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 Four Seasons Hotels and Resorts Reports 1st Qtr Net Income of $13.4 million
Compared to $5.2 million in Prior Year,  Hotel Management Fees
increased 23.1% / Hotel Operating Data
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TORONTO, May 5, 2006 - Four Seasons Hotels Inc. (TSX Symbol "FSH"; NYSE Symbol "FS") today reported its results for the first quarter ended March 31, 2006.

All amounts disclosed in this news release are in US dollars unless otherwise noted. Endnotes can be found at the end of this news release.

Highlights of the First Quarter of 2006

For the three months ended March 31, 2006, as compared to the same period in 2005:

    Hotel and Resort Operating Results:

        -  RevPAR(1) at our worldwide Core Hotels(2) increased 11.7%. RevPAR
           at our US Core Hotels increased 12.6%.

        -  Gross operating margins(3) at our worldwide Core Hotels increased
           250 basis points to 32.4%. At our US Core Hotels, gross operating
           margins increased 210 basis points to 30.2%.

        -  Revenues under management increased 15.1% to $692.3 million. We
           had approximately 17,500 rooms under management in the first
           quarter of 2006, as compared to approximately 16,500 rooms in the
           first quarter of 2005.

"We are very pleased with our operating results in the first quarter, which reflect continued strong travel demand, particularly for luxury travel experiences. We are also pleased with the strong profitability improvements at the hotels and resorts we manage," commented Isadore Sharp, Chairman and Chief Executive Officer. "Recently opened properties in Hong Kong, Geneva, Palo Alto and a new tented camp in the Golden Triangle, Thailand are garnering immediate critical acclaim and a strong positive customer response, which further enhances the Four Seasons brand."

    Company Operating Results:

        -  Overall, we recorded net earnings of $13.4 million ($0.36 basic
           and diluted earnings per share), compared to net earnings of
           $5.2 million ($0.14 basic and diluted earnings per share).

        -  As a result of improved results at properties under our management
           and an increase in the number of rooms under management, hotel
           management fees increased 23.1%.

        -  Base fees increased 12.1%, generally in line with RevPAR
           improvements for the quarter.

        -  As a result of improved profitability and the addition of new
           properties under our management, incentive fees increased 50.3%.
           Incentive fees from resorts under our management had the most
           significant year over year increase.

        -  Other fees improved 44.7%, primarily as a result of an increase in
           branded residential royalty fees.

        -  Operating earnings before other items(4) increased $8.4 million to
           $20.5 million.

"We are pleased with the growth in our management fees. Our financial results are tracking with the operational improvements at the properties we manage," said John Davison, Chief Financial Officer. "Our base fees increased generally in line with the overall RevPAR performance of properties under our management, which was ahead of our expectations. We are also pleased with the progress we have made on certain corporate initiatives related to cost control and foreign exchange management."

    Expanding and Refining the Portfolio:

        -  Negotiations continue with the owner of the Ritz-Carlton Chicago
           concerning the sale of that property and the potential cessation
           of our management on acceptable terms.

        -  Since the beginning of the year, we have announced new projects in
           the following five locations: Barbados, Macau, Seychelles,
           Shanghai and Taipei.

"We are delighted with the strength of our development pipeline, which continues to grow in depth and breadth," said Kathleen Taylor, President Worldwide Business Operations. "Each of these new locations will be exciting additions to our portfolio and will help support the future growth of the Company."

    -------------------------------
    (1) RevPAR is defined as average room revenue per available room. It is a
        non-GAAP financial measure and does not have any standardized meaning
        prescribed by GAAP and is, therefore, unlikely to be comparable to
        similar measures presented by other issuers. We use RevPAR because it
        is a commonly used indicator of market performance for hotels and
        resorts and represents the combination of the average daily room rate
        and the average occupancy rate achieved during the period. RevPAR
        does not include food and beverage or other ancillary revenues
        generated by a hotel or resort. RevPAR is the most commonly used
        measure in the lodging industry to measure the period-over-period
        performance of comparable properties. Our calculation of RevPAR may
        be different than the calculation used by other lodging companies.

    (2) The term "Core Hotels" means hotels and resorts under management for
        the full year of both 2006 and 2005. However, if a "Core Hotel" has
        undergone or is undergoing an extensive renovation program in one of
        those years that materially affects the operation of the property in
        that year, it ceases to be included as a "Core Hotel" in either year.
        Changes from the 2005/2004 Core Hotels are the additions of Four
        Seasons Resort Scottsdale at Troon North, Four Seasons Resort
        Whistler, Four Seasons Resort Costa Rica at Peninsula Papagayo, Four
        Seasons Hotel Gresham Palace Budapest, Four Seasons Resort Provence
        at Terre Blanche and Four Seasons Hotel Cairo at Nile Plaza, and the
        deletion of The Regent Kuala Lumpur.

