As previously announced, effective the first quarter of 2005, we have adopted US dollars as our reporting currency. All amounts disclosed in this news release (including amounts for prior periods) are in US dollars unless otherwise noted.(1)

Highlights of the Second Quarter of 2005

As described in greater detail in the accompanying Management's Discussion and Analysis, for the three months ended June 30, 2005, in each case as compared to the same period in 2004:

    -   RevPAR(2) of worldwide and US Core Hotels(3) increased 12.8% and
        13.6%, respectively.

    -   Gross operating margins(4) at worldwide Core Hotels increased 270
        basis points to 33.1% and increased 290 basis points to 30.7% at US
        Core Hotels.

    -   Revenues under management increased 18.5%.

    -   Management fee revenues (excluding reimbursed costs(5) and the impact
        of forward exchange contracts(6))(7) increased 16.0%, including
        incentive fees which increased 36.7%.

    -   Net earnings were $15.8 million ($0.43 basic earnings per share and
        $0.42 diluted earnings per share), as compared to net earnings of
        $12.8 million ($0.36 basic earnings per share and $0.34 diluted
        earnings per share).

"Luxury travel demand trends continue the strength shown over the past few quarters in virtually all of our markets. The luxury segment continues to lead the industry in occupancy and room rate improvements," said Douglas L. Ludwig, Chief Financial Officer and Executive Vice President. "Some of this improvement in hotel operating fundamentals may not be apparent in our management operations earnings due to the further weakening of the US dollar, which has negatively affected the pace of improvement in these earnings when expressed in US dollars. The near-term outlook for continued improvement in demand and room rates is encouraging."

Additionally, during the quarter:

    -   We finalized the sale of approximately 53% of our interest in Four
        Seasons Hotel Shanghai, with the result that we now hold an interest
        of approximately 10% in that property.

    -   We entered into a currency and interest rate swap related to our
        convertible senior notes that is intended to reduce our net interest
        costs over the near-term.

    -   Four Seasons Hotel Doha and Four Seasons Private Residences Whistler,
        British Columbia opened.
 

Refining the Portfolio

We have now completed the disposition of The Pierre, a significant milestone toward our long-term strategic objective of reducing exposure to hotel ownership and the associated volatile impact on earnings caused by, among other things, business cycles, seasonality and event risks. This is the latest in a series of refinements to the portfolio in the last several years aimed at improving our financial position and strengthening the quality of our hotel management portfolio through strategic divestitures and significant enhancements to established hotels, as well as important new openings.

"Divesting of our ownership in The Pierre this year and Four Seasons Hotel Berlin in 2004 reflects our focus on hotel management, which is our expertise," said Isadore Sharp, Chairman and Chief Executive Officer, Four Seasons Hotels and Resorts.

During the second quarter, we agreed to a sale process for The Ritz- Carlton Chicago. Upon completion of a sale, we will cease to manage that hotel and will be entitled to receive payment in an amount that we believe will compensate us for the value of our long-term management contract.

"The owner of The Ritz-Carlton Chicago is also the owner of Four Seasons Hotel Chicago and plans to undertake significant enhancements to that hotel. This change will give us the opportunity to reinforce the leadership position our brand has long enjoyed in the Chicago market with a pre-eminent position for Four Seasons Hotel Chicago," said Kathleen Taylor, President, Worldwide Business Operations.

The owner of Four Seasons Hotel Newport Beach, The Irvine Company, has decided to independently manage their hotel. Under the terms of this management agreement, they would have the ability to make this change to their management if they are prepared to change the use of the property for an extended period of time. To avoid the disruption to guests and employees that would be caused by such change of use, Four Seasons and the owner have agreed to a monetary settlement satisfactory to both of them. The transition is scheduled to occur on October 31, 2005.

"Although it is unusual for us to cease management of a property before the contract term expires, we do consider opportunities to improve our market position by leaving one property to pursue others in the same region," said Ms. Taylor. "This strategy has worked well for us in destinations such as Hong Kong, San Francisco and Seattle, which represent state of the art, landmark properties."

"At the same time, Four Seasons presence in California continues to grow," said Ms. Taylor, "soon with the introduction of new hotels in Silicon Valley and Westlake Village, near Los Angeles. We are also seeing significant enhancement to California properties which we manage, including the landmark Four Seasons Resort Santa Barbara and The Regent Beverly Wilshire in Los Angeles.

The trend to significantly upgrade hotels under our management is reflected more broadly throughout properties under our management. Hotels which have undergone, or are in the process of undergoing, significant enhancement include Four Seasons properties in New York, Washington, Boston, Scottsdale, Philadelphia, Las Vegas and the Maldives. Projects recently added to the development pipeline include properties in Toronto and Marrakech.

Looking Ahead

Recent terrorist activity may cause further disruptions to travel patterns that currently cannot be predicted, which in turn makes it more difficult to provide RevPAR and gross operating margins guidance at this time. However, assuming the travel trends that we experienced in 2004 and the first half of 2005 continue, and based on current demand reflected in our reservation activity, we expect RevPAR for worldwide Core Hotels in the third quarter of 2005 and the full year 2005 to increase by approximately 10% and approximately 11%, respectively, as compared to the corresponding periods in 2004. We expect that this improvement will result from occupancy and pricing improvements in all geographic regions. If current trends continue, we expect gross operating margins of our worldwide Core Hotels to increase more than 220 basis points for the full year of 2005, as compared to the full year of 2004.

SECOND QUARTER OF 2005
MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") for the three months and six months ended June 30, 2005 is provided as of August 10, 2005. It should be read in conjunction with the interim consolidated financial statements for that period and the MD&A for the year ended December 31, 2004 and the audited consolidated financial statements for that period. Except as disclosed in this MD&A and the MD&A for the three months ended March 31, 2005, as of August 10, 2005 there has been no material change in the information disclosed in the MD&A for the year ended December 31, 2004. A summary of consolidated revenues, management earnings, ownership and corporate operations earnings and net earnings for the past eight quarters can be found in note 8.
Effective for the quarter ended March 31, 2005, we have adopted the US dollar as our reporting currency. We have not changed our functional currency, which remains Canadian dollars, or the functional currencies of any of our subsidiaries. All amounts disclosed in this MD&A (including amounts for prior periods) are in US dollars unless otherwise noted.(1)
    
Operating Environment

Seasonality

Four Seasons hotels and resorts are affected by normally recurring seasonal patterns, and demand is usually lower in the period from December through March than during the remainder of the year for most of our urban properties. However, December through March is typically a period of relatively strong demand at our resorts.

As a result, our management operations are affected by seasonal patterns, both in terms of revenues and operating results. Urban hotels generally experience lower revenues and operating results in the first quarter. This negative impact on management revenues from those properties is offset to some degree by increased travel to our resorts in the period.

