation to the securitization of the Group’s UK pubs and restaurants business (see Note 19 of Notes to the Financial Statements).(iii) Abortive acquisition costs were incurred in respect of the Scottish & Newcastle retail business.(iv) Separation costs related to the costs of separating the Group’s operations from the hotels and soft drinks businesses of Six Continents PLC. The cost includes external advisers’ fees, bid defense costs and various other costs directly related to the separation.(v) The exceptional interest charge in 2004 arose from the acceleration of facility fee amortization in respect of the Group’s borrowing facilities which were repaid on securitization.(vi) The exceptional tax credit arose in respect of group relief received from the Six Continents group.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 8 – Exceptional Items – (Continued)

Note 9 – Interest on net debt

F-32

53 weeks ended 52 weeks ended

October 1,

2005 September 25,

2004 September 27,

2003

(£ million) Interest payable and similar charges Securitized debt 116 100 —Bank overdrafts and loans — before exceptional charge — 10 33— exceptional charge — 2 8Six Continents group — — 24

116 112 65Interest receivable (i) (11) (9) (2) Interest on net debt 105 103 63

(i) Interest receivable includes £nil (2004 £nil, 2003 £1 million) from the Six Continents group.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 10 – Tax on Profit on Ordinary Activities

F-33

Tax charge 53 weeks ended 52 weeks ended

October 1, 2005

September 25, 2004

restated*

September 27, 2003

restated*

Before exceptional

items Exceptional

items Total

(£ million) United Kingdom corporation tax at 30% (2004 30%, 2003 30%)

Current year 45 1 46 45 36Prior years (1) (1) (2) (2) —

Total current tax 44 — 44 43 36 Deferred tax

Origination and reversal of timing differences: Capital allowances in excess of depreciation 8 (3) 5 9 (10) Other timing differences (2) — (2) — 2

Prior years — — — (1) 1

6 (3) 3 8 (7) Deferred tax on defined benefit pension schemes 12 — 12 2 8 Total deferred tax 18 (3) 15 10 1 Tax on profit on ordinary activities 62 (3) 59 53 37 Further analyzed as tax relating to:

Profit before exceptional items 62 — 62 56 68Exceptional items (see Note 8):

Operating — (1) (1) — (1) Non-operating — (2) (2) (2) (6) Interest — — — (1) (2) Tax credit — — — — (22)

62 (3) 59 53 37

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 10 – Tax on Profit on Ordinary Activities – (Continued)

The key factors which may affect future tax charges include continuing capital expenditure, the availability of accelerated tax depreciation, and changes in tax legislation.

Note 11 – Dividends

The proposed final dividend was paid on February 6, 2006 to shareholders registered on December 9, 2005.

F-34

Tax reconciliations 53 weeks ended 52 weeks ended

October 1,

2005

September 25, 2004

restated*

September27, 2003

restated*

(percentage) Reconciliation of United Kingdom standard rate to current tax rate United Kingdom corporation tax at standard rate 30.0 30.0 30.0Permanent differences 2.1 3.9 1.4Capital allowances in excess of depreciation (4.0) (7.4) (5.1)Pensions timing differences (6.3) (1.3) 1.6Other timing differences 0.9 0.1 (0.2)Overseas losses not utilized 0.2 0.3 0.7Adjustment to tax charge in respect of prior years (0.1) (1.1) —Exceptional items 0.1 0.6 (5.1) Effective current tax rate 22.9 25.1 23.3 Reconciliation of United Kingdom standard rate to overall rate of tax United Kingdom standard rate of corporation tax 30.0 30.0 30.0Adjusted for:

Permanent differences 2.1 3.9 1.4Overseas losses not utilized 0.2 0.3 0.7Adjustment to tax charge in respect of prior years (0.3) (1.8) —Other differences — — 0.4

Impact of exceptional items (1.3) (1.4) (8.5) Effective tax rate 30.7 31.0 24.0

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

Factors which may affect future tax charges

53 weeks ended 52 weeks ended

October 1, 2005

September 25,2004

September 27, 2003

(£ million)

Normal interim dividend paid of 3.20p per share (2004 2.85p per share) 16 15 — Proposed final dividend of 7.55p per share (2004 6.65p per share, 2003 5.65p per share) 37 34 29 Total normal dividend of 10.75p per share (2004 9.50p per share, 2003 5.65p per share) 53 49 29 Special interim dividend paid in 2004 of 68p per share — 501 —

53 550 29

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 12 – Earnings per Ordinary Share

Basic earnings per ordinary share are calculated by dividing the earnings available for shareholders of £133 million (2004 £118 million restated *, 2003 £117 million restated *) by 511 million (2004 559 million, 2003 735 million), being the weighted average number of ordinary shares in issue during the year excluding own shares held in treasury and by employee share trusts.

Diluted earnings per ordinary share are calculated by adjusting basic earnings per ordinary share to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding under the Group’s share option schemes. The resulting weighted average number of ordinary shares is 520 million (2004 563 million, 2003 736 million).

In arriving at the weighted average number of shares for fiscal 2003, it has been assumed that the ordinary shares of Mitchells & Butlers plc in issue on April 15, 2003 following separation from Six Continents of 734 million was the number of shares in issue prior to separation.

In December 2003, the Company combined the payment of a special dividend (see Note 11 of Notes to the Financial Statements) with a 12 for 17 consolidation of its share capital. These transactions were designed to have the same overall commercial effect, in terms of net assets, earnings and number of shares, as a buy-back of shares at fair value. Accordingly, earnings per share for prior periods were not restated for the share consolidation.

Adjusted earnings per ordinary share are calculated as follows:

Adjusted earnings per ordinary share are disclosed in order to show performance undistorted by exceptional items and thereby give shareholders a clearer understanding of the trading performance of the Group.

Note 13 – Intangible Fixed Assets

Goodwill is being amortized over its useful economic life, which is considered to be a 20-year period.

F-35

53 weeks ended 52 weeks ended

October 1, 2005

September 25, 2004 restated*

September 27, 2003 restated*

(pence per ordinary share)

Basic earnings 26.0 21.1 15.9 Exceptional items, less tax thereon – (Note 8) — (0.2) 3.3 Adjusted earnings 26.0 20.9 19.2

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

Goodwill (£ million)

Cost: At September 28, 2003, September 25, 2004 and October 1, 2005 15 Amortization: At September 28, 2003 4

Provided 1 At September 25, 2004 and October 1, 2005 5 Net book value: At October 1, 2005 and September 25, 2004 10

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 14 – Tangible Fixed Assets

Properties

Properties comprising land, buildings and certain fixtures, fittings and equipment, are included above at cost or valuation, less depreciation as required. The transitional rules of FRS 15 have been followed, permitting the carrying value of properties as at October 1, 1999 to be retained.

In 1996, a group restructuring by Six Continents resulted in the transfer at book value of certain fixed assets to a subsidiary that subsequently became part of the Mitchells & Butlers group. The book value included the effect of revaluations undertaken prior to 1996. Accordingly, the carrying value of the Group’s fixed assets reflects those revaluations in its historic cost, which at October 1, 2005 amounted to £386 million (2004 £392 million). In addition, the carrying value of the Group’s fixed assets reflects the 1999 revaluation (see below) which at October 1, 2005 amounted to £335 million (2004 £339 million).

The most recent valuation of properties reflected in the carrying value of fixed assets was undertaken in 1999 and covered all properties then owned by the Group other than leasehold properties having an unexpired term of 50 years or less. This valuation was undertaken by external Chartered Surveyors, Chesterton plc, internationally recognized valuers, in accordance with the Appraisal and Valuation Manual ofthe Royal Institution of Chartered Surveyors. The basis of valuation was predominantly existing use value and had regard to trading potential.

Historical cost

The comparable amounts under the historical cost convention for properties would be:

F-36

Land and buildings

Fixtures, fittings and equipment Total

(£ million) Cost or valuation: At September 28, 2003 2,814 933 3,747

Additions 67 83 150Disposals (37) (70) (107)Exchange adjustments — (1) (1)

At September 25, 2004 2,844 945 3,789

Additions 76 93 169Disposals (34) (60) (94)Reclassification 5 (5) —

At October 1, 2005 2,891 973 3,864 Depreciation: At September 28, 2003 54 171 225

Provided 17 90 107On disposals (3) (49) (52)

At September 25, 2004 68 212 280

Provided 19 97 116On disposals — (48) (48)

At October 1, 2005 87 261 348 Net book value: At October 1, 2005 2,804 712 3,516 At September 25, 2004 2,776 733 3,509

October 1, 2005

September 25, 2004

(£ million)

Cost 2,477 2,424Depreciation (95) (76) Net book value 2,382 2,348

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 14 – Tangible Fixed Assets – (Continued)

The split of the net book value of land and buildings is as follows:

Note 15 – Stocks

The replacement cost of stocks approximates to the value stated above. Work in progress is in respect of property developments.

Note 16 – Debtors

Note 17 – Creditors: amounts falling due within one year

Note 18 – Creditors: amounts falling due after one year

F-37

October 1, September 25,

2005

2004

Cost or valuation Depreciation

Net book value

(£ million)

Freehold 2,593 (37) 2,556 2,530 Leasehold: – unexpired term of more than 50 years 113 (4) 109 102

– unexpired term of 50 years or less 185 (46) 139 144

2,891 (87) 2,804 2,776 Cost or valuation of land and buildings: 1999 valuation 1,389Cost 1,502

2,891

October 1, 2005

September 25, 2004

(£ million)

Work in progress 17 20 Goods held for resale 22 23

39 43

October 1, 2005

September 25, 2004

restated*

(£ million)

Trade debtors 2 3 Other debtors (i) 38 42 Prepayments 36 37

76 82

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements). All amounts fall due within one year. (i) Net of provision for bad debts of £2 million (2004 £2 million).

October 1, 2005

September 25, 2004

(£ million)

Borrowings – (Note 19) 39 35 Trade creditors 67 41 Corporate taxation 60 59 Other taxation and social security 42 42 Accrued charges 78 90 Proposed dividend 37 34 Other creditors 27 25

350 326

October 1, 2005

September 25, 2004

(£ million)

Borrowings – (Note 19) 1,786 1,822

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 19 – Borrowings

On November 13, 2003, a group company, Mitchells & Butlers Finance plc, issued £1,900 million of secured loan notes in connection with the securitization of the majority of the Group’s UK pubs and restaurants business owned by Mitchells & Butlers Retail Limited. The funds raised were mainly used to repay existing bank borrowings of £1,243 million, pay issue costs of £23 million and return £501 million to shareholders by way of a special dividend (see Note 11 of Notes to the Financial Statements).

The loan notes consist of six tranches as follows:

The expected remaining WAL (weighted average life) is based on the amortization profile of the individual note tranches and assumes refinancing of the A1 and A3 notes on the margin step-up dates below.

The notes are secured on substantially all of the Group’s property and future income streams therefrom.

Interest on the Class A1 notes is payable at three month LIBOR plus a margin of 0.45%, stepping up to LIBOR plus 0.90% in December 2010. These notes are fully hedged using interest rate swaps which fix the interest rate payable.

The Class A3 notes were issued in principal amount of $418.75 million, with interest payable at three month US dollar LIBOR plus a margin of 0.45%, stepping up to US dollar LIBOR plus 0.90% in December 2010. These notes are fully hedged using currency swaps and interest rate swaps, whereby all principal and interest liabilities are swapped into sterling providing an initial principal of £250 million and fixed interest payable.

F-38

October 1, 2005 September 25, 2004

Within one

year After one

year Total Within one year

After one year Total

(£ million)

Securitized debt (i) 36 1,785 1,821 32 1,821 1,853 Loan notes (ii) 2 — 2 2 — 2 Finance leases 1 1 2 1 1 2

Total borrowings 39 1,786 1,825 35 1,822 1,857

(i) This debt is secured as explained below.(ii) These loan notes are partially secured by a bank deposit.

October 1, 2005

September 25, 2004

(£ million)

Analysis by year of repayment: Due within one year or on demand 39 35Due between one and two years 38 37Due between two and five years 128 121Due after five years 1,620 1,664 Total borrowings 1,825 1,857 Securitized debt

Tranche

Initial principal borrowed Interest Principal repayment period

Principal outstanding

at October 1, 2005

Expected WAL

(£ million) (£ million)

A1 200 Floating By installments 2011 to 2028 200 5 years A2 550 5.574% By installments 2003 to 2028 507 11 years A3 250 Floating By installments 2011 to 2028 250 5 years B1 350 5.965% By installments 2003 to 2023 330 9 years B2 350 6.013% By installments 2015 to 2028 350 19 years C 200 6.469% By installments 2029 to 2030 200 24 years 1,900 1,837

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 19 – Borrowings – (Continued)

The overall cash interest rate payable on the loan notes is 6% after taking account of interest rate hedging and the cost of the provision of a financial guarantee provided by Ambac in respect of the Class A notes.

The carrying value of the loan notes in the Group balance sheet at October 1, 2005 is analyzed as follows:

The securitization is governed by various covenants, warranties and events of default, many of which apply to Mitchells & Butlers Retail Limited (“MBRL”), the Group’s main operating subsidiary. In particular, MBRL must maintain a minimum free cash flow to debt service coverage ratio of no less than 1.10:1 as measured on any financial quarter date, in respect of the most recent relevant period or themost recent relevant year. MBRL must also maintain an aggregate consolidated net worth of at least £300,000,000 at the end of each year. MBRL is restricted in its ability to: (a) make any payments or other disposal of cash or other funds to another Group entity (including payment of dividends, payment of interest, distributions, repayment of loans, capital contributions etc.), except for any payment specificallypermitted (such as payment to the intra group services companies) unless (i) all payments due and payable under the working capital facility have been made, (ii) no event of default has occurred and iscontinuing or would occur as a result of the making of such payment, and (iii) certain minimum free cash flow to debt service ratios (at least 1.3:1) and EBITDA to debt service payments ratios (at least 1.7:1)are met; (b) sell, lease, transfer or dispose of any secured properties without the consent of the security trustee, and proceeds from these permitted disposals shall be deposited into a secured account withrestrictions on the use of such funds (disposal of assets other than secured properties are also subject to certain conditions); (c) acquire or substitute any business over which security is granted, or would begranted; (d) incur more than £7,500,000 in permitted encumbrances or more than £7,500,000 in permitted indebtedness. The Company is required to incur or reserve for each fiscal year a required maintenance amount equal to 6.4% of the actual aggregate turnover in respect of the preceding fiscal year of the secured properties.

No events of default have occurred.

At October 1, 2005, MBRL had short-term deposits and cash of £119 million (2004 £98 million). Of this amount, £86 million (2004 £74 million) was available to make permitted payments to other companies in the Mitchells & Butlers group, including £24 million (2004 £22 million) of dividends, £17 million (2004 £20 million) was held for general working capital purposes within MBRL and £16 million (2004 £4 million) of disposal proceeds were on deposit in a secured account.

At October 1, 2005, MBRL had net assets of £1,407 million (2004 £1,334 million restated) (after the elimination of inter-company balances excluding Term Advances) and distributable reserves of £748 million (2004 £709 million). Permitted dividends payments of £24 million (2004 £22 million) were allowed under the terms of the securitization covenants, leaving restricted net assets of £1,383 million (2004 £1,312 million restated) and restricted distributable reserves of £724 million (2004 £687 million) in MBRL at October 1, 2005. Access to these reserves would require the consent of the security trustee and cannot be guaranteed. The 2004 restatements relate to the reclassification of inter-company balances of £21 million.

F-39

(£ million) Principal outstanding at September 26, 2004 1,872Principal repaid during the period (35) Principal outstanding at October 1, 2005 1,837Unamortized deferred issue costs (20)Accrued interest 4 Carrying value at October 1, 2005 1,821

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 19 – Borrowings – (Continued)

As the restricted net assets of MBRL represent more than 25% of the consolidated net assets of the Group, parent company information is presented on Schedule I on pages SH1-1 to SH1-4.

Facilities committed by banks

Note 20 – Financial Instruments

Treasury management

The financial risks faced by the Group are identified and managed by a central Treasury department. The activities of the Treasury function are carried out in accordance with Board approved policies and are subject to regular audit. The department does not operate as a profit center.

On November 13, 2003, the Group completed a securitization of the majority of its pubs, raising a total of £1.9 billion through the issue of secured loan notes. The securitization provides the Group with long-term financing at a cash interest cost of 6% pre-tax, including the interest rate and currency swap agreements put in place to hedge the floating rate tranches. The Treasury department is responsible for ensuring that robust procedures are in place for the Company to comply with the various covenants attached to the securitization.

The Treasury department is also responsible for identifying and managing foreign exchange exposures. Whilst the Group has limited operations in Germany, the impact of movements in the Euro exchange rate do not have a material effect on the Group’s results. Consequently the only foreign exchange hedging in place relates to the US dollar denominated secured loan notes that were issued inconnection with the securitization.

Permitted interest rate hedging methods include the use of fixed rate debt, interest rate swaps, options (such as caps) and forward rate agreements. The only hedging arrangements in place are interest rate and currency swaps taken out at the time of the securitization to fix the interest cost relating to floating rate loan notes. As required under the terms of the securitization, these hedging arrangements mean thatthe interest payable in respect of the securitized debt is totally fixed.

Credit risk on treasury transactions is minimized by operating a policy for the investment of surplus funds that generally restricts the bank counterparties to those with an A credit rating or better, or those providing adequate security. Limits are also set with individual counterparties. Most of the Group’s surplus funds are held with financial institutions in the UK.

Principal hedging instruments

In order to manage interest rate risk, the Group has entered into interest rate and currency swap agreements that fix the interest payable on the floating rate tranches of the securitized debt (see Note 19 of Notes to the Financial Statements). At October 1, 2005, these agreements were for a notional principal amount of £450 million (2004 £450 million) and are contracted until 2028.

F-40

October 1, 2005

September 25, 2004

(£ million)

Utilized — — Unutilized 280 280 280 280

Unutilized facilities expire: Within one year (i) 220 220 Between two and five years 60 60 280 280

(i) The unutilized facility expiring within one year was renewed in November 2005 for a further 364 days. This facility is a liquidity facility entered into as part of the securitization structuring; it can only be drawn in very limited circumstances under the terms of the securitization agreements.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 20 – Financial Instruments – (Continued)

Currency and interest rate profile of financial assets and liabilities

After taking into account the interest rate and currency swap agreements entered into by the Group, the currency and interest profile of the Group’s financial assets and liabilities at the balance sheet date was:

Financial assets comprise cash of £129 million (2004 £81 million) and current asset investments of £71 million (2004 £144 million).

Financial liabilities comprise borrowings of £1,825 million (2004 £1,857 million) as disclosed in Note 19 of Notes to the Financial Statements and provisions for property leases of £4 million (2004 £2 million).

Floating rate financial assets and liabilities bear interest at market rates based on LIBOR.

Currency risk

After taking into account the above hedging arrangements, the Group does not have a material profit and loss account exposure to foreign exchange gains or losses on monetary assets and liabilities. In addition, the Group is predominantly UK based and therefore does not have a significant currency exposure from its operations. Under the provisions of SSAP 20, any foreign exchange gains or losses arisingfrom the translation of overseas net assets are recognized in the statement of total recognized group gains and losses.

F-41

October 1, 2005 September 25, 2004

Financial assets Total Non- interest

bearing Floating

rate Total Non- interest

bearing Floating

rate

(£ million)

Sterling 194 3 191 219 2 217 Euro 6 — 6 6 — 6 200 3 197 225 2 223

October 1, 2005

Financial liabilities

Total before currency

swaps Currency

swaps

Total after currency

swaps Non- interest

bearing Floating

rateFixed rate

Weighted average fixed

rate (%)

Weighted average

period fixed (years)

(£ million)

Sterling 1,581 248 1,829 4 2 1,823 6.15 12 US dollar 248 (248) — — — — — —

1,829 — 1,829 4 2 1,823 6.15 12

September 25, 2004

Financial liabilities Total before

currency swaps Currency

swaps

Total after currency

swaps Non- interest bearing

Floating rate

Fixed rate

Weighted average fixed

rate %

Weighted average

period fixed (years)

(£ million)

Sterling 1,611 248 1,859 2 2 1,855 6.15 13 US dollar 248 (248) — — — — — —

1,859 — 1,859 2 2 1,855 6.15 13

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 20 – Financial Instruments – (Continued)

Fair values of financial assets and liabilities

The various tranches of the securitized debt have been valued using period end mid-market quoted prices. The fair value of interest rate and currency swaps is the estimated amount which the Group could expect to pay or receive on the termination of the agreements. These amounts are based on quotations from counterparties and take into consideration interest and exchange rates prevailing at the balance sheetdate. Other financial assets and liabilities are either short-term in nature or book values approximate to fair values.

Gains and losses on hedges

Gains and losses on derivative instruments used for hedging are not recognized in the financial statements until the hedged exposure is itself recognized. Unrecognized gains and losses on hedging instruments are as follows:

F-42

October 1, 2005 September 25, 2004

Net book value Fair value

Net book value Fair value

(£ million) Cash 129 129 81 81Current asset investments 71 71 144 144Securitized debt (excluding interest rate and currency swaps) (1,808) (1,952) (1,835) (1,909)Loan notes (2) (2) (2) (2)Finance leases (2) (2) (2) (2)Provisions for property leases (4) (4) (2) (2)Interest rate swaps — (31) — (6)Currency swaps (13) (17) (18) (22) (1,629) (1,808) (1,634) (1,718)

Gains Losses Net

£ million)

Unrecognized at September 28, 2003 — — —Arising in the year but not recognized — (10) (10) Unrecognized at September 25, 2004 — (10) (10)Arising in previous years that were recognized in the year — 1 1 Arising in previous years that were not recognized in the year — (9) (9)Arising in the year but not recognized — (26) (26) Unrecognized at October 1, 2005 — (35) (35) Analyzed as: Expected to be recognized in 2005/06 — (6) (6)Expected to be recognized thereafter — (29) (29) — (35) (35)

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 21 – Deferred taxation

Analyzed as tax on timing differences related to:

Tax losses with a value of £6 million (2004 £6 million), have not been recognized as their use is uncertain or not currently anticipated. These tax losses do not have an expiry date.

No provision has been made for deferred tax on the sale of properties at their revalued amounts or where gains have been or are expected to be deferred against expenditure on replacement assets for an indefinite period until the sale of the replacement assets. The total amount unprovided is estimated at £214 million (2004 £230 million restated). It is not anticipated that any such tax will be payable in the foreseeable future.

The Company had a deferred tax asset of £2 million at October 1, 2005 (2004 £1 million as reclassified) relating to other timing differences.

Note 22 – Other Provisions for Liabilities and Charges

F-43

(£ million)

At September 27, 2003, as previously reported 203Adoption of FRS 17 (29) As restated* 174Profit and loss account* 8 At September 25, 2004* 182Profit and loss account 3 At October 1, 2005 185

October 1, 2005

September 25, 2004 restated*

(£ million)

Fixed assets 141 135Deferred gains 49 49Other (5) (2)

185 182

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

Other

Reorganization Property leases (i) Total

(£ million)

At September 28, 2003 1 3 4Utilized (1) (1) (2) At September 25, 2004 — 2 2Additions — 2 2 At October 1, 2005 — 4 4

(i) Onerous property leases extend for periods of up to nine years.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 23 – Share Options

Rolled-over options were originally granted under the Six Continents Executive Share Option Schemes. On separation from Six Continents on April 15, 2003, employees and certain former employees of the Six Continents group had the opportunity to roll over their options over Six Continents PLC shares into options over Mitchells & Butlers plc shares. The number of options exchanged and the exercise priceswere calculated in accordance with a formula based on the closing Six Continents’ and opening Mitchells & Butlers’ share prices, both averaged over a five-day period. Exercise prices in respect of outstanding options range from £2.14 to £3.64 and options are exercisable until May 28, 2012. These options are not subject to a future performance condition.

Since separation, the Company has granted options under the following share schemes:

F-44

Rolled over options

Post separation

options Total

(millions)

Rolled over options on separation 26.5 — 26.5Granted since separation — 10.7 10.7Exercised (1.8) — (1.8)Lapsed (0.6) — (0.6) At September 27, 2003 24.1 10.7 34.8Granted 0.8 7.1 7.9Exercised (4.6) — (4.6)Lapsed (5.1) (1.0) (6.1) At September 25, 2004 15.2 16.8 32.0Granted — 5.9 5.9Exercised (6.4) — (6.4)Lapsed (1.6) (2.1) (3.7) At October 1, 2005 7.2 20.6 27.8

(i) Sharesave – an Inland Revenue approved savings scheme open to all employees, whereby the proceeds from the savings contract, of either three or five years duration, are used to purchase shares under options granted at the commencement of the savings contract, at a discount of 20% to the market value of the shares at the date of grant. The options may be exercised up to six months after the maturity of the savings contract. Outstanding options over 4.9 million shares were in existence at October 1, 2005 (2004 4.7 million); 1.1 million at an exercise price of £2.59, 1.2 million (2004 1.5 million) at an exercise price of £2.09 and 2.6 million (2004 3.2 million) at an exercise price of £1.69.

(ii) Executive Share Option Plan – a discretionary share plan whereby options may be granted to senior management at the prevailing market price at the date of grant. Options generally become exercisable

between three and ten years after the date of grant, subject to achievement of a performance condition. Details of the performance conditions attached to these options are contained in Note 7 of Notes to the Financial Statements. Outstanding options over 11.3 million shares were in existence at October 1, 2005 (2004 8.0 million); 3.4 million at an exercise price of £3.26, 0.1 million at an exercise price of £3.31, 3.8 million (2004 3.9 million) at an exercise price of £2.53 and 4.0 million (2004 4.1 million) at an exercise price of £2.19.

