Northampton Group Inc. 2601 Matheson Blvd., East, Telephone (905) 629 9992

Suite 212, Mississauga, www.nhgi.com

Ontario L4W 5A8 Fax: (905) 629 9636

MANAGEMENT’S DISCUSSION & ANALYSIS For the three months ended June 30, 2007

As at August 21, 2007

This Management Discussion and Analysis should be read in conjunction with the consolidated financial statements of the Company and the notes thereto as at and for the three months ended June 30, 2007 and 2006 and the audited consolidated financial statements of the Company and the notes thereto as at and for the fiscal years ended March 31, 2007 and 2006. Forward-Looking Statements This document contains forward-looking information relating to Northampton Group Inc. and the hospitality industry, such as anticipated occupancies and average room rates. Forward-looking information addresses future events and conditions that are subject to a variety of risks and uncertainties beyond the Company’s ability to control or predict. Actual events or results therefore may differ materially from those anticipated in such forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements, and should acquaint themselves with management' s more detailed discussion of potential risks and uncertainties found later in this discussion and in the documentation posted on SEDAR (www.sedar.com). Non-GAAP Financial Measures The MD&A includes certain non-GAAP measures. These measures are not recognized under GAAP and our method of calculating them may not be comparable to measures presented by other entities. They are provided to supplement the reader’s understanding of the Company’s performance and should not be used as an alternative to the standard GAAP disclosures. The following non-GAAP measures have been included in this MD&A: Occupancies; average daily room rates (ADRs); revenue per available room (RevPAR); EBITDA (earnings before interest, incomes taxes, and amortization); and cash flow per share. These non-GAAP measures are commonly used within the hospitality industry. Overall Performance Overview During the three months ended June 30, 2007, both occupancies and ADRs were comparable to the prior year and consequently there was marginal improvement in revenues for the first quarter. There was marginal improvement in RevPAR overall, however hotels located in Greater Toronto Area - West continue to be challenged with new 1

supply out-pacing demand. Industry Update According to Pannell Kerr Forster Consulting (PKF), nationally the hotel industry continues to post gains in both room occupancies and average rates. However Western Canada again is posting higher growth in both demand and average daily rates compared to Central and Eastern Canada. PKF is forecasting an overall 3.0% growth in 2007. For the first six months to June 2007, according to PKF, Ontario saw an increase of 1.3% and Quebec a decrease of 2.9% in RevPAR. Results of Operations System Revenues System revenues (the sum total of all Northampton revenues plus all revenues reported by investee companies, co-owners, and limited partnerships) increased 4.2% to $15,260,394 in the three months ended June 30, 2007 from $14,647,056 in the corresponding period in 2006. The majority of this improvement arose from improvements in the Toronto Downtown and Ottawa locations. Consolidated Revenues Northampton Group’s consolidated revenues for the three months ended June 30, 2007 were $9,179,453, up 1.5% from $9,043,953 a year ago. The majority of Northampton’s properties continue to perform well in a tightening hotel market. The Downtown Toronto locations as well as the airport area posted a marked improvement in RevPAR. The Oakville – Hamilton corridor continues to be challenged, as new supply outpaces demand. The Ottawa location continues to show strong year-over-year growth, posting a RevPAR improvement of 9.5%. Expenses For the three months ended June 30, 2007, total expenses, including amortization and interest, were $7,608,321, up 1.6% from $7,492,312 in the corresponding period in the previous year. Expenses were pretty much in line with improvements in revenues. Operating expenses increased by 1.6% to $6,202,483 in the first quarter of the current year compared to operating expense of $6,101,961 in the corresponding period in the prior year. Year over year expenses were flat; however, utility and labour costs continue to cause concern. Amortization and interest costs were $657,716 and $748,122 respectively in the current quarter compared to $638,763 and $751,588 in the corresponding quarter in the previous year.

