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Four Seasons Reports 4th Qtr Net Earnings of $11.7 million, Compared to $7.6 million for Prior Year Same Quarter; 
 RevPAR Up Nearly 12% to $203 from $182
and Occupancy Up 4.1% to 65.4% / 
Hotel Operating Data
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TORONTO, Feb. 27, 2004 - Four Seasons Hotels Inc. (TSX Symbol "FSH"; NYSE Symbol "FS") today reported its results for the fourth quarter of 2003 and for the year ended December 31, 2003.

"2003 ended very differently than it began," said Isadore Sharp, Chairman and Chief Executive Officer. "The second half of the year saw an upswing in travel demand, as signs of economic recovery became clearer, while during the first half of the year travel was severely disrupted as a result of war, terrorism, SARS and economic uncertainty. The Company's 2003 financial results reflect that environment. As travel demand trends continue to improve, we anticipate a stronger financial performance in 2004."

Net earnings for the quarter ended December 31, 2003 were $11.7 million ($0.33 basic earnings per share and $0.32 diluted earnings per share), as compared to $7.6 million ($0.22 basic and diluted earnings per share) for the quarter ended December 31, 2002.

For the year ended December 31, 2003, net earnings were $5.4 million ($0.15 basic and diluted earnings per share), as compared to $21.2 million ($0.61 basic earnings per share and $0.59 diluted earnings per share) for the year ended December 31, 2002.

The decline in net earnings for the year ended December 31, 2003, as compared to the year ended December 31, 2002, is attributable primarily to a non-cash, unrealized foreign exchange loss for accounting purposes (in contrast to a non-cash, unrealized foreign exchange gain in 2002), increased losses from ownership operations and a write-down of the Company's fixed asset investment in Four Seasons Hotel Berlin, which losses and write-downs were offset by lower legal and enforcement costs relating to the disputes with the owners of the hotels in Seattle and Caracas in 2003 as compared to those costs in the prior year. The financial results for 2002 also were affected by asset impairment charges relating to the Company's investments in Four Seasons hotels in Caracas and Sydney.

Excluding these items (other than losses from ownership operations), adjusted(1) net earnings for the year ended December 31, 2003 were $28.5 million ($0.81 basic earnings per share and $0.79 diluted earnings per share), as compared to adjusted(1) net earnings for the year ended December 31, 2002 of $38.6 million ($1.10 basic earnings per share and $1.07 diluted earnings per share).

Cash flow from operations improved by $12.3 million to $21.9 million in the fourth quarter of 2003, as compared to $9.6 million in the same period in 2002 ($0.62 per share in the fourth quarter of 2003, as compared to $0.27 per share in the same period in 2002). For the year ended December 31, 2003, cash flow from operations also improved to $66 million, as compared to $41.8 million in the same period in 2002 ($1.89 per share for the year ended December 31 2003, as compared to $1.19 per share in the same period in 2002).

"2003 was the third, and we hope last, year of a very difficult period for the lodging industry. We are pleased that our management business showed continued resiliency, and that we were able to come out of this cycle in a strong position financially and operationally," said Douglas L. Ludwig, Chief Financial Officer and Executive Vice President. "Despite the extremely challenging operating conditions in 2003, we achieved a 58% improvement in cash flow from operations, generating $66 million. We have maintained our balance sheet strength, and have been able to continue to meet our objective of funding new management opportunities with cash generated by our existing management business."

OPERATING ENVIRONMENT

The Company continues to operate at or above market occupancy levels in most of its locations. Maintaining superior product and service levels has allowed the Company to generally maintain, and in some cases improve, its room rates. During the Company's negotiations with corporate accounts for 2004, overall rates were in line with or, in some cases, slightly better than those negotiated rates for 2003. The Company currently expects its full year achieved room rates in 2004 to be near the 2003 levels.

Four Seasons' customer base consists of business travellers, corporate groups and leisure travellers. Over the past three years, travel demand was negatively affected as the lodging industry dealt with the impact of terrorism, war, a weak economy and Severe Acute Respiratory Syndrome (SARS). Economic indicators suggest that the US economy began to show signs of recovery in mid-2003 and continued to recover further during the fourth quarter of 2003. Concurrently, business travel demand improved in many US and international markets, although it remains below levels achieved prior to 2001, which marked the beginning of the current downturn in travel demand. Notwithstanding the improvement in demand, both business and leisure travel is generally still being booked on a short lead-time.

The recovery in non-room related revenues at the hotels and resorts are lagging behind the recovery seen in room revenues. This pattern is consistent with prior economic cycles during which other ancillary revenues, including food, beverage and catering, recovered further into the economic recovery than room revenue.

Overall gross operating margins(2) at the hotels under management continued to be constrained as increased costs related to labour, workers compensation, health benefits, energy and insurance have not been completely offset by RevPAR(3) improvements. The Company expects that further significant cost increases, particularly relating to energy, insurance and workers compensation, will continue to put pressure on gross operating profit performance in 2004. For gross operating margins to remain at the same level as those realized in 2003, the Company estimates that RevPAR will need to increase by 4% to 5% in 2004. This level of RevPAR growth in 2004 is within the range of lodging industry experts' forecasts for 2004 of 3% to 6% improvements.

Please see the accompanying "Summary of Hotel Operating Data" for regional RevPAR and gross operating margin statistics by geographic region.

Worldwide Core Hotels

The 11.9% increase in RevPAR, on a US dollar basis, for the quarter ended December 31, 2003, as compared to the same period in 2002, for the Company's worldwide Core Hotels(4) reflects improvements in each of the regions in which the Company manages hotels and resorts. This is the first quarter since the middle of 2000 that all regions have experienced improved operating trends, on a US dollar basis; and the Company believes this reflects the beginning of a broader recovery in travel demand. As a result of the cost pressures noted above, gross operating margin for worldwide Core Hotels increased modestly from 27.8% in the fourth quarter of 2002 to 28.4% in the same period in 2003.

For the full year 2003, RevPAR of worldwide Core Hotels, on a US dollar basis, increased 2%, as compared to 2002. On a local currency basis, RevPAR of worldwide Core Hotels was essentially flat. On a full year basis, RevPAR performance varied significantly among regions, with the US outperforming the other regions. The full year occupancy decline in 2003, as compared to 2002, for worldwide Core Hotels was attributable principally to lower occupancy levels in the first half of the year, which was caused for the most part by travel disruption relating to the war, terrorism, SARS and lower demand related to a weak economy. This decline in occupancy was offset partially by a 4.3% increase, on a US dollar basis, in average daily room rate for the full year 2003, as compared to the same period in 2002. On a local currency basis, average room rates for worldwide Core Hotels increased 1.4%.

US Core Hotels

With the exception of Chicago, Philadelphia, Atlanta and Aviara, the US Core Hotels had RevPAR improvements in the quarter ended December 31, 2003, as compared to the same period in 2002. However, even the properties under management in these four locations continued to take more than their fair revenue market share(5) of business during the fourth quarter. The more modest improvement in RevPAR of 2.9% at the US Core Hotels in 2003, as compared to 2002 on a full year basis, reflects strong improvements in RevPAR in the last half of the year as increased travel demand offset weaker results in the first half of 2003. Exceptions to this improvement in RevPAR were Houston, Boston, Chicago, Washington and, to a lesser extent, New York, which did not have the same occupancy improvements as other markets, in part, because of increased supply in, and reduced convention traffic to, these cities.

Gross operating margins at the US Core Hotels were essentially flat in the fourth quarter of 2003, as compared to the same period in 2002, as increased labour, workers compensation, health benefits, energy and insurance costs negatively affected flow-through. On a full-year basis, the impact of these increased costs on gross operating margins was more significant, due to the weaker revenue growth at the hotels in the first half of 2003.

Europe/Middle East Core Hotels

With the exception of hotels under management in Paris and Istanbul, the Core Hotels under management in Europe/Middle East had occupancy improvements in the fourth quarter of 2003, as compared to the fourth quarter of 2002. Travel demand in Istanbul was negatively affected by the terrorist attacks in that market in early November. Four Seasons Hotel George V Paris experienced solid results with occupancy in excess of the average for the region, but realized an occupancy decline for the fourth quarter on a year-over-year basis. This hotel experienced an exceptional fourth quarter in 2002 as occupancy levels in October 2002 were almost 90%.

Although achieved average room rates for Europe/Middle East Core Hotels in the fourth quarter of 2003 increased 10.6% on a US dollar basis, as compared to the same period in 2002, on a local currency basis, achieved average room rates were essentially unchanged. Rate improvements achieved in certain hotels under management, including London, Lisbon and Dublin were offset by modest rate declines at hotels under management in Paris and Istanbul. On a local currency basis, RevPAR for the Europe/Middle East Core Hotels increased 7.3% during the fourth quarter of 2003, as compared to the same period in 2002. On both a US dollar basis and a local currency basis, the Europe/Middle East Core Hotels' RevPAR improvement in 2003, compared to the full year 2002, reflects the increases realized in the last six months of 2003, offset by the weakness in travel demand experienced in the first six months of the year, particularly in Cairo and Istanbul where travel was affected primarily by the war in Iraq.