(iii) Performance Restricted Share Plan – a discretionary share plan whereby options are granted to a small group of the Company’s most senior executives. Options are exercisable within two years after the

completion of a three-year performance period. Details of the performance conditions attached to these options are contained in Note 7 of Notes to the Financial Statements. Outstanding options over 4.4 million shares were in existence at October 1, 2005 (2004 4.1 million); all options have an exercise price of £1 per employee per share plan.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 23 – Share Options – (Continued)

Movements in the options outstanding under these schemes for the period from separation to September 27, 2003 are as follows:

Movements in the options outstanding under these schemes for the 52 weeks ended September 25, 2004 are as follows:

F-45

Options outstanding at April 15,

2003 Granted Exercised Lapsed or canceled

Options outstanding at September 27,

2003

Fair value of options granted

during the period

Rolled over options No. of shares (000) 26,479 — (1,762) (596) 24,121 Range of option prices (pence) 181.4–364.5 — 181.4–214.5 214.5–364.5 181.4–364.5 — Sharesave No. of shares (000) — 3,995 — (23) 3,972 Range of option prices (pence) — 169.0 — 169.0 169.0 68.4 Executive Share Option Plan No. of shares (000) — 4,264 — (33) 4,231 Range of option prices (pence) — 219.0 — 219.0 219.0 25.7 Performance Restricted Share Plan No. of shares (000) — 2,502 — — 2,502 Range of option prices (pence) — —(i) — — —(i) 202.0

(i) The exercise price relating to the Performance Restricted Share Plan is £1 per participating employee per share plan.

Options outstanding at September 27,

2003 Granted Rolled over Exercised

Lapsed or canceled

Options outstanding at September 25,

2004

Fair value of options

granted during the period

Rolled over options No. of shares (000) 24,121 — 774 (4,571) (5,099) 15,225 Range of option prices (pence) 181.4–364.5 — 186.8–364.5 181.4–268.0 181.4–364.5 181.4–364.5 — Sharesave No. of shares (000) 3,972 1,569 — (4) (816) 4,721 Range of option prices (pence) 169.0 209.0 — 169.0 169.0–209.0 169.0–209.0 87.4 Executive Share Option Plan No. of shares (000) 4,231 3,901 — — (201) 7,931 Range of option prices (pence) 219.0 252.5 — — 219.0–252.5 219.0–252.5 48.9 Performance Restricted Share Plan No. of shares (000) 2,502 1,610 — — — 4,112 Range of option prices (pence) —(i) —(i) — — — —(i) 206.8

i) The exercise price relating to the Performance Restricted Share Plan is £1 per participating employee per share plan.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 23 – Share Options – (Continued)

The weighted average fair values of options granted in the period from separation to September 25, 2004 were estimated using the Black – Scholes option pricing model with the following assumptions: dividend yield of 2004 4% (2003 4%), expected volatility of 2004 31% (2003 23%), risk free interest rate of 2004 5% (2003 4%) and expected life of 2004 31 months, 36 months or 60 months, (2003 18 months,30 months, 36 months or 60 months).

Movements in the options outstanding under these schemes for the 53 weeks ended October 1, 2005 are as follows:

In fiscal 2005, the Company refined the methods used to estimate the fair value of options by using separate option pricing models and assumptions for each plan. The fair values of options granted during the 53 weeks ended October 1, 2005 were estimated using the Binomial option pricing model for the Executive Share Option Plan, a combination of the Binomial option pricing model and Monte Carlosimulations for the Performance Restricted Share Plan and the Black – Scholes option pricing model for the sharesave schemes.

The weighted average fair values of options granted were estimated with the following weighted average assumptions: dividend yield 3%, expected volatility of 31%, risk free interest rate of 4% and expected life of 36 (Performance Restricted Share Plan), 42 (Sharesave 3 year scheme), 66 (Sharesave 5 year scheme) or 78 (Executive Share Option Plan) months.

F-46

Options outstanding at

September 25, 2004 Granted Exercised Lapsed or canceled

Options outstanding

at October 1, 2005

Fair value of options granted

during the period

Rolled over options No. of shares (000) 15,225 — (6,366) (1,637) 7,222 Range of option prices (pence) 181.4 – 364.5 — 181.4 – 364.5 214.5 – 364.5 214.5 – 364.5 — Sharesave No. of shares (000) 4,721 1,163 (22) (930) 4,932 Range of option prices (pence) 169.0 – 209.0 258.5 169.0 – 209.0 169.0 – 258.5 169.0 – 258.5 104.9 Executive Share Option Plan No. of shares (000) 7,931 3,460 — (69) 11,322 Range of option prices (pence) 219.0 – 252.5 326.1 – 330.5 — 219.0 – 252.5 219.0 – 330.5 86.0 Performance Restricted Share Plan No. of shares (000) 4,112 1,285 — (1,025) 4,372 Range of option prices (pence) —(i) —(i) — —(i) —(i) 211.6

(i) The exercise price relating to the Performance Restricted Share Plan is £1 per participating employee per share plan.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 23 – Share Options – (Continued)

Movements in the options outstanding under the option schemes for the period from separation to September 27, 2003 are as follows:

Movements in the options outstanding under the option schemes for the 52 weeks ended September 25, 2004 are as follows:

F-47

Options

outstanding at April 15, 2003 Granted Exercised

Lapsed or canceled

Options outstanding at

September 27, 2003 Options

exercisable at September 27, 2003

Rolled over options No. of shares (000) 26,479 — (1,762) (596) 24,121 24,121 Weighted average option price (pence) 257.8 — 214.4 294.6 260.1 260.1 Sharesave No. of shares (000) — 3,995 — (23) 3,972 — Weighted average option price (pence) — 169.0 — 169.0 169.0 — Executive Share Option Plan No. of shares (000) — 4,264 — (33) 4,231 — Weighted average option price (pence) — 219.0 — 219.0 219.0 — Performance Restricted Share Plan No. of shares (000) — 2,502 — — 2,502 — Weighted average option price (pence) — —(i) — — —(i) —

Options

outstanding at September 27, 2003 Granted Exercised

Lapsed or canceled

Options outstanding at

September 25, 2004 Options

exercisable at September 25, 2004

Rolled over options No. of shares (000) 24,121 774(ii) (4,571) (5,099) 15,225 15,225 Weighted average option price (pence) 260.1 257.0 220.5 289.6 261.9 261.9 Sharesave No. of shares (000) 3,972 1,569 (4) (816) 4,721 — Weighted average option price (pence) 169.0 209.0 169.0 170.1 182.1 — Executive Share Option Plan No. of shares (000) 4,231 3,901 — (201) 7,931 — Weighted average option price (pence) 219 252.5 — 225.1 235.3 — Performance Restricted Share Plan No. of shares (000) 2,502 1,610 — — 4,112 — Weighted average option price (pence) —(i) —(i) — — —(i) —

(i) The exercise price relating to the Performance Restricted Share Plan is £1 per participating employee per share plan.(ii) Rolled over options.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 23 – Share Options – (Continued)

Movements in the options outstanding under the option schemes for the 53 weeks ended October 1, 2005 are as follows:

Summarized information about options outstanding under the share option schemes at October 1, 2005 is as follows:

F-48

Options

outstanding at September 25, 2004 Granted Exercised

Lapsed or canceled

Options outstanding at

October 1, 2005 Options

exercisable at October 1, 2005

Rolled over options No. of shares (000) 15,225 — (6,366) (1,637) 7,222 7,222 Weighted average option price (pence) 261.9 — 246.3 279.2 271.9 271.9 Sharesave No. of shares (000) 4,721 1,163 (22) (930) 4,932 — Weighted average option price (pence) 182.1 258.5 171.4 186.6 199.3 — Executive Share Option Plan No. of shares (000) 7,931 3,460 — (69) 11,322 — Weighted average option price (pence) 235.3 326.1 — 234.8 263.1 — Performance Restricted Share Plan No. of shares (000) 4,112 1,285 — (1,025) 4,372 — Weighted average option price (pence) —(i) —(i) — —(i) —(i) —

(i) The exercise price relating to the Performance Restricted Share Plan is £1 per participating employee per share plan.

Options outstanding Options exercisable

Range of exercise prices (pence) Number

outstanding Weighted average

remaining contract life Weighted average

option price Number exercisable Weighted average

option price (000) (years) (pence) (000) (pence)

Rolled over options 181.4p to 242.0p 924 — 214.5 924 214.5 242.1p to 303.0p 5,146 — 269.0 5,146 269.0 303.1p to 364.5p 1,152 — 330.5 1,152 330.5

7,222 — 271.9 7,222 271.9

Sharesave 169.0 p 2,586 1.8 169.0 — — 209.0 p 1,221 2.6 209.0 — — 258.5 p 1,125 3.6 258.5 — — Executive Share Option Plan 219.0 p 4,030 0.7 219.0 — — 252.5 p 3,838 1.7 252.5 — — 326.1 p 3,371 2.7 326.1 — — 330.5 p 83 2.8 330.5 — — Performance Restricted Share Plan – (i) 4,372 1.1 —(i) — —

(i) The exercise price relating to the Performance Restricted Share Plan is £1 per participating employee per share plan.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 24 – Own shares

Own shares held by the Group and Company represent the shares in the Company held in treasury (“treasury shares”) and by the employee share trusts. During the year, 4,290,000 treasury shares were acquired at a cost of £14 million and of these, 2,182,102 shares were subsequently released to employees on the exercise of share options for a total consideration of £6 million. The 2,107,898 shares held in treasury at October 1, 2005 had a market value of £7.7 million. The aggregate nominal value of the treasury shares held at October 1, 2005 was £0.1 million.

During the year, the employee share trusts acquired 1,229,080 shares at a cost of £4 million and released 3,453,846 shares to employees on the exercise of options and other share awards for a totalconsideration of £8 million. The 2,139,879 shares held by the trusts at October 1, 2005 had a market value of £7.8 million (September 25, 2004, 4,364,645 shares held had a market value of £11.3 million).

The Company has established two employee share trusts:

Share Incentive Plan (“SIP”) Trust

The SIP Trust was established in 2003 to purchase shares on behalf of employees participating in the Company’s Share Incentive Plan. Under this scheme, eligible employees are awarded free shares which are normally held in trust for a holding period of at least three years. After five years the shares may be transferred to or sold by the employee free of income tax and national insurance contributions. Thetrust buys the shares in the market with funds provided by the Company. During the holding period, dividends are paid directly to the participating employees. At October 1, 2005, the trustees, Hill SamuelESOP Trustee Limited, were holding 836,811 (2004 627,974) shares in the Company. Of these shares, 809,503 (2004 605,689) have been conditionally gifted to employees. During fiscal 2005 309,993 shareswere conditionally awarded to employees under the Share Incentive Plan with a grant date fair value per share of 334.3p.

Employee Benefit Trust (“EBT”)

The EBT was established in 2003 in order to satisfy the exercise or vesting of existing and future share options and awards under the Executive Share Option Plan, Performance Restricted Share Plan, Short Term Deferred Incentive Plan and the Rolled over options. The trust purchases shares in the market from time to time, using funds provided by the Company, based on expectations of future requirements.Dividends are waived by the trust. At October 1, 2005, the trustees, Mourant & Co Trustees Limited, were holding 1,303,068 shares (2004 3,736,671) shares in the Company. Of these shares, 179,402 (2004277,320) have been conditionally gifted to employees and 822,859 (2004 822,859) are under option.

Note 25 – Reconciliation of Operating Profit before exceptional items to Net Cash Inflow from Operating Activities

F-49

53 weeks ended 52 weeks ended

October 1,

2005 September 25, 2004 restated * September 27,

2003 restated*

(£ million)

Operating profit before exceptional items 297 273 266 Depreciation and amortization 116 108 99 Earnings before interest, taxation, depreciation, amortization and exceptional items 413 381 365 Decrease in stocks 4 — 6 (Increase)/decrease in debtors (2 ) 10 3 Increase in creditors 12 20 2 Additional pension contributions (30 ) (40 ) (27 )Movement in provisions 2 (2 ) (4 )Other non-cash items 5 14 (1 ) Net cash inflow from operating activities before expenditure relating to exceptional items 404 383 344 Operating exceptional expenditure (4 ) (4 ) (2 )Separation costs paid — (1 ) (36 ) Net cash inflow from operating activities 400 378 306

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 26 – Net Cash Flow

Note 27 – Net Debt

F-50

53 weeks ended 52 weeks ended

October 1,

2005 September 25, 2004 September 27,

2003

(£ million)

Net cash inflow from operating activities before expenditure relating to exceptional items (i) 404 383 344 Net capital expenditure (110 ) (99 ) (103 ) Operating cash inflow after net capital expenditure 294 284 241 Net interest paid (102 ) (98 ) (49 )Tax paid (43 ) (34 ) (44 ) Normal cash flow 149 152 148 Normal dividends paid (50 ) (44 ) —Issue of ordinary share capital 2 8 4 Purchase of own shares by employee share trusts (101 ) (12 ) —Proceeds on release of shares by employee share trusts 14 1 —Special dividends paid — (501 ) —Operating exceptional expenditure (4 ) (4 ) (2 )Separation costs paid — (1 ) (36 )Facility fees paid — — (15 )Prepaid issue costs in respect of the securitization — (22 ) (1 ) Net cash flow 10 (423 ) 98

(i) Includes £30 million (2004 £40 million, 2003 £27 million) of additional pension contributions.

Cash at

bank and in hand (i) Overdraft (i)

Liquid resources (current

asset investments)

Borrowings due within one year

Borrowings due after one year

Amounts due to Six

Continents group Total

At September 29, 2002 16 — 2 (3 ) (1 ) (831 ) (817 )Cash flow prior to separation (9 ) — 4 — — 257 252 Balances at separation 7 — 6 (3 ) (1 ) (574 ) (565 )Cash flow after separation (3 ) (13 ) (3 ) (218 ) (1,000 ) 574 (663 ) At September 27, 2003 4 (13 ) 3 (221 ) (1,001 ) — (1,228 )Movement arising from cash flows 77 13 141 189 (821 ) — (401 )Non-cash movement in net debt — — — (3 ) — — (3 ) At September 25, 2004 81 — 144 (35 ) (1,822 ) — (1,632 )Movement arising from cash flows 48 — (73 ) 35 — — 10 Non-cash movement in net debt — — — (39 ) 36 — (3 ) At October 1, 2005 129 — 71 (39 ) (1,786 ) — (1,625 )

(i) Represents a movement in cash and overdrafts of £48 million inflow (2004 £90 million inflow, 2003 £25 million outflow) (see Consolidated Statement of Cash Flows).

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 27 – Net Debt – (Continued)

Reconciliation of net cash flow to movements in net debt

Note 28 – Financial Commitments

The Group has annual commitments under operating leases at October 1, 2005 which expire as follows:

F-51

October 1, 2005 September 25,

2004September 27,

2003

(£ million)

Increase/(decrease) in cash and overdrafts 48 90 (25 )Management of liquid resources (73 ) 141 1 Financing activities 120 (651 ) 118 Issue of ordinary share capital 2 8 4 Purchase of own shares (101 ) (12 ) —Proceeds on release of own shares held 14 1 — Net cash flow – (Note 26) 10 (423 ) 98 Issue costs paid in respect of securitized debt — 22 —Net funding flows with Six Continents group — — 193 Cash payment to former Six Continents PLC shareholders — — (702 ) Decrease/(increase) in net debt arising from cash flows 10 (401 ) (411 )Non-cash movement in net debt (3 ) (3 ) — Decrease/(increase) in net debt 7 (404 ) (411 )Opening net debt (1,632 ) (1,228 ) (817 ) Closing net debt (1,625 ) (1,632 ) (1,228 )

Operating lease commitments

October 1, 2005 September 25, 2004

Properties

Other

Properties

Other

(£ million)

Within one year 2 3 1 3 Between one and five years 3 3 2 3 After five years 37 — 39 —

42 6 42 6

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 28 – Financial Commitments – (Continued)

Total commitments under noncancelable operating leases at October 1, 2005 are as follows:

The vast majority of the Group’s leases are institutional standard UK commercial property leases which provide for five yearly rent reviews to open market value and enjoy statutory rights to renewal onexpiry. They generally do not contain conditions relating to rent escalation, rights to purchase, concessions, residual values or other material provisions of an unusual nature.

The future minimum rentals to be received under noncancelable subleases as at October 1, 2005 amounted to £29 million (2004 £26 million).

Note 29 – Contingencies

On separation from the Six Continents group on April 15, 2003, the Company gave no warranties and agreed to give certain limited indemnities to InterContinental Group. These indemnities were given to protect InterContinental Group against liabilities which it may incur but which relate exclusively or predominantly to Retail or SCPD. In addition, the Company indemnified InterContinental Group in respect of50% of certain contingent liabilities which do not relate exclusively or predominantly to the retail business and SCPD or to the hotels business and soft drinks business. These shared contingent liabilities relateprimarily to businesses which have been disposed of by the Six Continents Group or its subsidiaries in the past and where warranties and indemnities were given. It is the view of the Directors that, other than tothe extent that liabilities have been provided for in these financial statements, such indemnities are not expected to result in financial loss to the Group. The amount provided for such liabilities in these financialstatements at October 1, 2005 was £nil (2004 £1 million, 2003 £3 million). The terms of the guarantee provide no limitation to the maximum potential future liabilities. The indemnities described above expire on April 15, 2010 except in the case of liabilities relating to the former business of the group company, Lastbrew Limited, for which the indemnity applies indefinitely.

Note 30 – Related Party Transactions

There were no transactions with related parties requiring disclosure under FRS 8 ‘Related Party Transactions’ during either fiscal 2005 or fiscal 2004. During fiscal 2003 in the period before separation, the Group had the following transactions with Six Continents group:

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October 1,

2005 (£ million) Due within one year 48 One to two years 43 Two to three years 39 Three to four years 39 Four to five years 38 Thereafter 612

819

Capital commitments October 1,

2005 September 25, 2004

(£ million)

Contracts placed for expenditure on fixed assets not provided fo rin the financial statements 28 26

September 27,

2003

(£ million)

Net interest paid 23Costs recharged, including separation costs 29Pension scheme payments 3Net funding (184) Total (129) Amounts due to Six Continents group at the balance sheet date – (see Note 27) —

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP) which differ from those generally accepted in the United States (US GAAP). The significant differences, as they apply to the Group, are summarized below.

Basis of preparation

As described in Note 1 of Notes to the Financial Statements, the Group’s financial statements exclude the results, cash flows and net assets of Six Continents PLC and its hotels and soft drinks subsidiariesfor all periods presented. This basis of preparation accords with the ‘carve out’ basis of accounting that would be required under US GAAP. Similarly, the merger accounting principles used with respect to the transfer of entities to the Group from other Six Continents group companies accords with the accounting for a reorganization of entities under common control that would be required under US GAAP.

Intangible fixed assets

Under UK GAAP, goodwill arising on the acquisition of subsidiaries is capitalized and amortized over its estimated useful life. Goodwill arising on acquisitions prior to September 30, 1998 was eliminated against reserves. Under US GAAP, the Group adopted SFAS 142 ‘Goodwill and Other Intangible Assets’ with effect from October 1, 2002. In accordance with SFAS 142, goodwill would be capitalized and not amortized, but tested annually for impairment. Prior to October 1, 2002 under US GAAP, goodwill would have been capitalized and amortized over its estimated useful life, not exceeding 40years.

Under UK GAAP, computer software is included in tangible fixed assets. Under US GAAP, software which is not an integral part of a related item of hardware would be treated as an intangible asset.

Impairment of goodwill

Under UK GAAP, goodwill is tested for potential impairment when there is an indication that impairment may have occurred. The impairment is measured by comparing the goodwill carrying value of the relevant income-generating unit with the higher of net realizable value and value in use. Under US GAAP, SFAS 142 requires goodwill to be tested for impairment on an annual basis, or on an interim basis when a triggering event occurs, using a two-step process. The first step requires the comparison of the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds its carrying value, then no further testing is required. If the carrying value of a reporting unit exceeds its fair value, a second step is required to determine the amount of the impairment charge, if any. Animpairment charge is recognized if the carrying value of a reporting unit’s goodwill exceeds the fair value of that goodwill. The Group has performed an updated evaluation of its goodwill as at October 1, 2005 which has concluded that an impairment charge is not required under SFAS 142.

For US GAAP purposes, reporting units have been determined by reference to internal management and reporting structures at the level below the operating segments. Goodwill has been allocated to the reporting units in accordance with the location, in the reporting unit, of the acquired pubs and restaurants that generated the goodwill.

F-53

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

Tangible fixed assets

Prior to October 1, 1999, the Group’s properties were valued from time to time by professionally qualified external valuers and book values were adjusted to accord with the valuations. Under US GAAP, revaluation would not have been permitted, which means that the carrying value of tangible fixed assets is lower under US GAAP.

Under UK GAAP, depreciation is based on the book value of assets, including revaluation where appropriate. Prior to October 1, 1999, freehold pubs were not depreciated under UK GAAP, as any charge would have been immaterial given that such properties were maintained, as a matter of policy, by a program of repair and maintenance such that their residual values were at least equal to their book values.Following the introduction of FRS 15, which was implemented by the Group with effect from October 1, 1999, all properties are depreciated under UK GAAP. There is now no difference between UK GAAPand US GAAP with regard to the annual depreciation charge.

Under UK GAAP, impairment of tangible fixed assets is measured with reference to discounted cash flows. Under US GAAP, if the carrying value of assets is supported by undiscounted cash flows there would be no impairment.

Assets held for sale

US GAAP would require that where the value of an asset will be recovered through a sale transaction rather than continuing use the asset is classified as held for sale. Assets held for sale are valued at the lower of book value and fair value less costs to sell and no longer depreciated. Under UK GAAP, there is no held for sale classification.

Lease premiums

Under US GAAP, payments made on entering into operating leases would be classified as current and non-current prepayments and amortized over the life of the lease. Under UK GAAP, such payments are included in tangible fixed assets.

Share-based compensation

Under UK GAAP, the Group makes a charge for the cost of share awards or share options based on the difference between the fair value of the shares on the date of the award and the amount the scheme participant may be required to pay for the shares. The expense is recognized over the performance period of the relevant scheme based on a reasonable expectation of the extent to which the performance criteriawill be met. Under APB 25 ‘Accounting for stock issued to employees’, these awards and options would be accounted for as variable plans with the expense based on the intrinsic value using the share price at the balance sheet date, remeasured at each balance sheet date and spread over the performance period. Under US GAAP, a charge could therefore arise in respect of the Group’s Executive Share Option Plan (no charge arises under UK GAAP as the exercise price is equivalent to the market value at date of grant).

The Group also operates an Inland Revenue approved Sharesave scheme open to all employees, which gives a 20% discount on the fair value of its shares. Under UK GAAP no cost is recognized in respect of this scheme. Under US GAAP, fixed plan accounting would apply resulting in an expense for the 20% discount over the period of the savings contracts. Since January 24, 2002, an employer’s offer to enter into new contracts at a lower exercise price than the price under existing contracts can cause variable plan accounting to apply in respect of certain options. This could result in an additional charge forthose options that qualify for variable plan accounting.

Under UK GAAP, the National Insurance liability payable on gains made by employees on the exercise of share options is accrued during the performance period of the share scheme calculated using the market price of the Company’s shares at the balance sheet date. Under US GAAP, an accrual would only be recorded when the share options are exercised and a liability exists.

F-54

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

Pension costs

Under UK GAAP, amounts charged to the profit and loss account comprise the current service cost and net finance income or expense being the difference between the expected return on plan assets and the interest cost of the plan liabilities. Any amounts arising from changes in actuarial assumptions and differences between the expected and actual return on plan assets are recognized in the statement of totalrecognized group gains and losses. Under US GAAP, such amounts, to the extent that they exceed 10% of the greater of the benefit obligation and the fair value of plan assets, would be amortized through theincome statement over the average remaining service lives of the employees.

Under UK GAAP, the surplus or deficit in the pension plans is reported on the balance sheet. Under US GAAP, as the accumulated benefit obligations exceeded the fair value of the plans’ assets the difference would be recognized as a balance sheet liability, after the elimination of any amounts previously recognized as a prepaid pension cost. An equal amount, not exceeding the amount of unrecognizedpast service cost, would be recognized as an intangible asset with the balance reported in other comprehensive income.

Compensated absences

Under US GAAP, an accrual would be made to reflect the cost of employees’ unused vacation allowances at the point of entitlement, when the right to a compensated absence accumulates during the employee’s period of service. No equivalent accrual has been made under UK GAAP.

Deferred taxation

Under UK GAAP, the Group provides for deferred taxation in respect of timing differences, subject to certain exceptions, between the recognition of gains and losses in the financial statements and for tax purposes. Timing differences recognized include accelerated capital allowances and short-term timing differences. Timing differences not recognized include those relating to the revaluation of fixed assets in the absence of a commitment to sell the assets and the gain on sale of assets rolled into replacement assets. Under US GAAP, deferred taxation would be computed, on a stand-alone basis, on all temporary differences between the tax bases and book values of assets and liabilities which will result in taxable or tax deductible amounts arising in future years. A valuation allowance is established when it is more likelythan not that some portion or all of the deferred tax assets will not be realized.

Derivative instruments and hedging

The Group uses interest rate and currency swaps to fix the interest rate payable on the floating rate tranches of its securitized debt. Under UK GAAP, these instruments are measured at cost and accounted for as hedges, whereby gains and losses are recognized only when the exposure that is being hedged is itself recognized. Under US GAAP, all derivative instruments (including those embedded in othercontracts) are recognized on the balance sheet at their fair values. Changes in fair value are recognized in net income unless hedge accounting can be applied. To qualify for hedge accounting, the hedgingrelationship must be designated, documented and tested for ongoing effectiveness. If hedge accounting is applied, changes in fair value are recognized periodically in net income or in shareholders’ equity as a component of other comprehensive income depending on whether the derivative qualifies as a fair value or cash flow hedge.

Upon the issuance of the floating rate tranches of the securitized debt, the Group’s interest rate and currency swaps were designated as cash flow hedges and since then have qualified for hedgeaccounting. Hedge ineffectiveness has been immaterial since this date. Prior to their designation as cash flow hedges, changes in the fair value of the interest rate and currency swaps were recorded in the incomestatement.