Our ownership operations are particularly affected by seasonal fluctuations, with lower revenue, higher operating losses and lower cash flow in the first quarter, as compared to the other quarters. With the disposition of our leasehold interest in The Pierre at the end of the second quarter of 2005 (as discussed below under "Disposition of Hotel Investments"), we have substantially reduced the exposure to seasonality in our ownership operations. It remains our objective to further reduce our ownership exposure by modifying or restructuring our leasehold interest in Four Seasons Hotel Vancouver, our only remaining leasehold interest. There can be no assurance that acceptable alternative arrangements can be found with respect to this hotel or as to the terms of any such arrangements.
    
Hotel Operating Results

    -------------------------------------------------------------------------
                       Three months ended             Six months ended
                          June 30, 2005                 June 30, 2005
                          increase over                 increase over
                       three months ended             six months ended
                          June 30, 2004                 June 30, 2004
                       (percentage change,           (percentage change,
                       on US dollar basis)           on US dollar basis)
    -------------------------------------------------------------------------
                               Gross     Gross               Gross     Gross
                           Operating Operating           Operating Operating
                             Revenue    Profit             Revenue    Profit
    Region          RevPAR      (GOR)     (GOP)   RevPAR      (GOR)     (GOP)
    -------------------------------------------------------------------------
    Worldwide Core
     Hotels          12.8%     12.9%     22.7%     13.2%     12.2%     21.3%
    -------------------------------------------------------------------------
    US Core Hotels   13.6%     12.2%     23.9%     13.0%     11.1%     21.4%
    -------------------------------------------------------------------------
    Other Americas/
     Caribbean Core
     Hotels          17.6%     19.5%     43.0%     18.4%     17.3%     32.8%
    -------------------------------------------------------------------------
    Europe Core
     Hotels           4.6%      6.7%      2.2%      5.0%      6.8%      2.4%
    -------------------------------------------------------------------------
    Middle East
     Core Hotels     28.3%     35.3%     65.5%     26.9%     34.0%     62.3%
    -------------------------------------------------------------------------
    Asia/Pacific
     Core Hotels     14.1%     11.5%     23.2%     16.4%     11.7%     20.6%
    -------------------------------------------------------------------------

    Underlying these operating results:

    -   RevPAR for worldwide Core Hotels increased 12.8% in the second
        quarter of 2005, as compared to the same period in 2004, reflecting
        increased demand and improvements in achieved room rates in most
        markets. Revenue improvements and continued cost management efforts
        at the properties under management resulted in the significant
        increases in gross operating profits (an increase of 22.7% as
        compared to the second quarter of 2004) and gross operating margins
        (an increase of 270 basis points as compared to the second quarter of
        2004), despite continued pressure on profitability due to higher
        costs relating primarily to labour (including health care, benefits
        and worker's compensation) and energy. Similar improvements were
        achieved for the first six months of 2005, as compared to the same
        period in 2004, with RevPAR for worldwide Core Hotels increasing
        13.2%, gross operating revenue improving 12.2%, gross operating
        profit increasing 21.3% and gross operating margins increasing
        230 basis points.

    -   Virtually all of the US Core Hotels under management realized
        improvements in RevPAR and gross operating profits in the second
        quarter of 2005, as compared to the same period in 2004, resulting in
        a 13.6% and 23.9% increase in RevPAR and gross operating profits,
        respectively. The only exception was Four Seasons Hotel Houston,
        which continues to experience pressure on rates due to increased
        supply in that market. Properties under management in Miami, New
        York, Jackson Hole, Chicago and Philadelphia realized particularly
        strong improvements in RevPAR and gross operating profits, relative
        to the average for the region. For the six months ended June 30,
        2005, RevPAR increased 13.0%, primarily as a result of a 460 basis
        point increase in occupancy and a 6.0% increase in achieved room
        rates, and gross operating profits increased 21.4%.

    -   The Other Americas/Caribbean Core Hotels experienced improved demand
        and higher achieved room rates, resulting in a RevPAR improvement of
        17.6% in the second quarter of 2005, as compared to the second
        quarter of 2004. Also in the second quarter of 2005, gross operating
        profits and gross operating margins increased 43.0% and 510 basis
        points, respectively, which was primarily attributable to strong
        improvements at the properties under management in Exuma and Buenos
        Aires. For the six months ended June 30, 2005, the 18.4% improvement
        in RevPAR was mainly driven by a 7.7% increase in achieved room
        rates.

    -   For the second quarter of 2005, RevPAR in the Europe Core Hotels
        increased 4.6%, reflecting strong operating results at the hotels
        under management in Istanbul, Milan, Paris, and Prague relative to
        the other hotels in the region. The hotel under management in Lisbon
        continued to experience relatively large RevPAR and gross operating
        profit declines in the quarter due to lower corporate and group
        demand, as well as additional pressure on rates in that market. Gross
        operating margins declined 180 basis points in the second quarter of
        2005, as compared to the same period in 2004, as overall demand in
        Europe continued to lag behind the other regions in which we manage
        hotels and resorts, in part as a result of a more highly valued Euro
        relative to the US dollar. For the six months ended June 30, 2005,
        RevPAR increased 5.0%. However, the operating results of hotels under
        management in Lisbon and Canary Wharf remained lower relative to the
        other hotels in the region, primarily due to lower corporate and
        group demand and, in the case of Canary Wharf, new supply coming into
        the market. While there was a moderate 2.4% increase in gross
        operating profits, gross operating margins declined 140 basis points
        to 34.0% in the first six months of 2005, as compared to the first
        six months of 2004.

    -   RevPAR improvements in the second quarter of 2005 at the Middle East
        Core Hotels were primarily driven by an 18.3% increase in achieved
        room rates, as compared to the same period in 2004. Virtually all of
        the properties in the region experienced improved demand during the
        second quarter and for the first six months of 2005, as compared to
        the same periods in the prior year. The Middle East Core Hotels
        achieved a 65.5% improvement in gross operating profits and an 860
        basis points increase in gross operating margins in the second
        quarter of 2005, as compared to the same period in 2004. For the
        first six months of 2005, RevPAR for the Middle East Core Hotels
        improved 26.9% and gross operating margins increased 830 basis
        points, as compared to the same period in 2004.

    -   Asia/Pacific Core Hotels had a 14.1% RevPAR improvement in the second
        quarter of 2005, as compared to the same period in 2004, which was
        primarily driven by a 6.7% increase in achieved room rates. Gross
        operating margins and gross operating profits in the second quarter
        of 2005 improved 310 basis points and 23.2%, respectively, compared
        to the same period in 2004. In particular, properties in Jakarta,
        Singapore and Shanghai had strong improvements in both RevPAR and
        gross operating profits. For the first six months of 2005, RevPAR
        improved 16.4%, as compared to the same period in 2004, reflecting a
        470 basis point improvement in occupancy and a 6.7% increase in
        achieved room rates.