Gross operating margins in the region were essentially flat in the quarter, as compared to the same period in 2002, as a result of increased energy and labour costs. Gross operating margins declined for the full year, as compared to 2002, as the impact of these cost increases was magnified by weaker revenues in the first half of 2003.

Other Americas/Caribbean Core Hotels

During the fourth quarter of 2003, RevPAR of the Company's Core Hotels in Other Americas/Caribbean increased 20.3% over the fourth quarter of 2002, on a US dollar basis, as a result of broad based demand improvement. With the exception of Four Seasons Hotel Toronto, which is in a market that is still recovering from the impact of SARS, all of the Core Hotels under management in this region experienced occupancy gains. Although Vancouver is also recovering from the impact of SARS, the fourth quarter is historically a slower travel period for that market, and therefore the lingering effects of SARS did not have the same impact as in Toronto, which historically has strong demand in the fourth quarter relative to the rest of the year. On a local currency basis, achieved room rates in the region increased 2.8%, as compared to the fourth quarter of 2002.

RevPAR for the full year 2003, as compared to 2002, on both a US dollar basis and local currency basis, was essentially unchanged as the weaker results in the first six months of 2003, resulting primarily from the impact of SARS on travel demand for Toronto and Vancouver, were offset by the stronger RevPAR results in the second half of the year.

Asia/Pacific Core Hotels

Virtually all of the hotels under the Company's management in the Asia/Pacific region contributed to a RevPAR improvement for the region of 23.9% in the fourth quarter of 2003, as compared to the same period in 2002, on a US dollar basis, as travel demand in the region continued to improve. Demand remained relatively weak in Bali as the impact of the terrorist event on that island in October 2002 lingers. Full-year RevPAR declined 9.2% in 2003, as compared to 2002, on a US dollar basis, reflect the devastating impact of SARS on that region in the first half of 2003. On a local currency basis, RevPAR improved 12% in the fourth quarter and declined 15.6% for the full year of 2003, as compared to the same periods in 2002.

Gross operating margins in the region improved from 35.1% in the fourth quarter of 2002 to 37.4% in the same period in 2003, reflecting the relatively low labour cost in the region and RevPAR improvements. Consistent with the full year RevPAR declines, gross operating profits declined in the full year.

"We are pleased that our properties are experiencing an improvement in demand," said Wolf Hengst, President Worldwide Hotel Operations. "Many of the hotels and resorts under our management are dealing with significant increases in certain costs that are largely outside the control of management, including labour, workers compensation, health benefits, energy and insurance. However, assuming travel demand continues to improve, we believe revenue improvements should help absorb these additional costs and we should begin to see margin improvements over the course of this year."

MANAGEMENT OPERATIONS

Management revenues increased 3.2% to $40.6 million for the quarter ended December 31, 2003, as compared to $39.3 million for the same period in 2002. The increase in management revenues is attributable to an improvement in fees from recently opened hotels and resorts including the Four Seasons hotels in Amman, Riyadh, Shanghai and the addition of fees from the Four Seasons resorts in Jackson Hole and Sharm el Sheik.

These improvements were offset by a decline of approximately $1.3 million in fees related to currency conversion, as the Canadian dollar strengthened primarily against the US dollar and pound sterling. In addition, incentive fees declined approximately $1.3 million, primarily as a result of reduced incentive fees from the US hotels (including Chicago and Philadelphia) in the three months ended December 31, 2003, as compared to the same period in 2002. Incentive fees are typically calculated based on the adjusted gross operating profits of the hotels and resorts under management, and the US hotels had reduced profitability as the hotels incurred additional costs related primarily to labour, workers compensation, health benefits, energy and insurance.

Management revenues increased 1.3% to $149.8 million for the year ended December 31, 2003, as compared to $147.9 million for 2002. Increases in management fees from new and recently opened hotels were offset by a currency- related decline in fees of approximately $600,000 relating to US dollar, Euro and pound sterling-denominated fees and reduced fees from the Company's residential business. In addition, the Company's management incentive fees decreased to $20.9 million for the year ended December 31, 2003, as compared to $25.1 million in 2002. The Company earned incentive fees from 33 of the 60 hotels and resorts under its management during 2003, as compared to 33 of its 57 hotels and resorts in 2002. Incentive fees declined primarily due to the lower levels of profitability at certain properties under management, resulting from higher costs related primarily to labour, workers compensation, health benefits, energy and insurance.

General and administrative expenses increased by 12.4% to $19.9 million for the fourth quarter of 2003 and increased 6.6% to $70.2 million for the year ended December 31, 2003, in each case as compared to the same periods in 2002. A large portion of these increases in general and administrative expenses in the fourth quarter ($1.1 million) and for the full year 2003 ($1.8 million) was attributable to items relating to relocation and severance and other atypical expenses at certain regional offices.

As a result of the items described above, management earnings before other operating items decreased to $20.7 million in the fourth quarter of 2003, as compared to $21.6 million in the fourth quarter of 2002, and to $79.5 million for the year ended December 31, 2003, as compared to $82 million in 2002.

For the quarter ended December 31, 2003, the Company's management operations profit margin(6) was 50.9%, as compared to 54.9% for the same period in 2002. For the year ended December 31, 2003, the Company's management operations profit margin was 53.1%, as compared to 55.4% in 2002. Excluding the impact of foreign currency on fee revenues described above (approximately $1.3 million in the quarter and $600,000 for the full year 2003) and the items relating to relocation and severance ($1.1 million in the quarter and $2.1 million for the full year 2003), management operations profit margin would have been 54.9% in the fourth quarter of 2003 and 54.7% for the full year 2003.

OWNERSHIP OPERATIONS(7)

In the fourth quarter of 2003, ownership losses before other operating items were $2.0 million, as compared to ownership losses before other operating items of $4.6 million in the fourth quarter of 2002. The improvement in ownership losses is primarily attributable to the Company ceasing to accrue rent expense for Four Seasons Hotel Berlin from August 2003, as discussed below.

Ownership losses before other operating items were $30.1 million for the year ended December 31, 2003, as compared to ownership losses before other operating items of $19.6 million for the year ended December 31, 2002. The increase in the full year loss over the prior year is attributable primarily to increased losses at The Pierre ($4.9 million) and Four Seasons Hotel Vancouver ($3.2 million) and reduced distributions from other hotel investments ($1.2 million).

Operating earnings at The Pierre were essentially flat in the fourth quarter of 2003, as compared to the fourth quarter of 2002. Although the hotel had RevPAR gains in the quarter driven by both occupancy and rate improvements, as a result of increased costs and a modest decline in catering revenues, earnings were essentially unchanged. For the full year ended December 31, 2003, the increased losses were attributable primarily to lower revenues from banqueting and ancillary revenues and higher labour, workers compensation, health benefits, energy and insurance costs.

Operating losses at Four Seasons Hotel Vancouver were essentially unchanged during the fourth quarter of 2003, as compared to the same period in 2002. Primarily as a result of travel disruption relating to SARS, Four Seasons Hotel Vancouver experienced weak operating conditions, with RevPAR, on a local currency basis, declining 11.6% for the full year of 2003, as compared to the same period in 2002, resulting in the operating loss at Four Seasons Hotel Vancouver increasing by $3.2 million.

The Company's obligation to fund any stipulated minimum lease payments at Four Seasons Hotel Berlin was limited to a maximum amount of approximately euro 11 million and was supported by a letter of credit. The Company reached its maximum funding obligation during the third quarter of 2003 and accordingly, the letter of credit has been released. Since the Company ceased funding shortfalls on the stipulated minimum lease payments, the lease payments made have been limited to the cash flow generated by the hotel. As a result, effective the first quarter of 2004, the landlord will be entitled to terminate the lease.

Primarily as a result of not accruing the stipulated minimum lease payments for Four Seasons Hotel Berlin during the fourth quarter of 2003, the operating results from this hotel for that quarter improved by $2.9 million, as compared to the fourth quarter of 2002. The benefit of the reduction in rent expense was however reduced by lower revenues at the hotel, resulting from a significant decline in occupancy for the full year 2003 (primarily as a result of new supply in that market), as compared to 2002, and increased labour, heath benefits, energy and insurance costs. The Company wrote down its fixed asset investment in the hotel to nil in the fourth quarter of 2003, resulting in a $3.2 million expense that is included in other operating items.