    (3) Gross operating margin represents gross operating profit as a
        percentage of gross operating revenue.

    (4) Operating earnings before other items is equal to net earnings plus
        (i) income tax expense plus (ii) interest expense less (iii) interest
        income plus (iv) other expenses, net plus (v) depreciation and
        amortization. Operating earnings before other items is a non-GAAP
        financial measure and does not have any standardized meaning
        prescribed by GAAP and is therefore unlikely to be comparable to
        similar measures presented by other issuers. We consider operating
        earnings before other items to be a meaningful indicator of
        operations and use it as a measure to assess our operating
        performance. It is included because we believe it can be useful in
        measuring our ability to service debt, fund capital expenditures and
        expand our business. Operating earnings before other items is also
        used by investors, analysts and our lenders as a measure of our
        financial performance.
 

FIRST QUARTER OF 2006
MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2006 is provided as of May 5, 2006. It should be read in conjunction with the interim unaudited consolidated financial statements for that period, the audited consolidated financial statements for the year ended December 31, 2005 and the MD&A for that year, including the discussion of risks and uncertainties associated with forward-looking statements. Except as disclosed in this MD&A, as of May 5, 2006, there has been no material change in the information disclosed in the MD&A for the year ended December 31, 2005. A summary of total revenues, net income or loss in total and on a per share basis for the past eight quarters can be found under "Eight Quarter Summary".

All amounts disclosed in this MD&A are in US dollars unless otherwise noted. Endnotes can be found at the end of this document.

Operational and Financial Review and Analysis

Hotel and Resort Operating Results

Consistent with industry practices, we track RevPAR(1) on a US dollar basis, and all numbers noted below reflect that practice unless otherwise noted. For the first quarter of 2006, RevPAR of our worldwide Core Hotels(2) increased 11.7%, as compared to the first quarter of 2005, reflecting improvements in each of the regions in which we manage hotels and resorts. This increase in RevPAR was attributable to a 7.2% improvement in achieved room rates and a 270 basis point increase in overall occupancy.

Gross operating revenues of our worldwide Core Hotels increased 9.4% in the first quarter of 2006, as compared to the first quarter of 2005. The improvements in revenue, combined with continued cost management efforts at the properties under our management, resulted in a 18.6% and 250 basis point increase in gross operating profits(3) and gross operating margins(4), respectively.

With respect to our Core Hotels, the United States represents the most significant geographic area to us, contributing 50.5% of revenues under management for the first quarter of 2006, followed by Other Americas/Caribbean (17.9%), Europe (13.2%), Asia/Pacific (12.3%) and the Middle East (6.1%). The following tables highlight the results of operations for our Core Hotels in each of these regions.

    United States Region
    -------------------------------------------------------------------------
                             Results for First Quarter 2006, as
                               compared to First Quarter 2005
    -------------------------------------------------------------------------
                                   Gross       Gross
                                 Operating   Operating
                                  Revenue      Profit      Gross Operating
                    RevPAR         (GOR)       (GOP)           Margin
               --------------------------------------------------------------
                     Percentage  Percentage  Percentage          Basis Point
                 $    Increase    Increase    Increase   Margin  Improvement
    -------------------------------------------------------------------------
    First
     Quarter    301     12.6%       11.6%       20.2%     30.2%      210
    -------------------------------------------------------------------------
                The increase in RevPAR was attributable to an 8.3% increase
                in achieved room rates in the region and a 290 basis point
                improvement in occupancy. Virtually all of the hotels and
                resorts in this region experienced RevPAR improvements. In
                particular, properties under management in Atlanta, Houston,
                New York, San Francisco and Maui had very strong RevPAR
                improvements relative to the average for the U.S. region. As
                a result of improvements in RevPAR, gross operating profits
                and gross operating margins increased 20.2% and 210 basis
                points, respectively.
    -------------------------------------------------------------------------
 

    Other Americas/Caribbean Region
    -------------------------------------------------------------------------
                             Results for First Quarter 2006, as
                               compared to First Quarter 2005
    -------------------------------------------------------------------------
                                   Gross       Gross
                                 Operating   Operating
                                  Revenue      Profit      Gross Operating
                    RevPAR         (GOR)       (GOP)           Margin
               --------------------------------------------------------------
                     Percentage  Percentage  Percentage          Basis Point
                 $    Increase    Increase    Increase   Margin  Improvement
    -------------------------------------------------------------------------
    First
     Quarter    303     13.1%       14.0%       19.8%     36.9%      170
    -------------------------------------------------------------------------
                The majority of the properties under management in this
                region experienced RevPAR improvements as the result of an
                increase in achieved room rates and occupancy. Properties
                under management in Buenos Aires, Costa Rica, and Whistler
                had particularly strong RevPAR improvements relative to the
                average for the region. RevPAR at properties under management
                in Exuma and Nevis declined slightly mostly due to the
                unusually warm weather on the US Eastern Seaboard, which had
                a negative impact on travel to these resorts. On a local
                currency basis, RevPAR improved 11.8%. As a result of
                improvements in RevPAR, gross operating profits and gross
                operating margins increased 19.8% and 170 basis points,
                respectively.
    -------------------------------------------------------------------------
 