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Operating Profit With expenses marginally higher than increases in revenues, the Company’s operating margin was 32.4% compared to 32.5% for the same period in the prior year. Operating profit, (earnings before interest, income taxes, and amortization), increased 1.2% to $2,976,970 in the current quarter, up from $2,941,992 in the corresponding period in the previous year. Income from operations Income from operations for the current quarter increased marginally to $1,571,132, up from $1,551,641 in the same quarter last year. The resulting net income for the quarter was $744,115 or $0.03 per share, up from $702,647 or $0.03 per share in the first quarter of last year. Summary of Quarterly Results The following tables provide a summary of selected financial information for current and the eight most recently completed quarters. Quarterly Consolidated Financial Information

(amounts in thousands, except per share amounts) Quarters ended

30-Jun-2007 31-Mar-2007 31-Dec-2006 30-Sep-2006 30-Jun-2006 31-Mar-2006 31-Dec-2005 30-Sep-2005 30-Jun-2005

Revenue

$9,179 $7,046 $7,894 $10,678 $9,044 $6,351 $6,823 $9,208 $7,782

Net Income

$744 ($1,064) (2) $108 $1,166 $702 ($34) $210 $969 $691

Earnings per common share

$0.03 ($0.05) $0.01 $0.05 $0.03 $0.00 $0.01 $0.04 $0.03

Cash flow (1) per common share

$0.05 ($0.01) $0.03 $0.08 $0.06 $0.02 $0.03 $0.07 $0.06

(1) Net income for the period plus amortization. (2) After a non-recurring charge of $1,357,033 to operations related to reorganization costs Seasonality Northampton’s business demonstrates seasonal variation, in that it consistently benefits from higher leisure travel rates in the spring and summer, and shows a contraction during the period from November to March. This variation can result in occupancy fluctuations of as much as 45 percentage points across the Company’s holdings. Northampton attempts to moderate this impact by marketing strategically in the off-season, and by marketing specifically to the corporate and commercial traveler year-round. In the past three years, quarterly variation has followed the traditional pattern of moderate third fiscal quarter and 3

soft fiscal fourth quarter. Occupancy (1)

April May June

Fiscal 2008

61.02% 70.58% 74.33%

Rate (2)

$102.24 $108.47 $118.36

RevPAR( 3)

$62.38 $75.56 $87.98

Fiscal 2007

Occupancy

Rate

59.70% 69.22% 71.69%

$101.69 $113.39 $118.92

RevPAR

$60.71 $78.49 $85.26

OccupAncy

67.91% 68.22% 78.05%

Fiscal 2006 Rate

RevPAR

$97.59 $103.42 $112.38

$66.27 $70.56 $87.71

(1) Occupancy means rooms occupied divided by rooms available. (2) Rate means the average room rental derived from occupied rooms. (3) RevPar means the average room rental derived from available rooms.

Liquidity The Company' s cash flow is generated by funds from hotel operations, bank operating lines, and the potential to finance under-leveraged assets. Northampton currently has unused operating loan facilities of approximately $9 million. Cash flows from operating activities increased 4.5% in the quarter ended June 30, 2007 to $1,401,831, up from $1,341,410 last year. Total assets were $83,393,133 as at June 30, 2007, up 2.0% from $81,705,636 as at March 31, 2007. The following chart summarizes Northampton' s future principal repayments on long-term debt that will be refinanced as it comes due: Payments on Long-Term Debt Due by Year Total Less than 1 year Long-term debt due $40,916,213 $8,574,737

1-to-3 years

3-to-5 years

More than 5 years

$15,661,649

$15,229,121

$1,450,706

Total long-term liabilities were $40,916,213 as at June 30, 2007, representing a 1.8% decrease from $41,670,837 as at March 31, 2007. The decrease resulted from normal monthly principal repayments during the current quarter. As at June 30, 2007, the current portion of long-term debt represents principal repayments due within the next 12 months and a mortgage in the amount of $1,623,180 up for renewal as well as the corporate debenture of $5,000,000 due July 2007. The mortgage maturing next year will be renewed under similar terms and conditions to the existing loan. The corporate debenture of $5,000,000 has, subsequent to the quarter-end been renewed by the Corporation for a further term of five years, interest at 10% payable each 23 January and 23 July, and a maturity date of July 2012. Capital Resources Cash Flows and Debt Financing Historically, Northampton has financed most of its growth through cash flows and new property-specific debt as required. The company has consistently been able to access debt 4