Proposed dividends

Under UK GAAP, final ordinary dividends are provided for in the year in respect of which they are proposed by the Board for approval by shareholders. Under US GAAP, dividends would not be provided for until the year in which they are declared.

F-55

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

On December 2, 2003, the Company completed a share consolidation which resulted in the issue of 12 new ordinary shares of 7 1/12p each for every 17 existing ordinary shares of 5p each. Under UK GAAP, prior period earnings per share have not been restated as the share consolidation was accompanied by a special dividend and the combined transaction was designed to have the same overall effect as abuy-back of shares at fair value. US GAAP would require prior period net income per ordinary share to be restated to reflect the change in capital structure.

Under UK GAAP, certain exceptional items are shown on the face of the profit and loss account statement after operating profit. These items are mainly gains and losses on the sale of businesses and fixed assets, and the cost of fundamental reorganizations. Under US GAAP these items would be classified as operating profit or expenses.

Under UK GAAP, the debt issuance costs relating to the securitized debt are deducted from the carrying value of the related loan notes. Under US GAAP, these costs would be reported as deferred financing costs and classified as current and non-current assets.

In previous years, under UK GAAP provisions for liabilities and charges included amounts relating to the restructuring of certain of the Group’s operations. Under US GAAP, certain of these amounts would have been charged to net income as incurred. The restructuring was substantially completed in fiscal 2003.

Under UK GAAP, cash at bank and in hand comprises deposits repayable on demand (less overdrafts payable on demand) and restricted cash and excludes liquid resources (short-term deposits and investments of less than one year other than cash). Under US GAAP, cash and cash equivalents comprises deposits repayable on demand, liquid resources with a maturity of three months or less at the dateacquired and excludes restricted cash.

Restricted cash of £16 million (2004 £4 million, 2003 £nil) represents disposal proceeds held on deposit in a secured account. The use of these funds is restricted by the terms of the securitization and may only be used with the approval of the security trustee for certain specified purposes such as capital enhancement expenditure and business acquisitions.

F-56

Earnings per share

Exceptional items

Classification of debt issuance costs

Provisions

Cash and cash equivalents

Restricted cash

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

The significant adjustments required to convert earnings available for shareholders in accordance with UK GAAP to net income in accordance with US GAAP are:

F-57

Income

53 weeks ended 52 weeks ended

October 1,

2005 September 25,

2004* September 27,

2003*

(£ million, except per ordinary share amounts) Earnings available for shareholders in accordance with UK GAAP 133 118 117

Adjustments:

Amortization of intangible fixed assets (5) (3) (3)Depreciation of tangible fixed assets 6 5 5Amortization of lease premiums (1) (1) (1)Disposal of tangible fixed assets 13 11 7Pension costs (18) (20) (3)Share-based compensation (4) (1) —Compensated absences (6) — —Change in fair value of derivatives — 2 —Provisions — — (13)Deferred taxation: – on above adjustments 3 11 1– methodology — — (9)

(12) 4 (16)

Net income in accordance with US GAAP 121 122 101 Net income per ordinary share

Basic (i) £0.24 £0.23 £0.19Diluted (ii) £0.23 £0.23 £0.19

* Restated to (a) reflect the adoption of FRS 17 under UK GAAP and (b) include computer software amortization of 2004 £4 million (2003 £4 million) in amortization of intangible fixed assets and separately disclose the amortization of lease premiums of 2004 £1 million (2003 £1 million), both previously included within depreciation of tangible fixed assets. None of these adjustments have an impact on net income previously reported under US GAAP.

(i) Calculated by dividing net income in accordance with US GAAP of £121 million (2004 £122 million, 2003 £101 million) by 511 million (2004 520 million, 2003 519 million) shares, being the weighted average number of ordinary shares in issue during the year. Share numbers for all periods have been adjusted retrospectively to reflect the share consolidation on December 2, 2003.

(ii) Calculated by adjusting basic net income per ordinary share in accordance with US GAAP to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding during the year. The resulting weighted average number of ordinary shares is 517 million (2004 523 million, 2003 520 million). Share numbers for all periods have been adjusted retrospectively to reflect the share consolidation on December 2, 2003.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

Comprehensive income under US GAAP is as follows:

Movements in other comprehensive income amounts (net of related tax) are as follows:

Since the designation of the Group’s derivatives as cash flow hedges on the issuance of the floating rate tranches of the securitized debt, under US GAAP there has been no ineffectiveness recorded in the income statement.

F-58

Comprehensive income

53 weeks ended 52 weeks ended

October 1, 2005 September 25,

2004 September 27, 2003

(£ million)

Net income in accordance with US GAAP 121 122 101 Other comprehensive income:

Transfer of minimum pension liability on April 1, 2003, net of tax of £109 million — — (255)Minimum pension liability, net of tax of £5 million (2004 £13 million, 2003 £8 million) 11 31 19Currency translation differences — (1) 7Cash flow hedges, net of tax of £8 million (2004 £3 million, 2003 £nil) (18) (8) —

(7) 22 (229)

Comprehensive income in accordance with US GAAP 114 144 (128)

Minimum pension

liability adjustment

Currency translation differences

Cash flow hedges Total

(£ million)

At September 29, 2002 — — — —Movement in the year (236) 7 — (229) At September 27, 2003 (236) 7 — (229)Movement in the year 31 (1) (8) 22 At September 25, 2004 (205) 6 (8) (207)Movement in the year 11 — (18) (7) At October 1, 2005 (194) 6 (26) (214)

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

The significant adjustments required to convert shareholders’ funds in accordance with UK GAAP to shareholders’ equity in accordance with US GAAP are:

F-59

Shareholders’ equity

October 1, 2005

September 25, 2004 restated*

(£ million)

Shareholders’ funds as reported in accordance with UK GAAP 1,417 1,423Adjustments:

Intangible fixed assets: Goodwill – cost 174 174

– accumulated amortization 5 5 179 179

Computer software – cost 31 29– accumulated amortization (15) (10)

16 19

Pension intangible fixed asset 10 12

Total intangible fixed assets 205 210

Tangible fixed assets: Cost (782) (781)Accumulated depreciation (99) (108)

Total tangible fixed assets (881) (889)

Non-current assets:

Lease premiums 16 17Deferred financing costs 18 20Assets held for sale 9 —

Current assets: Cash and cash equivalents 183 201Restricted cash 16 4Cash at bank and in hand (129) (81)Current asset investments (70) (124)Lease premiums 1 1Deferred financing costs 2 2

Creditors: amounts falling due within one year: Accrual for compensated absences (6) —Share-based compensation 2 —Borrowings (2) (2)Proposed dividends 37 34Derivatives (6) —

Creditors: amounts falling due after one year: Borrowings (5) (2)Derivatives (42) (28)

Provisions for liabilities and charges: Accrued pension cost (25) (40)Deferred taxation 55 60

Total adjustments (622) (617) Shareholders’ equity in accordance with US GAAP 795 806

* Restated to (a) reflect the adoption of FRS 17 under UK GAAP, (b) reclassify lease premiums of £18 million paid in relation to operating leases from tangible fixed assets to current (£1 million) and non-current assets (£17 million), and (c) reclassify computer software of

£19 million from tangible fixed assets to intangible fixed assets. The latter two adjustments arose in connection with preparing to convert the Group’s financial statements from UK GAAP to International Financial Reporting Standards. None of these restatements have an impact on previously reported shareholders’ equity under US GAAP.

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

The following table sets forth the computation of basic and diluted earnings per share from continuing operations under US GAAP:

The consolidated statement of cash flows prepared under UK GAAP presents substantially the same information as that required under US GAAP but differs with regard to classification of items within the statement and as regards the definition of cash under UK GAAP and cash and cash equivalents under US GAAP.

US GAAP requires that cash and cash equivalents include liquid resources with a maturity of three months or less at the date acquired but do not include bank overdrafts and restricted cash. Under UK GAAP ‘cash’ for the purposes of the cash flow statement comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand but excludes liquid resources (short-term deposits and investments of less than one year other than cash). Under UK GAAP, cash flows are presented separately for operating activities, dividends received from associates, returns on investments and servicing offinance, taxation, capital expenditure and financial investment, acquisitions, equity dividends and management of liquid resources and financing. US GAAP, however, requires only three categories of cash flowactivity to be reported: operating, investing and financing. Cash flows from taxation and returns on investments and servicing of finance shown under UK GAAP would, with the exception of dividends paid tominority shareholders, be included as operating activities under US GAAP. The payment of dividends would be included as a financing activity under US GAAP. Under US GAAP, capital expenditure andfinancial investment and acquisitions are reported within investing activities.

F-60

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

53 weeks ended

52 weeks ended

October 1, 2005

September 25, 2004 September 27,

2003

Numerator for basic and diluted earnings per ordinary share (£ million) 121 122 101 Denominator for basic earnings per ordinary share (million) (i) 511 520 519 Dilutive effect of employee share options (million) (i) 6 3 1 Denominator for diluted earnings per share (million) (i) 517 523 520 Basic earnings per ordinary share £0.24 £0.23 £0.19 Diluted earnings per ordinary share £0.23 £0.23 £0.19

(i) Share numbers for all periods have been adjusted retrospectively to reflect the share consolidation on December 2, 2003.

Consolidated statement of cash flows

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

The consolidated statement of cash flows presented under US GAAP would be as follows.

F-61

Consolidated statement of cash flows – (continued)

53 weeks ended 52 weeks ended

October 1,

2005

September 25, 2004

restated*

September 27, 2003

restated*

(£ million)

Operating activities: Earnings available for shareholders 133 118 117Adjustments to reconcile profit for the financial year to net cash provided by operating activities:

Depreciation and amortization 116 108 99Working capital movements 35 25 7Additional pension contributions (30) (40) (27)Other non-cash items 1 13 1

Net cash provided by operating activities 255 224 197 Investing activities: Property and equipment additions (167) (150) (151)Property and equipment disposals 57 51 48Restricted cash (12) (4) —Decrease/(increase) in short-term deposits and investments 19 (20) — Net cash used in investing activities (103) (123) (103) Financing activities: Issue of ordinary share capital 2 8 4Purchase of own shares by employee share trusts (101) (12) —Proceeds on release of own shares held 14 1 —Equity dividends paid (50) (545) —Repayment of amounts due to Six Continents group — — (831)Proceeds from issue of securitized debt — 1,900 —Repayments of principal in respect of securitized debt (35) (28) —Borrowings drawn down under syndicated loan facility — 25 1,350Borrowings repaid in respect of syndicated loan facility — (1,243) (132)(Decrease)/increase in overdraft — (13) 13Net funding flows with Six Continents group — — 193Cash payment to former Six Continents PLC — — (702) Net cash used in financing activities (170) 93 (105) Net change in cash and cash equivalents (18) 194 (11)Opening cash and cash equivalents 201 7 18 Closing cash and cash equivalents 183 201 7 Supplemental disclosures of cash flow information Interest paid 113 107 51Taxes paid 43 34 44

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see Note 3 of Notes to the Financial Statements).

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

At October 1, 2005, the Group had interest rate and currency swap agreements in place with a notional underlying principal of £450 million. The sole counterparty to these arrangements was the Royal Bank of Scotland. The Group does not consider this to be a significant concentration of credit risk due to the size, financial standing and scale of operations of the Royal Bank of Scotland.

The following information is presented in compliance with the requirements of US GAAP. The carrying amounts and fair values of the financial instruments of the Group are as follows:

The following methods and assumptions were used by the Group in establishing its fair values of financial instruments:

At October 1, 2005, surplus property assets with a net book value of £9 million were classified as held for sale. No write down has been required as the fair value of assets (less costs to sell) exceeds the carrying amounts. Of these surplus assets, sites with a net book value of £1 million have been sold for an amount exceeding carrying value since the year end. The remaining sites are expected to be sold in the period up to September 2006. The assets classified as held for sale at the year end, were included in reportable segments as follows; Pubs & Bars £1 million and Restaurants £8 million.

Subsequent to the year end, additional surplus properties with a net book value of £11 million included in tangible fixed assets at the balance sheet date, have met the criteria to be classified as held for sale. Apart from two sites, these properties have subsequently been sold for an amount exceeding carrying value. The remaining two sites with a net book value of £2 million are expected to be sold during March 2006.

F-62

Concentrations of credit risk

Fair value of financial instruments

October 1, 2005 September 25, 2004

Carrying amount

Fair value

Carrying amount

Fair value

(£ million)

Assets Cash and cash equivalents 183 183 201 201Restricted cash 16 16 4 4Current asset investments 1 1 20 20 Liabilities Securitized debt (1,828) (1,952) (1,857) (1,909)Other borrowings (4) (4) (4) (4)Interest rate swaps (31) (31) (6) (6)Currency swaps (17) (17) (22) (22)

Cash and cash equivalents (including restricted cash):

the carrying amount reported in the balance sheet for cash approximates to its fair value.

Current asset investments: the carrying amount reported in the balance sheet for current asset investments approximates their fair value. Overdrafts: the carrying amount reported in the balance sheet for overdrafts approximates their fair value. Securitized debt: the fair values of the various tranches of the securitized debt have been estimated using period end mid-market quoted prices. Other borrowings: the carrying amount reported in the balance sheet for other borrowings approximates their fair value.

Interest rate and currency swaps: the estimated fair values of the Group’s interest rate and currency swaps is the amount which the Group could expect to pay or receive on the termination of the

agreements. These amounts are based on quotations from counterparties and take into consideration interest and exchange rates prevailing at the balance sheet date.

Assets held for sale

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

Mitchells & Butlers became the sponsoring employer of its two principal pension plans on April 1, 2003. The pension cost for these plans since this date computed in accordance with the requirements of US GAAP comprises:

The net periodic pension cost of £28 million consists of £20 million in respect of the Mitchells & Butlers Pension Plan and £8 million in relation to the Mitchells & Butlers Executive Pension Plan.

The major assumptions used in computing the pension expense were:

The assets of these plans principally comprise UK and other listed equities, property investments, bank deposits and UK Government index-linked stocks.

F-63

Additional information required by US GAAP in respect of the Group’s two principal pension plans

53 weeks ended October 1,

2005

52 weeks ended September 25,

2004

Six-month period ended

September 27, 2003

(£ million)

Service cost 14 14 6Interest cost 59 55 27Expected return on plan assets (62) (55) (24)Amortization of:

Unrecognized transition asset — (3) (2)Unrecognized prior service cost 2 2 1Unrecognized net loss 15 20 8

Net periodic pension cost 28 33 16

53 weeks ended October 1,

2005

52 weeks ended September 25,

2004

Six-month period ended

September 27, 2003

Expected long-term rate of return on plan assets 6.8% 6.8% 6.7%Discount rate 5.5% 5.3% 5.4%Expected long-term rate of earnings increases 4.3% 4.2% 4.1%

October 1, 2005 September 25, 2004

Mitchells & Butlers

Pension Plan

Mitchells & Butlers Executive

Pension Plan Mitchells & Butlers

Pension Plan

Mitchells & Butlers Executive

Pension Plan

(£ million)

Accumulated benefit obligation (all vested) 919 286 815 254

Fair value of plan assets 825 257 695 220Projected benefit obligation (936) (294) (828) (260)

Net plan obligation (111) (37) (133) (40)Unrecognized prior service cost 9 1 11 1Unrecognized net loss 245 57 252 59

Net amount recognized 143 21 130 20

The amounts recognized in the balance sheet consist of: Accrued pension liability (95) (29) (120) (34)Intangible asset 9 1 11 1Other comprehensive income (before tax) 229 49 239 53

Net amount recognized 143 21 130 20

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

Additional information required by US GAAP in respect of the Group’s two principal pension plans – (continued)

The following table sets forth movements in the fair value of plan assets:

The following table sets forth movements in the projected benefit obligation of the principal plans:

The following pension benefit payments, are expected to be paid:

F-64

Mitchells & Butlers Pension

Plan

Mitchells & Butlers Executive Pension

Plan

(£ million)

At September 27, 2003 622 203Members’ contributions 3 1Company contributions 34 10Benefits paid (29) (11)Actual return on assets 65 17 At September 25, 2004 695 220Members’ contributions 3 1Company contributions 34 8Benefits paid (30) (12)Actual return on assets 123 40 At October 1, 2005 825 257

Mitchells & Butlers Pension

Plan

Mitchells & Butlers Executive Pension

Plan

(£ million)

At September 27, 2003 815 253Service cost 10 4Members’ contributions 3 1Interest expense 42 13Benefits paid (29) (11) Actuarial gain arising in the year (13) — At September 25, 2004 828 260Service cost 9 5Members’ contributions 3 1Interest expense 45 14Benefits paid (30) (12) Actuarial loss arising in the year 81 26 At October 1, 2005 936 294

Mitchells & Butlers Pension

Plan

Mitchells & Butlers Executive Pension

Plan

(£ million) 2006 31.0 11.8 2007 31.9 12.1 2008 32.8 12.5 2009 33.7 12.8 2010 34.6 13.2 2011 – 2015 188.3 69.8

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

Additional information required by US GAAP in respect of the Group’s two principal pension plans – (continued)

The percentages of the fair value of total plan assets held by major category of plan assets were:

Goodwill under US GAAP by reportable segment

There has been no impairment of goodwill either on the adoption of SFAS 142 or at the time of subsequent impairment tests.

Intangible assets subject to amortization

The estimated aggregate amortization expense in respect of computer software for each of the next five years is £5 million, £4 million, £3 million, £2 million and £1 million. These amounts relate to assets capitalized at the balance sheet date only and exclude future expenditure.

Additional information required by US GAAP in respect of deferred taxation

The analysis of the deferred taxation liability required by US GAAP is as follows:

F-65

October 1, 2005 September 25,

2004 ( % )

Equities 52 50 Bonds 40 41 Property 8 9

100 100

October 1,

2005 September 25,

2004 (£ million)

Pubs & Bars 109 109 Restaurants 80 80 Retail 189 189 SCPD — —

189 189

October 1,

2005 September 25,

2004

(£ million)

Deferred taxation liabilities:

Excess of book value over taxation value of fixed assets 141 135Deferred gains 49 49Other temporary differences 2 2

192 186 Deferred taxation assets:

Taxation effect of realized and unrealized losses (6) (6)Pensions (39) (57)Derivatives (10) (3)Other temporary differences (13) (4)

(68) (70)

Valuation allowance 6 6

130 122 Of which:

Current (7) (3)Non-current 137 125

130 122

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MITCHELLS & BUTLERS PLC

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Note 31 – Differences between United Kingdom and United States Generally Accepted Accounting Principles – (Continued)

Accounting and disclosure of stock-based compensation

FAS 123 – Accounting for Stock-Based Compensation, established accounting disclosure standards for stock-based employee compensation plans. The statement gives companies the option of continuing to account for such costs under the intrinsic value accounting provisions set out in Accounting Principles Board Opinion 25 – Accounting for Stock Issued to Employees (“APB 25”) and related interpretations. The Group has chosen to continue to account for such costs under APB 25. Had the Group chosen to account for such costs under FAS 123, the Group’s pro forma net income and basic and diluted earnings per ordinary share under US GAAP would be as indicated below:

The amounts shown above for stock-based employee compensation expense under fair value accounting have been calculated using the Black-Scholes option pricing model, the Binomial option pricing model or Monte Carlo simulations. The following assumptions have been used for valuing share options granted by the Group:

New US Accounting Standards not yet adopted

In December 2004, the FASB issued SFAS No. 123 (R) – ‘Accounting for Stock-Based Compensation’. SFAS 123(R) replaces SFAS 123 and supersedes APB 25 and becomes effective for accounting periods that begin after June 15, 2005. The statement eliminates the option to use APB 25’s intrinsic value method of accounting which was available under FAS 123. Under FAS 123(R), stock-based compensation is recognized in the financial statements based on the grant-date fair value of the awards (with limited exceptions). The fair value method is similar to the method in FAS 123 and an indication ofits impact on the Group is provided by the disclosures given above.

In May 2005, the FASB issued SFAS No. 154 – ‘Accounting Changes and Error Corrections’. SFAS 154 replaces APB opinion No. 20 – ‘Accounting Changes’ and SFAS No. 3 – ‘ Reporting Accounting Changes in Interim Financial Statements’ and becomes effective for accounting periods that begin after 15 December 2005. APB 20 previously required that most voluntary changes in accounting principle be recognized by including, in net income of the period of the change, the cumulative effect of changing to the new accounting principle. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period specific effects or the cumulative effect of the change. The adoption of SFAS 154 is not expected to have amaterial effect on the results or net assets of the group.

F-66

53 weeks ended

52 weeks ended

October 1,

2005 September 25,

2004 September 27,

2003

(£ million, except per ordinary share amounts)

Net income: As reported under US GAAP 121 122 101Stock-based compensation, net of related tax effects, included in the determination of net income as reported 7 3 1Stock-based employee compensation expense, under fair value based method for all awards, net of related tax effects (5) (3) (3) Pro forma net income 123 122 99 Basic earnings per ordinary share: As reported under US GAAP £0.24 £0.23 £0.19Pro forma basic earnings per ordinary share £0.24 £0.23 £0.19Diluted earnings per ordinary share: As reported under US GAAP £0.23 £0.23 £0.19Pro forma diluted earnings per ordinary share £0.24 £0.23 £0.19

October 1, 2005 September 25, 2004 September 27, 2003

(%) Annual dividends 3 4 4 Expected volatility 31 31 23 Risk free interest rate 4 5 4

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SCHEDULE I

MITCHELLS & BUTLERS PLC

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

As the restricted net assets of Mitchells & Butlers Retail Limited (see Note 19 of the Notes to the Financial Statements) represent more than 25% of the consolidated net assets of the Group at October 1, 2005, the following condensed financial information is presented in respect of Mitchells & Butlers plc, the parent company of the Group. Mitchells & Butlers plc was incorporated on October 2, 2002.

Profit and loss account

Statement of total recognized gains and losses

SH1 - 1

53 weeks ended

52 weeks ended

October 1, 2005

September 25, 2004 restated*

September 27, 2003 restated*

(£million) Administration expenses — (5 ) (14 ) Operating profit/(loss) — (5 ) (14 )Dividends received from consolidated subsidiaries 117 54 — Separation costs — — (1 )Amounts written off investments (1 ) (2 ) (3 ) Profit/(loss) on ordinary activities before interest 116 47 (18 )Interest receivable 7 13 — Interest payable and similar charges (3 ) (17 ) (42 ) Profit/(loss) on ordinary activities before taxation 120 43 (60 )Tax credit on profit/(loss) on ordinary activities — 2 16 Earnings available for shareholders 120 45 (44 )Dividends (53 ) (550 ) (29 ) Retained profit/(loss) 67 (505 ) (73 )

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see page SH1-2).

53 weeks ended

52 weeks ended

October 1, September 25, September 27,2005 2004 restated* 2003 restated*

£million) Earnings available for shareholders 120 45 (44 )Actuarial (loss)/gain on pension schemes (7 ) 39 (71 )Deferred tax relating to actuarial (loss)/gain 2 (12 ) 22 Exchange differences — (1 ) 2 Total recognized gains/(losses) for the year 115 71 (91 ) Prior year adjustment on the full adoption of FRS 17 (219 ) Total recognized losses since previous year end (104 )

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see page SH1-2).

October 1, 2005

September 25, 2004 restated*Balance sheet

(£million) Fixed asset investments 1,739 1,740 Current assets: Debtors 140 141 Investments 2 77 Cash at bank and in hand 79 66 221 284 Creditors: amounts falling due within one year (1,566 ) (1,596 ) Net current liabilities (1,345 ) (1,312 )Net assets before pension liabilities 394 428 Net pension liabilities (99 ) (114 ) Net assets 295 314 Capital and reserves: Called up share capital 35 37 Share premium account 14 12 Capital redemption reserve 2 — Profit and loss account reserve 244 265 Equity shareholders’ funds 295 314

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see page SH1-2).

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SCHEDULE I

MITCHELLS & BUTLERS PLC

CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

Cash flow statement

Notes to the condensed financial statements

The parent only financial statements should be read in conjunction with the Company’s consolidated financial statements.

The adoption of FRS17 ‘Retirement Benefits’ under UK GAAP has resulted in the restatement of prior year comparatives. Earnings under UK GAAP for fiscal 2004 and fiscal 2003 are £7 million and £8 million lower than previously reported respectively. Net assets under UK GAAP at September 25, 2004 are £219 million lower than previously reported.

The Company’s investment in its subsidiaries is stated at cost less provision for permanent diminution in value. Investments in overseas holdings are denominated in foreign currencies and exchange differences arising on their translation are taken directly to reserves along with any exchange differences arising on foreign currency borrowings hedging those investments.

The Company does not have any unconsolidated subsidiaries.

The Company does not have any long-term debt obligations with external third parties. Amounts due to other group companies are repayable on demand.

The Company has contingent liabilities as described in Note 29 of the Notes to the Financial Statements.

The Company is party to a composite guarantee with other Group companies in connection with its day-to-day cash pooling arrangements. Any potential liability is capped at the level of in hand balances held by the Company and any net overdraft of the group of companies subject to the arrangement. At October 1, 2005, the Company had an overdraft of £11 million (2004 £3 million) and the group of companies had a small net cash balance. Therefore, at October 1, 2005, the Company did not have a contingent liability under the composite guarantee.

Cash dividends paid to Mitchells & Butlers plc from its subsidiaries are shown in the cash flow statement above. There were no dividends receivable at either October 1, 2005 or September 25, 2004.

The above information is prepared in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP) which differ from those generally accepted in the United States (US GAAP). The significant differences as they apply to the Group are summarized in Note 31 of Notes to the Financial Statements. An additional difference arises in respect of the parent only financial statementsas investments in subsidiaries would be accounted for on an equity basis under US GAAP.