    Europe Region
    -------------------------------------------------------------------------
                             Results for First Quarter 2006, as
                               compared to First Quarter 2005
    -------------------------------------------------------------------------
                                   Gross       Gross
                                 Operating   Operating
                                  Revenue      Profit      Gross Operating
                    RevPAR         (GOR)       (GOP)           Margin
               --------------------------------------------------------------
                     Percentage  Percentage  Percentage          Basis Point
                 $    Increase    Increase    Increase   Margin  Improvement
    -------------------------------------------------------------------------
    First
     Quarter    307     15.6%        2.1%       20.3%     25.0%      370
    -------------------------------------------------------------------------
                RevPAR changes in the European Core Hotels were mixed. RevPAR
                increases at the properties under management in Dublin,
                Lisbon, London, Milan and Paris was the result of increases
                in achieved room rates. However certain other properties
                under management in the European region (in particular in
                Prague and Terre Blanche) experienced RevPAR declines due in
                part to a decline in achieved room rates. On a local currency
                basis, RevPAR increased 25.5%, reflecting an 11.0% increase
                in achieved room rates in local currency, versus 2.2% in US
                dollars. Gross operating profits increased 20.3% (31.1% on a
                local currency basis), and gross operating margins improved
                370 basis points due to improvements in overall occupancy and
                achieved room rates.
    -------------------------------------------------------------------------
 

    Middle East Region
    -------------------------------------------------------------------------
                             Results for First Quarter 2006, as
                               compared to First Quarter 2005
    -------------------------------------------------------------------------
                                   Gross       Gross
                                 Operating   Operating
                                  Revenue      Profit      Gross Operating
                    RevPAR         (GOR)       (GOP)           Margin
               --------------------------------------------------------------
                     Percentage  Percentage  Percentage          Basis Point
                 $    Increase    Increase    Increase   Margin  Improvement
    -------------------------------------------------------------------------
    First
     Quarter    182     14.4%       14.6%       20.5%     52.1%      260
    -------------------------------------------------------------------------
                With the exception of Sharm el Sheikh, where business was
                adversely affected by the lingering effect of the July 2005
                bombings in that area, all of the properties under management
                in the Middle East region had RevPAR improvements. The
                increase in RevPAR was driven almost entirely by a 14.9%
                increase in achieved room rates. Four Seasons Hotel Cairo
                Nile Plaza and Four Seasons Hotel Riyadh had particularly
                strong RevPAR improvements, as compared to the average for
                the region. On a local currency basis, RevPAR improved 12.4%.
                Gross operating profits increased 20.5% (18.4% on a local
                currency basis). Gross operating margins increased 260 basis
                points as a result of the improvement in achieved room rate.
    -------------------------------------------------------------------------
 

    Asia/Pacific Region
    -------------------------------------------------------------------------
                             Results for First Quarter 2006, as
                               compared to First Quarter 2005
    -------------------------------------------------------------------------
                                   Gross       Gross
                                 Operating   Operating
                                  Revenue      Profit      Gross Operating
                    RevPAR         (GOR)       (GOP)           Margin
               --------------------------------------------------------------
                     Percentage  Percentage  Percentage          Basis Point
                 $    Increase    Increase    Increase   Margin  Improvement
    -------------------------------------------------------------------------
    First
     Quarter    132      3.0%        0.7%        8.6%     32.6%      240
    -------------------------------------------------------------------------
                RevPAR increased 3.0% (6.1% on a local currency basis).
                RevPAR changes in the Asia/Pacific region were mixed.
                Properties under management in Bangkok and Singapore
                experienced strong RevPAR improvements. However, other
                properties in the region experienced flat RevPAR or a decline
                in RevPAR. In particular, the resorts in Bali experienced
                lower demand during the first quarter of 2006. Gross
                operating profits improved 8.6% (11.5% on a local currency
                basis) and gross operating margins increased 240 basis
                points, mainly as the result of improved operating results at
                properties under management in Bangkok and Singapore.
    -------------------------------------------------------------------------
 

Company Operating Results

Our strategy has been to focus on hotel management rather than hotel ownership. Over the past few years, we have reduced our ownership interests such that Four Seasons Hotel Vancouver is our only remaining hotel whose results we currently consolidate. As a result, commencing January 1, 2006, corporate expenses have been included in general and administrative expensesin the consolidated statements of operations for the three months ended March 31, 2006. Corporate expenses for the three months ended March 31, 2005 that previously were included in our Ownership Operations segment, have been reclassified to the Management Operations segment and included in general and administrative expenses in the consolidated statements of operations. Attached are supplementary schedules including prior quarters in 2004 and 2005 reflecting this reclassification.