financing sufficient to allow it to purchase or build hotels when opportunities arose. Like all hotel and real estate companies, Northampton can leverage its properties, but Northampton has the added advantage of a strong network of associates and partners who are knowledgeable and active investors in the hotel business. This, in combination with its solid relationships with the investment and banking communities, permits Northampton some latitude in accessing capital. Given the nature of financing in the industry, the state of the capital markets, and the relationship of Northampton to its bankers, debt remains the safest, least expensive, and most practical mechanism to finance the Company’s growth. The Company continues to be focused on the goal of unlocking shareholder value and maintaining access to capital markets to finance future growth at reasonable cost. Northampton will continue to assess all variables carefully, and is committed to keeping long-term debt/equity levels at reasonable industry standards. The industry debt level averages about 50-to-65% of property value, where as Northampton’s ratio of approximately 40% currently provides the Company with extra leverage when necessary. Capital Replacement Fund Over the years, by corporate policy, some of Northampton’s subsidiaries have established a capital replacement fund for future repairs and maintenance, upgrades and renovations, and to pay down existing debt. The fund balance as at June 30, 2007 was $2,094,867 compared to a balance of $2,082,638 as at March 31, 2007. Shareholders’ Equity As at March 31, 2007 there remained outstanding 641,430 warrants arising from the 10% debentures issued in July 2002, exercisable at a price of $0.90. During the current quarter 344,950 warrants were exercised resulting in proceeds to the company of $310,455. There remained a balance of 296,480 warrants as at June 30, 2007. Subsequent to the quarterend, 97,050 warrants were exercised at an exercise price of $0.90 and 199,430 warrants expired on July 23, 2007. There remain 100,000 common share options outstanding with an exercise price of $0.80 per share from a prior grant. Capital Expenditures Capital expenditures comprise capital maintenance costs and repairs and maintenance. Northampton has consistently maintained a policy of active capital maintenance for each of its properties. For both the current quarter and the corresponding quarter last year the Company spent approximately $700,000 and $1,000,000 respectively, of which approximately $300,000 and $400,000 respectively was for repairs and maintenance and the balance was capitalized as additions to hotel properties. Related-Party Transactions The Company is a shareholder of and exercises significant influence over 1310866 Ontario Limited (o/a The Strathcona Hotel). The Company provides management services to this entity as well as to its co-tenancies and a limited partnership interests, and earned $400,219 5

in fees in the quarter ended June 30, 2007 and $358,894 for the same period last year. These fees are based on revenues and results of operations. For the current quarter and the corresponding quarter last year, interest in the amount of $5,504 and $9,493 respectively was paid to the controlling shareholder on loans and debentures arising from advances made to assist in acquisitions and developments. Significant Accounting Policies The audited consolidated financial statements for the year ended March 31, 2007 summarizes the Company’s significant accounting policies. Effective April 1, 2007, Northampton adopted new accounting policies related to financial instruments as described further herein under “Changes in Accounting Policies”. Changes in Accounting Policies Effective April 1, 2007, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants Handbook Section 1530, Comprehensive Income; Section 3251, Equity; Section 3855, Financial Instruments – Recognition and Measurement; and Section 3861, Financial Instruments – Disclosure and Presentation. The prospective implementation of this Section by the Company was to change the method of amortization of the deferred financing costs from straight-line to the effective interest rate method and to record the fair value increase and decrease of the capital replacement fund and cash and short-term investments. The adoption of this change in accounting policy resulted in opening retained earnings being increased by $52,262, deferred financing charges being reduced by $342,810, the carrying value of long-term debt being reduced by $327,488, increasing the capital replacement funds by $96,625 and reducing short-term deposits by $29,041. Internal Controls There have been no changes in the company’s internal control over financial reporting that occurred during the most recent interim period ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting. Risks and Uncertainties Normal business risk is associated with Northampton’s operations, but there are several areas where Northampton may encounter challenges. The Company is at risk from increases in interest rates, which will have an impact on margins. The modest market interest rates in place now work to hoteliers'advantage. Northampton monitors rates carefully and consistently works to negotiate favourable agreements. The Company is traditionally vulnerable to seasonal and cyclical fluctuations in occupancies. Currency fluctuations also impact travel markets. The Company’s best 6

counter to this vulnerability is expansion into different geographical markets, as exhibited by its moves into Ottawa, Montreal, and Princeton, New Jersey. Similarly, hotels generally reflect fluctuations in the overall economy. The hospitality industry is also affected by geo-political uncertainties worldwide. Although mid-range operators have traditionally been somewhat buffered against economic declines, which is not the case when a drop in travel and tourism results in up-scale hotels reducing their prices significantly. Management recognizes the cyclical nature of the hotel industry and will continue to manage its business and its debt levels accordingly. Outstanding Common and Preference Share Data Shares Outstanding

as at August 21, 2007 25,981,437

Common shares

100,000

Potential issuance of common shares on exercise of outstanding options at $0.80

5,500,000

Preferred shares

"Additional information relating to the Company, including the Company' s Annual Information Form, is available on its website www.nhgi.com and/or on SEDAR at www.sedar.com."

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