The significant adjustments required to convert earnings available for shareholders in accordance with UK GAAP to net income in accordance with US GAAP and shareholders’ funds in accordance with UK GAAP to shareholders’ equity in accordance with US GAAP are presented below, together with comprehensive income under US GAAP and a condensed cash flow statement presented under US GAAP.

SH1 - 2

53 weeks ended 52 weeks ended

October 1, September 25, September 27,2005 2004 2003

(£million) Net cash outflow from operating activities (30) (37) (3)Dividends received from consolidated subsidiaries 117 54 —Returns on investments and servicing of finance 1 (4) (41)Equity dividends paid (50) (545) — Net cash inflow/(outflow) before management of liquid resources and financing 38 (532) (44)Management of liquid resources 75 (76) (1)Financing: Issue of ordinary share capital 2 8 4Purchase of own shares (101) (12) —Proceeds on release of own shares held 14 1 —Borrowings drawn down under syndicated loan facility — 25 1,350Borrowings repaid in respect of syndicated loan facility — (1,243) (132)Cash payment to former Six Continents PLC shareholders — — (702)Inter-company funding (26) 1,924 (504) Increase/(decrease) in cash and overdrafts 2 95 (29)

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SCHEDULE I

MITCHELLS & BUTLERS PLC

CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

Notes to the condensed financial statements – (continued)

Income

Comprehensive income

Movements in other comprehensive income amounts (net of related tax) are as follows:

SH1 - 3

53 weeks ended

52 weeks ended

October 1, September 25,

September 27,

2005 2004 restated* 2003 restated*

(£million) Earnings available for shareholders in accordance with UK GAAP 120 45 (44)Adjustments:

Equity in net income of subsidiaries 20 82 144Pension costs (17) (16) 1Deferred taxation (2) 11 —

1 77 145 Net income in accordance with US GAAP 121 122 101

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see page SH1-2).

53 weeks ended

52 weeks ended

October 1, September 25,

September 27,2005 2004 2003

(£million) Net income in accordance with US GAAP 121 122 101Other comprehensive income:

Transfer of minimum pension liability on April 1, 2003, net of tax of £109 million — — (255)

Minimum pension liability, net of tax of £5 million (2004 £13 million, 2003 £8 million) 11 31 19

Equity in other comprehensive income of subsidiaries (18) (9) 7 Comprehensive income in accordance with US GAAP 114 144 (128)

Minimum pension

liability adjustment

Equity in other comprehensive

income amounts of subsidiaries Total

(£million) At October 2, 2002 — — —Movement in the year (236 ) 7 (229 ) At September 27, 2003 (236 ) 7 (229 )Movement in the year 31 (9 ) 22 At September 25, 2004 (205 ) (2 ) (207 )Movement in the year 11 (18 ) (7 ) At October 1, 2005 (194 ) (20 ) (214 )

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SCHEDULE I

MITCHELLS & BUTLERS PLC

CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

SH1-4

Shareholders’ equity October 1,

2005 September 25, 2004 restated*

(£million)

Shareholders’ funds as reported in accordance with UK GAAP 295 314Adjustments:

Pension intangible asset 10 12Fixed asset investments 425 423Non-current assets: Deferred taxation 39 57Inter-company balances 14 6Current assets: Cash and cash equivalents 81 123Cash at bank and in hand (79) (66)Current asset investments (2) (57)Creditors: amounts falling due within one year:

Proposed dividends 37 34Provisions for liabilities and charges:

Accrued pension cost (25) (40)

500 492 Shareholders’ equity in accordance with US GAAP 795 806

* Restated on the full adoption of FRS 17 ‘Retirement Benefits’ (see page SH1-2).

Statement of cash flows 53 weeks ended 52 weeks ended

October 1,

2005 September 25,

2004 September 27,

2003

(£million) Net cash provided/(used) by operating activities 88 13 (44)Net cash released from/(used in) investing activities 20 (20) —Financing activities:

Issue of ordinary share capital 2 8 4Purchase of own shares (101) (12) —Proceeds on release of own shares held 14 1 —Equity dividends paid (50) (545) —Increase/(decrease) in overdrafts 11 (29) 29Borrowings drawn down under syndicated loan facility — 25 1,350Borrowings repaid in respect of syndicated loan facility — (1,243) (132)Cash payment to former Six Continents PLC shareholders — — (702)Inter-company funding (26) 1,924 (504)

Net cash used in financing activities (150) 129 45 Net change in cash and cash equivalents (42) 122 1Opening cash and cash equivalents 123 1 — Closing cash and cash equivalents 81 123 1 Supplemental disclosures of cash flow information:

Interest paid 3 16 43Taxes paid — — —

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SCHEDULE II

MITCHELLS & BUTLERS PLC

VALUATION AND QUALIFYING ACCOUNTS

SH2-1

Description

Balance at beginning of period

Additions charged to costs and expenses

Bad debts written

off

Balance atend ofperiod

(£million) 53 weeks ended October 1, 2005Provisions for bad and doubtful debts 2 — — 2 52 weeks ended September 25, 2004Provisions for bad and doubtful debts 3 — (1) 2 52 weeks ended September 27, 2003Provisions for bad and doubtful debts 2 1 — 3

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CERTIFICATION

/s/ Tim Clarke ................................................................. Chief Executive

Date: February 28, 2006

C-1

I, Tim Clarke, certify that: 1. I have reviewed this annual report on Form 20-F of Mitchells & Butlers plc; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under

which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows

of the company as of, and for, the periods presented in this report; 4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the

company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the

company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of

the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is

reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the

company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to

record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

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CERTIFICATION

Date: February 28, 2006

C-2

I, Karim Naffah, certify that: 1. I have reviewed this annual report on Form 20-F of Mitchells & Butlers plc; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under

which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows

of the company as of, and for, the periods presented in this report; 4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) for the

company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the

company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of

the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is

reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the

company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to

record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

/s/ Karim Naffah ------------------------------------------------ Finance Director

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CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officers of Mitchells & Butlers plc (the “Company”), hereby certify that the Company’s Annual Report on Form 20-F for the fiscal year ended October 1, 2005 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

C-3

/s/ Tim Clarke ------------------------------------------------ Tim Clarke Chief Executive /s/ Karim Naffah ------------------------------------------------ Karim Naffah Finance Director Dated February 28, 2006

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

S-1

MITCHELLS & BUTLERS PLC (Registrant) By: /s/ Tim Clarke ------------------------------------------------ Name: Tim Clarke Title: Chief Executive Date: February 28, 2006

Exhibit 1

No. 4551498

The Companies Act 1985

Company Limited by Shares

MITCHELLS & BUTLERS PLC

MEMORANDUM and

ARTICLES OF ASSOCIATION

THE COMPANIES ACT 1985

COMPANY LIMITED BY SHARES

MEMORANDUM OF ASSOCIATION

OF

MITCHELLS & BUTLERS PLC

1. * The name of the Company is “Mitchells & Butlers PLC”. 2. The Company is to be a public company. 3. The registered office of the Company is to be situate in England and Wales. 4. The objects for which the Company is established are:-

(a) To acquire, purchase and take over for the purpose of amalgamation shares in Six Continents Retail Limited and Standard Commercial Property Development Limited, and their

subsidiaries and subsidiary undertakings and to carry on business as an investment holding company and to control and co-ordinate the business of any companies in which the Company is for the time being interested.

(b) To acquire (whether by original subscription, tender, purchase, exchange, underwriting or otherwise and whether conditionally or otherwise) shares or stocks, debentures, debenture stock, bonds, obligations or any other securities issued or guaranteed by any other corporation constituted or carrying on business in any part of the world and whether or not engaged or concerned in the same or similar trades or occupations as those carried on by the Company or its subsidiaries and the debentures, debenture stock, bonds, obligations or any other security issued or guaranteed by any government, sovereign ruler, commissioner, public body or authority, whether supreme, local or otherwise in any part of the world and whether such shares, stocks, debentures, debenture stocks, bonds, obligations or securities are or are not fully paid up and to make payments thereon as called up or in advance of calls or otherwise and to hold the same with a view to investment or to sell, exchange or otherwise dispose of the same.

(c) To carry on all or any of the businesses of licensed victuallers, hotel keepers, inn- keepers, beer-house keepers, restaurant keepers, lodging-house keepers, ice manufacturers

and merchants, caterers and purveyors of refreshments, refreshment contractors, refreshment room proprietors, sugar and sweetmeat merchants, tobacconists, farmers, dairymen, yeast dealers, grain sellers, and dryers, timber merchants, brick makers, finings merchants and isinglass merchants and leisure retailing business of all kinds, including carrying on the business of ten-pin bowling alleys.

(d) To carry on the business or businesses or brewers and maltsters in all its branches, distillers and importers and exporters of and merchants and wholesale and retail dealers in and bottlers of beer, ale, porter, stout, cider, perry, wines, spirits and liquors of every description; and to manufacture, buy, sell, improve, treat, preserve, fine, aerate, mineralise, bottle and otherwise deal in minerals and aerated waters and other liquids of every description; and to produce, buy, sell, and deal in malt, hops, grain, meal, yeast and all other materials and things capable of being used in connection with any such business aforesaid; and to manufacture, buy, sell and deal in casks, kegs, bottles and other containers of all kinds and plant, machines, apparatus and appliances capable of being used in connection with any such business has aforesaid.

* The Company was incorporated on 2 October 2002, under the name Hackplimco (No. 111) public limited company. The name was changed to Mitchells & Butlers plc on 4 February 2003, pursuant to a Special Resolution passed on that date pursuant to Section 28 of the Companies Act 1985.

(e) To grow, manufacture, buy, sell, manipulate, and deal both wholesale and retail in commodities, articles and things of all kinds which can conveniently be dealt in by the Company

in connection with any of its objects. (f) To carry on any other business which may seem to the Company capable of being conveniently carried on in connection with any of the above businesses or objects, or calculated

directly or indirectly to enhance the value of or render profitable any of the Company’s property or rights for the time being. (g) To carry on any of its business by or through a subsidiary or subsidiaries and to form or establish in any part of the world any company or companies for the purpose of carrying on

as principal or as agent for the Company any business herein authorised or which may seem conducive to the Company’s interests and to subscribe for, hold and deal with the shares of any company that may be so formed or established and to guarantee the due performance of its obligations and to transfer to any such company any part or branch of its business.

(h) To carry on the business of a property investment company in all its branches and to purchase, acquire (by purchase, lease, concession, grant, licence or otherwise), rent, build,

construct, equip, execute, carry out, improve, work, develop, administer, maintain, manage or control any freehold, leasehold or other property and, in particular, breweries, hotels, restaurants, licensed premises, cafes, bars or refreshment saloons and the goodwill of any business carried on therein and the stock-in-trade, plant, machinery or effects thereof or thereupon, whether the same be required for the purposes of the Company or for sale or hire to or in return for any consideration from any other company or persons and to contribute to or assist in the carrying out or establishment, construction, maintenance, improvement, management, working, control or superintendence thereof respectively.

(i) To purchase or otherwise acquire for any estate or interest any property or assets or any concessions, licences, grants, patents, trade marks or other exclusive or non-exclusive

rights of any kind which may appear to be necessary or convenient for any business of the Company, and to develop and turn to account and deal with the same in such manner as may be thought expedient, and to make experiments and tests and to carry on all kinds of research work.

(j) To borrow and raise money and to secure or discharge any debt or obligation of or binding on the Company in such manner as may be thought fit and in particular by mortgages

and charges upon the undertaking and all or any of the property and assets (present and future) and the uncalled capital of the Company, or by the creation and issue on such terms and conditions as may be thought expedient of debentures, debenture stock or other securities of any description.

(k) To draw, make, accept, endorse, discount, negotiate, execute and issue, and to buy, sell and deal with bills of exchange, promissory notes, and other negotiable or transferable

instruments. (l) To amalgamate or enter into partnership or any joint purpose or profit / loss-sharing arrangement with and to co-operate in any way with or assist or subsidise any company, firm or

person, and to purchase or otherwise acquire and undertake all or any part of the business, property and liabilities of any person, body or company carrying on any business which this Company is authorised to carry on or possessed of any property suitable for the purposes of the Company.

(m) To promote or concur in the promotion of any company, the promotion of which shall be considered desirable. (n) To pay all preliminary expenses of the Company and any company promoted by the Company or any company in which this Company is or may contemplate beinginterested,

including in such preliminary expenses all or any part of the costs and expenses of owners of any business or property acquired by the Company.

(o) To advance, lend or deposit money or give credit to or with any company, firm or person on such terms as may be thought fit and with or without security. (p) To issue any securities which the Company has power to issue for any other purpose by way of security or indemnity or in satisfaction of any liability undertaken or agreed to be

undertaken by the Company. (q) To lend money and to guarantee or provide security (whether by personal covenant or by mortgage or charge) for the performance of the contracts or obligations of any company,

firm or person, and the payment and repayment of the capital and principal of, and dividends, interest or premiums payable on, any stock, shares and securities of any company, whether having objects similar to those of the Company or not, and to give all kinds of indemnities.

(r) To sell, lease, grant licenses, easements and other rights over, and in any other manner deal with or dispose of, the undertaking, property, assets, rights and effects of the

Company or any part thereof for such consideration as may be thought fit, and in particular for stocks, shares or securities of any other company whether fully or partly paid up. (s) To procure the registration or incorporation of the Company in or under the laws of any place outside England. (t) To subscribe, or guarantee money for any national, charitable, benevolent, public, general or useful object or for any exhibition, or for any purpose which may be considered likely

directly or indirectly to further the objects of the Company or the interest of its members. (u) To grant pensions or gratuities to any employees or ex-employees and to officers and ex-officers (including Directors and ex-Directors) of the Company or its predecessors in

business, or the relations, connections or dependents of any such persons, and to establish or support associations, institutions, clubs, funds, and trusts which may be considered calculated to benefit any such persons or otherwise advance the interests of the Company or of its members, and to establish and contribute to any scheme for the purchase by trustees of shares in the Company to be held for the benefit of the Company’s employees, and to lend money to the Company’s employees to enable them to purchase shares of the Company and to formulate and carry into effect any scheme for sharing the profits of the Company with its employees or any of them.

(v) (i) To purchase and maintain insurance for or for the benefit of any persons who are or were at any time Directors, officers or employees or auditors of the Company, or of any

other company which is its holding company or in which the Company or such holding company or any of the predecessors of the Company or of such holding company has any interest whether direct or indirect or which is any way allied to or associated with the Company, or of any subsidiary undertaking of the Company or of any such other company, or who are or were at any time trustees of any pension fund in which any employees of the Company or of any such other company or subsidiary undertaking are interested, including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such persons in respect of any act or omission in the actual or purported execution and/or discharge of their duties and/or in the exercise or purported exercise of their powers and/or otherwise in relating to the Company or any such other company, subsidiary undertaking or pension fund and (ii) to such extent as may be permitted by law otherwise to identify or to exempt any such person against or from any such liability; for the purposes of this clause “holding company” and “subsidiary undertaking” shall have the same meanings as in the Companies Act 1985.

And it is hereby declared that the objects of the Company as specified in each of the foregoing paragraphs of this clause (except only if and so far as otherwise expressly provided in any paragraph) shall be separate and distinct objects of the Company and shall not be in anywise limited by reference to any other paragraph or the order in which the same occur or the name of the Company.

(w) To distribute among members of the Company in specie or otherwise, by way of dividend or bonus or by way of reduction of capital, all or any of the property or assets of the Company, or any proceeds of sale or other disposal of any property or assets of the Company, with and subject to any incident authorised and consent required by law.

(x) To do all or any of the things and matters aforesaid in any part of the word and either as principals, agents, contractors, trustees or otherwise, and either alone or in conjunction

with others. (y) To do all such other things as may be considered to be incidental or conducive to the above objects or any of them.

5. The liability of the members is limited. 6. The share capital of the Company is £50,000 divided into 50,000 shares of £1 each.1

1. By Ordinary and Special Resolutions passed on 6 February 2003 the existing authorised share capital of the Company was subdivided into 5,000,000 shares of 1 penny each and the share capital of the Company was increased to

£10,000,050,000 divided into 999,999,999,998 Ordinary Shares of 1 penny each, 2 Redeemable Shares of 1 penny each and 1 Redeemable Preference Share of £50,000. By Ordinary and Special Resolutions passed on 9 April 2003 the existing authorised share capital of the Company was further increased to £10,000,088,384.02 by the creation of an additional 3,838,402 Ordinary Shares of 1 penny each and all

issued and unissued Ordinary Shares of 1 penny each were subsequently consolidated into Ordinary Shares of £4.20 each, resulting in an existing authorised share capital of £10,000,088,384.02, divided into 2 Redeemable Deferred Shares of 1 penny each, 1 Redeemable Preference Share of £50,000 and 2,380,961,520 Ordinary Shares of £4.20 each.

By Special Resolution passed on 9 April 2003 each issued and unissued authorised share in the capital of the Company at 12.01 am on 13 April 2003 was sub-divided into 4,200 Ordinary Shares of 0.1 penny each and every 4,956 such Ordinary

Shares of 0.1 penny each were then consolidated into 1 Ordinary Share of £4.956 each, resulting in an authorised share capital of £10,000,088,384.02 divided into 2 Redeemable Deferred Shares of 1 penny each, 1 Redeemable Preference Share of £50,000 and 2,017,764,000 Ordinary Shares of £4.956 each.

By Order of the High Court of Justice dated 14 April 2003 the capital of the Company was reduced to £100,938,200.02 divided into 2 Redeemable Deferred Shares of 1 penny each, 1 Redeemable Preference Share of £50,000 and 2,017,764,000

Ordinary Shares of 5 pence each. By an Ordinary resolution passed on 1 December 2003, the authorised ordinary share capital of the Company was converted into 1,424,304,000 new ordinary shares of 7 1/12 pence each.

By Special Resolution passed on 2 February 2006 the unissued share capital divided into 2 Redeemable Deferred Shares of 1 penny each and 1 Redeemable Preference Share of £50,000 was converted into ordinary shares of 7 1/12 pence

each and the authorised share capital was amended accordingly.

We, the Subscribers to this Memorandum of Association wish to be formed into a Company pursuant to this Memorandum; and we agree to take the number of Shares shown opposite our respective names.

Names and Addresses of Subscribers Number of Shares taken by each Subscriber

1 Hackwood Directors Ltd One One Silk Street London EC2Y 8HQ Mark Jackson

For and on behalf of Hackwood Directors Limited

2 Hackwood Secretaries Limited One One Silk Street London EC2Y 8HQ Mark Jackson

For and on behalf of Hackwood Secretaries Limited

Total Shares Taken : Two

DATED : 30 September 2002 Witness to the above Signatures:- J. DAVIES One Silk Street London EC2Y 8HQ

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The Companies Act 1985

COMPANY LIMITED BY SHARES

Articles of Association

Adopted by Special Resolution passed on 9 April 2003.

of

MITCHELLS & BUTLERS PLC*

Preliminary

1

1 The regulations in Table A in The Companies (Tables A to F) Regulations 1985 and in any Table A applicable to the Company under any former enactment relating to companies shall not apply to the Company.

2 In these Articles (if not inconsistent with the subject or context) the words and expressions set out in the first column below shall bear the meanings set opposite to them respectively: “The Act” means The Companies Act 1985 as amended by the Companies Act 1989. “These Articles” means these Articles of Association as from time to time altered. “The Auditors” means the auditors for the time being of the Company. “London Stock Exchange” means London Stock Exchange plc. “Month” means calendar month. “Office” means the registered office of the Company for the time being. “Operator” means CRESTCo Limited or such other person as may for the time being be approved by H.M. Treasury as Operator under the Regulations. “Operator-instruction” means a properly authenticated dematerialised instruction attributable to the Operator. “paid” means paid or credited as paid. “participating security” means a security title to units of which is permitted by the Operator to be transferred by means of a relevant system. “Register” means the register of members of the Company. “The Regulations” means the Uncertificated Securities Regulations 2001.

* The name of the Company was changed from Hackplimco (No. 111) public limited company to Mitchells & Butlers PLC on 4 February 2003, pursuant to a Special Resolution passed on that date.

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“relevant system” means a computer-based system, and procedures, which enable title to units of a security to be evidenced and transferred without a written instrument pursuant to the Regulations.

“Seal” means the Common Seal of the Company. “Securities Seal” means the official seal kept by the Company by virtue of Section 40 of the Act. “Statutes” means the Act, the Regulations and every other statute for the time being in force concerning companies and affecting the Company. “Transfer Office” means the place where the Register is situated for the time being. “The United Kingdom” means Great Britain and Northern Ireland. “UK Listing Authority” means the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000. “in writing” means written or produced by any substitute for writing or partly one and partly another. “Year” means calendar year. The expression “address” shall include, in relation to electronic communication, any number or address (including in the use of any Uncertificated Proxy Instruction permitted under

Article 76, an identification number of a participant in the relevant system) used for the purpose of such communication.

The expressions “communication” and “electronic communication” shall have the same respective meanings as in the Electronic Communications Act 2000, the latter including, without limitation, e-mail, facsimile, CD-Rom, audio tape and telephone transmission and (in the case of electronic communication by the Company in accordance with Article 65) publication on a web site.

“Consent” in relation to the holders of any particular class of shares shall mean the consent or sanction of such holders given in accordance with the provisions of Article 4 of these

presents relating to Variation of Rights. The expressions “debenture” and “debenture holder” shall respectively include “debenture stock” and “debenture stockholder”. The expression “Director” shall include all the directors of the Company. The expression “Group” in relation to moneys borrowed means the Company and its subsidiary undertakings for the time being. “Moneys borrowed” shall be deemed to include (to the extent that the same would not otherwise fall to be taken into account): (i) the principal amount of any debentures, as defined in Section 744 of the Act and any fixed premium payable on final repayment thereof save to the extent that such amounts

otherwise fall to be included as moneys borrowed; (ii) the principal amount raised by the acceptance of bills by the Company or any subsidiary (not being acceptance of trade bills for the purchase of goods in the ordinary course of

business) or by any bank or accepting house under any acceptance credit opened on behalf of the Company or any subsidiary;

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(iii) the nominal amount of any share capital and the principal amount of any other debentures or other borrowed moneys (together with any fixed premium payable on final redemption or repayment) the redemption or repayment of which is guaranteed (or is the subject of an indemnity granted) by the Company or a subsidiary, save to the extent that the amount guaranteed otherwise falls to be included as moneys borrowed;

(iv) the nominal amount of any paid-up share capital, except ordinary share capital, of a subsidiary which is not for the time being beneficially owned by the Company or a

subsidiary; (v) the aggregate amount owing by any member of the Group under finance leases (as determined in accordance with any then current Financial Reporting Standard or otherwise

in accordance with United Kingdom generally accepted accounting principles but excluding leaseholds of immovable property); (vi) the principal amount of any book debts of any member of the Group which have been sold or agreed to be sold, to the extent that any member of the Group is for the time

being liable to indemnify or reimburse the purchaser in respect of any non- payment in respect of such book debts; and (vii) any part of the purchase price of any movable or immovable assets acquired by any member of the Group, the payment of which is deferred beyond the date of completion of

the conveyance, assignment or transfer of the legal estate to such assets or, if no such conveyance, assignment or transfer is to take place within six months after the date on which the contract for such purchase is entered into or (if later) becomes unconditional, beyond that date;

but shall be deemed not to include: (viii) a proportion of the moneys borrowed by any partly-owned subsidiary otherwise than from the Company or a subsidiary equal to the proportion of its ordinary share capital not

directly or indirectly attributable to the Company; (ix) amounts borrowed and falling to be taken into account as moneys borrowed pending their application for the purpose of repaying the whole or any part of the other moneys

borrowed provided that they are so applied within six months of being so borrowed;

(x) amounts borrowed by the Company or any subsidiary to finance any contract for the sale of goods in respect of which any part of the price receivable is guaranteed by the

Export Credit Guarantee Department of the Board of Trade or any institution carrying on similar business to the extent of that part of the contract price guaranteed notwithstanding that such amount is secured by a pledge or charge on the interest in such contract or the underlying goods or bills of exchange or the negotiable instruments drawn or made in connection therewith or the interest in any letters of credit issued or guarantee or indemnity or security held in relation thereto;

(xi) all sums (whether or not carrying interest) deposited with the Company or with any subsidiary by tenants or managers of premises owned by any such company by way of

earnest or security for the performance by such tenants or managers of their obligations or by loan clubs or by similar associations; and so that:

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(xii) no amount shall be taken into account more than once in the same calculation but subject thereto (i) to (xii) above shall be read cumulatively; (xiii) moneys borrowed shall be offset by cash and cash equivalence as determined in accordance with any then current Financial Reporting Standards or otherwise in accordance

with United Kingdom generally accepted accounting principles; and (xiv) in determining the amount of any debentures or other moneys borrowed or of any share capital for the purpose of this paragraph there shall be taken into account the nominal

or principal amount thereof (or, in the case of partly-paid debentures or shares, the amount for the time being paid up thereon) together with any fixed or minimum premium payable on final redemption or repayment Provided that if moneys are borrowed or shares are issued on terms that they may be repayable or redeemable (or that any member of the Group may be required to purchase them) earlier than their final maturity date (whether by exercise of an option on the part of the issuer or the creditor (or a trustee for the creditor) or the shareholder, by reason of a default or for any other reason) at a premium or discount to their nominal or principal amount then there shall be taken into account the amount (or the greater or greatest of two or more alternative amounts) which would, if those circumstances occurred, be payable on such repayment, redemption or purchase at the date as at which the calculation is being made.

The expression “officer” shall include a Director, manager and the Secretary, but shall not include an auditor. The expressions “recognised clearing house” and “recognised investment exchange” shall mean any clearing house or investment exchange (as the case may be) granted

recognition under the Financial Services and Markets Act 2000. The expression “Secretary” shall include any person appointed by the Directors to perform any of the duties of the Secretary including, but not limited to, a joint, assistant or deputy

Secretary.