    Revenues

    -------------------------------------------------------------------------
    (in millions            Three months ended  Dollar Change    Percentage
     of dollars)                  March 31,                        Change
    -------------------------------------------------------------------------
                                2006    2005   2006 over 2005  2006 over 2005
    -------------------------------------------------------------------------
    Hotel management fees
      Base                     $19.7   $17.6        $2.1            12.1%
      Incentive                 10.7     7.1         3.6            50.3%
    -------------------------------------------------------------------------
        Subtotal                30.4    24.7         5.7            23.1%
    -------------------------------------------------------------------------
    Other fees                   5.3     3.7         1.6            44.7%
    -------------------------------------------------------------------------
        Subtotal                35.7    28.4         7.3            25.9%
    -------------------------------------------------------------------------
    Hotel ownership revenues     5.5  20.5(x)      (15.0)          (73.3%)
    -------------------------------------------------------------------------
    Reimbursed costs(5)         16.4    14.2         2.2            15.6%
    -------------------------------------------------------------------------
      Total revenues           $57.6 $63.1(x)      ($5.5)           (8.7%)
    -------------------------------------------------------------------------
    (x) Included in 2005 were the 100% consolidated results of The Pierre.
 
 

Hotel Management Fees

Base Fees

Base fees increased $2.1 million (from $17.6 million to $19.7 million) for the quarter ended March 31, 2006, as compared to the quarter ended March 31, 2005. Of the $2.1 million increase in base fees, base fees from Core Hotels contributed $1.4 million or 66.2% of the increase. The increase in base fees from Core Hotels in the three months ended March 31, 2006 represented a 8.7% increase over the base fees generated from Core Hotels in the first quarter of 2005. Properties that opened in 2005 and 2006 contributed base fees of $1.4 million in the first quarter of 2006, as compared to nil in the same period in 2005. The increase in base fees in the quarter was moderated slightly by a $0.4 million reduction in base fees from properties no longer under management.

Incentive Fees

For the quarter ended March 31, 2006, incentive fees increased $3.6 million, as compared to the same period in 2005. The incentive fees earned from properties that opened in 2005 and 2006 represented $1.3 million of the increase. Incentive fees were earned from 38 of the 70 hotels and resorts under management for the first quarter of 2006, as compared to 36 of the 65 hotels and resorts under management in the same period in 2005. The strong increase in incentive fees was primarily due to strong operating results at many of the resorts under management.

Typically, the incentive fees we receive from the properties under our management are reconciled on an annual basis to the actual full year operating results at a particular property. On a quarterly basis, we recognize incentive fees that would be calculated under the incentive fee formula as if the particular management contract was terminated at the relevant reporting date. If a property's profitability decreases in a subsequent quarter (due mainly to seasonal differences), the incentive fee accrued in a previous quarter may be reduced or eliminated. Based on our current outlook and historical patterns, we expect that a portion of the incentive fees accrued during the first quarter of 2006, primarily related to resorts under management, may be reversed in subsequent quarters.

Other Fees

Other fees include royalty and management fees from our residential business, fees we earn during the development of our hotels and resorts, capital procurement fees and other miscellaneous fees. For the three months ended March 31, 2006, other fees increased 44.7% or $1.6 million, to $5.3 million as compared to the same period in 2005. The increase in other fees for the first quarter of 2006, as compared to the same period in 2005, was attributable to royalty fees related to the sale of branded residences in Miami and San Francisco. Royalty fees earned on the sale of branded residences will vary period to period based on the volume of sales closing in those periods, and these fluctuations may be significant.

Hotel Ownership Revenues

We have a 100% leasehold interest in the Four Seasons Hotel Vancouver and, as a result, we consolidate the results of that hotel. During the first half of 2005, we also had a 100% leasehold interest in The Pierre and consolidated the results of that property. We assigned the lease of The Pierre to a third party at the end of June 2005 and, as a result, we ceased to consolidate that property at that time. Our investment strategy is not to hold any majority interests in properties. However, Four Seasons Hotel Vancouver is a long-term leasehold interest that was established at an earlier stage in our development. We continue to review our options for the Four Seasons Hotel Vancouver to determine what, if any, alternatives may be available to modify or restructure our operation of, or investment in, this hotel. There can be no assurance that acceptable alternative arrangements will be found with respect to this hotel or as to the terms of any such alternative arrangements.