In 2004, the Company will continue to consolidate the revenue and expenses of Four Seasons Hotel Berlin. However, the stipulated minimum lease payments beyond what can be funded by the hotel's operation will not be paid or accrued. As a result, the Company expects the earnings from Four Seasons Hotel Berlin to be nil throughout the year.

The Company is in discussions with the landlords of The Pierre, Four Seasons Hotel Berlin and Four Seasons Hotel Vancouver to determine what, if any, alternatives may be available to change or restructure the Company's investments in these hotels. There can be no assurance that acceptable alternative arrangements will be agreed upon with respect to any or all of these hotels.

OTHER INCOME/EXPENSE

Other income for the fourth quarter of 2003 was $178,000, as compared to other expense of $2.8 million for the same period in 2002. For the full year of 2003, other expense was $25.8 million, as compared to other expense of $22.9 million in 2002.
 

 Three months ended                        Years ended
    (Unaudited)                        December 31,          December 31,
    (In millions of dollars)         2003       2002       2003       2002
    -------------------------------------------------------------------------

    Asset impairment charge, net
     of recoveries(x)              $   (2.3)   $  (1.9)  $  (11.1)  $  (26.5)
    Foreign exchange gain (loss)        2.5        0.5      (14.7)       5.0
    Decline in value life
     insurance policies                   -       (1.4)         -       (1.4)
    -------------------------------------------------------------------------

    Other income (expense), net    $    0.2   $   (2.8)  $  (25.8)  $  (22.9)
    -------------------------------------------------------------------------

    (x) Includes legal and enforcement costs relating to Caracas and Seattle
        (2003 and 2002), asset impairment charge on Four Seasons Hotel Sydney
        (2002) and Four Seasons Hotel Caracas (2003 and 2002), writedown of
        Four Seasons Hotel Berlin (2003) and loss on sale of vacant land in
        Toronto (2002), net of recoveries on items previously provided for.

Legal and Enforcement Costs

Included in other expenses during the fourth quarter of 2002 are legal and enforcement costs of approximately $1.8 million incurred in connection with the Company's disputes relating to the Four Seasons hotels in Caracas and Seattle, which are described below. Included in other expense during the year ended December 31, 2003 are legal and enforcement costs of $9.5 million in connection with the disputes with the owners of the Four Seasons hotels in Caracas and Seattle. Other expense for the year ended December 31, 2002 includes an asset impairment charge for Four Seasons Hotel Caracas and Four Seasons Hotel Sydney and legal and enforcement costs relating to the Company's investments in Four Seasons Hotel Caracas and Four Seasons Olympic Hotel Seattle which, in the aggregate, were $25 million.

Four Seasons Olympic Hotel Seattle

During the second quarter of 2003, the Company and the owner of Four Seasons Olympic Hotel Seattle settled their disagreement, which was subject to arbitration, concerning the management of the hotel. Under the settlement, Four Seasons concluded its management of Four Seasons Olympic Hotel upon the sale of the hotel, which occurred on August 1, 2003. On closing of the sale of the hotel, the Company received an initial payment, which included its share of the sale proceeds as a result of its minority ownership interest in the hotel. The Company will also receive annual payments over the next several years, subject to certain conditions being met, that are not materially different from the fees that the Company would have otherwise earned during this period under its previous management contract for that property. The Company believes that a fair and equitable settlement has been reached and that the payments under the settlement agreement will, in aggregate, compensate it for the near-term value of its management contract as it works to obtain a new management opportunity in Seattle. A portion of this payment has been included in net earnings for 2003.

Four Seasons Hotel Caracas

The Company is in dispute with the owner of Four Seasons Hotel Caracas regarding a variety of matters relating to the completion and ongoing operation of the hotel, including the default of a US$5 million loan owed to the Company. During the second quarter of 2003, the Company received a judgment in the legal proceedings against the owner, which involved the protection of its proprietary materials. The court found against the owner on all matters, including illegal computer "hacking" and unlawful and unauthorized use of the Company's proprietary information, and ordered that the owner pay to the Company damages totalling US$4.9 million, plus legal costs and expenses of US$1.4 million. The owner has appealed the judgment from the legal proceeding, but has not stayed execution pending appeal. Therefore, the Company is moving to enforce the judgment from the legal proceeding against the owner, but has not recorded any receivable arising from the judgment as at December 31, 2003. In addition, the arbitration hearing in respect of the other contractual breaches of the management contract by the owner was completed during the third quarter of 2003 and a decision is pending.

Foreign Exchange Gain/Loss

Included in other income for the fourth quarter of 2003 is a foreign exchange gain of $2.5 million. The foreign exchange gain is primarily due to the translation of the Company's Australian dollars and pounds sterling net monetary assets, as the Canadian dollar weakened relative to those currencies during the quarter. This foreign exchange gain was partially offset by foreign exchange losses on the translation of the Company's US-dollar net monetary assets due to the strengthening of the Canadian dollar against the US dollar, as discussed below.

Other expense for the full year 2003 also includes a $14.7 million non-cash, unrealized foreign exchange loss, as compared to a $5.0 million non-cash, unrealized foreign exchange gain for the same period in 2002. The non-cash, unrealized foreign exchange loss for accounting purposes for the year ended December 31, 2003 arose as the result of the translation to Canadian dollars at the end of each month at current exchange rates of the Company's non-Canadian dollar-denominated net monetary assets not included in the Company's designated self-sustaining operations. Net monetary assets are the sum of the Company's foreign currency-denominated assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, long-term receivables and long-term obligations, as determined under Canadian generally accepted accounting principles (GAAP).

From an economic perspective, the Company looks to offset its net monetary asset position against the full obligation of its convertible notes. Under Canadian GAAP, the convertible notes were allocated between long-term obligations and shareholders' equity. At the time of issuance, the portion allocated to long-term obligations and included in net monetary assets was US$46.7 million, and US$125.8 million was allocated to shareholders' equity. If the portion of the convertible notes included in shareholders' equity was revalued at the current exchange rates, which is not contemplated under Canadian GAAP, the result of this revaluation would have been a non-cash, unrealized foreign exchange gain for accounting purposes of $36.1 million for the year ended December 31, 2003, more than offsetting the non-cash, unrealized foreign exchange loss for accounting purposes otherwise recorded. On this basis, the Company believes it has an appropriate economic hedge of its net monetary assets and liabilities. For a further discussion of the convertible notes see "Liquidity and Capital Resources" below.

The Canadian dollar strengthened by 18.2% (28.7 cents) during 2003 against the US dollar, causing the majority of the non-cash, unrealized foreign exchange loss for accounting purposes.

NET INTEREST INCOME/EXPENSE

The Company had net interest income of $962,000 in the fourth quarter of 2003, as compared to net interest expense of $266,000 in the fourth quarter of 2002. Net interest is a combination of $3.7 million interest income and $2.8 million interest expense in the fourth quarter of 2003. For the same period in 2002, interest income was $4.8 million, interest expense was $3.3 million and the Company incurred a cost of $1.8 million relating to the purchase of forward exchange contracts.

The decrease in interest income of $1.1 million is primarily due to lower interest earned on loans to certain properties and lower interest earned on short-term cash deposits in the fourth quarter of 2003, as compared to the fourth quarter of 2002.

For the same reasons as discussed above for the fourth quarter, net interest income for the year ended December 31, 2003 was $3.4 million, as compared to $3.2 million for the same period in 2002. The components of net interest income were interest income of $14.4 million and interest expense of $11.1 million, partially offset by income relating to the purchase of forward exchange contracts of $136,000 in 2003, as compared to $18.3 million, $11.6 million and an expense of $3.5 million, respectively, during the same period in 2002.

INCOME TAX EXPENSE

The Company's effective tax rate for the quarter ended December 31, 2003 was 27.9%, as compared to 24% for the same period in 2002. The Company's effective tax rate for the year ended December 31, 2003 was 55.2%, as compared to 24% in 2002. The increase in the tax rate in the fourth quarter and full year of 2003 was due to a portion of the non-cash, unrealized foreign exchange losses for accounting purposes not being tax-effected as it will not be realized for tax purposes.

As a result of the regional office income generally being taxed at rates lower than the Canadian statutory income tax rate, the Company expects its income tax rate to be approximately 24% in 2004 on income other than unusual items like foreign exchange gains and losses, which may have a different tax treatment.

STOCK OPTION EXPENSE

Stock option expense for the fourth quarter and full year 2003 was $368,000 and $893,000, respectively, as compared to nil for the same periods in 2002.