“Share capital and consolidated reserves” shall mean at any time a sum equal to the aggregate of reserves, as shown by the relevant balance sheet, of the amount paid up on the issued or allotted share capital of the Company and the amount standing to the credit of the reserves (including the profit and loss account and any share premium account or capital redemption reserve) of the Company and its subsidiary undertakings included in the consolidation in the relevant balance sheet but after:

(i) adding back any debit balance on profit and loss account or on any other reserve; (ii) excluding any amount taken directly to reserves for taxation;

(iii) making such adjustments as may be appropriate in respect of any variation in the amount of such paid up share capital and/or any such reserves (other than profit and loss account) subsequent to the date of the relevant balance sheet and so that for this purpose if any issue or proposed issue of shares by the Company for cash has been underwritten then such shares shall be deemed to have been issued and the amount (including any premium) of the subscription moneys payable in respect thereof (not being moneys payable later than six months after the date of allotment) shall to the extent so underwritten be deemed to have been paid up on the date when the issue of such shares was underwritten (or, if such underwriting was conditional, on the date when it became unconditional);

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(iv) making such adjustments as may be appropriate in respect of any distribution declared, recommended or made by the Company or its subsidiary undertakings (to the extent not attributable directly or indirectly to the Company) out of profits earned up to and including the date of the relevant balance sheet to the extent that such distribution is not provided for in such balance sheet;

(v) making such adjustments as may be appropriate in respect of any variation in the interests of the Company in its subsidiary undertakings (including a variation whereby an

undertaking becomes or ceases to be a subsidiary undertaking) since the date of the relevant balance sheet; (vi) if the calculation is required for the purposes of or in connection with a transaction under or in connection with which any undertaking is to become or cease to be a subsidiary

undertaking of the Company, making all such adjustments as would be appropriate if such transaction had been carried into effect; (vii) excluding minority interests in subsidiary undertakings to the extent not already excluded; (viii) excluding the effect on the reserves of the Company of any retirement benefits scheme surplus or deficit (net of related deferred tax) which would otherwise be reflected in

accordance with any applicable accounting standard. For the purpose of this definition, the “relevant balance sheet” means, as at the date of the adoption of these Articles, the latest audited consolidated balance sheet of Six

Continents PLC and its subsidiary undertakings, until the audited accounts for the Company and its subsidiary undertakings for the period ended 30 September 2003 are published, and from that date the relevant balance sheet shall be the latest audited consolidated balance sheet dealing with the state of affairs of the Company and (with or without exceptions) its subsidiary undertakings.

The expression “shareholders’ meeting” shall include both a General Meeting and a meeting of the holders of any class of shares of the Company. For the purposes of this definition: (i) capital allotted shall be treated as issued and any capital already called up or payable at any fixed future date shall be treated as already paid up, and (ii) any company which it is proposed shall become a subsidiary shall be treated as if it had already become a subsidiary. All such provisions of these Articles as are applicable to paid-up shares shall apply to stock, and the words “share” and “shareholder” shall be construed accordingly. Words denoting the singular shall include the plural and vice versa. Words denoting the masculine shall include the feminine. Words denoting persons shall include bodies corporate and unincorporated associations. References to any statute or statutory provision shall be construed as relating to any statutory modification or re-enactment thereof for the time being in force. Subject as aforesaid any words or expressions defined in the Act or the Regulations shall (if not inconsistent with the subject or context) bear the same meanings in these Articles.

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A Special or Extraordinary Resolution shall be effective for any purpose for which an Ordinary Resolution is expressed to be required under any provision of these Articles. References herein to a share (or to a holding of shares) being in uncertificated form or in certificated form are references, respectively, to that share being an uncertificated unit of a security or a certificated unit of a security for the purposes of the Regulations.

Share Capital 3 Amount of Share Capital The share capital of the Company at the date of adoption of these Articles is £10,000,088,384.02 divided into 2,380,961,520 ordinary shares of £4.20 each (“Ordinary Shares”), two

Redeemable Deferred Shares of 1 penny each (“Redeemable Deferred Shares”) and one Redeemable Preference Share of £50,000 (“Redeemable Preference Share”).† The Ordinary Shares will have attached thereto the rights and privileges and be subject to the limitations and restrictions specified in this Article 3.

3.1 Income Subject to the rights attached to any other share or class of share, the holders of Ordinary Shares shall be entitled to be paid any profits of the Company available for distribution and

determined to be paid by the Directors rateably according to the amounts paid up on such shares. 3.2 Capital On a return of capital on winding up or otherwise (except on redemption in accordance with the terms of issue of any share, or purchase by the Company of any share or on a

capitalisation issue and subject to the rights of any other class of shares that may be issued) after paying such sums as may be due in priority to holders of any other class of shares in the capital of the Company, any further such amount shall be paid to the holders of the Ordinary Shares rateably according to the amounts paid up or credited as paid up in respect of each Ordinary Share.

3.3 Voting at General Meetings The holders of Ordinary Shares shall be entitled, in respect of their holdings of such shares, to receive notice of general meetings and to attend, speak and vote at such meetings in

accordance with these Articles.

2 By Special Resolution passed on 9 April 2003 each issued and unissued authorised ordinary share in the capital of the Company at 12.01 a.m. on 13 April 2003 was sub-divided into 4,200 Ordinary Shares of 0.1 penny each and every 4,956

such Ordinary Shares of 0.1 penny each were then consolidated into 1 Ordinary Share of £4.956 each, resulting in an authorised share capital of £10,000,088,384.02 divided into 2 Redeemable Deferred Shares of 1 penny each, 1 Redeemable Preference Share of £50,000 and 2,017,764,000 Ordinary Shares of £4.956 each.

By Order of the High Court of Justice dated 14 April 2003 the capital of the Company was reduced to £100,938,200.02 divided into 2 Redeemable Deferred Shares of 1 penny each, 1 Redeemable Preference Share of £50,000 and

2,017,764,000 Ordinary Shares of 5 pence each. By an Ordinary resolution passed on 1 December 2003, the authorised ordinary share capital of the Company was converted into 1,424,304,000 new ordinary shares of 7 1/12 pence each.

By Special Resolution passed on 2 February 2006 the unissued share capital divided into 2 Redeemable Deferred Shares of 1 penny each and 1 Redeemable Preference Share of £50,000 was converted into ordinary shares of 7 1/12 pence

each and the authorised ordinary share capital was amended accordingly.

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Variation of Rights 4 Manner of variation of rights Whenever the share capital of the Company is divided into different classes of shares, the special rights attached to any class may, subject to the provisions of the Statutes, be

varied or abrogated either with the consent in writing of the holders of three-quarters in nominal value of the issued shares of the class or with the sanction of an Extraordinary Resolution passed at a separate General Meeting of the holders of the shares of the class (but not otherwise) and may be so varied or abrogated either whilst the Company is a going concern or during or in contemplation of a winding-up. To every such separate General Meeting all the provisions of these Articles relating to General Meetings of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two persons at least holding or representing by proxy at least one-third in nominal value of the issued shares of the class (but so that at any adjourned meeting any holder of shares of the class present in person or by proxy shall be a quorum) and that any holder of shares of the class present in person or by proxy may demand a poll and that every such holder shall on a poll have one vote for every £1 in nominal amount of capital held by him but not otherwise. The foregoing provisions of this Article shall apply to the variation or abrogation of the special rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class the special rights whereof are to be varied.

5 Matters not constituting variation of rights The special rights attached to any class of shares having preferential rights shall not unless otherwise expressly provided by the terms of issue thereof be deemed to be varied by

the creation or issue of further shares ranking as regards participation in the profits or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto.

Alteration of Share Capital

6 Increase of Share Capital The Company may from time to time by Ordinary Resolution increase its capital by such sum to be divided into shares of such amounts as the resolution shall prescribe. All new

shares shall be subject to the provisions of the Statutes and of these Articles with reference to allotment, payment of calls, lien, transfer, transmission, forfeiture and otherwise. 7 Consolidation, cancellation and subdivision The Company may by Ordinary Resolution: 7.1 Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

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7.2 Cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person and diminish the amount of its capital by the amount of the shares so cancelled;

7.3 Sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the Memorandum of Association (subject, nevertheless, to the provisions of the Statutes), and so

that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such subdivision, one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights, or be subject to any such restrictions, as the Company has power to attach to unissued or new shares.

8 Proceeds of consolidation and subdivision Whenever as a result of a consolidation or subdivision of shares any members would become entitled to fractions of a share, the Directors may, on behalf of those members, sell the

shares representing the fractions for the best price reasonably obtainable to any person (including, subject to the provisions of the Act, the Company) and distribute the net proceeds of sale in due proportion among those members, and the Directors may authorise some person to transfer the shares to, or in accordance with the directions of, the purchaser. The transferee shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale. So far as the Statutes allow, the Directors may treat shares of a member in certificated form and in uncertificated form as separate holdings in giving effect to subdivisions and/or consolidations and may cause any shares arising on consolidation or subdivision and representing fractional entitlements to be entered in the Register as shares in certificated form where this is desirable to facilitate the sale thereof.

9 Purchase of own shares Subject to the provisions of the Statutes, the Company may purchase, or may enter into a contract under which it will or may purchase, any of its own shares (including any

redeemable shares). Every contract for the purchase by the Company of, or under which it may become entitled or obliged to purchase, its own shares shall, in addition to such authorisation as may be required by the Statutes, be sanctioned by an Extraordinary Resolution passed at a separate General Meeting of the holders of each class of shares in issue convertible into equity share capital of the Company.

10 Reduction of capital The Company may reduce its share capital or any capital redemption reserve, share premium account or other undistributable reserve in any manner and with and subject to any

incident authorised and consent required by law.

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Shares 11 Rights attaching to shares on issue Without prejudice to any special rights previously conferred on the holders of any shares or class of shares for the time being issued, any share in the Company may be issued with

such preferred, deferred or other special rights, or subject to such restrictions, whether as regards dividend, return of capital, voting or otherwise, as the Company may from time to time by Ordinary Resolution determine (or, in the absence of any such determination, as the Directors may determine) and subject to the provisions of the Statutes the Company may issue any shares which are, or at the option of the Company or the holder are liable, to be redeemed.

12 Directors’ power to allot 12.1 Subject to the provisions of the Statutes relating to authority, pre-emption rights and otherwise and of any resolution of the Company in General Meeting passed pursuant thereto, all

unissued shares shall be at the disposal of the Directors and they may allot (with or without conferring a right of renunciation), grant options over or otherwise dispose of them to such persons, at such times and on such terms as they think proper.

12.2 The Directors shall be generally and unconditionally authorised pursuant to and in accordance with Section 80 of the Act to exercise for each Allotment Period all the powers of the

Company to allot relevant securities up to an aggregate nominal amount not exceeding an amount equal to one-third of the Ordinary Shares in issue at the beginning of the Allotment Period.

12.3 During each Allotment Period the Directors shall be empowered to allot equity securities wholly for cash pursuant to and within the terms of any authority for the time being in force

under Section 80 of the Act: 12.3.1 in connection with a rights issue; and 12.3.2 otherwise than in connection with a rights issue, up to an aggregate nominal amount not exceeding an amount equal to five per cent. of the Ordinary Shares in issue at the

beginning of the Allotment Period, as if Section 89(1) of the Act did not apply to any such allotment. 12.4 By each such authority and power the Directors may during each Allotment Period, make offers or agreements which would or might require the allotment of securities after the

expiry of such period. 12.5 For the purposes of this Article 12: 12.5.1 “rights issue” means an offer of equity securities open for a period fixed by the Directors to holders of equity securities on the Register on a fixed record date in proportion

to their respective holdings of such securities or in accordance with the rights attached thereto (but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or legal or practical problems under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory);

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12.5.2 “Allotment Period” means the period ending at the conclusion of the next Annual General Meeting or 15 months from the date of passing the resolution, whichever is the earlier, or any other period (not exceeding five years on any occasion) for which the authority conferred by this Article 12 is renewed or extended by Resolution of the Company in General Meeting stating the Section 80 Amount for such period;

12.5.3 “Section 80 Amount” shall for the first Allotment Period be an aggregate nominal amount not exceeding an amount equal to one third of the Ordinary Shares in issue at

the beginning of the Allotment Period; 12.5.4 the nominal amount of any securities shall be taken to be, in the case of rights to subscribe for or to convert any securities into shares of the Company, the nominal amount

of such shares which may be allotted pursuant to such rights. 13 Commission on issue of shares The Company may exercise the powers of paying commissions conferred by the Statutes to the full extent thereby permitted. The Company may also on any issue of shares pay

such brokerage as may be lawful. 14 Renunciation of allotment The Directors may at any time after the allotment of any share but before any person has been entered in the Register as the holder: 14.1 recognise a renunciation thereof by the allottee in favour of some other person and may accord to any allottee of a share a right to effect such renunciation; and/or 14.2 allow the rights represented thereby to be one or more participating securities, in each case upon and subject to such terms and conditions as the Directors may think fit to impose. 15 Trust etc. interests not recognised Except as required by law, no person shall be recognised by the Company as holding any share upon any trust, and the Company shall not be bound by or compelled in any way to

recognise any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these Articles or by law otherwise provided) any other right in respect of any share, except an absolute right to the entirety thereof in the registered holder.

16 Right to refuse registration The Directors may in their absolute discretion and without assigning any reason therefor refuse to register any transfer of shares (not being fully-paid shares) provided that, where

any such shares are admitted to the Official List maintained by the UK Listing Authority, such discretion may not be exercised in such a way as to prevent dealings in the shares of that class from taking place on an open and proper basis. The Directors may also refuse to register an allotment or transfer of shares (whether fully-paid or not) in favour of more than four persons jointly. If the Directors refuse to register an allotment or transfer they shall within two months after the date on which the letter of allotment or transfer was lodged with the Company send to the allottee or transferee notice of the refusal.

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Evidence of Title to Securities 17 Nothing in these Articles shall require title to any securities of the Company to be evidenced or transferred by a written instrument, the regulations from time to time made under the

Statutes so permitting. The Directors shall have power to implement any arrangements which they may think fit for such evidencing and transfer which accord with those regulations.

Share Certificates 18 Issue of share certificate Every share certificate shall be executed by the Company in such manner as the Directors may decide (which may include use of the Seal or the Securities Seal (or, in the case of

shares on a branch register, an official seal for use in the relevant territory) and/or manual or facsimile signatures by one or more Directors) and shall specify the number and class of shares to which it relates and the amount paid up thereon. No certificate shall be issued representing shares of more than one class. No certificate shall normally be issued in respect of shares held by a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange.

19 Joint Holder In the case of a share held jointly by several persons in certificated form the Company shall not be bound to issue more than one certificate therefor and delivery of a certificate to

one of the joint holders shall be sufficient delivery to all. 20 Timing of issue of share certificate Any person (subject as aforesaid) whose name is entered in the Register in respect of any shares in certificated form of any one class upon the issue or transfer thereof shall be

entitled without payment to a certificate therefor (in the case of issue) within one month (or such longer period as the terms of issue shall provide) after allotment or (in the case of a transfer of fully-paid shares) within 14 days after lodgment of a transfer or (in the case of a transfer of partly-paid shares) within two months after lodgment of a transfer.

21 Balance certificate Where some only of the shares comprised in a share certificate are transferred, the old certificate shall be cancelled and, to the extent that the balance is to be held in certificated

form, a new certificate for the balance of such shares issued in lieu without charge.

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22 Replacement of share certificates 22.1 Any two or more certificates representing shares of any one class held by any member may at his request be cancelled and a single new certificate for such shares issued in lieu

without charge. 22.2 If any member shall surrender for cancellation a share certificate representing shares held by him and request the Company to issue in lieu two or more share certificates

representing such shares in such proportions as he may specify, the Directors may, if they think fit, comply with such request. 22.3 If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed, a new certificate representing the same shares may be issued to the holder upon

request subject to delivery up of the old certificate or (if alleged to have been lost, stolen or destroyed) compliance with such conditions as to evidence and indemnity and the payment of any exceptional out-of-pocket expenses of the Company in connection with the request as the Directors may think fit.

22.4 In the case of shares held jointly by several persons any such request may be made by any one of the joint holders.

Calls on Shares 23 Power to make calls The Directors may from time to time make calls upon the members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or, when

permitted, by way of premium) but subject always to the terms of allotment of such shares. A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed and may be made payable by instalments.

24 Liability for calls Each member shall (subject to receiving at least 14 days’ notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified,

the amount called on his shares. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. A call may be revoked or postponed as the Directors may determine.

25 Interest on overdue amounts If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day

appointed for payment thereof to the time of actual payment at such rate (not exceeding 3 per cent per annum above the base rate for the time being of Barclays Bank PLC on the date on which payments are made to the Company) as the Directors determine but the Directors shall be at liberty in any case or cases to waive payment of such interest wholly or in part.

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26 Other sums due on shares Any sum (whether on account of the nominal value of the share or by way of premium) which by the terms of allotment of a share becomes payable upon allotment or at any fixed

date shall for all the purposes of these Articles be deemed to be a call duly made and payable on the date on which by the terms of allotment the same becomes payable. In case of non-payment all the relevant provisions of these Articles as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified.

27 Power to differentiate between holders The Directors may on the allotment of shares differentiate between the holders as to the amount of calls to be paid and the times of payment. 28 Payment of calls in advance The Directors may if they think fit receive from any member willing to advance the same all or any part of the moneys (whether on account of the nominal value of the shares or by

way of premium) uncalled and unpaid upon the shares held by him and such payment in advance of calls shall extinguish pro tanto the liability upon the shares in respect of which it is made and upon the money so received (until and to the extent that the same would but for such advance become payable) the Company may pay interest at such rate (not exceeding 3 per cent per annum above the base rate for the time being of Barclays Bank PLC on the date on which payments are made to the Company) as the member paying such sum and the Directors may agree.

Forfeiture and Lien

29 Notice on failure to pay a call 29.1 If a member fails to pay in full any call or instalment of a call on or before the due date for payment thereof, the Directors may at any time thereafter serve a notice on him requiring

payment of so much of the call or instalment as is unpaid together with any interest which may have accrued thereon and any expenses incurred by the Company by reason of such non-payment.

29.2 The notice shall name a further day (not being less than seven days from the date of service of the notice) on or before which and the place where the payment required by the

notice is to be made, and shall state that in the event of non-payment in accordance therewith the shares on which the call has been made will be liable to be forfeited. 30 Forfeiture for non-compliance If the requirements of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all

calls and interest and expenses due in respect thereof has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited share and not actually paid before forfeiture. The Directors may accept a surrender of any share liable to be forfeited hereunder.

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31 Disposal of forfeited share A share so forfeited or surrendered shall become the property of the Company and may be sold, re-allotted or otherwise disposed of either to the person who was before such

forfeiture or surrender the holder thereof or entitled thereto or to any other person upon such terms and in such manner as the Directors shall think fit and at any time before a sale, re-allotment or disposal the forfeiture or surrender may be cancelled on such terms as the Directors think fit. The Directors may, if necessary, authorise some person to transfer a forfeited or surrendered share to any such other person as aforesaid.

32 Holder to remain liable despite forfeiture A member whose shares have been forfeited or surrendered shall cease to be a member in respect of the shares (and shall, in the case of shares held in certificated form, surrender

to the Company for cancellation the certificate for such shares) but shall notwithstanding the forfeiture or surrender remain liable to pay to the Company all moneys which at the date of forfeiture or surrender were presently payable by him to the Company in respect of the shares with interest thereon at 3 per cent per annum above the base rate for the time being of Barclays Bank PLC on the date on which payments are made to the Company (or such lower rate as the Directors may determine) from the date of forfeiture or surrender until payment and the Directors may at their absolute discretion enforce payment without any allowance for the value of the shares at the time of forfeiture or surrender or for any consideration received on their disposal or waive payment in whole or in part.

33 Lien on partly-paid shares The Company shall have a first and paramount lien on every share (not being a fully-paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in

respect of such share and the Directors may waive any lien which has arisen and may resolve that any share shall for some limited period be exempt wholly or partially from the provisions of this Article.

34 Sale of shares subject to lien The Company may sell in such manner as the Directors think fit any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien

exists is presently payable nor until the expiration of 14 days after a notice in writing stating and demanding payment of the sum presently payable and giving notice of intention to sell in default shall have been given to the holder for the time being of the share or the person entitled thereto by reason of his death or bankruptcy or otherwise by operation of law.

35 Proceeds of sale subject to lien The net proceeds of such sale after payment of the costs of such sale shall be applied in or towards payment or satisfaction of the amount in respect whereof the lien exists so far as

the same is then payable and any residue shall, upon surrender (in the case of shares held in certificated form) to the Company for cancellation of the certificate for the shares sold and subject to a like lien for sums not presently payable as existed upon the shares prior to the sale, be paid to the person entitled to the shares at the time of the sale. For the purpose of giving effect to any such sale the Directors may authorise some person to transfer the shares sold to, or in accordance with the directions of, the purchaser.

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36 Evidence of forfeiture A statutory declaration in writing that the declarant is a Director or the Secretary of the Company and that a share has been duly forfeited or surrendered or sold to satisfy a lien of

the Company on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. Such declaration shall (subject to the making of a transfer if the same be required) constitute a good title to the share and the person to whom the share is sold, re-allotted or disposed of shall not be bound to see to the application of the consideration (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the forfeiture, surrender, sale, re-allotment or disposal of the share.

Transfer of Shares 37 Form of transfer 37.1 Subject to the provisions of Article 17, all transfers of shares which are in certificated form may be effected by transfer in writing in any usual or common form or in any other form

acceptable to the Directors and may be under hand only. The instrument of transfer shall be signed by or on behalf of the transferor and (except in the case of fully-paid shares) by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register in respect thereof.

37.2 All transfers of shares which are in uncertificated form may, unless the Regulations otherwise provide, be effected by means of a relevant system. 38 Closure of Register 38.1 The registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine and either generally or in respect of any class of

shares except that, in respect of any shares which are participating securities, the Register shall not be closed without the consent of the Operator. The Register shall not be closed for more than 30 days in any year.

39 Right to refuse registration 39.1 The Directors may decline to recognise any instrument of transfer relating to shares in certificated form unless the instrument of transfer is in respect of only one class of share and

is lodged at the Transfer Office accompanied by the relevant share certificate(s) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do), provided that, where any such shares are admitted to the official list maintained by the UK Listing Authority, such discretion may not be exercised in such a way as to prevent dealings in the shares of that class from taking place on an open and proper basis. In the case of a transfer of shares in certificated form by a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange the lodgment of share certificates will only be necessary if and to the extent that certificates have been issued in respect of the shares in question.

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40 Instruments of transfer All instruments of transfer which are registered may be retained by the Company. 41 No fee on registration No fee will be charged by the Company in respect of the registration of any transfer or any document relating to or affecting the title to any shares or otherwise for making any entry

in the Register affecting the title to any shares. 42 Destruction of documents Subject to compliance with the rules (as defined in the Regulations) applicable to shares of the Company in uncertificated form, the Company shall be entitled to destroy or delete all

instruments of transfer or other documents (whether in hard copy or electronic form) which have been registered or on the basis of which registration was made at any time after the expiration of six years from the date of registration thereof and all dividend mandates and notifications of change of address at any time after the expiration of two years from the date of recording thereof and all share certificates which have been cancelled at any time after the expiration of one year from the date of the cancellation thereof and it shall conclusively be presumed in favour of the Company that every entry in the Register purporting to have been made on the basis of an instrument of transfer or other document so destroyed or deleted was duly and properly made and every instrument of transfer so destroyed or deleted was a valid and effective instrument duly and properly registered and every share certificate so destroyed was a valid and effective certificate duly and properly cancelled and every other document hereinbefore mentioned so destroyed or deleted was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company. Provided always that:

42.1 The provisions aforesaid shall apply only to the destruction or deletion of a document in good faith and without notice of any claim (regardless of the parties thereto) to which the

document might be relevant; 42.2 Nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction or deletion of any such document earlier than as aforesaid or in

any other circumstances which would not attach to the Company in the absence of this Article; 42.3 References herein to the destruction or deletion of any document include references to the disposal thereof in any manner.

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43 Further provisions on shares in uncertificated form 43.1 Subject to the Statutes and the rules (as defined in the Regulations), the Directors may determine that any class of shares may be held in uncertificated form and that title to such

shares may be transferred by means of a relevant system or that shares of any class should cease to be held and transferred as aforesaid. 43.2 The provisions of these Articles shall not apply to shares of any class which are in uncertificated form to the extent that such Articles are inconsistent with: 43.2.1 the holding of shares of that class in uncertificated form; 43.2.2 the transfer of title to shares of that class by means of a relevant system; or 43.2.3 any provision of the Regulations.

Transmission of Shares 44 Persons entitled on death In case of the death of a shareholder, the survivors or survivor where the deceased was a joint holder, and the executors or administrators of the deceased where he was a sole or

only surviving holder, shall be the only persons recognised by the Company as having any title to his interest in the shares, but nothing in this Article shall release the estate of a deceased holder (whether sole or joint) from any liability in respect of any share held by him.

45 Election by persons entitled by transmission Any person becoming entitled to a share in consequence of the death or bankruptcy of a member or otherwise by operation of law may (subject as hereinafter provided) upon

supplying to the Company such evidence as the Directors may reasonably require to show his title to the share either be registered himself as holder of the share upon giving to the Company notice in writing of such his desire or transfer such share to some other person. All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the notice or transfer were a transfer made by the member registered as the holder of any such share.

46 Rights of persons entitled by transmission Save as otherwise provided by or in accordance with these Articles, a person becoming entitled to a share in consequence of the death or bankruptcy of a member or otherwise by

operation of law (upon supplying to the Company such evidence as the Directors may reasonably require to show his title to the share) shall be entitled to the same dividends and other advantages as those to which he would be entitled if he were the registered holder of the share except that he shall not be entitled in respect thereof (except with the authority of the Directors) to exercise any right conferred by membership in relation to meetings of the Company until he shall have been registered as a member in respect of the share.