In the first quarter of 2006, the decline in hotel ownership revenue was primarily related to our owning and consolidating 100% of The Pierre during the first quarter of 2005 and our not owning and not consolidating it during the first quarter of 2006. Hotel ownership revenue for the first quarter of 2006 relates to the Four Seasons Hotel Vancouver only. Revenue at that property increased modestly relative to the first quarter of 2005, primarily as the result of a 720 basis point improvement in occupancy.

Reimbursed Costs

Reimbursed costs, which primarily represents sales, marketing, advertising and central reservation expenses, are generally incurred on a cost-recovery basis to us and are a function of the revenues under our management. For the three months ended March 31, 2006, reimbursed costs increased $2.2 million or 15.6%, as compared to the corresponding period in 2005. The increase was due in part to a larger portfolio of properties, as compared to the same period in 2005.

Expenses

General and Administrative Expenses

As discussed above, general and administrative expenses include amounts that were previously classified as corporate expenses. General and administrative expenses increased 11.9% to $14.2 million from $12.7 million in the first quarter of 2006, as compared to the same period in 2005. The majority of our general and administrative expenses are in Canadian dollars and, accordingly, a portion of the increase for the first quarter of 2006, as compared to the same period in 2005, was attributable to the US dollar having declined relative to the Canadian dollar (average Canadian/US foreign exchange rate: first quarter 2006 - $1.15421; 2005 - $1.22652). For the first quarter of 2006, general and administrative expenses increased 5.4% on a Canadian dollar basis as compared to the same period in 2005.

Hotel Ownership Cost of Sales and Expenses

As discussed above, we consolidate 100% of the operations of Four Seasons Hotel Vancouver, and until June 30, 2005 we also consolidated the operations of The Pierre. Hotel ownership cost of sales and expenses declined 73.0% to $6.5 million in the first quarter of 2006, from $24.1 million during the first quarter of 2005 primarily as a result of the operations of The Pierre being consolidated during the first quarter of 2005 and not being consolidated during the first quarter of 2006. Costs of sales and expenses at Four Seasons Hotel Vancouver increased 7.4% in the first quarter of 2006, as compared to the same period in 2005, primarily as a result of higher labour costs related to the improvement in occupancy. Overall, our net loss from hotel ownership declined from $3.6 million in the first quarter of 2005 to $1.0 million in the first quarter of 2006.

Operating Earnings Before Other Items(6)

As a result of the items described above, operating earnings before other items were $20.5 million in the first quarter of 2006 as compared to $12.1 million in the same period in 2005. Excluding hotel ownership revenues, hotel ownership cost of sales and expenses and reimbursed costs, our profit margin on our management business was as follows:

    -------------------------------------------------------------------------
                                                          Three months ended
    (in millions of  dollars)                                  March 31,
    -------------------------------------------------------------------------
                                                           2006         2005
    -------------------------------------------------------------------------
    Hotel management fees                                 $30.4        $24.7
    -------------------------------------------------------------------------
    Other fees                                              5.3          3.7
    -------------------------------------------------------------------------
      Subtotal                                             35.7         28.4
    -------------------------------------------------------------------------
    General and administrative expenses (including
     corporate expenses as discussed above)               (14.2)       (12.7)
    -------------------------------------------------------------------------
      Total                                               $21.5        $15.7
    -------------------------------------------------------------------------
      Profit margin                                        60.1%       55.2%
    -------------------------------------------------------------------------
 

    Other Expenses, Net

For the first quarter of 2006, other expenses, net was $0.8 million, as compared to $2.7 million for the same period in 2005.

    -------------------------------------------------------------------------
                                                          Three months ended
    (in millions of  dollars)                                  March 31,
    -------------------------------------------------------------------------
                                                           2006         2005
    -------------------------------------------------------------------------
    Foreign exchange loss                                  $0.5         $0.4
    -------------------------------------------------------------------------
    Loss on disposition of assets                             -          0.4
    -------------------------------------------------------------------------
    Asset provision and write downs                         0.3          1.9
    -------------------------------------------------------------------------
      Other expenses, net                                  $0.8         $2.7
    -------------------------------------------------------------------------
 

Foreign Exchange

Other expenses for the first quarter of 2006 included a foreign exchange loss of $0.5 million, as compared to a loss of $0.4 million for the same period in 2005.

The majority of our general and administrative expenses are incurred in Canadian dollars, while the majority of fee revenues and cash balances are in US dollars. We also incur Canadian dollar capital funding requirements, which are primarily attributable to our corporate office expansion. Accordingly, in December 2005 we began selling forward US dollars for conversion to Canadian dollars.