The Canadian Institute Chartered Accountants Handbook Section 3870 - Stock-based Compensation and Other Stock-based Payments was amended in December 2003 to require entities to account for employee stock options using the fair value-based method, beginning January 1, 2004. Under the fair value- based method, compensation cost of an award is measured at fair value at the date of grant and is expensed over the stock option's vesting period, with a corresponding increase to contributed surplus. In accordance with one of the transitional alternatives permitted under amended Section 3870, the Company has adopted the fair value-based method prospectively to all employee stock options granted on or after January 1, 2003. Options granted prior to that date continue, as permitted by the new rules, to be accounted for using the settlement method. Under the settlement method, no compensation expense is recorded on the grant of stock options, and consideration paid on the exercise of stock options or the purchase of shares is recorded as capital stock.

The allocation of the full year stock option expense of $893,000 among the four quarters of 2003 is as follows: first quarter (quarter ending March 31, 2003) - $15,000, second quarter (quarter ending June 30, 2003) - $144,000, third quarter (quarter ending September 30, 2003) - $366,000 and fourth quarter (quarter ending December 31, 2003) - $368,000. The quarterly results to be reported in the Company's 2003 annual filing will reflect this allocation.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2003, the Company's cash and cash equivalents were $170.7 million, as compared to total cash and cash equivalents of $165 million as at December 31, 2002. A significant amount of the Company's cash reserves are in US dollars and as a result, a large portion of the Company's cash reserves showed a year-over-year decline when translated to Canadian dollars for financial reporting purposes due to currency movements during 2003.

Long-term obligations were $120.3 million as at December 31, 2003, as compared to $129.1 million as at December 31, 2002. The Company's debt position consists primarily of that portion of its convertible notes that is characterized as debt for accounting purposes. The decrease in long-term obligations was primarily due to the foreign currency translation of the US dollar debt component of the convertible notes.

The Company is entitled to redeem its convertible notes commencing in September 2004 for cash equal to the issue price plus accrued interest calculated at 4 1/2% per annum. Holders of the notes have conversion rights, which they can exercise at any time before the maturity date or date of redemption of the notes, pursuant to which they can require the Company to issue to them 5.284 Limited Voting Shares for each US$1,000 principal amount of notes. The holders of notes also can require the Company to repurchase the notes in September 2004 for an amount equal to the issue price plus accrued interest calculated at 4 1/2% per annum. This right also may be exercised in September 2009 and September 2014. The Company has a choice of funding its obligation in connection with the conversion or purchase of the notes at the option of the holder with cash or shares. The rights of the Company and the noteholders relating to the convertible notes are more fully described in the Company's 2002 Annual Report.

It is possible that the Company may redeem some or all of the notes, especially if the current interest rate and general business environment continues. A cash redemption in September 2004 of all outstanding notes would require a cash payment to the noteholders of approximately US$215.5 million, assuming that the holders did not exercise their right to convert their notes before the redemption date. If the Company redeems the notes, it may replace the financing provided by the notes with a combination of debt (which could be raised in various means, including bank lines and/or the issuance of additional notes or convertible notes) and/or the utilization of cash reserves.

CASH FLOW

During the fourth quarter of 2003, the Company generated $21.9 million from operations, as compared to $9.6 million for the same period in 2002. The increase in cash from operations of $12.3 million in 2003 resulted primarily from a reduction in working capital of $9.3 million, a decrease in cash used in ownership operations of $2.8 million and a decrease in legal and enforcement costs paid in 2003 of $1.6 million, partially offset by a decrease in cash contributed by management operations of $1.3 million.

The Company generated $66 million of cash from operations during the year ended December 31, 2003, as compared to $41.8 million for the year ended December 31, 2002. The increase in cash from operations of $24.2 million in 2003 resulted primarily from a reduction in working capital of $33 million and a decrease in income tax paid in 2003 of $10.4 million, partially offset by an increase in cash used in ownership operations of $10 million, and an increase in legal and enforcement costs paid in 2003 of $4.5 million.

A part of the Company's business strategy is to invest a portion of available cash to obtain new management agreements or enhance existing management arrangements. These loans or investments will only be made where the overall economic return to the Company is expected to justify the loan or investment. During the year ended December 31, 2003, the Company made investments in a variety of projects, including Costa Rica, Buenos Aires, Jackson Hole, Whistler and Scottsdale Residence Club. For the quarter and year ended December 31, 2003, the Company funded $5.2 million and $42.6 million, respectively, in management opportunities, including amounts advanced as loans receivable, investment in hotel partnerships and investment in management contracts ($26.7 million and $56 million, respectively, for the same periods in 2002). The Company currently expects to fund in the range of US$50 million to US$60 million in 2004 in management opportunities such as Geneva, Hampshire and Palo Alto, which may be augmented by additional investments in other properties if appropriate opportunities become available.

Total fixed asset expenditures were $13.9 million in the fourth quarter of 2003 and $19.3 million for the year ended December 31, 2003, as compared to $21.8 million and $31.1 million, respectively, for the same periods in 2002. During the fourth quarter of 2003, the Company purchased land for $11.2 million relating to its corporate office expansion. During the fourth quarter of 2002, $17.6 million was expended by the Company in connection with the purchase of land relating to its investment in its project in Orlando, Florida.

During 2002, the Company generated $4.6 million from the disposition of its interest in the Inn on the Park vacant land in Toronto. Also during 2002, the Company made normal course purchases of 337,600 of its Limited Voting Shares through the facilities of The Toronto Stock Exchange and the New York Stock Exchange for a total purchase price, including commissions, of approximately $16.5 million ($7.7 million in the fourth quarter of 2002). During 2003, the Company did not make any normal course purchases.

FOUR SEASONS PROPERTIES - RECENT AND EXPECTED OPENINGS

Over the past four months, the Company has added four new Four Seasons hotels and resorts in Miami, Jackson Hole, Exuma and Costa Rica, as well as adding a third Four Seasons Residence Club in Jackson Hole. Four Seasons is continuing to expand its international presence with several new projects. During the next 12 months, the Company expects to open new hotels and resorts in Budapest, Hampshire (England), Cairo, Doha, Langkawi (Malaysia), Provence (France), Whistler (British Columbia) and Lanai (Hawaii). A full list of the Company's properties under construction or advanced development is provided in a schedule attached to this press release. Recent additions to the development list include two new projects in Lanai.

"The Four Seasons collection is continuing to expand. We have some great recent additions to the Four Seasons portfolio, including our first mountain resort in Jackson Hole, as well as Four Seasons Resort Great Exuma at Emerald Bay and Four Seasons Resort Costa Rica. Each will offer an exceptional destination resort experience," said Kathleen Taylor, President Worldwide Business Operations. "We have a very busy year ahead of us as we expect to open a record number of Four Seasons properties in one year, adding nine exciting destinations to our network around the world."

LOOKING AHEAD

Travel trends have continued to improve early in the first quarter of 2004. Although January is a historically weak period for business travel, the Company's worldwide RevPAR for the month increased nearly 8% on a US dollar basis, as compared to January 2003. The Europe/Middle East segment realized the strongest improvements in occupancy during January 2004. In January, the Company continued to realize higher achieved room rates in each of the geographic regions of operation. This is consistent with the continued improvement in economic indicators for most of the major global economies. At this time, the Company expect to see these positive demand trends and pricing improvements continue through the first quarter of 2004.

The Company expects that the improving economic environment should translate into continued improvement in travel demand, particularly business travel. The Company also expects that leisure travel demand, which overall has been more resilient in the past few years than to business travel, will remain stable. On a full-year basis, the Company continues to expect its average daily room rates for 2004 to meet or exceed the rates achieved in 2003. The Company also expects its business model to perform at or above industry levels consistent with past experience. However, the Company is not providing any specific guidance for earnings per share for 2004, or any quarter thereof at this time.

CONCLUSION

"Four Seasons has enhanced its competitive position over the past three years. Notwithstanding the very difficult operating conditions experienced by the lodging industry, we maintained our strategic direction. We continued to focus on our guests and the consistent and cost effective execution of the finest service in the industry," said Isadore Sharp, Chairman and Chief Executive Officer. "We believe that our commitment to this strategy will benefit Four Seasons shareholders and the owners of the properties that we manage as the lodging industry experiences the improved travel demand that we have now begun to see."
 
 

    --------------------------
    1.  Adjusted net earnings is equal to net earnings (loss) plus (i)
        foreign exchange loss, less (ii) foreign exchange gain, plus (iii)
        asset impairment charge, plus (iv) loss on sale of hotel investment,
        each tax-effected as applicable. Adjusted net earnings, as calculated
        by the Company, may not be comparable to adjusted net earnings used
        by other companies, which may be calculated differently. In addition,
        adjusted net earnings is not intended to represent net earnings as
        defined by Canadian GAAP and should not be considered an alternative
        to net earnings or any other measure of performance prescribed by
        Canadian GAAP. It is included because the Company's management
        believes it can assist in the period-over-period comparability of the
        Company's financial performance.