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Untraced Shareholders 47 Untraced shareholders

The Company shall be entitled to sell at the best price reasonably obtainable at the time of sale the shares of a member or the shares to which a person is entitled by virtue of transmission on death or bankruptcy or otherwise by operation of law if and provided that:

47.1 during the period of six years prior to the date of the publication of the advertisements referred to in Article 47.2 below (or, if published on different dates, the first thereof) no

communication has been received by the Company from the member or the person entitled by transmission and no cheque or warrant sent by the Company through the post in a pre-paid letter addressed to the member or to the person entitled by transmission to the shares at his address on the Register or the last known address given by the member or the person entitled by transmission to which cheques and warrants are to be sent has been cashed and at least three dividends in respect of the shares in question have become payable and no dividend in respect of those shares has been claimed; and

47.2 the Company shall on expiry of the said period of six years have inserted advertisements in both a leading national daily newspaper and in a newspaper circulating in the area in

which the address referred to in Article 47.1 above is located giving notice of its intention to sell the said shares; and 47.3 during the said period of six years and the period of three months following the publication of the said advertisements the Company shall have received no communication from such

member or person. 48 Executor and proceeds To give effect to any such sale the Company may appoint any person to execute as transferor an instrument of transfer of the said shares and such instrument of transfer shall be as

effective as if it had been executed by the registered holder of or person entitled by transmission to such shares and the title of the transferee shall not be affected by any irregularity or invalidity in the proceedings relating thereto. The net proceeds of sale shall belong to the Company which shall be obliged to account to the former member or other person previously entitled as aforesaid for an amount equal to such proceeds and shall enter the name of such former member or other person in the books of the Company as a creditor for such amount which shall be a permanent debt of the Company. No trust shall be created in respect of the debt, no interest shall be payable in respect of the same and the Company shall not be required to account for any money earned on the net proceeds, which may be employed in the business of the Company or invested in such investments (other than shares of the Company or its holding company if any) as the Directors may from time to time think fit.

49 Uncertificated shares In the case of shares in uncertificated form, the foregoing provisions of this Article are subject to any restrictions applicable under the Regulations.

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General Meetings 50 Annual and Extraordinary General Meetings An Annual General Meeting shall be held not more than 18 months after the incorporation of the Company and subsequently once in every year, at such time (within a period of not

more than 15 months after the holding of the last preceding Annual General Meeting) and place as may be determined by the Directors. All other General Meetings shall be called Extraordinary General Meetings.

51 Convening of General Meetings The Directors may whenever they think fit, and shall on requisition in accordance with the Statutes, proceed with proper expedition to convene an Extraordinary General Meeting.

Notice of General Meetings 52 Notice of General Meetings An Annual General Meeting and any Extraordinary General Meeting at which it is proposed to pass a Special Resolution or (save as provided by the Statutes) a resolution of which

special notice has been given to the Company, shall be called by 21 clear days’ notice in writing (including, subject to the provision of the Statutes and regulations of the London Stock Exchange, electronic mail), as further described in Article 150 at the least and any other Extraordinary General Meeting by 14 clear days’ notice in writing (including, subject to the provision of the Statutes and regulations of the London Stock Exchange, electronic mail), as further described in Article 150 at the least. The period of notice shall in each case be exclusive of the day on which it is served or deemed to be served and of the day on which the meeting is to be held and shall be given in manner hereinafter mentioned to all members other than such as are not under the provisions of these Articles entitled to receive such notices from the Company: Provided that the Company may determine that only those persons entered on the Register at the close of business on a day determined by the Company, such day being no more than 21 days before the day that notice of the meeting is sent, shall be entitled to receive such a notice and Provided also that a General Meeting notwithstanding that it has been called by a shorter notice than that specified above shall be deemed to have been duly called if it is so agreed:

52.1 in the case of an Annual General Meeting by all the members entitled to attend and vote thereat; and 52.2 in the case of an Extraordinary General Meeting by a majority in number of the members having a right to attend and vote thereat, being a majority together holding not less than 95

per cent in nominal value of the shares giving that right. 53 Contents of notice of General Meetings 53.1 Every notice calling a General Meeting shall specify the place and the day and hour of the meeting, and there shall appear with reasonable prominence in every such notice a

statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him and that a proxy need not be a member of the Company.

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53.2 In the case of an Annual General Meeting, the notice shall also specify the meeting as such. 53.3 The notice shall specify the general nature of the business to be transacted; if any resolution is to be proposed as an Extraordinary Resolution or as a Special Resolution, the notice

shall contain a statement to that effect. 53.4 For the purposes of determining which persons are entitled to attend or vote at a meeting and how many votes such person may cast, the Company may specify in the notice of the

meeting a time, not more than 48 hours before the time fixed for the meeting, by which a person must be entered on the Register in order to have the right to attend or vote at the meeting.

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Overflow of General Meetings 54 The Board may, notwithstanding that the notice of any General Meeting may specify the place of the meeting (the “Principal Place”), at which the chairman of the meeting shall

preside, make arrangements for simultaneous attendance and participation at other places by members and proxies entitled to attend the General Meeting but unable to do so at the Principal Place.

55 Such arrangements for simultaneous attendance at the meeting may include arrangements regarding the level of attendance as aforesaid at the other places provided that they shall

operate so that any members and proxies excluded from attendance at the Principal Place are able to attend at one or more of the other places. For the purpose of all other provisions of these Articles any such meeting shall be treated as being held and taking place at the Principal Place.

56 The Board may, for the purpose of facilitating the organisation and administration of any General Meeting to which such arrangements apply, from time to time make arrangements,

whether involving the issue of tickets (on a basis intended to afford all members and proxies entitled to attend the meeting an equal opportunity of being admitted to the Principal Place) or the imposition of some random means of selection or otherwise as it shall in its absolute discretion consider to be appropriate, and may from time to time vary any such arrangements or make new arrangements in their place and the entitlement of any member or proxy to attend a General Meeting at the Principal Place shall be subject to the arrangements as may be for the time being in force whether stated in the notice of meeting to apply to that meeting or notified to the members concerned subsequent to the provision of the notice of the meeting.

Proceedings at General Meetings

57 Chairman The Chairman of the Directors, failing whom a Deputy Chairman, shall preside as chairman at a General Meeting. If there be no such Chairman or Deputy Chairman, or if at any

meeting neither be present within five minutes after the time appointed for holding the meeting and willing to act, the Directors present shall choose one of their number (or, if no Director be present or if all the Directors present decline to take the chair, the members present shall choose one of their number) to be chairman of the meeting.

58 Quorum No business other than the appointment of a chairman shall be transacted at any General Meeting unless a quorum is present at the time when the meeting proceeds to business.

Three members present in person or by proxy and entitled to vote shall be a quorum for all purposes.

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59 Lack of quorum If within five minutes from the time appointed for a General Meeting (or such longer interval as the chairman of the meeting may think fit to allow) a quorum is not present, the

meeting, if convened on the requisition of members, shall be dissolved. In any other case it shall stand adjourned to such other day and such time and place as may have been specified for the purpose in the notice convening the meeting or (if not so specified) as the chairman of the meeting may determine and in the latter case not less than seven days’ notice of the adjourned meeting shall be given in like manner as in the case of the original meeting. At the adjourned meeting two members present in person or by proxy and entitled to vote shall be a quorum for all purposes.

60 Adjournment The chairman of any General Meeting at which a quorum is present may with the consent of the meeting (and shall if so directed by the meeting) adjourn the meeting from time to

time (or sine die) and from place to place, but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place. Where a meeting is adjourned sine die, the time and place for the adjourned meeting shall be fixed by the Directors. When a meeting is adjourned for 30 days or more or sine die, not less than seven days’ notice of the adjourned meeting shall be given in like manner as in the case of the original meeting.

61 Notice of adjourned meeting Save as hereinbefore expressly provided, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 62 Amendments to resolutions If an amendment shall be proposed to any resolution under consideration but shall in good faith be ruled out of order by the chairman of the meeting the proceedings on the

substantive resolution shall not be invalidated by any error in such ruling. In the case of a resolution duly proposed as a Special or Extraordinary Resolution no amendment thereto (other than a mere clerical amendment to correct a patent error) may in any event be considered or voted upon.

63 Polls At any General Meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of

hands) demanded by: 63.1 the chairman of the meeting; or 63.2 not less than five members present in person or by proxy and entitled to vote; or 63.3 a member or members present in person or by proxy and representing not less than one- tenth of the total voting rights of all the members having the right to vote at the meeting; or

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Votes of Members

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63.4 a member or members present in person or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

64 Demand for poll A demand for a poll may be withdrawn only with the approval of the chairman of themeeting. Unless a poll is demanded a declaration by the chairman that a resolution has been

carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the minute book, shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded for or against such resolution. If a poll is demanded, it shall be taken in such manner (including the use of ballot or voting papers or tickets) as the chairman of the meeting may direct, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The chairman of the meeting may (and if so directed by the meeting shall) appoint scrutineers and may fix a place and time for the purpose of declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.

65 Voting on a poll On a poll votes may be given either personally or by proxy and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

Unless his appointment otherwise provides, the proxy may vote or abstain at his discretion on any matter coming before the meeting on which proxies are entitled to vote. 66 Chairman’s casting vote In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded

shall be entitled to a casting vote in addition to any other vote he may have. 67 Timing of poll A poll demanded on the choice of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken either immediately or at

such subsequent time (not being more than 30 days from the date of the meeting) and place as the chairman may direct. No notice need be given of a poll not taken immediately. The demand for a poll shall not prevent the continuance of the meeting for the transaction of any business other than the question on which the poll has been demanded.

68 Votes attaching to shares Subject to Article 53.4 and to any special rights or restrictions as to voting attached by or in accordance with these Articles to any class of shares, on a show of hands every member

who is present in person or by proxy shall have one vote and on a poll every member who is present in person or by proxy shall have one vote for every share of which he is the holder.

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69 Votes of joint holders In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint

holders and for this purpose seniority shall be determined by the order in which the names stand in the Register in respect of the share. 70 Voting by guardian Where in England or elsewhere a receiver or other person (by whatever name called) has been appointed by any court claiming jurisdiction in that behalf to exercise powers with

respect to the property or affairs of any member on the ground (however formulated) of mental disorder, the Directors may in their absolute discretion, upon or subject to production of such evidence of the appointment as the Directors may require, permit such receiver or other person on behalf of such member to vote in person or by proxy at any General Meeting or to exercise any other right conferred by membership in relation to meetings of the Company.

71 Restrictions on voting if holding unpaid shares No member shall, unless the Directors otherwise determine, be entitled in respect of any share held by him to vote either personally or by proxy at a General Meeting or a meeting of

the holders of any class of shares of the Company or to exercise any other right conferred by membership in relation to General Meetings of the Company or meetings of the holders of any class of shares of the Company if any call or other sum presently payable by him to the Company in respect of that share remains unpaid.

72 Restrictions on voting in particular circumstances 72.1 If any member, or any other person appearing to be interested in shares held by such member, has been duly served with a notice under Section 212 of the Act and is in default for

the prescribed period in supplying to the Company the information thereby required, then (unless the Directors otherwise determine) in respect of: 72.1.1 the shares comprising the shareholding account in the Register which comprises or includes the shares in relation to which the default occurred (all or the relevant number

as appropriate of such shares being the “default shares” which expression shall include any further shares which are issued in respect of such shares); and 72.1.2 any other shares held by the member, the member shall (for so long as the default continues) not, nor shall any transferee to which any of such shares are transferred other than pursuant to an approved transfer or

pursuant to paragraph 74.2.2 below, be entitled to vote either personally or by proxy at a General Meeting of the Company or a meeting of the holders of any class of shares of the Company or to exercise any other right conferred by membership in relation to General Meetings of the Company or meetings of the holders of any class of shares of the Company.

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provided that, in the case of shares in uncertificated form, the Directors may only exercise their discretion not to register a transfer if permitted to do so by the Regulations.

Any direction notice may treat shares of a member in certificated and uncertificated form as separate holdings and either apply only to the former or to the latter or make different provision for the former and the latter.

Upon the giving of a direction notice its terms shall apply accordingly.

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72.2 Where the default shares represent at least 0.25 per cent of the issued shares of the class in question, the Directors may in their absolute discretion by notice (a “direction notice”) to such member direct that:

72.2.1 any dividend or part thereof or other money which would otherwise be payable in respect of the default shares shall be retained by the Company without any liability to pay

interest thereon when such money is finally paid to the member; and/or

72.2.2 no transfer of any of the shares held by such member shall be registered unless the transfer is an approved transfer or:

(i) the member is not himself in default as regards supplying the information required; and

(ii) the transfer is of part only of the member’s holding and, when presented for registration, is accompanied by a certificate by the member in a form satisfactory to the Directors to the effect that after due and careful enquiry the member is satisfied that none of the shares the subject of the transfer are default shares,

72.3 The Company shall send to each other person appearing to be interested in the shares which are the subject of any direction notice a copy of the notice, but the failure or omission by the Company to do so shall not invalidate such notice.

72.4

72.4.1 Save as herein provided any direction notice shall have effect in accordance with its terms for so long as the default in respect of which the direction notice was issued continues and shall cease to have effect thereafter upon the Directors so determining (such determination to be made within a period of one week of the default being duly remedied with written notice thereof being given forthwith to the member).

72.4.2 Any direction notice shall cease to have effect in relation to any shares which are transferred by such member by means of an approved transfer or in accordance with

paragraph 74.2.2 above. 72.5 For the purposes of this Article:

72.5.1 a person shall be treated as appearing to be interested in any shares if the member holding such shares has been served with a notice under the said Section 212 and

either (a) the member has named such person as being so interested or (b) (after taking into account the response of the member to the said notice andany other relevant information) the Company knows or has reasonable cause to believe that the person in question is or may be interested in the shares;

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Proxies

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72.5.2 the prescribed period is 14 days from the date of service of the notice under the said Section 212; and

72.5.3 a transfer of shares is an approved transfer if: (i) it is a transfer of shares to an offeror by way or in pursuance of acceptance of a takeover offer for a company (as defined in Section 428 of the Act); or

(ii) the Directors are satisfied that the transfer is made pursuant to a bona fide sale of the whole of the beneficial ownership of the shares to a party unconnected with the member or with any person appearing to be interested in such shares including any such sale made through the London Stock Exchange or any other stock exchange outside the United Kingdom on which the Company’s shares are normally traded. For the purposes of this sub-paragraph any associate (as that term is defined in Section 435 of the Insolvency Act 1986) shall be included amongst the persons who are connected with the member or any person appearing to be interested in such shares.

72.6 The provisions of this Article are in addition and without prejudice to the provisions of the Act. 73 Validity and result of vote

No objection shall be raised as to the admissibility of any vote except at the meeting or adjourned meeting at which the vote objected to is or may be given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairman of the meeting whose decision shall be final and conclusive.

74 Proxy need not be a member A proxy need not be a member of the Company. 75 Form of proxy Subject to Article 76.1, an instrument appointing a proxy shall be in writing in any usual or common form or in any other form which the Directors may approve and: 75.1 in the case of an individual shall be signed by the appointor or his attorney; and 75.2 in the case of a corporation shall be either given under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation. The signature on such instrument need not be witnessed. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney

or a duly certified copy thereof must (failing previous registration with the Company) belodged with the instrument of proxy pursuant to the next following Article, failing which the instrument may be treated as invalid.

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76 Deposit of form of proxy 76.1 An instrument appointing a proxy must be received by the Company at such place or one of such places (if any) as may be specified for that purpose in or by way of note to or in any

document accompanying the notice convening the meeting (or, if no place is so specified, at the Transfer Office) not less than forty-eight hours before the time appointed for the holding of the meeting or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) for the taking of the poll at which it is to be used, and in default shall not be treated as valid. The instrument shall, unless the contrary is stated thereon, be valid as well for any adjournment of the meeting as for the meeting to which it relates.

76.2 Without limiting the foregoing, in relation to any shares in uncertificated form the Directors may permit a proxy to be appointed by means of an electronic communication in the form

of an Uncertificated Proxy Instruction (that is, a properly authenticated dematerialised instruction, and/or other instruction or notification, sent by means of a relevant system to such participant in that system acting on behalf of the Company as the Directors may prescribe, in such form and subject to such terms and conditions as may from time to time be prescribed by the Directors (subject always to the facilities and requirements of the relevant system)); and may permit any supplement to, or amendment or revocation of, any such Uncertificated Proxy Instruction to be made by a further Uncertificated Proxy Instruction. The Directors may in addition prescribe the method of determining the time at which any such instruction or notification purporting or expressed to be sent on behalf of a holder of a share as sufficient evidence of the authority of the person sending the instruction to send it on behalf of that holder.

77 Differing proxy appointments When two or more valid but differing proxy appointments are delivered in respect of the same share for use at the same meeting, the one which is last delivered (regardless of its

date or the date of its execution (if relevant)) shall be treated as replacing and revoking the others as regards that share and if the Company is unable to determine which was last delivered none of them shall be treated as valid in respect of that share.

78 Rights of proxy An instrument appointing a proxy shall be deemed to include the right to demand or join in demanding a poll but shall not confer any further right to speak at the meeting, except with

the permission of the chairman of the meeting. 79 Revocation of proxy A vote cast by proxy shall not be invalidated by the previous death or insanity of the principal or by the revocation of the appointment of the proxy or of the authority under which the

appointment was made provided that no intimation in writing, or electronically or by telephone of such death, insanity or revocation shall have been received by the Company at the address or one of the addresses specified under Article 76 (subject to any conditions attached to the use of a particular address imposed under that Article) or, if no address was specified, at the Transfer Office 48 hours or such lesser time as the Directors may determine before the commencement of the meeting or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) the time appointed for the taking of the poll at which the vote is cast. The Directors may establish such procedures as they deem appropriate to receive and verify the validity and acceptance of the revocation of proxy.

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Corporations Acting by Representatives

Directors

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80 Any corporation which is a member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company. The person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of the Company and such corporation shall for the purposes of these Articles be deemed to be present in person at any such meeting if a person so authorised is present thereat.

81 Number of Directors

Subject as hereinafter provided the Directors shall not be less than five nor more than 18 in number. The Company may by Ordinary Resolution from time to time vary the minimum number and/or maximum number of Directors.

82 Share qualification

A Director shall not be required to hold any shares of the Company by way of qualification.A Director who is not a member of the Company shall nevertheless be entitled to receivenotice of, attend and speak at General Meetings.

83 Directors’ fees

Each of the Directors, other than those who hold executive office or are employees of the Company or any subsidiary, shall be paid a fee (which shall accrue from day to day) at such rate as may from time to time be determined by the Directors, provided that the aggregate of all such fees shall not in respect of any year exceed £550,000 or such other sum as shall be determined by Ordinary Resolution of the Company.

84 Other remuneration of Directors

Any Director who holds any executive office (including for this purpose the office of Chairman or Deputy Chairman or Vice Chairman whether or not such office is held in an executive capacity), or who serves on any committee of the Directors, or who otherwise performs services which in the opinion of the Directors are outside the scope of theordinary duties of a Director, may be paid such extra remuneration by way of salary, commission or otherwise or may receive such benefits as the Directors may determine.

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85 Directors’ expenses

The Directors may repay to any Director all such reasonable expenses as he may incur in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise in connection with the business of the Company.

86 Directors’ pensions and other benefits

The Directors shall have power to pay and agree to pay gratuities, pensions or other retirement, superannuation, death or disability benefits to (or to any person in respect of) any Director or ex-Director of the Company or any of its subsidiaries and for the purpose of providing any such gratuities, pensions or other benefits to contribute to any scheme or fund or to pay premiums.

87 Directors’ insurance

Without prejudice to the provisions of Article 160 the Directors shall have the power to purchase and maintain insurance for or for the benefit of any persons who are or were at any time Directors, officers or employees of the Company, or of any other company which is its holding company or in which the Company or such holding company or any of the predecessors of the Company or of such holding company has any interest whether direct or indirect or which is in any way allied to or associated with the Company, or of any subsidiary undertaking of the Company or of any such other company, or who are or were at any time trustees of any pension fund or employees’ share scheme in which any employees of the Company or of any such other company or subsidiary undertaking are interested, including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such persons in respect of any act or omission in the actual or purported execution and/or discharge of their duties and/or in the exercise or purported exercise of their powers and/or otherwise in relation to the Company or any such other company, subsidiary undertaking or pension fund or employees’ share scheme.

88 Directors’ interests

Subject to the provisions of the Statutes, and provided that he has disclosed to the Directors the nature and extent of any interest of his, a Director or alternate Director may be party to or in any way interested in any contract or arrangement or transaction to which the Company is a party or in which the Company is in any way interested and he may hold and be remunerated in respect of any office or place of profit (other than the office of Auditor of the Company or any subsidiary thereof) under the Company or any other company in which the Company is in any way interested and he (or any firm of which he is a member) may act in a professional capacity for the Company or any such other company and be remunerated therefor and in any such case as aforesaid (save as otherwise agreed by him) he may retain for his own absolute use and benefit all profits and advantages accruing to him thereunder or in consequence thereof.

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89 Appointment of executive Directors 89.1 The Directors may from time to time appoint one or more of their body to be the holder of any executive office (including, where considered appropriate, the office of Chairman,

Deputy Chairman, Vice Chairman or Group Chief Executive) on such terms and for such period as they may (subject to the provisions of the Statutes) determine and, without prejudice to the terms of any contract entered into in any particular case, may at any time revoke or vary the terms of any such appointment.

89.2 The appointment of any Director to the office of Chairman, Deputy Chairman, Vice Chairman or Group Chief Executive or Managing or Joint Managing or Deputy or Assistant

Managing Director shall automatically determine if he ceases to be a Director but without prejudice to any claim for damages for breach of any contract of service between him and the Company.

89.3 The appointment of any Director to any other executive office shall not automatically determine if he ceases from any cause to be a Director, unless the contract or resolution under

which he holds office shall expressly state otherwise, in which event such determination shall be without prejudice to any claim for damages for breach of any contract of service between him and the Company.

90 Powers of executive Directors 90.1 The Directors may entrust to and confer upon any Director holding any executive office any of the powers exercisable by them as Directors upon such terms and conditions and with

such restrictions as they think fit, and either collaterally with or to the exclusion of their own powers, and may from time to time revoke, withdraw, alter or vary all or any of such powers.

Appointment and Retirement of Directors

91 Election or appointment of additional director

The Company may by Ordinary Resolution appoint any person to be a Director either to fill a casual vacancy or as an additional Director. Without prejudice thereto the Directors shall have power at any time so to do, but so that the total number of Directors shall not thereby exceed the maximum number (if any) fixed by or in accordance with these Articles. Any person so appointed by the Directors shall hold office only until the next Annual General Meeting and shall then be eligible for re-appointment, but shall not be taken into account in determining the number of Directors who are to retire by rotation at such meeting.

92 Vacation of office The office of a Director shall be vacated in any of the following events, namely: 92.1 If he shall become prohibited by law from acting as a Director; 92.2 If he shall resign by writing under his hand left at the Office or if he shall in writing offer to resign and the Directors shall resolve to accept such offer;

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92.3 If he shall have a bankruptcy order made against him or shall compound with his creditors generally or shall apply to the court for an interim order under Section 253 of the Insolvency Act 1986 in connection with a voluntary arrangement under that Act;

92.4 If in England or elsewhere an order shall be made by any court claiming jurisdiction in that behalf on the ground (however formulated) of mental disorder for his detention or for the

appointment of a guardian or for the appointment of a receiver or other person (by whatever name called) to exercise powers with respect to his property or affairs; 92.5 If he shall be absent from meetings of the Directors for six months without leave and the Directors shall resolve that his office be vacated; or 92.6 If he shall be removed from office by notice in writing served upon him signed by at least 75 per cent of his co-Directors, but so that if he holds an appointment to an executive office

which thereby automatically determines such removal shall be deemed an act of the Company and shall have effect without prejudice to any claim for damages for breach of any contract of service between him and the Company.

93 Retirement by rotation at Annual General Meetings At each Annual General Meeting: 93.1 any Director who was elected or last re-elected a Director at or before the Annual General Meeting held in the third calendar year before the current year shall retire by rotation; and 93.2 such further Directors (if any) shall retire by rotation as would bring the number retiring by rotation up to one-third of the number of Directors in office at the date of the notice of

meeting (or, if their number is not a multiple of three, the number nearest to but not greater than one-third). 94 Other Directors retiring by rotation

The Directors to retire by rotation shall include (so far as necessary to obtain the number required) any Director who wishes to retire and not to offer himself for re-appointment. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-appointment or appointment and so that as between persons who became or were last re-appointed Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring Director shall be eligible for re-appointment.

95 Re-election of retiring Director The Company at the meeting at which a Director retires under any provision of these Articles may by Ordinary Resolution fill the office being vacated by appointing thereto the

retiring Director or some other person eligible for appointment. In default the retiring Director shall be deemed to have been re-appointed except in any of the following cases: 95.1 Where at such meeting it is expressly resolved not to fill such office or a resolution for the re-appointment of such Director is put to the meeting and lost; 95.2 Where such Director has given notice in writing to the Company that he is unwilling to be re-appointed;

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95.3 Where the default is due to the moving of a resolution in contravention of the next following Article; 95.4 Where such Director has attained any retiring age applicable to him as Director.

The retirement shall not have effect until the conclusion of the meeting except where a resolution is passed to appoint some other person in the place of the retiring Director or a resolution for his re-appointment is put to the meeting and lost and accordingly a retiring Director who is re-appointed or deemed to have been re-appointed will continue in office without a break.