As at March 31, 2006, we had contracts in place to sell forward $24.6 million at a weighted average exchange rate of 1.156 at various maturities extending to June 2006. Subsequent to March 31, 2006, we have extended the program to sell forward an additional $28.8 million with maturities extending to October 2007, at a weighted average rate of 1.137. Although these forward contracts relate to our general and administrative expenses and capital funding requirements, for accounting purposes they are "marked-to-market", with the corresponding gains or losses included in "Other Expenses, Net". The mark-to-market loss on these contracts for the three months ended March 31, 2006 was $0.1 million.

While this program of selling forward US dollars allows us to predict the cost in US dollars of the majority of our Canadian dollar general and administrative expenses and capital requirements, it will not eliminate the impact of foreign currency fluctuations related to our management fees in currencies other than US dollars. It will also not eliminate foreign currency gains and losses related to un-hedged net monetary assets and liability positions. As such, our consolidated results will continue to include gains and losses related to foreign currency fluctuations. The impact of foreign currency gains and losses has been material in the past and could continue to be material in the future.

Interest Income and Interest Expense

The $0.6 million increase in interest income for the quarter ended March 31, 2006, as compared to the same period in 2005, was primarily attributable to higher deposit interest rates.

The $0.6 million increase in interest expense was primarily attributable to the interest expense accrued relating to the currency and interest rate swap agreement we entered into in the second quarter of 2005 related to the convertible senior notes. These arrangements are more fully described in the MD&A for the year ended December 31, 2005. The effective interest rate on the convertible senior notes in the first quarter of 2006 was approximately 5.5%, which represents $3.0 million of interest expense for that period.

Income Tax Expense

Our income tax expense during the first quarter of 2006 was $4.3 million (effective tax rate of 24.5%), as compared to income tax expense of $1.9 million (effective tax rate of 26.8%), for the same period in 2005.

Net Earnings and Earnings per Share

For the reasons outlined above, net earnings for the quarter ended March 31, 2006 were $13.4 million ($0.36 basic and diluted earnings per share), as compared to net earnings of $5.2 million ($0.14 basic and diluted earnings per share) for the quarter ended March 31, 2005.

Adjusted Net Earnings and Adjusted Earnings per Share

In the first quarter of 2005, we recorded $2.7 million of other expenses related to losses on the disposition of minority investments and a foreign exchange loss, as compared to $0.8 million in other expenses in the first quarter of 2006.

Adjusting for these items, adjusted net earnings are as follows:

    -------------------------------------------------------------------------
                                                          Three months ended
    (in millions of  dollars)                                  March 31,
    -------------------------------------------------------------------------
                                                           2006         2005
    -------------------------------------------------------------------------
    Net earnings                                          $13.4         $5.2
    -------------------------------------------------------------------------
    Other expense                                           0.8          2.7
    -------------------------------------------------------------------------
    Tax effect of adjustments                              (0.1)        (0.5)
    -------------------------------------------------------------------------
      Adjusted net earnings                               $14.1         $7.4
    -------------------------------------------------------------------------
    Adjusted basic earnings per share                     $0.38        $0.20
    -------------------------------------------------------------------------
    Adjusted diluted earnings per share                   $0.38        $0.19
    -------------------------------------------------------------------------

Adjusted net earnings is a non-GAAP financial measure and does not have any standardized meaning prescribed by GAAP and is, therefore, unlikely to be comparable to similar measures presented by other issuers and should not be considered as an alternative to net earnings, cash flow from operating activities or any other measure of performance prescribed by Canadian GAAP. Our adjusted net earnings may also not be comparable to adjusted net earnings used by other companies, which may be calculated differently. We consider adjusted net earnings to be a meaningful indicator of our operations, and we use it as a measure to assess our operating performance. Adjusted net earnings is also used by investors, analysts, and our lenders as a measure of our financial performance. As a result, we have chosen to provide this information.

Eight Quarter Summary

    -------------------------------------------------------------------------
    (in millions of dollars except per share amounts)