        A reconciliation of net earnings to adjusted net earnings is
        as follows:
 
 

                                   Three months ended        Years ended
        (Unaudited)                    December 31,          December 31,
        (In thousands of dollars)    2003       2002       2003       2002
        ---------------------------------------------------------------------

        Net earnings               $ 11,704   $  7,637   $  5,384   $ 21,231
        Adjustments:
          Foreign exchange loss
           (gain)                    (2,476)      (510)    14,703     (5,036)
          Net asset impairment
           charge(x)                  2,298      3,145     11,080     26,396
          Loss on sale of hotel
           investment                     -         50          -      1,409
          Restructuring change            -         91          -         91
        Tax effect of adjustments      (552)      (666)    (2,659)    (5,486)
                                 --------------------------------------------
        Adjusted net earnings    $    10,974  $  9,747   $ 28,508   $ 38,605
                                 --------------------------------------------
                                 --------------------------------------------
        Adjusted basic earnings
         per share               $      0.31  $   0.28   $   0.81   $   1.10
                                 --------------------------------------------
                                 --------------------------------------------
        Adjusted diluted
         earnings per share      $      0.30  $   0.28   $   0.79   $   1.07
                                 --------------------------------------------
                                 --------------------------------------------
        (x) Includes legal and enforcement costs.
 

    2.  Gross operating margin represents gross operating profit as a percent
        of gross operating revenue.

    3.  RevPAR is defined as average room revenue per available room. RevPAR
        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. The Company reports RevPAR as it is
        the most commonly used measure in the lodging industry to measure the
        period-over-period performance of comparable properties.

    4.  The term "Core Hotels" means hotels and resorts under management for
        the full year of both 2003 and 2002. Changes from the 2002/2001 Core
        Hotels are the additions of Four Seasons Hotel San Francisco, Four
        Seasons Hotel Dublin, Four Seasons Hotel Buenos Aires and Four
        Seasons Resort Carmelo, and the deletion of Four Seasons Olympic
        Hotel Seattle.

    5.  Fair revenue market share as determined by Smith Travel Research,
        which is based on the RevPAR Index comparing the Company to a
        competitive set of peer companies determined by the Company.

    6.  The management operations profit margin represents management
        operations earnings before other operating items, as a percent of
        management operations revenue.

    7.  Included in ownership operations are the consolidated revenues and
        expenses from the Company's 100% leasehold interests in The Pierre in
        New York, Four Seasons Hotel Vancouver and Four Seasons Hotel Berlin,
        distributions from other ownership interests in properties that Four
        Seasons manages and corporate overhead expenses related, in part, to
        these ownership interests.

                         --------------------------
 

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


FOUR SEASONS HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

                                    Three months ended       Years ended
    (In thousands of dollars           December 31,          December 31,
     except per share amounts)       2003       2002       2003       2002
    -------------------------------------------------------------------------
                                 (Unaudited)(Unaudited)(Unaudited)

    Consolidated revenues (note 4) $ 75,236   $ 76,935   $268,371   $284,674
                                  -------------------------------------------
                                  -------------------------------------------

    MANAGEMENT OPERATIONS

    Revenues                       $ 40,577   $ 39,321   $149,756   $147,894
    General and administrative
     expenses                       (19,916)   (17,716)   (70,234)   (65,903)
                                  -------------------------------------------

                                     20,661     21,605     79,522     81,991
                                  -------------------------------------------

    OWNERSHIP OPERATIONS

    Revenues                         36,020     38,839    123,214    141,290
    Distributions from hotel
     investments                         --        503        153      1,321
    Expenses:
      Cost of sales and expenses    (36,637)   (42,244)  (148,684)  (156,374)
      Fees to Management Operations  (1,361)    (1,728)    (4,752)    (5,831)
                                  -------------------------------------------

                                     (1,978)    (4,630)   (30,069)   (19,594)
                                  -------------------------------------------

    Earnings before other
     operating items                 18,683     16,975     49,453     62,397
    Depreciation and amortization    (3,592)    (3,885)   (15,011)   (14,837)
    Other income (expense),
     net (note 5)                       178     (2,776)   (25,783)   (22,860)
                                  -------------------------------------------

    Earnings from operations         15,269     10,314      8,659     24,700
    Interest income (expense), net      962       (266)     3,350      3,235
                                  -------------------------------------------

    Earnings before income taxes     16,231     10,048     12,009     27,935
                                  -------------------------------------------

    Income tax recovery (expense):
      Current                        (2,833)    (3,793)    (2,395)    (5,743)
      Future                         (1,924)     1,225     (4,460)    (1,118)
      Increase in future income
       tax assets                       230        157        230        157
                                  -------------------------------------------

                                     (4,527)    (2,411)    (6,625)    (6,704)
                                  -------------------------------------------

    Net earnings                   $ 11,704   $  7,637   $  5,384   $ 21,231
                                  -------------------------------------------
                                  -------------------------------------------

    Basic earnings per share
     (note 3)                      $   0.33   $   0.22   $   0.15   $   0.61
                                  -------------------------------------------
                                  -------------------------------------------

    Diluted earnings per share
     (note 3)                      $   0.32   $   0.22   $   0.15   $   0.59
                                  -------------------------------------------
                                  -------------------------------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED BALANCE SHEETS
                                                    As at           As at
                                                 December 31,    December 31,
    (In thousands of dollars)                        2003            2002
    -------------------------------------------------------------------------
                                                  (Unaudited)

    ASSETS

    Current assets:
      Cash and cash equivalents                     $170,725        $165,036
      Receivables                                     88,636         106,361
      Inventory                                        2,169           2,609
      Prepaid expenses                                 3,780           4,718
                                                   --------------------------

                                                     265,310         278,724

    Long-term receivables                            197,635         207,106
    Investments in hotel partnerships
     and corporations                                157,638         146,362
    Fixed assets                                      75,789          74,593
    Investment in management contracts               203,670         222,835
    Investment in trademarks and trade names           5,757           6,329
    Future income tax assets                          13,230          17,460
    Other assets                                      27,631          37,982
                                                   --------------------------

                                                    $946,660        $991,391
                                                   --------------------------
                                                   --------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Accounts payable and accrued liabilities      $ 61,045        $ 61,129
      Long-term obligations due within one year        2,587           2,668
                                                   --------------------------

                                                      63,632          63,797

    Long-term obligations (note 2)                   117,521         126,386
    Shareholders' equity (note 3):
      Capital stock                                  329,274         321,601
      Convertible notes                              178,543         178,543
      Contributed surplus                              5,529           4,636
      Retained earnings                              265,754         264,016
      Equity adjustment from foreign
       currency translation                          (13,593)         32,412
                                                   --------------------------

                                                     765,507         801,208
                                                   --------------------------

                                                    $946,660        $991,391
                                                   --------------------------
                                                   --------------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED STATEMENTS OF CASH PROVIDED BY OPERATIONS

                                    Three months ended       Years ended
                                       December 31,          December 31,
    (In thousands of dollars)        2003       2002       2003       2002
    -------------------------------------------------------------------------
                                 (Unaudited)(Unaudited)(Unaudited)

    Cash provided by (used in)
     operations:

    MANAGEMENT OPERATIONS

    Earnings before other
     operating items               $ 20,661   $ 21,605   $ 79,522   $ 81,991
    Items not requiring an
     outlay of funds                    377        732      1,476      1,805
                                  -------------------------------------------

    Working capital provided by
     Management Operations           21,038     22,337     80,998     83,796
                                  -------------------------------------------

    OWNERSHIP OPERATIONS

    Loss before other operating
     items                           (1,978)    (4,630)   (30,069)   (19,594)
    Items not requiring an
     outlay of funds                    189         --        467         --
                                  -------------------------------------------

    Working capital used in
      Ownership Operations           (1,789)    (4,630)   (29,602)   (19,594)
                                  -------------------------------------------

                                     19,249     17,707     51,396     64,202

    Interest received, net            2,341      1,845     10,426     11,582
    Current income tax paid              --         --         --    (10,374)
    Change in non-cash working
     capital                          1,339     (7,997)    13,709    (19,293)
    Other                            (1,048)    (1,988)    (9,528)    (4,354)
                                  -------------------------------------------

    Cash provided by operations    $ 21,881   $  9,567   $ 66,003   $ 41,763
                                  -------------------------------------------
                                  -------------------------------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                    Three months ended       Years ended
                                       December 31,          December 31,
    (In thousands of dollars)        2003       2002       2003       2002
    -------------------------------------------------------------------------
                                 (Unaudited)(Unaudited)(Unaudited)

    Cash provided by (used in):

    Operations:                    $ 21,881   $  9,567   $ 66,003   $ 41,763
                                  -------------------------------------------

    Financing:
      Long-term obligations
       including current portion       (136)     2,084       (200)     1,139
      Issuance of shares              3,759        205      7,673      5,653
      Repurchase of shares               --     (7,741)       --    (16,495)
      Dividends paid                     --         --     (3,622)    (3,639)
                                  -------------------------------------------