96 Election of two or more Directors A resolution for the appointment of two or more persons as Directors by a single resolution shall not be moved at any General Meeting unless a resolution that it shall be so moved

has first been agreed to by the meeting without any vote being given against it; and any resolution moved in contravention of this provision shall be void. 97 Nomination of Directors for election

No person other than a Director retiring at the meeting shall, unless recommended by the Directors for appointment, be eligible for appointment as a Director at any General Meeting unless not less than seven nor more than 42 days (inclusive of the date on which the notice is given) before the date appointed for the meeting there shall have been lodged at the Office notice in writing signed by some member (other than the person to be proposed) duly qualified to attend and vote at the meeting for which such notice is given of his intention to propose such person for appointment and also notice in writing signed by the person to be proposed of his willingness to be appointed.

98 Power to remove Director

The Company may in accordance with and subject to the provisions of the Statutes by Ordinary Resolution of which special notice has been given remove any Director from office (notwithstanding any provision of these Articles or of any agreement between the Company and such Director, but without prejudice to any claim he may have for damages for breach of any such agreement) and appoint another person in place of a Director so removed from office and any person so appointed shall be treated for the purpose of determining the time at which he or any other Director is to retire by rotation as if he had become a Director on the day on which the Director in whose place he is appointed was last appointed a Director. In default of such appointment the vacancy arising upon the removal of a Director from office may be filled as a casual vacancy.

99 Age Limit

Any provision of the Statutes which, subject to the provisions of these Articles, would have the effect of rendering any person ineligible for appointment as a Director or liable to vacate office as a Director on account of his having reached any specified age or of requiring special notice or any other special formality in connection with the appointment of any Director over a specified age, shall not apply to the Company.

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100 Retirement age A Director shall vacate his office at the conclusion of the Annual General Meeting commencing next after he attains the age of 67. Such a retiring Director shall be eligible for re-

appointment. Any person who has attained the age of 67 and is appointed or reappointed by the Company as a Director shall hold office only until the next Annual General Meeting and shall then be eligible for re-appointment. Such a Director shall not be taken into account in determining the number of Directors who are to retire by rotation.

Alternate Directors

101 Any Director may at any time by writing under his hand and deposited at the Office, or delivered at a meeting of the Directors, appoint any person (including another Director) to be

his alternate Director and may in like manner at any time terminate such appointment. Such appointment, unless previously approved by the Directors, shall have effect only upon and subject to being so approved.

102 The appointment of an alternate Director shall determine on the happening of any event which if he were a Director would cause him to vacate such office or if his appointor ceases

to be a Director. 103 An alternate Director shall (except when absent from the United Kingdom) be entitled to receive notices of meetings of the Directors and shall be entitled to attend and vote as a

Director at any such meeting at which the Director appointing him is not personally present and generally at such meeting to perform all functions of his appointor as a Director and for the purposes of the proceedings at such meeting the provisions of these Articles shall apply as if he (instead of his appointor) were a Director. If he shall be himself a Director or shall attend any such meeting as an alternate for more than one Director, his voting rights shall be cumulative but he shall count as only one for the purpose of determining whether a quorum is present. If his appointor is for the time being absent from the United Kingdom or temporarily unable to act through ill health or disability his signature to any resolution in writing of the Directors shall be as effective as the signature of his appointor. To such extent as the Directors may from time to time determine in relation to any committees of the Directors the foregoing provisions of this paragraph shall also apply mutatis mutandis to any meeting of any such committee of which his appointor is a member. An alternate Director shall not (save as aforesaid) have power to act as a Director nor shall he be deemed to be a Director for the purposes of these Articles.

104 An alternate Director shall be entitled to contract and be interested in and benefit from contracts or arrangements or transactions and to be repaid expenses and to be indemnified to

the same extent mutatis mutandis as if he were a Director but he shall not be entitled to receive from the Company in respect of his appointment as alternate Director any remuneration except only such part (if any) of the remuneration otherwise payable to his appointor as such appointor may by notice in writing to the Company from time to time direct.

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Meetings and Proceedings of Directors 105 Governing of meetings of Directors 105.1 Subject to the provisions of these Articles the Directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit. At any time

any Director may, and the Secretary on the requisition of a Director shall, summon a meeting of the Directors. Any Director may waive notice of any meeting and any such waiver may be retroactive.

105.2 A notice of a meeting of directors convened in accordance with Article 105.1, or a copy of the text of any resolution proposed to be passed in accordance with Article 112, (each a

“Communication”) shall be provided to each Director at their last known address, fax number or electronic mail address in the United Kingdom or to such temporary address, fax number or electronic mail address as may be notified to the Secretary from time to time. It shall not be necessary to give notice of a meeting of Directors to any Director for the time being absent from the United Kingdom. Any such Communication may be delivered by hand or sent by courier, fax, electronic mail or prepaid first class post. If sent by fax or electronic mail such Communication shall conclusively be deemed to have been given or served at the time of despatch. If sent by post or courier such Communication shall conclusively be deemed to have been received 24 hours from the time of posting or despatch, in the case of inland mail and couriers in the United Kingdom.

105.3 A Communication shall be deemed duly served under Article 105.2 if sent to the address, fax number or electronic mail address last provided by each Director to the Secretary. The

non-receipt by any Director of any Communication served in accordance with the provisions of this Article 105 shall not invalidate any meeting of directors, or any written resolution signed in accordance with Article 112, to which the Communication relates if such meeting or resolution is otherwise held or signed in accordance with the provisions of these Articles.

106 Quorum

The quorum necessary for the transaction of business of the Directors may be fixed from time to time by the Directors and unless so fixed at any other number shall be three. A meeting of the Directors at which a quorum is present shall be competent to exercise all powers and discretions for the time being exercisable by the Directors. For the purposes of these Articles any Director who is able (directly or by telephonic communication) to speak and be heard by each of the other Directors present or deemed to be present at any meeting of the Directors, shall be deemed to be present in person at such meeting and shall be entitled to vote or be counted in the quorum accordingly. Such meeting shall be deemed to take place where the largest group of those participating is assembled, or, if there is no such group, where the chairman of the meeting then is, and the word “meeting” shall be construed accordingly.

107 Casting vote Questions arising at any meeting of the Directors shall be determined by a majority of votes. In case of an equality of votes the chairman of the meeting shall have a second or

casting vote.

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108 Directors’ interests

Save as herein provided, a Director shall not vote in respect of any contract or arrangement or any other proposal whatsoever in which he together with any person connected with him within the meaning of Section 346 of the Act has any material interest (having previously disclosed to the Directors the nature and extent of any interest) otherwise than by virtue of his interests in shares or debentures or other securities of or otherwise in or through the Company. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting.

109 Directors may have interests 109.1 Subject to the provisions of the Statutes, a Director shall (in the absence of some other material interest than is indicated below) be entitled to vote (and be counted in the quorum) in

respect of any resolution concerning any of the following matters, namely: 109.1.1 The giving of any security or indemnity to him in respect of money lent or obligations incurred by him at the request of or for the benefit of the Company or any of its

subsidiaries; 109.1.2 The giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which he himself has assumed

responsibility in whole or in part under a guarantee or indemnity or by the giving of security; 109.1.3 Any proposal concerning an offer of shares or debentures or other securities of or by the Company or any of its subsidiaries for subscription or purchase in which offer he is

or is to be interested as a participant in the underwriting or sub-underwriting thereof;

109.1.4 Any proposal concerning any other body corporate in which he is interested, directly or indirectly and whether as an officer or shareholder or otherwise howsoever,

provided that he (together with persons connected with him within the meaning of Section 346 of the Act) is not beneficially interested in 1 per cent or more of the issued shares of any class of such body corporate (or of any third company through which his interest is derived) or of the voting rights available to members of the relevant body corporate (any such interest being deemed for the purpose of this Article to be a material interest in all circumstances);

109.1.5 Any proposal relating to an arrangement for the benefit of the employees of the Company or any of its subsidiary undertakings which does not award him any privilege or

benefit not generally awarded to the employees to whom such arrangement relates;

109.1.6 Any proposal concerning any insurance which the Company is empowered to purchase and/or maintain for or for the benefit of any Directors of the Company or for persons

who include Directors of the Company provided that for the purposes of this sub-paragraph insurance shall mean only insurance against liability incurred by a Director in respect of any act or omission by him referred to in Article 87 or any other insurance which the Company is empowered to purchase and/or maintain for or for the benefit of any groups of persons consisting of or including Directors of the Company.

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109.2 Where proposals are under consideration concerning the appointment (including fixing or varying the terms of appointment) of two or more Directors to offices or employments with the Company or any company in which the Company is interested, such proposals may be divided and considered in relation to each Director separately and in such case each of the Directors concerned (if not debarred from voting under paragraph 109.1.4 of this Article) shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment.

109.3 If any question shall arise at any time as to the materiality of a Director’s interest or as to the entitlement of any Director to vote and such question is not resolved by his voluntarily

agreeing to abstain from voting, such question shall be referred to the chairman of the meeting and his ruling in relation to any other Director shall be final and conclusive except in a case where the nature or extent of the interest of such Director has not been fairly disclosed.

109.4 The Company may by Ordinary Resolution suspend or relax the provisions of this Article to any extent or ratify any transaction not duly authorised by reason of a contravention of

this Article. 109.5 For the purposes of this Article 109 an interest of a person who is connected (within the meaning of Section 346 of the Act) with a Director shall be treated as an interest of the

Director. 110 Number of Directors below minimum

The continuing Directors may act notwithstanding any vacancies, but if and so long as the number of Directors is reduced below the minimum number fixed by or in accordance with these Articles the continuing Directors or Director may act for the purpose of filling such vacancies or of summoning General Meetings, but not for any other purpose. If there be no Directors or Director able or willing to act, then any two members may summon a General Meeting for the purpose of appointing Directors.

111 Chairman 111.1 The Directors may elect from their number a Chairman, a Deputy Chairman and/or a Vice Chairman (or two or more Deputy Chairmen and/or Vice Chairmen) and determine the

period for which each is to hold office. If no Chairman, Deputy Chairman or Vice Chairman shall have been appointed or if at any meeting of the Directors no Chairman, Deputy Chairman or Vice Chairman shall be present within five minutes after the time appointed for holding the meeting, the Directors present may choose one of their number to be chairman of the meeting.

111.2 If at any time there is more than one Deputy Chairman and/or Vice Chairman the right in the absence of the Chairman to preside at a meeting of the Directors or of the Company

shall be determined as between the Deputy Chairmen and/or Vice Chairmen present (if more than one) by seniority in length of appointment or otherwise as resolved by the Directors.

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112 Written resolutions

A resolution in writing signed by 70 per cent of the Directors for the time being in the United Kingdom and entitled to vote thereon (being not less in number than a quorum for the meetings of Directors) shall be as effective as a resolution duly passed at a meeting of the Directors and may consist of several documents in the like form each signed by one or more Directors. The documents may be facsimile or electronic copies of the resolution. A resolution in writing shall be effective upon receipt by the Secretary of resolutions signed by the requisite number of Directors.

113 Appointment and constitution of committees 113.1 The Directors may delegate any of their powers or discretions (including without prejudice to the generality of the foregoing all powers and discretions whose exercise involves or

may involve the payment of remuneration to or the conferring of any other benefit on all or any of the Directors) to committees. Any such committee shall, unless the Directors otherwise resolve, have power to sub-delegate to sub-committees any of the powers or discretions delegated to it. Any such committee or sub-committee shall consist of one or more Directors and (if thought fit) one or more other persons co-opted as hereinafter provided. Insofar as any such power or discretion is delegated to a committee or sub- committee any reference in these Articles to the exercise by the Directors of the power or discretion so delegated shall be read and construed as if it were a reference to the exercise by such committee or sub-committee. Any committee or sub-committee so formed shall in the exercise of the powers so delegated conform to any regulations which may from time to time be imposed by the Directors. Any such regulations may provide for or authorise the co-option to the committee or sub-committee of persons other than Directors and for such co-opted members to have voting rights as members of the committee or sub- committee. Any such meeting of the committee or sub-committee shall be chaired by a Director.

113.2 The meetings and proceedings of any such committee or sub-committee consisting of two or more members shall be governed mutatis mutandis by the provisions of these Articles

regulating the meetings and proceedings of the Directors, so far as the same are not superseded by any regulations made by the Directors under the last preceding Article. 113.3 All acts done by any meeting of Directors, or of any such committee or sub-committee, or by any person acting as a Director or as a member of any such committee or sub-

committee, shall as regards all persons dealing in good faith with the Company, notwithstanding that there was some defect in the appointment of any of the persons acting as aforesaid, or that any such persons were disqualified or had vacated office, or were not entitled to vote, be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director or member of the committee or sub-committee and had been entitled to vote.

Borrowing Powers

114 Borrowing Powers Subject as hereinafter provided and to the provisions of the Statutes, the Directors may exercise all the powers of the Company to borrow money, and to mortgage or charge its

undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

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115 Borrowing Restrictions 115.1 The Directors shall restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary

companies (if any) so as to secure (so far, as regards subsidiaries, as by such exercise they can secure) that the aggregate amount for the time being remaining outstanding of all moneys borrowed by the Group (which expression in this Article means and includes the Company and its subsidiaries for the time being) and for the time being owing to persons outside the Group shall not at any time without the previous sanction of an Ordinary Resolution of the Company exceed an amount equal to three times the share capital and consolidated reserves.

115.2 No person dealing with the Company or any of its subsidiaries shall by reason of the foregoing provision be concerned to see or enquire whether the said limit is observed and no

debt incurred or security given in excess of such limit shall be invalid or ineffectual unless the lender or the recipient of the security had, at the time when the debt was incurred or security given, express notice that the said limit had been or would thereby be exceeded.

General Powers of Directors

116 General Powers 116.1 The business and affairs of the Company shall be managed by the Directors, who may exercise all such powers of the Company as are not by the Statutes or by these Articles

required to be exercised by the Company in General Meeting subject nevertheless to any regulations of these Articles; to the provisions of the Statutes and to such regulations, whether or not consistent with these Articles, as may be prescribed by Special Resolution of the Company, but no regulation so made by the Company shall invalidate any prior act of the Directors which would have been valid if such regulation had not been made. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Directors by any other Article.

117 Local boards

The Directors may establish any local boards or agencies for managing any of the affairs of the Company, either in the United Kingdom or elsewhere, and may appoint any persons to be members of such local boards, or any managers or agents, and may fix their remuneration, and may delegate to any local board, manager or agent any of the powers, authorities and discretions vested in the Directors, with power to sub-delegate, and may authorise the members of any local boards, or any of them, to fill any vacancies therein, and to act notwithstanding vacancies, and any such appointment or delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors may remove any person so appointed, and may annul or vary any suchdelegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.

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118 Appointment of attorney

The Directors may from time to time and at any time by power of attorney or otherwise appoint any company, firm or person or any fluctuating body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such appointment may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him.

119 Register of members in territories Subject to and to the extent permitted by the Statutes, the Company, or the Directors on behalf of the Company, may cause to be kept in any territory a branch register of members

resident in such territory, and the Directors may make and vary such regulations as they may think fit respecting the keeping of any such register. 120 Signature on cheques etc. All cheques, promissory notes, drafts, bills of exchange, and other negotiable or transferable instruments, and all receipts for moneys paid to the Company, shall be signed, drawn,

accepted, endorsed, or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine.

President 121 The Directors may from time to time elect a President of the Company and may determine the period for which he shall hold office. Such President may be either honorary or paid

such remuneration as the Directors in their discretion shall think fit, and need not be a Director but shall, if not a Director, be entitled to receive notice of and attend and speak, but not to vote, at meetings of the Board of Directors only if so invited by the Directors. The President (unless he is a Director) shall not be an officer of the Company for the purposes of the Act.

Departmental, Divisional or Local Directors

122 The Directors may from time to time appoint any person to be a Departmental, Divisional or Local Director and define, limit or restrict his powers and duties and determine his

remuneration and the designation of his office and may at any time remove any such person from such office. A Departmental, Divisional or Local Director (notwithstanding that the designation of his office may include the word “Director”) shall not by virtue of such office be or have power in any respect to act as a Director of the Company nor be entitled to receive notice of or attend or vote at meetings of the Directors nor be deemed to be a Director for any of the purposes of these presents.

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Secretary 123 The Secretary shall be appointed by the Directors on such terms and for such period as they may think fit. Any Secretary so appointed may at any time be removed from office by

the Directors, but without prejudice to any claim for damages for breach of any contract of service between him and the Company. If thought fit two or more persons may be appointed as Joint Secretaries. The Directors may also appoint from time to time on such terms as they may think fit one or more Deputy and/or Assistant Secretaries.

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The Seal 124 The Directors shall provide for the safe custody of the Seal which shall not be used without the authority of the Directors or of a committee authorised by the Directors in that behalf.

Every instrument to which the Seal shall be affixed shall be signed autographically by one Director and the Secretary or Deputy or Assistant Secretary or by two Directors. 125 Where the Statutes so permit, any instrument signed by one Director and the Secretary or by two Directors and expressed to be executed by the Company shall have the same

effect as if executed under the Seal, provided that no instrument shall be so signed which makes it clear on its face that it is intended to have effect as a deed without the authority of the Directors or of a committee authorised by the Directors in that behalf.

126 The Company may exercise the powers conferred by the Statutes with regard to having an official seal for use abroad and such powers shall be vested in the Directors.

Record Date 127 Notwithstanding any other provision of these Articles but subject always to the Statutes the Company or the Directors may by resolution specify any date (the “record date”) as the

date at the close of business (or such other time as the Directors may determine) on which persons registered as the holders of shares or other securities shall be entitled to receipt of any dividend, distribution, interest, allotment, issue, notice, information, document or circular and such record date may be on or at any time before the date on which the same is paid or made or (in the case of any dividend, distribution, interest, allotment or issue) at any time after the same is recommended, resolved, declared or announced but without prejudice to the rights inter se in respect of the same of transferors and transferees of any such shares or other securities.

Authentication of Documents

128 Any Director or the Secretary or any person appointed by the Directors for the purpose shall have power to authenticate any documents affecting the constitution of the Company

and any resolutions passed by the Company or the Directors or any committee, and any books, records, documents and accounts relating to the business of the Company, and to certify copies thereof or extracts therefrom as true copies or extracts; and where any books, records, documents or accounts are elsewhere than at the Office the local manager or other officer of the Company having the custody thereof shall be deemed to be a person appointed by the Directors as aforesaid. A document purporting to be a copy of a resolution, or an extract from the minutes of a meeting, of the Company or of the Directors or any committee which is certified as aforesaid shall be conclusive evidence in favour of all persons dealing with the Company upon the faith thereof that such resolution has been duly passed or, as the case may be, that any minute so extracted is a true and accurate record of proceedings at a duly constituted meeting.

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Reserves 129 The Directors may from time to time set aside out of the profits of the Company and carry to reserve such sums as they think proper which, at the discretion of the Directors, shall be

applicable for any purpose to which the profits of the Company may properly be applied and pending such application may either be employed in the business of the Company or be invested. The Directors may divide the reserve into such special funds as they think fit and may consolidate into one fund any special funds or any parts of any special funds into which the reserve may have been divided. The Directors may also without placing the same to reserve carry forward any profits. In carrying sums to reserve and in applying the same the Directors shall comply with the provisions of the Statutes.

Dividends

130 Final dividends The Company may by Ordinary Resolution declare dividends but no such dividend shall exceed the amount recommended by the Directors. 131 Fixed and interim dividends If and so far as in the opinion of the Directors the profits of the Company justify such payments, the Directors may pay the fixed dividends on any class of shares carrying a fixed

dividend expressed to be payable on fixed dates on the half-yearly or other dates prescribed for the payment thereof and may also from time to time pay interim dividends on shares of any class of such amounts and on such dates and in respect of such periods as they think fit. Provided the Directors act in good faith they shall not incur any liability to the holders of any shares for any loss they may suffer by the lawful payment, on any other class of shares having rights ranking after or pari passu with those shares, of any such fixed or interim dividend as aforesaid.

132 Ranking of shares for dividends Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares not fully paid throughout the

period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid. For the purposes of this Article no amount paid on a share in advance of calls shall be treated as paid on the share.

133 No dividend except out of profits No dividend shall be paid otherwise than out of profits available for distribution under the provisions of the Statutes.

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134 Treatment of dividend

Subject to the provisions of the Statutes, where any asset, business or property is bought by the Company as from a past date the profits and losses thereof as from such date may at the discretion of the Directors in whole or in part be carried to revenue account and treated for all purposes as profits or losses of the Company. Subject as aforesaid, if any shares or securities are purchased cum dividend or interest, such dividend or interest may at the discretion of the Directors be treated as revenue, and it shall not be obligatory to capitalise the same or any part thereof.

135 No interest on dividends No dividend or other moneys payable on or in respect of a share shall bear interest as against the Company. 136 Retention of dividends 136.1 The Directors may retain any dividend or other moneys payable on or in respect of a share on which the Company has a Iien and may apply the same in or towards satisfaction of

the moneys payable to the Company in respect of that share. 136.2 The Directors may retain the dividends payable upon shares in respect of which any person is under the provisions as to the transmission of shares hereinbefore contained entitled

to become a member, or which any person is under those provisions entitled to transfer, until such person shall become a member in respect of such shares or shall transfer the same.

137 Waiver of dividends

The waiver in whole or in part of any dividend on any share by any document (whether or not executed as a Deed) shall be effective only if such document is signed by the shareholder (or the person entitled to the share in consequence of the death or bankruptcy of the holder or otherwise by operation of law) and delivered to the Company and if or to the extent that the same is accepted as such or acted upon by the Company.

138 Unclaimed dividends

The payment by the Directors of any unclaimed dividend or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof, no interest shall be payable in respect of the same and the Company shall not be required to account for any money earned on the net proceeds, which may be employed in the business of the Company or invested in such investments (other than shares of the Company or its holding company if any) as the Directors may from time to time think fit. Any dividend unclaimed after a period of six years from the date of declaration of such dividend shall be forfeited and shall revert to the Company.

139 Distribution in specie

The Company may upon the recommendation of the Directors by Ordinary Resolution direct payment of a dividend in whole or in part by the distribution of specific assets (and in particular of paid-up shares or debentures of any other company) and the Directors shall give effect to such resolution. Where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates, may fix the value for distribution of such specific assets or any part thereof, may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors.

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140 Manner of payment of dividends 140.1 Any dividend or other moneys payable on or in respect of a share may be paid by cheque, warrant or financial instrument, or by other means sent direct, to the registered address of

the member or person entitled thereto (or, if two or more persons are registered as joint holders of the share or are entitled thereto in consequence of the death or bankruptcy of the holder or otherwise by operation of law, to any one of such persons) or to such person and such address as such member or person or persons may by writing direct. Such dividend or other moneys may be paid (i) by cheque sent by post to the payee or, where there is more than one payee, to any one of them, or (ii) by inter-bank transfer to such account as the payee or payees shall in writing direct, or (iii) using the facilities of a relevant system, or (iv) by such other method of payment as the member (or in the case of joint holders of a share, all of them) may agree to. Every such cheque, warrant, financial instrument or other form of payment shall be made payable to the order of the person to whom it is sent or such other person as the holder, or joint holders or person or persons entitled to the share in consequence of the death or bankruptcy of the holder or otherwise by operation of law may direct, and payment of the cheque, warrant, instrument or other form of payment shall be a good discharge to the Company. Every such payment shall be sent at the risk of the person entitled to the money represented thereby and payment of a cheque by the banker upon whom it is drawn, and any transfer or payment within (ii) or (iii) above, shall be a good discharge to the Company.

140.2 Subject to the provisions of these Articles and to the rights attaching to any shares, any dividend or other moneys payable on or in respect of a share may be paid in such currency

as the Directors may determine, using such exchange rate for currency conversions as the Directors may select. 140.3 The Company may cease to send any cheque, warrant or order by post for any dividend on any shares which is normally paid in that manner if in respect of at least three

consecutive dividends payable on those shares the cheque, warrant or order has been returned undelivered or remains uncashed but, subject to the provisions of these Articles, shall recommence sending cheques, warrants or orders in respect of the dividends payable on those shares if the holder or person entitled by transmission claims the arrears of dividend and does not instruct the Company to pay future dividends in some other way.

141 Joint holders If two or more persons are registered as joint holders of any share, or are entitled jointly to a share in consequence of the death or bankruptcy of the holder or otherwise by operation

of law, any one of them may give effectual receipts for any dividend or other moneys payable or property distributable on or in respect of the share.

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142 Record date for dividends Any resolution for the declaration or payment of a dividend on shares of any class, whether a resolution of the Company in General Meeting or a resolution of the Directors, may

specify that the same shall be payable to the persons registered as the holders of such shares at the close of business on a particular date, notwithstanding that it may be a date prior to that on which the resolution is passed, and thereupon the dividend shall be payable to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect of such dividend or transferors and transferees of any such shares.

Capitalisation of Profits and Shares

143 The Directors may, with the sanction of an Ordinary Resolution of the Company, capitalise any sum standing to the credit of any of the Company’s reserve accounts (including any

share premium account, capital redemption reserve or other undistributable reserve) or any sum standing to the credit of profit and loss account by appropriating such sum to the holders of Ordinary Shares on the Register at the close of business on the date of the Resolution (or such other date as may be specified therein or determined as therein provided) in proportion to their then holdings of Ordinary Shares and applying such sum on their behalf in paying up in full unissued Ordinary Shares (or, subject to any special rights previously conferred on any shares or class of shares for the time being issued, unissued shares of any other class) for allotment and distribution credited as fully paid up to and amongst them as bonus shares in the proportion aforesaid. The Directors may do all acts and things considered necessary or expedient to give effect to any such capitalisation with full power to the Directors to make such provisions as they think fit for any fractional entitlements which would arise on the basis aforesaid (including provisions whereby fractional entitlements are disregarded or the benefit thereof accrues to the Company rather than to the members concerned). The Directors may authorise any person to enter on behalf of all the members interested into an agreement with the Company providing for any such capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.