    
Financial Review and Analysis
Three months and six months ended June 30, 2005 compared to three months and six months ended June 30, 2004

Management Operations

For the three months ended June 30, 2005, management fee revenues (excluding reimbursed costs and the $2.8 million impact of forward exchange contracts) increased 16.0% ($4.5 million) to $32.3 million, as compared to $27.8 million in the second quarter of 2004. Management fee revenues (including reimbursed costs and the impact of forward exchange contracts) increased 9.2% ($4.1 million) to $48.3 million in the second quarter of 2005, as compared to $44.2 million in the second quarter of 2004.

For the six months ended June 30, 2005, management fee revenues (excluding reimbursed costs and the $5.5 million impact of forward exchange contracts) increased 21.6% ($10.9 million) to $61.3 million, as compared to $50.4 million in the same period in 2004. Management fee revenues (including reimbursed costs and the impact of forward exchange contracts) increased 12.2% ($10.0 million) to $91.9 million in the six months ended June 30, 2005, as compared to $81.9 million in the same period in 2004.

For the three months and six months ended June 30, 2005, reimbursed costs increased $2.4 million and $4.7 million, respectively, as compared to the corresponding periods in 2004. The increase was attributable to more properties opening and being under development compared to the same periods in 2004.

The increases in management fee revenues for the three months and six months ended June 30, 2005 noted above were the result of the improvement in revenues under management stemming from RevPAR and other revenue increases at the worldwide Core Hotels.

Excluding the impact of forward exchange contracts, incentive fees increased 36.7% and 40.6% in the three months and six months ended June 30, 2005, respectively, as compared to the same periods in 2004. Including the impact of forward exchange contracts, incentive fees increased 29.6% and 31.1% in the three months and six months ended June 30, 2005, respectively, as compared to the same periods in 2004. 42 of the hotels and resorts under management accrued incentive fees during these periods, as compared to 36 and 37 during the corresponding periods last year. The increase in incentive fees was attributable primarily to the improvement in gross operating profit at the properties under management in each of the geographic regions in which we operate. All six of our properties under management in the Middle East accrued incentive fees during the second quarter and first six months of 2005, as compared to two and three in the same periods in 2004.

Despite the strong operating fundamentals in the second quarter, management fee revenue growth was more modest due to foreign exchange currency fluctuations and lower residential fees earned in the second quarter of 2005, as compared to the second quarter of 2004. The $1.2 million decline in residential fees is primarily attributable to no residential royalty fees in respect of our projects in Whistler, Miami and Jackson Hole being earned in the second quarter of 2005, as compared to the same period in 2004. The limited number and size of our residential projects and their specialized target market make it difficult to predict the timing of sales and the resulting royalty fees that may be earned. As a result, it will continue to be difficult to predict the timing of fee revenues from our residential business.

Several of the hotels and resorts under our management are and will be undergoing significant renovations during this year. We expect the majority of the renovations at Four Seasons properties in Washington, Las Vegas and the Maldives to be completed by the end of 2005. Significant renovation programs at other hotels under management, including Boston, Santa Barbara, Philadelphia and The Regent Beverly Wilshire are expected to be substantially completed in 2006. Based on the scheduling and staging of these renovations, we expect these programs to have some, but not a material, effect on fee revenues in the last two quarters of 2005.

General and administrative expenses (excluding reimbursed costs) increased 12.0% to $9.5 million in the second quarter of 2005, as compared to $8.4 million for the same period in 2004. Including reimbursed costs, general and administrative expenses increased 15.6% to $25.5 million in the second quarter of 2005, as compared to $22.1 million for the same period in 2004.

The majority of these costs are in Canadian dollars and, accordingly, a substantial portion of this increase is attributable to the US dollar having declined relative to the Canadian dollar since the second quarter of 2004. On a Canadian dollar basis, general and administrative expenses (excluding reimbursed costs) increased 2.6% during the quarter, as compared to the same period last year. The modest increase in these costs related primarily to an increase in the number of employees at our corporate offices to handle the significant unit growth in our portfolio, which was offset somewhat by a reduction in certain costs, including relatively low travel costs during the second quarter.

General and administrative expenses (excluding reimbursed costs) increased 15.1% to $19.2 million in the first six months of 2005, as compared to $16.7 million in the same period in 2004. General and administrative expenses (including reimbursed costs) increased 16.8% to $49.8 million in the first six months of 2005, as compared to $42.6 million in the same period in 2004. On a Canadian dollar basis, general and administrative expenses (excluding reimbursed costs) increased 6.2% during the first half of 2005, as compared to the same period last year. The increase in these costs related primarily to an increase in the number of employees at our corporate offices to handle the significant unit growth in our portfolio and to cost of living increases for corporate employees that were implemented at the beginning of 2005.

As a result of the items described above, our management operations earnings before other operating items (excluding reimbursed costs and the impact of forward exchange contracts) for the second quarter of 2005 increased 17.8% to $22.8 million, as compared to $19.3 million in the second quarter of 2004. Our management operations profit margin(9) (excluding reimbursed costs and the impact of forward exchange contracts) increased 110 basis points to 70.7% in the second quarter of 2005, as compared to 69.6% in the second quarter of 2004.

For the six months ended June 30, 2005, our management operations earnings before other operating items (excluding reimbursed costs and the impact of forward exchange contracts) increased 24.8% to $42.1 million, as compared to $33.7 million for the same period in 2004. Our management operations profit margin (excluding reimbursed costs and the impact of forward exchange contracts) increased to 68.7% for the six months ended June 30, 2005, as compared to 66.9% for the six months ended June 30, 2004.

Our management operations earnings before other operating items (including reimbursed costs and the impact of forward exchange contracts) for the three months ended June 30, 2005 remained relatively unchanged at $22.8 million, compared to $22.1 million for the same period in 2004. For the six months ended June 30, 2005, our management operations earnings before other operating items (including reimbursed costs and the impact of forward exchange contracts) increased 7.3% to $42.1 million, as compared to $39.2 million in the same period in 2004. Our management operations profit margin (including reimbursed costs and the impact of forward exchange contracts) was 47.2% in the second quarter of 2005, as compared to 50.1% in the second quarter of 2004 and 45.8% for the six months ended June 30, 2005, as compared to 47.9% for the same period in 2004.

Ownership and Corporate Operations(10)

In the second quarter of 2005, operating results from ownership and corporate operations before other operating items were a loss of $2.3 million, as compared to a loss of $1.3 million in the second quarter of 2004.