    Cash provided by (used in)
     financing                        3,623     (5,452)     3,851    (13,342)
                                  -------------------------------------------

    Capital investments:
      Long-term receivables           3,052     (5,816)    (6,394)   (28,893)
      Hotel investments                (678)    (3,966)    (8,580)    (9,451)
      Disposal of hotel
       investments                       --       (249)     1,529      4,566
      Purchase of fixed assets      (13,931)   (21,801)   (19,331)   (31,085)
      Investments in trademarks,
       trade names and management
       contracts                       (536)      (239)    (2,116)    (1,598)
      Other assets                     (321)       168     (5,181)    (7,809)
                                  -------------------------------------------

    Cash used in capital
     investments                    (12,414)   (31,903)   (40,073)   (74,270)
                                  -------------------------------------------

    Increase (decrease) in cash
     and cash equivalents            13,090    (27,788)    29,781    (45,849)
    Increase (decrease) in cash
     due to unrealized foreign
     exchange gain (loss)            (3,769)      (111)   (24,092)       464
    Cash and cash equivalents,
     beginning of period            161,404    192,935    165,036    210,421
                                  -------------------------------------------

    Cash and cash equivalents,
     end of period                 $170,725   $165,036   $170,725   $165,036
                                  -------------------------------------------
                                  -------------------------------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                                                             Years ended
                                                             December 31,
    (In thousands of dollars)                              2003       2002
    -------------------------------------------------------------------------
                                                       (Unaudited)

    Retained earnings, beginning of period               $264,016   $259,253
    Net earnings                                            5,384     21,231
    Dividends declared                                     (3,646)    (3,633)
    Repurchase of shares                                       --    (12,835)
                                                        ---------------------

    Retained earnings, end of period                     $265,754   $264,016
                                                        ---------------------
                                                        ---------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

    (Unaudited)
    (In thousands of dollars except share amounts)
    -------------------------------------------------------------------------
    These interim consolidated financial statements do not include all
    disclosures required by Canadian generally accepted accounting principles
    for annual financial statements and should be read in conjunction with
    the Company's annual consolidated financial statements for the year ended
    December 31, 2002, except as disclosed in note 6 below.
 

    1.  Significant accounting policies:

    The significant accounting policies used in preparing these interim
    consolidated financial statements are consistent with those used in
    preparing the Company's annual consolidated financial statements for the
    year ended December 31, 2002, except as disclosed in note 6.
 

    2.  Bank credit facilities:

    In 2003, the Company increased availability under its committed bank
    credit facilities by US$12,500, and now has facilities of US$212,500, of
    which US$112,500 expires in April 2004 and US$100,000 expires in July
    2004. No amounts have been borrowed under these facilities to date;
    however, US$28,100 in letters of credit were issued but undrawn as at
    December 31, 2003.
 

    3.  Shareholders' equity:

    As at December 31, 2003, the Company has outstanding Variable Multiple
    Voting Shares ("VMVS") and Limited Voting Shares ("LVS") of 35,241,592
    and outstanding stock options of 5,836,897 (weighted average exercise
    price of $53.91).

    A reconciliation of the net earnings and weighted average number of VMVS
    and LVS used to calculate basic earnings per share and diluted earnings
    per share is as follows:

                                           Three months ended
    (Unaudited)                                December 31,
    (In thousands of dollars)           2003                 2002
    -------------------------------------------------------------------------

                                    Net                 Net
                                 earnings    Shares   earnings    Shares
    -------------------------------------------------------------------------

    Basic earnings per share:
      Net earnings and number
       of shares                  $11,704  35,146,473  $ 7,637  34,871,389
    Effect of assumed dilutive
     conversions:
      Stock option plan                --   1,489,773       --          --(x)
    -------------------------------------------------------------------------

    Diluted earnings per share:
      Net earnings and number
       of shares                  $11,704  36,636,246  $ 7,637  34,871,389
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
 

                                               Years ended
    (Unaudited)                                December 31,
    (In thousands of dollars)           2003                 2002
    -------------------------------------------------------------------------

                                   Net                  Net
                                 earnings    Shares   earnings    Shares
    -------------------------------------------------------------------------

    Basic earnings per share:
      Net earnings and number
       of shares                  $ 5,384  34,996,389  $21,231  35,051,619
    Effect of assumed dilutive
     conversions:
      Stock option plan                --     870,135       --   1,118,953
    -------------------------------------------------------------------------

    Diluted earnings per share:
      Net earnings and number
       of shares                  $ 5,384  35,866,524  $21,231  36,170,572
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (x) The effect of assumed conversions to LVS under the Company's stock
        option plan was anti-dilutive and was therefore excluded from the
        calculation of diluted earnings per share.
 

    4.  Consolidated revenues:

    Consolidated revenues for Four Seasons Hotels Inc. comprise revenues from
    Management Operations, revenues from Ownership Operations and
    distributions from hotel investments, less fees from Ownership Operations
    to Management Operations.
 

    5.  Other income (expense), net:

    Included in other income (expense), net for the three months and year
    ended December 31, 2003 is a net foreign exchange gain of $2,476 and a
    net foreign exchange loss of $14,703 respectively (2002 - net foreign
    exchange gain of $510 and $5,036, respectively) related to the foreign
    currency translation gains and losses on unhedged net monetary asset and
    liability positions, primarily in US dollars, euros, pounds sterling and
    Australian dollars, and foreign exchange gains and losses incurred by the
    Company's foreign self-sustaining subsidiaries.

    Also included in other income (expense), net for the three months and
    year ended December 31, 2003 are legal and enforcement costs of $795 and
    $9,475, respectively, in connection with the disputes with the owners of
    Four Seasons hotels in Caracas and Seattle. These disputes are described
    in detail in the Company's 2002 Annual Report. During the three months
    ended December 31, 2003, the Company also wrote down its fixed asset
    investment in Four Seasons Hotel Berlin to nil, resulting in an expense
    of $3,174. Other income (expense), net for the three months and year
    ended December 31, 2002 also included an asset impairment charge and
    legal and enforcement costs of $1,784 and $25,091, respectively, related
    to the Company's investments in Four Seasons Hotel Caracas, Four Seasons
    Hotel Sydney and Four Seasons Olympic Hotel Seattle.
 

    6.  Stock-based compensation and other stock-based payments:

    In 2002, as permitted by The Canadian Institute of Chartered Accountants
    ("CICA") Handbook Section 3870, "Stock-based Compensation and Other Stock-
    based Payments", the Company opted to apply the settlement method of
    accounting for employee stock options. Under the settlement method, no
    compensation expense is recorded on the grant of stock options to
    employees to purchase Limited Voting Shares, and consideration paid by
    employees on the exercise of stock options or the purchase of shares is
    recorded as capital stock.

    In December 2003, the CICA amended Section 3870 to require entities to
    account for employee stock options using the fair value-based method,
    beginning January 1, 2004. Under the fair value-based method,
    compensation cost of a stock option is measured at fair value at the date
    of grant and is expensed over the stock option's vesting period, with a
    corresponding increase to contributed surplus. When these stock options
    are exercised, the proceeds, together with the amount recorded in
    contributed surplus, are recorded in capital stock.

    In accordance with one of the transitional alternatives permitted under
    amended Section 3870, the Company has prospectively adopted the fair
    value-based method 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, and results from the
    year ended December 31, 2002 have not been restated. For the three months
    and year ended December 31, 2003, the prospective application of adopting
    the fair value-based method effective January 1, 2003 resulted in a
    decrease in net earnings of $368 and $893, respectively, and a decrease
    in both basic and diluted earnings per share of $0.01 and a decrease in
    basic earnings per share of $0.03 and a decrease in diluted earnings per
    share of $0.02, respectively.

    The fair value of stock options granted has been estimated using a Black-
    Scholes option pricing model with the following assumptions: risk-free
    interest rates in 2003 ranging from 4.44% to 5.02% (2002 - 4.01% to
    5.20%); semi-annual dividend per Limited Voting Share in 2003 and 2002 of
    $0.055; volatility factor of the expected market price of the Company's
    Limited Voting Shares in 2003 of 32% (2002 - 47% to 50%); and expected
    lives of the options in 2003 and 2002 ranging between four and seven
    years, depending on the level of the employee who was granted stock
    options. For the options granted in 2003 and 2002, the weighted average
    fair value of the options at the grant dates were $18.46 and $33.76,
    respectively. For purposes of stock option expense and pro forma
    disclosures, the estimated fair value of the options is amortized to
    compensation expense over the options' vesting period.