               First Quarter   Fourth Quarter  Third Quarter   Second Quarter
    -------------------------------------------------------------------------
                2006    2005    2005    2004    2005    2004    2005    2004
    -------------------------------------------------------------------------
    Total
    revenues    $57.6   $63.1   $58.5   $69.5   $52.2   $63.3   $74.5   $71.4
    -------------------------------------------------------------------------
    Operating
    earnings
    before other
    items       $20.5   $12.1   $12.3   $14.7   $11.7   $14.9   $20.1   $20.5
    -------------------------------------------------------------------------
    Net earnings
    (loss)      $13.4    $5.2  $(37.8)  $12.8  $(11.4)  $(8.5)  $15.8   $12.8
    -------------------------------------------------------------------------
    Basic
    earnings
    (loss) per
    share(8)    $0.36   $0.14  $(1.03)  $0.35  $(0.31) $(0.24)  $0.43   $0.36
    -------------------------------------------------------------------------
    Diluted
    earnings
    (loss) per
    share(7)    $0.36   $0.14  $(1.03)  $0.34  $(0.31) $(0.24)  $0.42   $0.34
    -------------------------------------------------------------------------
    Average
    Canadian/US
    foreign
    exchange
    rate used
    for
    specified
    quarter   1.15421 1.22652 1.17478 1.22033 1.20687 1.30758 1.24401 1.35860
    -------------------------------------------------------------------------
 
 

Liquidity and Capital Resources

As at March 31, 2006, our cash and cash equivalents were $245.3 million, as compared to $242.2 million as at December 31, 2005. Our investments in cash and cash equivalents are highly liquid, with original maturities of less than 90 days. These investments include bank deposits, guaranteed investment certificates and money market funds held with major financial institutions.

We have a committed bank credit facility of $125.0 million, which expires September 2007. Borrowings under this credit facility bear interest at LIBOR plus a spread ranging between 0.875% and 2.25% in respect of LIBOR-based borrowings (prime rate plus a spread ranging between nil and 1.25% in respect of prime rate borrowings), depending upon certain criteria specified in the credit agreement. As at March 31, 2006, no amounts were borrowed under the credit facility. However, approximately $1.6 million of letters of credit were issued under the facility. No amounts have been drawn under these letters of credit. We believe that, absent of unusual opportunities, this bank credit facility, when combined with cash on hand and internally generated cash flow, should be more than adequate to allow us to finance our normal operating needs and anticipated investment commitments related to our current growth objectives.

As discussed in the MD&A for the year ended December 31, 2005, we have contractual obligations, guarantees and other commitments, including certain lease commitments. There has been no material change to these commitments through the first quarter of 2006.

Cash Flows

Cash from Operations

The increase in cash from operations of $10.3 million in the first quarter of 2006, as compared to the same period in 2005, resulted primarily from higher earnings generated from our management business and lower losses incurred by hotel ownership, changes of $2.8 million in non-cash working capital, and a $1.3 million reduction in income taxes paid.

Investing Activities

Long-Term Receivables

In the first quarter of 2006, we advanced $2.3 million, in the aggregate, as long-term receivables to properties under our management. Also in the first quarter of 2006, we were repaid $7.9 million, in the aggregate, of our long- term receivables, including repayments related to properties under our management in Washington and Shanghai.

In the first quarter of 2005, we advanced $20.8 million, in the aggregate, as long-term receivables to properties under our management and were repaid $0.3 million of our long-term receivables.

Investments in Hotel Partnerships and Corporations

To fund capital requirements in properties in which we have an interest (primarily properties under construction or development), we invested $0.5 million in the first quarter of 2006. In the first quarter of 2006, we were also repaid $2.3 million relating to our equity interest in a property under our management.

During the first quarter of 2006, we contributed our equity interest in a property under our management in exchange for a management contract enhancement of approximately the same fair value. No gain or loss was recorded in connection with this transition.

In the first quarter of 2005, we invested $7.2 million in properties in which we have an interest and were repaid $5.3 million relating to one of our equity interests.

Investment in Management Contracts

In the first quarters of 2006 and 2005, we funded an aggregate of $4.0 million and $0.1 million, respectively, related to our investments in management contracts.

Fixed Assets

Our capital expenditures were $5.6 million for the quarter ended March 31, 2006, as compared to $3.6 million for the same period in 2005. In 2004, we commenced construction on our Toronto corporate office expansion, which is scheduled to be completed during 2006. In the first quarters of 2006 and 2005, capital expenditures related to this expansion were $5.4 million and $2.6 million, respectively.

                           Outstanding Share Data

    -------------------------------------------------------------------------
    Designation                                Outstanding as at May 4, 2006
    -------------------------------------------------------------------------
    Variable Multiple Voting Shares(1)                             3,725,698
    -------------------------------------------------------------------------
    Limited Voting Shares                                         33,030,478
    -------------------------------------------------------------------------
    Options to acquire Limited Voting Shares(2):
    -------------------------------------------------------------------------
      Outstanding                                                  4,393,243
    -------------------------------------------------------------------------
      Exercisable                                                  3,416,929
    -------------------------------------------------------------------------
    Convertible Senior Notes issued June 2004
     and due 2024(3)                                        $251.4 million(4)
    -------------------------------------------------------------------------
 
 

    (1) Convertible into Limited Voting Shares at any time at the option of
        the holder on a one-for-one basis.