For the six months ended June 30, 2005, operating results from ownership and corporate operations before other operating items were a loss of $9.1 million, as compared to a loss of $8.7 million for the same period in 2004.

Corporate Costs, including Compliance Costs

For the three months and six months ended June 30, 2005, our corporate and compliance costs, including the ongoing implementation of the substantive changes to governance and disclosure requirements applicable to public companies in the US and Canada and other public company costs, increased $0.8 million and $0.7 million to $3.1 million and $5.4 million, respectively, as compared to $2.3 million and $4.7 million for the respective periods in 2004. The majority of these costs are in Canadian dollars and, accordingly, some of the increase is attributable to the US dollar having declined relative to the Canadian dollar since the second quarter of 2004. On a constant currency basis, corporate and compliance costs for the three months and six months ended June 30, 2005 increased $0.5 million and $0.2 million, respectively, as compared to the corresponding periods in 2004.

The Pierre

In June 2005, Four Seasons disposed of its interest in The Pierre and ceased managing the property on June 30, 2005.(11) Further details on the disposition of this investment are discussed below under "Disposition of Hotel Investments".

RevPAR at The Pierre increased 17.4% in the second quarter of 2005, as compared to the same period in 2004, as a result of a 4.4% improvement in occupancy and an 11.5% increase in achieved room rates. These increases reflected the higher travel demand in New York, particularly in leisure travel, during the quarter. As a result, operating results at The Pierre improved by $0.2 million to earnings of $1.2 million in the second quarter of 2005, as compared to earnings of $1.0 million in second quarter of 2004.

RevPAR at The Pierre increased 20.1% in the first six months of 2005, as compared to the same period in 2004, as a result of a 6.5% improvement in occupancy and a 10.6% increase in achieved room rates. As a result, operating results at The Pierre improved by $0.7 million to a loss of $0.8 million in the first six months of 2005, as compared to a loss of $1.5 million in the first six months of 2004.

Four Seasons Hotel Vancouver

RevPAR at Four Seasons Hotel Vancouver decreased 1.6% for the three months ended June 30, 2005, as compared to the same period in 2004, primarily as the result of slight declines in occupancy and achieved room rates. Operating results at the hotel remained relatively unchanged with a loss of $0.2 million in both the second quarter of 2005 and 2004.

RevPAR at Four Seasons Hotel Vancouver increased 3.0% in the six months ended June 30, 2005, as compared to the same period in 2004, primarily as the result of an improvement in occupancy, partially offset by a modest decrease in achieved room rates. Operating results at the hotel remained relatively flat, with a loss of $2.4 million in the first half of 2005, as compared to a loss of $2.2 million in the first half of 2004, mainly due to an offsetting reduction in banquet revenue.

We are continuing to review options in respect of Four Seasons Hotel Vancouver to determine what, if any, alternatives may be available to modify or restructure our operation of, or investment in, this hotel. There can be no assurance that acceptable alternative arrangements can be found with respect to this hotel or as to the terms of any such alternative arrangements.

Other Income/Expense, Net

Other expense, net for the second quarter of 2005 was $8.6 million, as compared to other expense, net of $2.2 million for the same period in 2004. Other expense, net for the six months ended June 30, 2005 was $11.4 million, as compared to other income, net of $1.1 million for the same period in 2004.

Disposition of Hotel Investments

In April 2005, we sold approximately 53% of our equity interest in Four Seasons Hotel Shanghai for gross proceeds of $9.5 million (cash of $4.2 million and a loan receivable of $5.3 million), which approximated book value, and reduced our interest in the hotel to approximately 10%. As a result of the sale, we revalued this US dollar investment at March 31, 2005 at current exchange rates and recorded a loss of $1.9 million for the three months ended March 31, 2005.

On June 30, 2005, we finalized the assignment of our leases and the sale of the related assets in The Pierre for net proceeds of $4.5 million. The net book value of our assets in The Pierre was $7.8 million and, after deducting disposition costs, we recorded a loss on sale of $5.0 million. We also recorded a tax benefit in connection with the sale of $9.2 million, which is discussed further under "Income Tax Expense" below.

As part of the sale of The Pierre, in accordance with statutory provisions, the purchaser agreed to assume a portion of our contribution history with a multi-employer pension fund for the unionized hotel employees (the "NYC Pension"). This permitted us to withdraw from the NYC Pension without incurring a withdrawal liability estimated at $10.7 million. In certain limited circumstances, as a part of our agreement, we may be required to pay a portion of the purchaser's withdrawal liability, if any.

We believe that the likelihood of our being required to make a payment is remote, and have not recorded any amount as at June 30, 2005 in respect of a potential NYC Pension withdrawal liability. For further details, please see note 5 to our interim consolidated financial statements for the three months and six months ended June 30, 2005.

Foreign Exchange

Other expense for the second quarter of 2005 included a $3.3 million foreign exchange loss, as compared to a $2.2 million foreign exchange loss for the same period in 2004. Other expense for the six months ended June 30, 2005 included a $3.7 million foreign exchange loss, as compared to a $1.3 million foreign exchange gain for the same period in 2004.

Foreign exchange gains and losses arose primarily from the translation to Canadian dollars (using current exchange rates at the end of each quarter) of our foreign currency-denominated net monetary assets, which are not included in our designated foreign self-sustaining subsidiaries. They also reflected local currency foreign exchange gains and losses on net monetary assets incurred by our designated foreign self-sustaining subsidiaries. Net monetary assets is the difference between our foreign currency-denominated monetary assets and our foreign currency-denominated monetary liabilities, and consists primarily of cash and cash equivalents, accounts receivable, long-term receivables and long-term obligations, as determined under Canadian generally accepted accounting principles ("GAAP"). As a result of the currency swap relating to our convertible senior notes which is described below, our net US dollar asset position increased significantly during the second quarter of 2005. This combined with the strengthening of the Canadian dollar relative to the US dollar resulted in the foreign exchange loss during the second quarter of 2005.

Ongoing fluctuations in rates of exchange between currencies will likely result in future foreign exchange gains or losses. Although we have engaged in hedging activities in the past, we do not anticipate entering into any hedging arrangements in the near-term due to the continued volatility of many foreign currencies (and in particular the US dollar) and the associated costs of these arrangements.

Net Interest Income

During the second quarter of 2005, we had net interest income of $0.8 million, as compared to $0.5 million in the second quarter of 2004. Net interest income is a combination of approximately $3.7 million in interest income and approximately $2.9 million in interest expense in the second quarter of 2005, as compared to $2.8 million and $2.3 million, respectively, for the same period in 2004. The increase in interest income for the second quarter of 2005, as compared to the same period in 2004, was primarily attributable to increased cash and cash equivalents as a result of the issuance of our convertible senior notes in June 2004 and higher deposit interest rates.