    Section 3870 requires pro forma disclosure of the effect of the
    application of the fair value-based method to employee stock options
    granted on or after January 1, 2002 and not accounted for using the fair
    value-based method. For the three months and years ended December 31,
    2002 and 2003, if the Company had applied the fair value- based method to
    options granted from January 1, 2002 to December 31, 2002, the Company's
    net earnings and basic and diluted earnings per share would have been
    reduced to the pro forma amounts indicated below:
 

    (Unaudited)                     Three months ended       Years ended
    (In thousands of dollars           December 31,          December 31,
     except per share amounts)       2003       2002       2003       2002
    -------------------------------------------------------------------------
    Stock option expense included
     in compensation expense       $    368   $     --   $    893   $     --
    -------------------------------------------------------------------------

    Net earnings, as reported      $ 11,704   $  7,637   $  5,384   $ 21,231
    Additional expense that would
     have been recorded if all
     outstanding stock options
     granted during 2002
     had been expensed                  863        832      3,450      1,790

    -------------------------------------------------------------------------
    Pro forma net earnings         $ 10,841   $  6,805   $  1,934   $ 19,441
    -------------------------------------------------------------------------

    Earnings per share:
      Basic, as reported           $   0.33   $   0.22   $   0.15   $   0.61
      Basic, pro forma                 0.31       0.20       0.06       0.55
      Diluted, as reported             0.32       0.22       0.15       0.59
      Diluted, pro forma               0.30       0.20       0.05       0.54
    -------------------------------------------------------------------------
 

    7.  Guarantees, commitments and indemnifications:

    Guarantees and commitments
    --------------------------

    As at December 31, 2003, the Company has provided certain guarantees and
    has other commitments in connection with the hotels under management.
    These include three bank guarantees in respect of three projects
    totalling a maximum of $29,100. The Company has lease commitments in
    respect of Four Seasons Hotel London, which are more fully described in
    the Company's Annual Report, and Four Seasons Hotel Prague of euro 718.
    In addition, the Company has three other commitments totalling $7,800.
    The Company also has guaranteed certain obligations of various directors,
    officers and employees in the amount of $384, all of which were entered
    into before 2002.

    To the extent it is called upon to honour any one of these commitments,
    the Company generally has either the right to be repaid from hotel
    operations and/or has various forms of security or recourse to the owner
    of the property. The Company does not anticipate funding any amount
    pursuant to these commitments during 2004 and no amount has been recorded
    in the consolidated financial statements in respect of these commitments.
    The Company's assessment of its potential liability for such matters
    could change as a result of, among other things, the associated risks and
    uncertainties.
 

    Disposition indemnification arrangements

    In connection with the sale of all or a part of its interest in a
    property, the Company and its subsidiaries may agree to indemnify against
    claims relating to breaches of specific covenants or representations and
    warranties. The maximum amount of the indemnification in these
    transactions is generally limited to the purchase price paid for that
    interest. The nature of these indemnities prevents the calculation of an
    exact amount that may be payable to the indemnified parties.

    Also, in the case of two of the Company's dispositions, the Company
    received indemnity agreements in its favour, for its existing guarantee
    obligations related to the disposed interest that have remained
    outstanding notwithstanding the disposition. The Company believes that
    the indemnification agreements in its favour will fully indemnify the
    Company for any possible payment under these existing guarantees.

    Director and officer indemnification arrangements

    To the extent permitted by law, the Company and its subsidiaries
    indemnify individuals that are, or have been, directors or officers
    against certain claims that may be made against them as a result of their
    being, or having been, a director or officer at the request of the
    Company or its subsidiaries. The Company has purchased directors' and
    officers' liability insurance that may be available in respect of certain
    of these claims.

    Other indemnification arrangements

    In the ordinary course of their business, the Company and its
    subsidiaries enter into other agreements with third parties that may
    contain indemnification provisions pursuant to which the parties to the
    agreements agree to indemnify one another if certain events occur (such
    as, but not limited to, changes in laws and regulations or as a result of
    litigation claims or liabilities which arise in respect of tax or
    environmental matters).

    The terms of the Company's indemnification provisions vary based on the
    contract, which (together with the fact that any amounts that could be
    payable would be dependent on the outcome of future, contingent events,
    the nature and likelihood of which cannot be determined at this time)
    precludes the Company from making a reasonable estimate of the maximum
    potential amount the Company and its subsidiaries could be required to
    pay to counterparties. The Company believes that the likelihood that it
    or its subsidiaries would incur significant liability under these
    obligations is remote. Historically, the Company and its subsidiaries
    have not made any significant payments under such indemnifications. No
    amount has been recorded in the consolidated financial statements with
    respect to these indemnification provisions. The Company's assessment of
    its potential liability could change in the future as a result of
    currently unforeseen circumstances.

    Other commitments and contingencies
    -----------------------------------
    In the ordinary course of its business, the Company is named as a
    defendant in legal proceedings resulting from incidents taking place at
    hotels owned or managed by it. The Company maintains comprehensive
    liability insurance and also requires hotel owners to maintain adequate
    insurance coverage. The Company believes such coverage to be of a nature
    and amount sufficient to ensure that it is adequately protected from
    suffering any material financial loss as a result of such claims.
 

    8.  Seasonality:

    The Company's hotels and resorts are affected by normally recurring
    seasonal patterns and, for most of the properties, demand is lower in
    December through March than during the remainder of the year. Typically,
    the fourth quarter is the strongest quarter for the majority of the
    properties, although this was not true in 2002 as a result of the
    difficult economic environment and geopolitical instability.

    The Company's ownership operations are particularly affected by seasonal
    fluctuations, with lower revenue, operating profit and cash flow in the
    first quarter. As a result, ownership operations typically incur an
    operating loss in the first quarter of each year.

    Management operations are also impacted by seasonal patterns, as fee
    revenues are affected by the seasonality of hotel and resort revenues and
    operating results. Urban hotels generally experience lower revenues and
    operating results in the first quarter. However, this negative impact on
    management revenues is offset, to some degree, by increased travel to the
    Company's resorts in the period.
 
 

FOUR SEASONS HOTELS INC.
    SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)

                                              Three months ended
                                                  December 31,
    (Unaudited)                                 2003       2002     Variance
    -------------------------------------------------------------------------
    Worldwide
      No. of Properties                             48         48         --
      No. of Rooms                              12,870     12,870         --
      Occupancy(2)                               65.4%      61.3%       4.1%
      ADR(3)        - in US dollars           $    311   $    296       4.9%
      RevPAR(4)     - in US dollars           $    203   $    182      11.9%
      Gross operating margin(5)                  28.4%      27.8%       0.6%
    United States
      No. of Properties                             22         22         --
      No. of Rooms                               6,798      6,798         --
      Occupancy(2)                               66.7%      64.3%       2.4%
      ADR(3)        - in US dollars           $    343   $    335       2.5%
      RevPAR(4)     - in US dollars           $    229   $    215       6.3%
      Gross operating margin(5)                  25.4%      26.0%      (0.6%)
    Other Americas/Caribbean
      No. of Properties                              7          7         --
      No. of Rooms                               1,550      1,550         --
      Occupancy(2)                               59.6%      53.5%       6.1%
      ADR(3)        - in US dollars           $    281   $    261       7.9%
      RevPAR(4)     - in US dollars           $    168   $    139      20.3%
      Gross operating margin(5)                  29.5%      25.2%       4.3%
    Europe/Middle East
      No. of Properties                              9          9         --
      No. of Rooms                               1,807      1,807         --
      Occupancy(2)                               59.8%      55.2%       4.6%
      ADR(3)        - in US dollars           $    426   $    385      10.6%
      RevPAR(4)     - in US dollars           $    255   $    213      19.8%
      Gross operating margin(5)                  30.8%      30.1%       0.7%
    Asia/Pacific
      No. of Properties                             10         10         --
      No. of Rooms                               2,715      2,715         --
      Occupancy(2)                               69.2%      62.2%       7.0%
      ADR(3)        - in US dollars           $    182   $    163      11.5%
      RevPAR(4)     - in US dollars           $    126   $    102      23.9%
      Gross operating margin(5)                  37.4%      35.1%       2.3%
    -------------------------------------
    1.  The term "Core Hotels" means hotels and resorts under management for
        the full year of both 2003 and 2002. Changes from the 2002/2001 Core
        Hotels are the additions of Four Seasons Hotel San Francisco, Four
        Seasons Hotel Dublin, Four Seasons Hotel Buenos Aires and Four
        Seasons Resort Carmelo, and the deletion of Four Seasons Olympic
        Hotel Seattle.
    2.  Occupancy percentage is defined as the total number of rooms occupied
        divided by the total number of rooms available.
    3.  ADR is defined as average daily room rate per room occupied.
    4.  RevPAR is defined as average room revenue per available room. RevPAR
        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. The Company reports RevPAR as it is
        the most commonly used measure in the lodging industry to measure the
        period-over-period performance of comparable properties.
    5.  Gross operating margin represents gross operating profit as a percent
        of gross operating revenue.
 