144 Scrip dividends 144.1 Subject as hereinafter provided, the Directors may offer to ordinary shareholders the right to receive, in lieu of dividend (or part thereof), an allotment of new Ordinary Shares

credited as fully paid. 144.2 The Directors shall not make such an offer unless so authorised by an Ordinary Resolution passed at any General Meeting, which authority may extend to dividends declared or paid

prior to the Annual General Meeting of the Company occurring thereafter, but no further Provided that this Article shall, without the need for any further Ordinary Resolution, authorise the Directors to offer rights of election in respect of any dividend declared or proposed after the date of the adoption of these Articles and at or prior to the Annual General Meeting which is held in the fifth year after the Ordinary Resolution is passed.

144.3 The Directors may either offer such rights of election in respect of the next dividend (or part thereof) proposed to be paid; or may offer such rights of election in respect of that

dividend and all subsequent dividends, until such time as the election is revoked; or may allow shareholders to make an election in either form.

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144.4 The basis of allotment on each occasion shall be determined by the Directors so that, as nearly as may be considered convenient, the value of the Ordinary Shares to be allotted in lieu of any amount of dividend shall equal such amount. For such purpose the value of an Ordinary Share shall be either (i) the average of the middle market quotations of an Ordinary Share on the London Stock Exchange, as derived from the Daily Official List, on each of the first five business days on which the Ordinary Shares are quoted “ex” the relevant dividend; or (ii) established in such other manner as may be determined by the Directors.

144.5 If the Directors determine to offer such right of election on any occasion they shall give notice in writing to the ordinary shareholders of such right and shall issue forms of election

and shall specify the procedures to be followed in order to exercise such right Provided that they need not give such notice to a shareholder who has previously made, and has not revoked, an earlier election to receive Ordinary Shares in lieu of all future dividends, but instead shall send him a reminder that he has made such an election, indicating how that election may be revoked in time for the next dividend proposed to be paid.

144.6 On each occasion the dividend (or that part of the dividend in respect of which a right of election has been accorded) shall not be payable on Ordinary Shares in respect whereof the

share election has been duly exercised and has not been revoked (the “elected Ordinary Shares”), and in lieu thereof additional shares (but not any fraction of a share) shall be allotted to the holders of the elected Ordinary Shares on the basis of allotment determined as aforesaid. For such purpose the Directors shall capitalise, out of such of the sums standing to the credit of reserves (including any share premium account or capital redemption reserve) or profit and loss account as the Directors may determine, a sum equal to the aggregate nominal amount of additional Ordinary Shares to be allotted on that occasion on such basis and shall apply the same in paying up in full the appropriate number of unissued Ordinary Shares for allotment and distribution to and amongst the holders of the elected Ordinary Shares on such basis.

144.7 The additional Ordinary Shares so allotted on any occasion shall rank pari passu in all respects with the fully-paid Ordinary Shares then in issue save only as regards participation in

the relevant dividend. 144.8 Article 143 shall apply (mutatis mutandis) to any capitalisation made pursuant to this Article. 144.9 No fraction of an Ordinary Share shall be allotted. The Directors may make such provision as they think fit for any fractional entitlements including, without limitation, provision

whereby, in whole or in part, the benefit thereof accrues to the Company and/or fractional entitlements are accrued and/or retained and in either case accumulated on behalf of any ordinary shareholder.

144.10 The Directors may on any occasion determine that rights of election shall not be made available to any ordinary shareholders with registered addresses in any territory where in the

absence of a registration statement or other special formalities the circulation of an offer of rights of election would or might be unlawful, and in such event the provisions aforesaid shall be read and construed subject to such determination.

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144.11 In relation to any particular proposed dividend the Directors may in their absolute discretion decide (i) that shareholders shall not be entitled to make any election in respect thereof and that any election previously made shall not extend to such dividend or (ii) at any time prior to the allotment of the Ordinary Shares which would otherwise be allotted in lieu thereof, that all elections to take shares in lieu of such dividend shall be treated as not applying to that dividend, and if so the dividend shall be paid in cash as if no elections had been made in respect of it.

Minutes

145 The Directors shall cause Minutes to be made in books to be provided for the purpose: 145.1 Of all appointments of officers made by the Directors. 145.2 Of the names of the Directors present at each meeting of Directors and of any committee of Directors. 145.3 Of all resolutions and proceedings at all meetings of the Company and of any class of members of the Company and of the Directors and of committees of Directors.

Accounts 146 Accounting records Accounting records sufficient to show and explain the Company’s transactions and otherwise complying with the Statutes shall be kept at the Office, or at such other place as the

Directors think fit, and shall always be open to inspection by the officers of the Company. Subject as aforesaid no member of the Company or other person shall have any right of inspecting any account or book or document of the Company except as conferred by statute or ordered by a court of competent jurisdiction or authorised by the Directors.

147 Copies of accounts for members A copy of every balance sheet and profit and loss account which is to be laid before a General Meeting of the Company (including every document required by law to be comprised

therein or attached or annexed thereto) shall not less than 21 days before the date of the meeting be sent to every member of, and every holder of debentures of, the Company and to every other person who is entitled to receive notices of meetings from the Company under the provisions of the Statutes or of these Articles. Provided that this Article shall not require a copy of these documents to be sent to any member to whom a summary financial statement is sent in accordance with the Statutes and provided further that this Article shall not require a copy of these documents to be sent to more than one of joint holders or to any person of whose address the Company is not aware, but any member or holder of debentures to whom a copy of these documents has not been sent shall be entitled to receive a copy free of charge on application at the Office.

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Auditors 148 Validity of Auditor’s acts Subject to the provisions of the Statutes, all acts done by any person acting as an Auditor shall, as regards all persons dealing in good faith with the Company, be valid,

notwithstanding that there was some defect in his appointment or that he was at the time of his appointment not qualified for appointment or subsequently became disqualified. 149 Auditor’s rights to attend General Meetings An Auditor shall be entitled to attend any General Meeting and to receive all notices of and other communications relating to any General Meeting which any member is entitled to

receive and to be heard at any General Meeting on any part of the business of the meeting which concerns him as Auditor.

Notices 150 Service of notice 150.1 Any notice to be given to or by any person pursuant to these Articles shall be in writing, except that a notice calling a meeting of the directors need not be in writing. 150.2 Any notice or document (including a share certificate) may be served on or delivered to any member by the Company either personally or by sending it through the post in a prepaid

cover addressed to such member at his registered address, or (if he has no registered address within the United Kingdom) to the address, if any, within the United Kingdom supplied by him to the Company as his address for the service of notices, or by delivering it to such address addressed as aforesaid.

150.3 Any document or notice (excluding a share certificate) which, in accordance with these Articles, may be sent by the Company by electronic communication shall, if so sent, be

deemed to be received at the expiration of 24 hours after the time it was sent. Proof (in accordance with the formal recommendations of best practice contained in the guidance issued by the Institute of Chartered Secretaries and Administrators) that an electronic communication was sent by the Company shall be conclusive evidence of such sending.

150.4 Where a notice or other document is served or sent by post, service or delivery shall be deemed to be effected at the expiration of 24 hours (or, where second-class mail is

employed, 48 hours) after the time when the cover containing the same is posted and in proving such service or delivery it shall be sufficient to prove that such cover was properly addressed, stamped and posted.

150.5 The accidental failure to send, or the non-receipt by any person entitled to, any notice of or other document relating to any meeting or other proceeding shall not invalidate the

relevant meeting or other proceeding.

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151 Joint holders Any notice given to that one of the joint holders of a share whose name stands first in the Register in respect of the share shall be sufficient notice to all the joint holders in their

capacity as such. For such purpose a joint holder having no registered address in the United Kingdom and not having supplied an address within the United Kingdom for the service of notices shall be disregarded.

152 Deceased and bankrupt members A person entitled to a share in consequence of the death or bankruptcy of a member or otherwise by operation of law upon supplying to the Company such evidence as the Directors

may reasonably require to show his title to the share, and upon supplying also an address within the United Kingdom for the service of notices, shall be entitled to have served upon or delivered to him at such address any notice or document to which the said member would have been entitled, and such service or delivery shall for all purposes be deemed a sufficient service or delivery of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share. Save as aforesaid any notice or document delivered or sent by post to or left at the address of any member in pursuance of these Articles shall, notwithstanding that such member be then dead or bankrupt or in liquidation, and whether or not the Company have notice of his death or bankruptcy or liquidation, be deemed to have been duly served or delivered in respect of any share registered in the name of such member as sole or first-named joint holder.

153 Overseas members A member who (having no registered address within the United Kingdom) has not supplied to the Company an address within the United Kingdom for the service of notices shall not

be entitled to receive notices from the Company. If on three consecutive occasions notices have been sent through the post to any member at his registered address or his address for the service of notices but have been returned undelivered, such member shall not thereafter be entitled to receive notices from the Company until he shall have communicated with the Company and supplied in writing to the Transfer Office a new registered address within the United Kingdom for the service of notices.

154 Suspension of postal services If at any time by reason of the suspension or curtailment of postal services within the United Kingdom the Company is unable effectively to convene a General Meeting by notices

sent through the post, a General Meeting may be convened by a notice advertised on the same date in at least two national daily newspapers with appropriate circulation and such notice shall be deemed to have been duly served on all members entitled thereto on the day when the advertisement appears. In any such case the Company shall send confirmatory copies of the notice by post if at least seven days prior to the meeting the posting of notices to addresses throughout the United Kingdom again becomes practicable.

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155 Statutory requirements as to notices Nothing in any of the preceding five Articles shall affect any requirement of the Statutes that any particular offer, notice or other document be served in any particular manner. 156 Signature of documents

Where under these Articles a document requires to be signed by a member or other person then, if in the form of an electronic communication, it must to be valid incorporate the electronic signature or personal identification details (which may be details previously allocated by the Company) of that member or other person, in such form as the Directors may approve, or be accompanied by such other evidence (including evidence in accordance with the last sentence of Article 76.2) as the Directors may require to satisfy themselves that the document is genuine. The Company may designate mechanisms for validating any such document, and any such document not so validated by use of such mechanisms shall be deemed not to have been received by the Company.

157 Electronic communication

Any member may notify the Company of an address for the purpose of his receiving electronic communications from the Company, and having done so shall be deemed to have agreed to receive notices and other documents from the Company by electronic communication of the kind to which the address relates. In addition, if a member notifies the Company of his e-mail address, the Company may satisfy its obligation to send him any notice or other document by:

157.1 publishing such notice or document on a web site; and 157.2 notifying him by e-mail to that e-mail address that such notice or document has been so published, specifying the address of the web site on which it has been published, the place

on the web site where it may be accessed, how it may be accessed and (if it is a notice relating to a shareholders’ meeting) stating (i) that the notice concerns a notice of a company meeting served in accordance with the Act, (ii) the place, date and time of the meeting, (iii) whether the meeting is to be an annual or extraordinary general meeting and (iv) such other information as the Statutes may prescribe.

Any amendment or revocation of a notification given to the Company under this Article shall only take effect if in writing, signed by the member and on actual receipt by the Company

thereof. An electronic communication shall not be treated as received by the Company if it is rejected by computer virus protection arrangements.

158 Directors’ powers to petition The Directors shall have power in the name and on behalf of the Company to present a petition to the Court for the Company to be wound up.

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Indemnity

Sale of Share of Relevant US Holders

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159 Distribution of assets in specie If the Company shall be wound up (whether the (liquidation is voluntary, under supervision, or by the Court) the Liquidator may, with the authority of an Extraordinary Resolution,

divide among the members in specie or kind the whole or any part of the assets of the Company and whether or not the assets shall consist of property of one kind or shall consist of properties of different kinds, and may for such purpose set such value as he deems fair upon any one or more class or classes of property and may determine how such division shall be carried out as between the members or different classes of members. The Liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the Liquidator with the like authority shall think fit, and the liquidation of the Company may be closed and the Company dissolved but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

160 Except to the extent prohibited or restricted by the Statutes, but without prejudice to any indemnity to which a Director, the Secretary or any officer may otherwise be entitled, every Director, the Secretary or other officer (excluding an auditor) of the Company may be indemnified out of the assets of the Company against all liabilities incurred by him in the actual or purported execution or discharge of his duties or the exercise or purported exercise of his powers or otherwise in relation to or in connection with his duties, powers or office.

161 Sale of Shares of Relevant US Holders 161.1 Purpose and interpretation

161.1.1 The purpose of this article is to enable the Company to reduce the number of Relevant US Holders (as defined in article 161.1.2(f)) of its shares, so as to enable the

Company to suspend its obligations under the US Securities Exchange Act of 1934 (the “Exchange Act”), and to prevent any such obligations from arising again in the future.

161.1.2 For the purpose of this article: (a) “interest” in relation to shares, means any interest which would be taken into account in determining for the purposes of Part VI of the Act whether a person has a

notifiable interest in a share (including any interest which he would be taken as having for those purposes) and applying Section 212(5) of the Act and “interested” shall be construed accordingly;

(b) “Register of Relevant US Holders” means the register of Relevant US Holders to be maintained in accordance with article 161.4;

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(c) “Relevant Nominee US Holder” means (a) a person who holds shares in the Company and all or part of whose holding is held as nominee for or on behalf of a person resident in the US in any manner described in Rule 12g3-2(a)(1) under the Exchange Act or in any amendment to such rule or equivalent rule promulgated by the SEC under the Exchange Act, provided that the number of shares so held as nominee does not exceed 20,000 and (b) a person who appears, at any time, to the Directors to fall within subparagraph (a);

(d) “Relevant Registered US Holder” means (a) a person resident in the US and who holds no more than 20,000 shares in the Company in any manner described in

Rule 12g 3-2(a)(1) under the Exchange Act or in any amendment to such rule or equivalent rule promulgated by the SEC under the Exchange Act and (b) a person who appears, at any time, to the Directors to fall within subparagraph (a);

(e) “Relevant Shares” means shares in the Company which are held by Relevant US Holders in any manner described in Rule 12g 3-2(a)(1) under the Exchange Act of

1934 or in any amendment to such rule or equivalent rule promulgated by the SEC under the Exchange Act or which are deemed pursuant to this article to be so held;

(f) “Relevant US Holders” means Relevant Registered US Holders and Relevant Nominee US Holders; (g) “Required Disposal” means in relation to any Relevant Shares a disposal or disposals of such shares or interests therein which will result in such shares ceasing to

be Relevant Shares; (h) “SEC” means the US Securities and Exchange Commission; and (i) “US” means the United States of America, its territories and possessions, any state of the United States of America, and the District of Columbia. 161.2 Disclosure notices 161.2.1 The Directors may by notice in writing require any member or other person appearing to be interested or appearing to have been interested in shares in the Company to

disclose to the Company in writing such information as the Directors shall require relating to the ownership of or interests in the shares in question as lies within the knowledge of such member or other person (supported if the Directors so require by a statutory declaration and/or by independent evidence) including (without prejudice to the generality of the foregoing) any information which the Company is entitled to seek pursuant to section 212 of the Act and any information which the Directors shall deem necessary or desirable in order to determine whether any shares are Relevant Shares.

161.2.2 Whether or not a notice pursuant to article 161.2.1 has been given, the Directors may by notice in writing require any member or other person appearing to be interested or

appearing to have been interested in shares in the Company to show to the satisfaction of the Directors that the shares in question are not Relevant Shares. Any person on whom such a notice has been served and any other person who is interested in such shares may within 14 days of such notice (or such longer period as the Directors may consider reasonable) make representations to the Directors as to why such shares should not be treated as Relevant Shares but if, after considering any such representations and such other information as seems to them relevant, the Directors believe such shares to be Relevant Shares, the Directors may determine that such shares shall be deemed to be Relevant Shares and they shall thereupon be treated as such for all purposes of this article.

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161.2.3 The Directors may give a notice pursuant to article 161.2.1 or 161.2.2 or both of them at any time and the Directors may give one or more than one such notice to the same member or other person in respect of the same shares.

161.2.4 Article 72 [(Restrictions on voting in particular circumstances)] shall have effect for the purposes of this article 161.2 as if any reference in that article to a notice under

Section 212 of the Act were also a reference to a notice under article 161.2.1. 161.2.5 Nothing contained in this article 161.2 shall limit the power of the Directors under Section 216 of the Act. 161.3 Notification obligation Each member shall notify the Company immediately upon becoming aware that any shares in which he is interested (a) is or has become a Relevant Share or (b) has ceased to be a

Relevant Share. 161.4 Register of Relevant US Holders 161.4.1 The Directors shall maintain, in addition to the register, a register of Relevant US Holders, in which there shall be entered particulars of any shares which are or have been

deemed to be Relevant Shares. The particulars entered in the register of Relevant US Holders in respect of any Relevant Share shall comprise, in addition to the name of the holder, the name of any Relevant US Holder or any other person resident in the US interested or who appears to the Directors to be interested in such share and such information as has been supplied to the Directors pursuant to article 161.2.1 or 161.2.2 or otherwise or, if no such information has been supplied, such information as the Directors consider appropriate.

161.4.2 The Directors shall remove from the Register of Relevant US Holders particulars of any share if there has been furnished to them a declaration (in such form as the

Directors may from time to time prescribe) by the holder of such share, together with such other evidence as the Directors may require, that satisfies the Directors that such share is no longer a Relevant Share.

161.5 Required Disposal 161.5.1 The Directors may give notice to a Relevant US Holder calling for a Required Disposal of some or all of the Relevant Shares to be made within 21 days or such longer

period as the Directors consider reasonable. The Directors may extend the period in which any such notice is required to be complied with and may withdraw any such notice (whether before or after the expiration of the period referred to) if it appears to them that the shares to which the notice relates are not or are no longer Relevant Shares or in any other circumstances whatsoever, in each case in their absolute discretion.

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161.5.2 If a notice given under article 161.5.1 above has not been complied with in all respects to the satisfaction of the Directors or withdrawn, the Directors shall, so far as they are able, arrange for a Required Disposal of those shares and shall give written notice of such disposal to those persons on whom such notice was served. The holder of the shares duly disposed of and all other persons interested in such shares shall be deemed irrevocably and unconditionally to have authorised the Directors to make such Required Disposal. The manner, timing and terms of any such Required Disposal made or sought to be made by the Directors (including but not limited to the price or prices at which the same is made and the extent to which assurance is obtained that no transferee is or would become a Relevant US Holder) shall be such as the Directors determine (based on advice from bankers, brokers, or other persons the Directors consider appropriate to be consulted by it for the purpose) to be reasonably obtainable having regard to all the circumstances, including but not limited to the number of shares to be disposed of; and the Directors shall not be liable to any person (whether or not a Relevant US Holder) for any of the consequences of reliance on such advice.

161.5.3 For the purpose of effecting any Required Disposal, the Directors may: (i) authorise in writing any officer or employee of the Company to execute any necessary transfer on behalf of any holder and to do all such acts and things as the

Directors consider necessary or expedient to effect the Required Disposal; and/or (ii) convert any share from uncertificated form to certificated form, and may enter the name of the transferee in the register in respect of the transferred shares notwithstanding the absence of any share certificate and may issue a new certificate to

the transferee, and an instrument of transfer executed by any officer or employee of the Company so authorised by the Directors shall be as effective as if it had been executed by the holder of the transferred shares and the title of the transferee to the transferred shares shall not be affected by any irregularity or invalidity in the proceedings relating to the sale of such shares. The proceeds of the Required Disposal shall be received by the Company or by any person nominated by the Company whose receipt shall be a good discharge for the purchase money and shall be paid (together with interest at such rate as the Directors deem appropriate) to the former holder (or, in the case of joint holders, the first of them named in the register) upon surrender by him or on his behalf to the Company for cancellation of any certificate in respect of the transferred shares.

161.6 Miscellaneous 161.6.1 Nothing in this article shall require the Directors to assume that any person is a Relevant US Holder unless the information contained in the Register, the registers kept by

the Company under Part VI of the Act or the Register of Relevant US Holders appears to the Directors to indicate that such person is a Relevant US Holder or the Directors have reason to believe that such person is a Relevant US Holder, in which circumstances the Directors shall make enquiries in good faith to discover whether any person is a Relevant US Holder.

161.6.2 The Directors shall not be obliged to give any notice otherwise required under this article to any person if they do not know either his identity or his address. The absence of

such a notice in those circumstances and any accidental error in or

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failure to give any notice to any person to whom notice is required to be given under this article shall not prevent the implementation of, or invalidate, any procedure under this article.

161.6.3 Save as otherwise provided in this article, the provisions of these articles applying to the giving of notice of meetings to members shall apply to the giving of any notice

required by this article. Any notice required by this article to be given to a person who is not a member, or who is a member whose registered address is not within the United Kingdom and who has not given to the Company an address within the United Kingdom at which notices may be given to him, shall be deemed validly served if it is sent through the post in a prepaid cover addressed to that person at the address (or, if more than one, at one of the addresses), if any, at which the Directors believe him to be resident or carrying on business or to his last known address as shown in the register. Service or delivery of such notice shall be deemed to be effected at the expiration of 48 hours after the time when the cover containing the same is posted and in proving such service or delivery it shall be sufficient to prove that such cover was properly addressed, stamped and posted.

161.6.4 Any resolution or determination of, or decision or exercise of any discretion or power by, the Directors or any of them or by the chairman of any meeting under or pursuant

to the provisions of this article (including without prejudice to the generality of the foregoing as to what constitutes enquiries made in good faith or as to the manner, timing and terms of any Required Disposal made by the Directors under article 161.5 above) shall be final and conclusive; and any disposal or transfer made, or other thing done, by or on behalf of, or on the authority of, the Directors or any of them pursuant to the foregoing provisions of this article shall be conclusive and binding on all persons concerned and shall not be open to challenge, whether as to its validity or otherwise on any ground whatsoever. The Directors shall not be required to give any reasons for any decision, determination or declaration taken or made in accordance with this article.

161.6.5 Nothing in this article 161 shall constitute the Relevant US Holders as a separate class. 161.6.6 None of the Company, any director, any officer or employee appointed by the Directors to effect any Required Disposal and any of the Company's other officers and

employees, advisers and agents shall have any liability in connection with any Required Disposal, including without limitation in relation to: (i) his or her exercise of discretion as to whether or not to sell or transfer the Relevant Shares; (ii) the timing of any such sale or transfer and the manner in which such Relevant Shares are sold or transferred; and (iii) the price obtained for the sale or transfer of such Relevant Shares, provided that nothing in this article 161.6.6 shall exclude any liability that any such person may have for fraud or any other matter that cannot be lawfully excluded.

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161.6.7 The Company may by ordinary resolution determine that the definitions of “Relevant Nominee US Holder” and “Relevant Registered US Holder” shall take effect as if the number of shares in the Company referred to therein is a number other than 20,000 and following the passing of any such ordinary resolution, this article 161 shall take effect accordingly.

161.6.8 This article shall apply notwithstanding any provision in any other of these articles which is inconsistent with or contrary to it.

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Index Article No. Page No. Accounts 146-147 47 Auditors 148-149 48 Authentication of Documents 128 41 Borrowing Powers 114-115 37-38 Capitalisation of Profits and Shares 143-144 45-47 Corporations acting by Representatives 80 28 Directors 81-90 28-30 Alternate 101-104 33 Appointment and Retirement of 91-100 30-33 Departmental, Divisional or Local 122 39 General Powers of 116-120 38-39 Meetings and Proceedings of 105-113 34-37 Dividends 130-142 42-45 Evidence of Title to Securities 17 11 Forfeiture and Lien 29-36 13-15 General Meetings 50-51 19 Notice of 52-53 19-20 Overflow of 54-56 21 Proceedings at 57-67 21-23 Indemnity 160 51 Minutes 145 47 Notices 150-157 48-50 Preliminary 1-2 1-6 President 121 39 Proxies 74-79 26-27 Record Date 127 41 Reserves 129 42 Seal 124-126 41 Secretary 123 40 Share Capital 3 6 Alteration of 6-10 7-8

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Article No. Page No. Variation of Rights 4-5 7 Share Certificates 18-22 11-12 Shares 11-16 9-10 Calls on 23-28 12-13 Transfer of 37-43 15-16 Transmission of 44-46 17 Untraced Shareholders 47-49 18 Votes of Members 68-73 23-26 Winding Up 158-159 50-51

Exhibit 8

Subsidiaries

Bede Retail Investments Ltd Mitchells & Butlers Lease Company Ltd N.A.S. (Jersey) Ltd Mitchells & Butlers Holdings Ltd Mitchells & Butlers (IP) Ltd Mitchells & Butlers (Property) Ltd Mitchells & Butlers Leisure Holdings Ltd Mitchells & Butlers Leisure Retail Ltd Crownhill Estates (Derriford) Ltd Lastbrew Ltd Toby Restaurants Ltd Vintage Inns Ltd East London Pubs & Restaurants Ltd Mitchells & Butlers Retail Holdings Ltd Mitchells & Butlers Finance plc Mitchells & Butlers Retail Ltd Browns Restaurants Ltd Browns Restaurant (Brighton) Ltd Browns Restaurant (Bristol) Ltd Browns Restaurant (Cambridge) Ltd Browns Restaurant (London) Ltd Browns Restaurant (Oxford) Ltd Old Kentucky Restaurants Ltd Mitchells & Butlers Leisure Entertainment Ltd Milton Keynes Entertainment Company Ltd Mitchells and Butlers Healthcare Trustee Ltd Mitchells & Butlers Guernsey Ltd Landmark Leisure Ltd Mitchells & Butlers Germany GmbH All Bar One Gaststatten Betriebsgesellschaft mbH Plan-Bar Gastronomie Einrichtungs GmbH Alex Gaststattenbetrieb Immobiliengesellschaft mbH Alex Gaststatten Gesellschaft mbH & Co KG Alex Gaststatten Management GmbH Alex Alsterpavillon Immobilien GmbH & Co KG Alex Alsterpavillon Management GmbH Standard Commercial Property Developments Ltd Hart Dean Management Company Ltd Standard Commercial Property Developments (Tangcourt) Ltd Standard Commercial Development Investments Ltd Standard Commercial Property Securities Ltd Standard Commercial Property Investments Ltd Great Eastern Enterprise Management Ltd (25%)