During the six months ended June 30, 2005, we had net interest income of $1.2 million, as compared to $1.4 million in the six months ended June 30, 2004. Net interest income is a combination of approximately $7.6 million in interest income and approximately $6.4 million in interest expense in the first six months of 2005, as compared to $6.0 million and $4.6 million, respectively, for the same period in 2004. 
The increase in interest income for the six months ended June 30, 2005, as compared to the same period in 2004, was primarily attributable to increased cash and cash equivalents and higher deposit interest rates, as well as new loans to certain properties under our management.
The increase in interest expense was attributable, in part, to the variance in interest expense relating to the convertible senior notes issued during the second quarter of 2004, as compared to the interest costs relating to our previously outstanding Liquid Yield Option Notes ("LYONs") during 2004. For accounting purposes, the convertible senior notes are bifurcated into debt and equity components under Canadian GAAP, and a notional interest rate is applied to the portion that is allocated to the debt component. Although the interest rate that is applied to the convertible senior notes is lower than the rate applied to the LYONs, a larger component of the convertible senior notes is allocated to debt than was the case with the LYONs. As a result, for accounting purposes, the interest expense associated with the convertible senior notes is higher than was the case for the LYONs.

As discussed below in "Liquidity and Capital Resources", we have entered into currency and interest rate swap arrangements relating to the convertible senior notes. Taking into account the amortization of the gain on a terminated swap and the existing swap, the effective interest rate on the convertible senior notes in the second quarter of 2005 was approximately 3.4%, which represents $1.8 million of interest expense for that period. For the six months ended June 30, 2005, the effective interest rate on the convertible senior notes was approximately 4.0%, which represents $4.3 million of interest expense for the six months.

Interest expense also includes amounts relating to financing fees and to our international retirement plan.

Income Tax Expense

Our effective tax rates for the three months and six months ended June 30, 2005, prior to considering the impact of our sale of The Pierre, were 19.3% and 22.6%, respectively, as compared to effective tax rates of 22.5% and 22.2% for the respective periods in 2004. The variation from our expected 24% tax rate is the result of certain items not being tax effected, including a portion of the foreign exchange gains and losses, since they will never be realized for tax purposes. Excluding these items and prior to considering the tax impact of our sale of The Pierre, our tax rate would have been our expected 24%.

As a result of disposing of The Pierre, we realized a tax benefit of approximately $6.4 million on the disposition of the fixed assets, which included significant leasehold improvements. In addition to the ordinary tax loss on the fixed assets, we will incur a capital loss on the dissolution of the partnership that operated The Pierre, which will result in a tax benefit of approximately $2.8 million.

Net Earnings and Earnings per Share

For the reasons outlined above, net earnings for the quarter ended June 30, 2005 were $15.8 million ($0.43 basic earnings per share and $0.42 diluted earnings per share), as compared to net earnings of $12.8 million ($0.36 basic earnings per share and $0.34 diluted earnings per share) for the quarter ended June 30, 2004.

For the reasons outlined above, net earnings for the six months ended June 30, 2005 were $21.0 million ($0.57 basic earnings per share and $0.55 diluted earnings per share), as compared to net earnings of $21.5 million ($0.61 basic earnings per share and $0.58 diluted earnings per share) for the six months ended June 30, 2004.

Liquidity and Capital Resources

Financing Activities

During the second quarter of 2004, we issued $250 million principal amount of convertible senior notes. For details relating to the terms of the convertible senior notes, please refer to our MD&A for the year ended December 31, 2004.

In accordance with Canadian GAAP, the convertible senior notes are bifurcated on our financial statements into a debt component (representing the principal value of a bond of $211.8 million as at June 18, 2004, which was estimated based on the present value of a $250 million bond maturing in 2009, yielding 5.33% per annum, compounded semi-annually, and paying interest at a rate of 1.875% per annum) and an equity component of $39 million (representing the value of the conversion feature of the convertible senior notes) as at June 18, 2004. For further details, see note 10(a) to our annual consolidated financial statements for the year ended December 31, 2004.

In connection with the offering of the convertible senior notes, we entered into a five-year interest rate swap agreement with an initial notional amount of $211.8 million, pursuant to which we agreed to receive interest at a fixed rate of 5.33% per year and pay interest at six-month LIBOR, in arrears, plus 0.4904%. In October 2004, we terminated the interest rate swap agreement and received proceeds of $9 million. The recognition of the resulting gain was deferred and is being amortized through to July 30, 2009, which would have been the maturity date of the swap.

In the second quarter of 2005, we entered into a new currency and interest rate swap agreement to July 30, 2009, pursuant to which we have agreed to receive interest at a fixed rate of 5.33% per annum on an initial notional amount of $215.8 million (C$269.2 million) and pay interest at a floating rate of six-month Canadian Bankers Acceptances ("BA") in arrears plus 1.1% per annum. On July 30, 2009, we will pay C$311.8 million and receive $250 million under the swap. We have designated the swap as a fair value hedge of our convertible senior notes. This swap will allow us to take advantage of lower floating interest rates, which should result in an economic and accounting savings of approximately 136 basis points at current six-month BA rates, or approximately $3.0 million on an annualized, pre-tax basis. This approximation will change as BA rates change.

As at June 30, 2005, no amounts were borrowed under our $125 million bank credit facility. However, approximately $4.0 million of letters of credit were issued under that facility. No amounts have been drawn under these letters of credit. We believe that, absent unusual opportunities or developments, this credit facility, when combined with cash on hand and internally generated cash flow, should be more than adequate to allow us to finance our normal operating needs and anticipated investment commitments related to our current growth objectives.

Our cash and cash equivalents were $218.6 million as at June 30, 2005, as compared to $226.4 million as at December 31, 2004. The $7.8 million decrease in cash and cash equivalents was primarily attributable to loans and other investments made to properties under our management.

Long-term obligations (as determined under Canadian GAAP) increased from $256.8 million as at December 31, 2004 to $261.1 million as at June 30, 2005, primarily as a result of the accretion of interest on the convertible senior notes.

Contractual Obligations and Other Commitments

We have provided certain guarantees and have other similar commitments typically made in connection with properties under our management totalling a maximum of $47.0 million. These contractual obligations and other commitments are more fully described in the MD&A for the year ended December 31, 2004. Since December 31, 2004, we have reduced two of our bank guarantees, reduced two of our other commitments, and extended one new bank guarantee and two other commitments to two properties under our management, resulting in a net increase in guarantees and other commitments of $1.9 million. During the remainder of the year, we expect to fund amounts relating to our management opportunities described under "Investing/Divesting Activities" below. In addition, we expect to fund approximately $21.0 million over the next 18 months in connection with an expansion of our corporate office which is currently underway.