 

    FOUR SEASONS HOTELS INC.
    SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)

                                                  Years ended
                                                  December 31,
    (Unaudited)                                 2003       2002     Variance
    -------------------------------------------------------------------------
    Worldwide
      No. of Properties                             48         48         --
      No. of Rooms                              12,870     12,870         --
      Occupancy(2)                               62.5%      63.9%      (1.4%)
      ADR(3)        - in US dollars           $    304   $    292       4.3%
      RevPAR(4)     - in US dollars           $    190   $    186       2.0%
      Gross operating margin(5)                  26.6%      29.3%      (2.7%)
    United States
      No. of Properties                             22         22         --
      No. of Rooms                               6,798      6,798         --
      Occupancy(2)                               67.6%      66.6%       1.0%
      ADR(3)        - in US dollars           $    331   $    327       1.3%
      RevPAR(4)     - in US dollars           $    224   $    218       2.9%
      Gross operating margin(5)                  24.9%      27.3%      (2.4%)
    Other Americas/Caribbean
      No. of Properties                              7          7         --
      No. of Rooms                               1,550      1,550         --
      Occupancy(2)                               56.1%      58.8%      (2.7%)
      ADR(3)        - in US dollars           $    271   $    258       5.0%
      RevPAR(4)     - in US dollars           $    152   $    152       0.2%
      Gross operating margin(5)                  26.7%      28.4%      (1.7%)
    Europe/Middle East
      No. of Properties                              9          9         --
      No. of Rooms                               1,807      1,807         --
      Occupancy(2)                               56.4%      58.4%      (2.0%)
      ADR(3)        - in US dollars           $    422   $    380      11.3%
      RevPAR(4)     - in US dollars           $    238   $    222       7.5%
      Gross operating margin(5)                  31.3%      34.6%      (3.3%)
    Asia/Pacific
      No. of Properties                             10         10         --
      No. of Rooms                               2,715      2,715         --
      Occupancy(2)                               57.5%      63.9%      (6.4%)
      ADR(3)        - in US dollars           $    165   $    164       1.0%
      RevPAR(4)     - in US dollars           $     95   $    105      (9.2%)
      Gross operating margin(5)                  29.2%      33.7%      (4.5%)
    -------------------------------------
    1.  The term "Core Hotels" means hotels and resorts under management for
        the full year of both 2003 and 2002. Changes from the 2002/2001 Core
        Hotels are the additions of Four Seasons Hotel San Francisco, Four
        Seasons Hotel Dublin, Four Seasons Hotel Buenos Aires and Four
        Seasons Resort Carmelo, and the deletion of Four Seasons Olympic
        Hotel Seattle.
    2.  Occupancy percentage is defined as the total number of rooms occupied
        divided by the total number of rooms available.
    3.  ADR is defined as average daily room rate per room occupied.
    4.  RevPAR is defined as average room revenue per available room. RevPAR
        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. The Company reports RevPAR as it is
        the most commonly used measure in the lodging industry to measure the
        period-over-period performance of comparable properties.
    5.  Gross operating margin represents gross operating profit as a percent
        of gross operating revenue.
 
 

    FOUR SEASONS HOTELS INC.

    SUMMARY OF HOTEL OPERATING DATA - ALL MANAGED HOTELS

                                                     As at
                                                  December 31,
    (Unaudited)                                 2003       2002     Variance
    -------------------------------------------------------------------------

    Worldwide
      No. of Properties                             60(1)      57          3
      No. of Rooms                              15,760(1)  15,433        327

    United States
      No. of Properties                             24         23          1
      No. of Rooms                               7,143      7,248       (105)

    Other Americas/Caribbean
      No. of Properties                              9(1)       8          1
      No. of Rooms                               1,945(1)   1,762        183

    Europe/Middle East
      No. of Properties                             13         12          1
      No. of Rooms                               2,553      2,304        249

    Asia/Pacific
      No. of Properties                             14         14         --
      No. of Rooms                               4,119      4,119         --

    1.  Since December 31, 2003, the Company has commenced management of Four
        Seasons Resort Costa Rica, which has 153 rooms and is not reflected
        in this table.
 
 

    FOUR SEASONS HOTELS INC.

    REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS

                                Three months ended         Years ended
    (Unaudited)                    December 31,            December 31,
    (In thousands of dollars)    2003        2002        2003        2002
    -------------------------------------------------------------------------

    Revenues under
     management(1)            $  691,886  $  752,776  $2,600,430  $2,845,361
                             ------------------------------------------------
                             ------------------------------------------------

    --------------------------
    1.  Revenues under management consist of rooms, food and beverage,
        telephone and other revenues of all the hotels and resorts which the
        Company manages. Approximately 69% of the fee revenues earned by the
        Company were calculated as a percentage of the total revenues under
        management of all hotels and resorts.
 
 

    FOUR SEASONS HOTELS INC.

    SCHEDULED OPENING OF PROPERTIES UNDER CONSTRUCTION OR
    IN ADVANCED STAGES OF DEVELOPMENT

    Hotel/Resort/Residence Club and Location(1)(2)             Approximate
                                                             Number of Rooms

    Scheduled 2004/2005 Openings
    ----------------------------
    Four Seasons Hotel Gresham Palace Budapest, Hungary            175
    Four Seasons Hotel Nile Plaza, Cairo, Egypt(x)                 375
    Four Seasons Hotel Damascus, Syria(x)                          300
    Four Seasons Hotel Doha, Qatar(x)                              235
    Four Seasons Hotel Geneva, Switzerland                         110
    Four Seasons Hotel Hampshire, England                          135
    Four Seasons Hotel Hong Kong, Hong Kong(x)                     390
    Four Seasons Hotel Istanbul at the Bosphorus, Turkey           170
    Four Seasons Resort Lanai at Koele, HI, USA                    100
    Four Seasons Resort Lanai at Manele Bay, HI, USA               250
    Four Seasons Resort Langkawi, Malaysia                          90
    Four Seasons Hotel Palo Alto, CA, USA                          200
    Four Seasons Resort Provence at Terre Blanche, France          115
    Four Seasons Resort Whistler, B.C., Canada                     270
    Four Seasons Private Residences Whistler, B.C., Canada          35

    Beyond 2005
    -----------
    Four Seasons Hotel Alexandria, Egypt(x)                        120
    Four Seasons Hotel Baltimore, MD, USA(x)                       200
    Four Seasons Hotel Beirut, Lebanon                             230
    Four Seasons Resort Bora Bora, French Polynesia                100
    Four Seasons Hotel Florence, Italy                             115
    Four Seasons Hotel Kuwait City, Kuwait                         225
    Four Seasons Hotel Mumbai, India                               200
    Four Seasons Resort Puerto Rico, Puerto Rico(x)                250
    Four Seasons Residence Club Punta Mita, Mexico                  35

    (x) Expected to include a residential component.

    --------------------------
    1.  Information concerning hotels, resorts and Residence Clubs under
        construction or under development is based upon agreements and
        letters of intent and may be subject to change prior to the
        completion of the project. The dates of scheduled openings have been
        estimated by management based upon information provided by the
        various developers. There can be no assurance that the date of
        scheduled opening will be achieved or that these projects will be
        completed. In particular, in the case where a property is scheduled
        to open near the end of a year, there is a greater possibility that
        the year of opening could be changed. The process and risks
        associated with the management of new properties are dealt with in
        greater detail in the Company's Annual Report.
    2.  The Company has made investments in Orlando and Sedona at Seven
        Canyons in Arizona. The financing for these projects has not yet been
        completed and therefore scheduled opening dates cannot be established
        at this time.

This press release contains "forward-looking statements" within the meaning of federal securities laws, including RevPAR, profit margin and earning 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. 

With a history spanning four decades and a portfolio that extends worldwide, Four Seasons Hotels and Resorts is the world's leading operator of luxury hotels, currently managing 61 properties in 29 countries. 

 

###

Contact:
Four Seasons Hotels and Resorts
www.fourseasons.com

 
Also See: Four Seasons Hotels Inc. Reports RevPAR Increased 11.8% During 4th Qtr 2002 Compared to Previous Year; For the Full Year of 2002, RevPAR Decreased 1.9% / Hotel Operating Data / Feb 2003
Four Seasons Hotels Reports 76% Decline in Fourth Quarter Earnings, Company Stress Tested But plans to Add Five New Hotels in 2002 and Seven in 2003 / Feb 2002
Worldwide RevPAR Grows 9.5% for 39 Four Seasons Hotels During 2000 / Feb 2001
Luxury Segment Experiences Solid Fundamentals - Four Seasons Hotels Inc. 1999 Net Earnings Up 24.1% / Feb 2000 
.

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