Cash From Operations

During the three months and six months ended June 30, 2005, we generated $23.9 million and $19.3 million, respectively, in cash from operations, as compared to $21.1 million and $24.8 million, respectively, for the same periods in 2004.

The increase in cash from operations of $2.8 million in the second quarter of 2005 resulted primarily from a decrease in non-cash working capital of $2.6 million and an increase in net interest received of $1.5 million, partially offset by an increase in income tax paid of $1.3 million.

The decrease in cash from operations of $5.5 million in the first six months of 2005 resulted primarily from an increase in non-cash working capital of $5.0 million, largely related to the settlement in the first quarter of 2005 of incentive compensation accrued at December 31, 2004, and an increase in current income tax paid of $4.2 million, partially offset by an increase in cash contributed by management operations of $3.2 million.

Investing/Divesting Activities

Part of our business strategy is to invest a portion of available cash to obtain management agreements or enhance existing management arrangements. These investments in, or advances in respect of or to owners of, properties are made where we believe that the overall economic return to Four Seasons justifies the investment or advance.

As described above under "Disposition of Hotel Investments", during the second quarter of 2005, we sold approximately 53% of our equity interest in Four Seasons Hotel Shanghai for gross proceeds of $9.5 million. We also finalized the transfer of our leasehold interest and the sale of the related assets in The Pierre for net proceeds of $4.5 million, leaving Four Seasons Hotel Vancouver as our only leasehold interest. In addition to these items which occurred during the second quarter of 2005, during the six months ended June 30, 2005, we also received gross proceeds of $5.3 million from our sale of approximately 80% of our equity interest in Four Seasons Residence Club Scottsdale at Troon North.

During the three and six months ended June 30, 2005, we were repaid $18.0 million and $19.1 million, respectively, in loans receivable, primarily from Four Seasons Hotel San Francisco and Four Seasons Residence Club Scottsdale at Troon North.

For the three months ended June 30, 2005, we funded $17.2 million to properties under development or management, including amounts advanced as loans receivable to properties in Geneva, Exuma, Buenos Aires, Budapest and Hampshire, as well as minor equity investments in properties in Punta Mita and Palo Alto. For the six months ended June 30, 2005, we funded $27.4 million to properties under development or management, including amounts advanced as loans receivable to properties in Toronto, Geneva, Exuma, Washington, Buenos Aires, Scottsdale, Jackson Hole, Budapest and Hampshire, as well as minor equity investments in properties in Damascus, Punta Mita and Palo Alto. For the three months and six months ended June 30, 2005, we also funded a total of $11.0 million and $14.2 million, respectively, in connection with an expansion of our corporate office, which is currently underway, and our commitment related to the Four Seasons Centre for the Performing Arts. These levels of investment were consistent with our business plan.

During the remaining six months of 2005, we expect to fund up to $48.0 million in respect of investments in, or advances in respect of or to owners of, various projects, including properties in Buenos Aires, Punta Mita and Exuma, a new resort in the Maldives and our project in Orlando, plus additional funding for the property in Geneva and the expansion of our corporate office facilities.

In August 2005, we finalized an agreement with the owner of Four Seasons Hotel Newport Beach pursuant to which, effective October 31, 2005, the owner will begin to manage this property as an independent hotel. At the time of transition, we will receive a payment in an amount that will exceed the net book value of our investment in the management contract.

Over the remainder of this year, we anticipate receiving at least $50 million as the result of repayment of investments made in certain of our managed properties.

Retirement Benefit Plan

Since 1983, we have maintained a non-qualified, non-registered unfunded, multi-employer, non-contributory "defined benefit" plan on behalf of the owners of our managed properties and for our senior corporate employees. The current plan provides supplemental retirement benefits for our senior corporate executives as well as for our general managers and regional vice presidents based on a formula that takes into account years and level of service and annual salary. Our liability in connection with the current plan for our corporate executives as at June 30, 2005 was $27.7 million.

Subject to approval of our Board, we are anticipating replacing the existing plan later this year for the majority of the plan participants with a fully-funded plan based on a "defined contribution" format, which should increase the certainty and predictability of the costs of the retirement benefits. The funding requirements relating to this new arrangement are anticipated to be in the range of $35 million to $40 million at current exchange rates. If a new plan is implemented this year on the basis of the structure currently contemplated, at current exchange rates, we have estimated that the transition would result in a one-time, after tax accounting loss in the range of $20 million to $25 million. We do not expect that the proposed change will have a significant impact on the ongoing annual pension cost. Our costs next year, in respect of the contemplated new plan, are expected to be similar to the costs incurred in 2004 for the current plan, increased by the cost of living and merit salary increases of the participants.

Long Term Incentive Plan

Since 1986, long-term incentives have been provided to a large group of our employees through stock options. Changes in the rules governing compensation, including accounting rules and regulations related to stock options have caused us to re-evaluate the use of stock options as the primary form of long-term incentive to our employees. As a result of the re- evaluation, we have determined to significantly reduce the use of stock options and are introducing a restricted stock program. Under the restricted stock program, eligible employees would be entitled to earn performance-based compensation, which will be used to purchase shares on their behalf in the market. Subject to limited exceptions, participants would not be able to dispose of those shares for a three-year period. We expect the expense for the full year 2005 related to the restricted stock program will be approximately $500,000.

    Outstanding Share Data

    -------------------------------------------------------------------------
    Designation                             Outstanding as at August 3, 2005
    -------------------------------------------------------------------------
    Variable Multiple Voting Shares(a)                             3,725,698
    -------------------------------------------------------------------------
    Limited Voting Shares                                         32,913,488
    -------------------------------------------------------------------------
    Options to acquire Limited Voting Shares:
    -------------------------------------------------------------------------
      Outstanding                                                  4,540,843
    -------------------------------------------------------------------------
      Exercisable                                                  3,383,821
    -------------------------------------------------------------------------
    Convertible Senior Notes issued June 2004
     and due 2024(b)                                       $250.05 million(c)
    -------------------------------------------------------------------------
    (a) Convertible into Limited Voting Shares at any time at the option of
        the holder on a one-for-one basis.
    (b) Details on the convertible senior notes are described more fully in
        our annual MD&A for the year ended December 31, 2004.
    (c) This amount is equal to the issue price of the convertible senior
        notes issued June 2004 and due 2024 plus accrued interest calculated
        at 1.875% per annum.

Looking Ahead

Recent terrorist activity may cause further disruptions to travel patterns that currently cannot be predicted, which in turn makes it more difficult to provide RevPAR and gross operating margins guidance at this time. However, assuming the travel trends that we experienced in 2004 and the first half of 2005 continue, and based on current demand reflected in our reservation activity, we expect RevPAR for worldwide Core Hotels in the third quarter of 2005 and the full year 2005 to increase by approximately 10% and approximately 11%, respectively, as compared to the corresponding periods in 2004. We expect that this improvement will result from occupancy and pricing improvements in all geographic regions. If current trends continue, we expect gross operating margins of our worldwide Core Hotels to increase more than 220 basis points for the full year of 2005, as compared to the full year of 2004.

Change in Reporting Currency to US Dollars

Effective the first quarter of 2005, we have adopted US dollars as our reporting currency. All amounts disclosed in this MD&A (including amounts for prior periods) are in US dollars unless otherwise noted.

The consolidated financial statements in Canadian dollars have been translated to US dollars using the foreign exchange rates applicable at each balance sheet date for assets and liabilities, and the weighted average exchange rates of the corresponding quarters for the consolidated statements of operations, consolidated statements of cash provided by operations and consolidated statements of cash flow. Equity transactions have been translated to US dollars at the historical exchange rates for 2005 and 2004 with opening equity accounts on January 1, 2004 translated at the exchange rate on that date. These exchange rates are disclosed in notes 1 and 8. Any resulting exchange gain or loss was charged or credited to "Equity adjustment from foreign currency translation", which is included as a separate component of shareholders' equity.

We have not changed the functional currency of Four Seasons Hotels Inc., which remains Canadian dollars, or the functional currencies of any of its subsidiaries. As a result, while US dollar reporting will minimize the currency fluctuations related to the majority of our US dollar management fee revenues, it will not eliminate foreign currency fluctuations related to our management fees in other currencies, or the majority of our management operations general and administrative expenses, which are incurred in Canadian dollars. It will also not eliminate foreign currency gains and losses related to unhedged net monetary asset and liability positions.

Changes in Accounting Policies

During the first six months of 2005, we adopted The Canadian Institute of Chartered Accountants' ("CICA") new accounting standards on variable interest entities and temporary controlled investments, as discussed in note 1 to the interim consolidated financial statements. The adoption of these changes did not have a material impact on our consolidated financial statements.

In June 2005, the Emerging Issues Committee of the CICA issued Abstract EIC-155, "The Effect of Contingently Convertible Instruments on Diluted Earnings per Share", which requires the application of the "if-converted method" to account for the potential dilution relating to the conversion of contingently convertible instruments, such as our convertible senior notes. EIC-155 will be effective for periods beginning on or after October 1, 2005. If we had adopted EIC-155 for the three months and six months ended June 30, 2005, there would have been no additional dilution for either period.

Additional Information

Additional information about us (including our most recent annual information form, annual MD&A and our audited financial statements for the year ended December 31, 2004) is available on SEDAR at www.sedar.com.
    ----------------------
    1.  The following Canadian/US dollar foreign exchange rates were used to
        translate the specified periods:

        ---------------------------------------------------------------------
        Average foreign       Foreign      Average foreign      Foreign
         exchange rate        exchange      exchange rate       exchange
        used for Second      rate as at    used for Second     rate as at
         Quarter 2005      June 30, 2005    Quarter 2004   December 31, 2004
        ---------------------------------------------------------------------
           1.24401           1.23240           1.35860           1.20360
        ---------------------------------------------------------------------

    2.  RevPAR is defined as average room revenue per available room. It is a
        non-GAAP measure. We use RevPAR because it is a commonly used
        indicator of market performance for hotels and resorts and represents
        the combination of the average daily room rate and the average
        occupancy rate achieved during the period. RevPAR does not include
        food and beverage or other ancillary revenues generated by a hotel or
        resort. RevPAR is the most commonly used measure in the lodging
        industry to measure the period-over-period performance of comparable
        properties. Our calculation of RevPAR may be different than the
        calculation used by other lodging companies.

    3.  The term "Core Hotels" means hotels and resorts under management for
        the full year of both 2005 and 2004. However, if a "Core Hotel" has
        undergone or is undergoing an extensive renovation program in one of
        those years that materially affects the operation of the property in
        that year, it ceases to be included as a "Core Hotel" in either year.
        Changes from the 2004/2003 Core Hotels are the additions of Four
        Seasons Resort Jackson Hole, Four Seasons Hotel Miami, Four Seasons
        Resort Great Exuma at Emerald Bay, Four Seasons Hotel Prague, Four
        Seasons Hotel Riyadh and Four Seasons Hotel Jakarta, and the
        deletions of Four Seasons Resort Maldives at Kuda Huraa (due to its
        temporary closure caused by the tsunami) and The Pierre in New York
        (due to its disposition on June 30, 2005).

    4.  Gross operating margin represents gross operating profit as a
        percentage of gross operating revenue.

    5.  Reimbursed costs includes the reimbursement of all out-of-pocket
        costs, including sales and marketing and advertising fees.

    6.  Effective January 1, 2004, we ceased designating our US dollar
        forward contracts as hedges of our US dollar fee revenues. These
        contracts were entered into during 2002, and all of these contracts
        matured during 2004. The foreign exchange gains on these contracts of
        $11.2 million, which were deferred prior to January 1, 2004, were
        recognized in 2004 as an increase of fee revenues over the course of
        the year. Foreign exchange gains on forward exchange contracts were
        recorded as increases in management fee revenues in the quarters of
        2004 and 2003 as follows:

        ---------------------------------------------------------------------
        (In millions of        First       Second        Third       Fourth
         US dollars)          Quarter      Quarter      Quarter      Quarter
        ---------------------------------------------------------------------
        2004                     $2.7         $2.8         $2.6         $3.1
        ---------------------------------------------------------------------
        2003                     $0.5         $1.5         $1.4         $2.3
        ---------------------------------------------------------------------

    7.  Including the reimbursed costs and forward exchange contracts,
        management fee revenues increased 9.2%, or $4.1 million, to
        $48.3 million in the second quarter of 2005, as compared to
        $44.2 million for the same period in 2004. We provide the information
        excluding the above items because the foreign exchange contracts
        applied only to the period in 2004 and the reimbursed costs have no
        net impact on earnings from management operations.

    8.  Eight Quarter Summary:

    -------------------------------------------------------------------------
    (In millions of US dollars
     except per share amounts)              Second Quarter    First Quarter
    -------------------------------------------------------------------------
                                            2005     2004     2005     2004
    -------------------------------------------------------------------------
    Consolidated revenues(b)                $74.5    $71.4    $63.1    $57.1
    -------------------------------------------------------------------------
    Earnings (loss) before other
     operating items:
    -------------------------------------------------------------------------
      Management operations                  22.8     22.1     19.3     17.1
    -------------------------------------------------------------------------
      Ownership and corporate operations     (2.3)    (1.3)    (6.8)    (7.4)
    -------------------------------------------------------------------------
    Net earnings (loss):
    -------------------------------------------------------------------------
      Total                                 $15.8    $12.8     $5.2     $8.7
    -------------------------------------------------------------------------
      Basic earnings (loss) per share(c)    $0.43    $0.36    $0.14    $0.25
    -------------------------------------------------------------------------
      Diluted earnings (loss) per share(c)  $0.42    $0.34    $0.14    $0.24
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Average Canadian/US foreign exchange
     rate used for specified quarter      1.24401  1.35860  1.22652  1.31785
    -------------------------------------------------------------------------
 

    -------------------------------------------------------------------------
    (In millions of US dollars
     except per share amounts)              Fourth Quarter    Third Quarter
    -------------------------------------------------------------------------
                                            2004    2003(a)   2004    2003(a)
    -------------------------------------------------------------------------
    Consolidated revenues(b)                $69.5    $66.8    $63.3    $52.6
    -------------------------------------------------------------------------
    Earnings (loss) before other
     operating items:
    -------------------------------------------------------------------------
      Management operations                  18.2     15.7     20.1     13.7
    -------------------------------------------------------------------------
      Ownership and corporate operations     (3.1)    (1.5)    (4.9)    (6.8)
    -------------------------------------------------------------------------
    Net earnings (loss):
    -------------------------------------------------------------------------
      Total                                 $12.8     $8.9    $(8.5)    $3.2
    -------------------------------------------------------------------------
      Basic earnings (loss) per share(c)    $0.35    $0.25   $(0.24)   $0.09
    -------------------------------------------------------------------------
      Diluted earnings (loss) per share(c)  $0.34    $0.24   $(0.24)   $0.09
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Average Canadian/US foreign exchange
     rate used for specified quarter      1.22033  1.31550  1.30758  1.37927
    -------------------------------------------------------------------------
    (a) In December 2003, the CICA amended Section 3870 of its Handbook to
        require entities to account for employee stock options using the fair
        value-based method, beginning January 1, 2004. In accordance with one
        of the transitional alternatives permitted under amended Section
        3870, in the fourth quarter of 2003 we prospectively adopted the fair
        value-based method with respect to all employee stock options granted
        on or after January 1, 2003. Accordingly, options granted prior to
        that date continue to be accounted for using the settlement method.
        In accordance with the new standard, however, the reported results
        for the first three quarters of 2003 are required to be restated. The
        prospective application of adopting the fair value-based method
        effective January 1, 2003 resulted in the following restatements:
        Third Quarter and Fourth Quarter 2003 - in each quarter, a decrease
        in net earnings of $0.3 million and a decrease in basic and diluted
        earnings per share of $0.01 for each quarter.
    (b) As a result of adopting Section 1100, "Generally Accepted Accounting
        Principles", which was issued by the CICA in July 2003 and was
        effective January 1, 2004, we have included the reimbursement of all
        out-of-pocket expenses in both revenues and expenses, instead of
        recording certain reimbursed costs as a "net" amount. As a result of
        this change, consolidated revenues have been restated as follows:
        Third Quarter 2003 - increase of $7.5 million; Fourth Quarter 2003 -
        increase of $9.6 million.

        Consolidated revenues is comprised of the following:

    -------------------------------------------------------------------------
                         Second         First        Fourth         Third
                         Quarter       Quarter       Quarter       Quarter
    (In millions of   -------------------------------------------------------
     US dollars)       2005   2004   2005   2004   2004   2003   2004   2003
    -------------------------------------------------------------------------
    Revenues from
     Management
     Operations       $48.3  $44.2  $43.6  $37.6  $44.3  $40.6  $41.9  $33.8
    -------------------------------------------------------------------------
    Revenues from
     Ownership and
     Corporate
     Operations        27.6   28.1   20.5   20.3   26.6   27.4   22.4   19.6
    -------------------------------------------------------------------------
    Distributions
     from hotel
     investments        0.1    0.3    0.0    0.0    0.0    0.0    0.0    0.1
    -------------------------------------------------------------------------
    Fees from
     Ownership and
     Corporate
     Operations to
     Management
     Operations        (1.5)  (1.2)  (1.0)  (0.9)  (1.4)  (1.2)  (1.0)  (0.9)
    -------------------------------------------------------------------------
                      $74.5  $71.4  $63.1  $57.1  $69.5  $66.8  $63.3  $52.6
    -------------------------------------------------------------------------

    (c) Quarterly computations of per share amounts are made independently on
        a quarter-by-quarter basis and may not equate to annual computations
        of per share amounts.
ADD: /FIRST AND FINAL ADD -- T0237 -- FOUR SEASONS HOTELS AND RESORTS/
    9.  The management operations profit margin represents management
        operations earnings before other operating items, as a percent of
        management operations revenue.

    10. Included in ownership and corporate operations are the consolidated
        revenues and expenses from our 100% leasehold interests in The Pierre
        in New York, Four Seasons Hotel Vancouver and Four Seasons Hotel
        Berlin (until the Berlin lease termination on September 26, 2004),
        distributions from other ownership interests in properties that Four
        Seasons manages and corporate overhead expenses related, in part, to
        these ownership interests.

    11. Depreciation and management fees related to The Pierre for the
        quarters of 2004 and first and second quarters of 2005.

        ---------------------------------------------------------------------
                                                            Management Fees,
                                                               including
        (In millions of US dollars)          Depreciation   reimbursed costs
        ---------------------------------------------------------------------
        First Quarter 2004                       $0.4             $0.5
        ---------------------------------------------------------------------
        Second Quarter 2004                      $0.5             $0.9
        ---------------------------------------------------------------------
        Third Quarter 2004                       $0.4             $0.5
        ---------------------------------------------------------------------
        Fourth Quarter 2004                      $0.5             $1.1
        ---------------------------------------------------------------------
        Full Year 2004                           $1.8             $3.0
        ---------------------------------------------------------------------
        First Quarter 2005                       $0.5             $0.7
        ---------------------------------------------------------------------
        Second Quarter 2005                      $0.4             $1.1
        ---------------------------------------------------------------------

                                  (+)(+)(+)

    All dollar amounts referred to in this news release are US dollars unless
    otherwise noted. The financial statements are prepared in accordance with
    Canadian generally accepted accounting principles.
 
 
 

This news release contains "forward-looking statements" within the meaning of applicable securities laws, including RevPAR, profit margin and earnings trends; statements concerning the number of lodging properties expected to be added in this and future years; expected investment spending; and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. 

Four Seasons Hotels and Resorts
www.fourseasons.com