    (2) As disclosed in note 11(a) to our annual consolidated financial
        statements for the year ended December 31, 2005, pursuant to an
        agreement approved by the shareholders in 1989, Four Seasons has
        agreed to make a payment to Mr. Isadore Sharp on an arm's length sale
        of control of Four Seasons Hotels Inc. that is calculated by
        reference to the consideration received per Limited Voting Share in
        the transaction and the total number of Variable Multiple Voting
        Shares and Limited Voting Shares outstanding at the time of sale.

    (3) The terms of the convertible senior notes are more fully described in
        our MD&A for the year ended December 31, 2005.

    (4) This amount is equal to the issue price of the convertible senior
        notes issued in June 2004 and due 2024 plus accrued interest
        calculated at 1.875% per annum.

Looking Ahead

If the travel trends that we experienced in 2005 and the first quarter of 2006 continue, and based on current demand reflected in our reservation activity, we expect RevPAR for worldwide Core Hotels in the second quarter of 2006 and the full year 2006 to increase in the range of 9% to 11%, as compared to the corresponding periods in 2005. We expect that this improvement will result from occupancy and rate improvements in all geographic regions. If these anticipated trends continue and we meet our expectations for cost management, we expect gross operating margins of our worldwide Core Hotels to increase in the range of 200 to 225 basis points for the full year of 2006, as compared to the full year of 2005. Accordingly, based on the current hotel operating outlook, we expect hotel management fee revenue to grow for the full year 2006 to be approximately 15%.

Changes in Accounting Policies
 

During the three months ended March 31, 2006, we adopted The Canadian Institute of Chartered Accountants' ("CICA") new accounting standard on non- monetary transactions, as discussed in note 1 to the interim consolidated financial statements. This standard was to be implemented for non-monetary transactions initiated on or after January 1, 2006. The adoption of this standard did not have a material impact on our consolidated financial statements.
 
 

SCHEDULE A(1)
                                -------------

    FOUR SEASONS HOTELS INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS

    (Unaudited)
    (In thousands of                             2005
    US dollars except  ------------------------------------------------------
    per share             First      Second     Third      Fourth
    amounts)            Quarter(2) Quarter(2) Quarter(2) Quarter(2)  Total(2)
    -------------------------------------------------------------------------
    Revenues:
      Hotel management
       fees            $  24,689  $  28,382  $  22,531  $  25,239  $ 100,841
      Other fees           3,680      2,840      3,471      4,057     14,048
      Hotel ownership
       revenues           20,517     27,704      9,749      7,505     65,475
      Reimbursed costs    14,211     15,613     16,453     21,697     67,974
                       ------------------------------------------------------
                          63,097     74,539     52,204     58,498    248,338
                       ------------------------------------------------------
    Expenses:
      General and
       administrative
       expenses          (12,720)   (13,150)   (15,625)   (16,653)   (58,148)
      Hotel ownership
       cost of sales
       and expenses      (24,087)   (25,685)    (8,417)    (7,897)   (66,086)
      Reimbursed costs   (14,211)   (15,613)   (16,453)   (21,697)   (67,974)
                       ------------------------------------------------------
                         (51,018)   (54,448)   (40,495)   (46,247)  (192,208)
                       ------------------------------------------------------

    Operating earnings
     before other items   12,079     20,091     11,709     12,251     56,130
    Depreciation and
     amortization         (3,029)    (2,908)    (2,575)    (2,675)   (11,187)
    Other expenses, net   (2,710)    (8,645)   (21,064)   (56,789)   (89,208)
    Interest income        3,876      3,740      3,974      5,156     16,746
    Interest expense      (3,105)    (2,530)    (2,766)    (3,144)   (11,545)
                       ------------------------------------------------------
    Earnings (loss)
     before income
     taxes                 7,111      9,748    (10,722)   (45,201)   (39,064)
                       ------------------------------------------------------

    Income tax recovery
     (expense):
      Current             (1,924)    (1,390)     2,925     (1,523)    (1,912)
      Future                  15      7,428     (3,644)     8,954     12,753
                       ------------------------------------------------------
                          (1,909)     6,038       (719)     7,431     10,841
                       ------------------------------------------------------

    Net earnings
     (loss)            $   5,202  $  15,786  $ (11,441) $ (37,770) $ (28,223)
                       ------------------------------------------------------
                       ------------------------------------------------------

    Basic earnings
     (loss) per
     share             $    0.14  $    0.43  $   (0.31) $   (1.03) $   (0.77)
                       ------------------------------------------------------
                       ------------------------------------------------------

    Diluted earnings
     (loss) per
     share             $    0.14  $    0.42  $   (0.31) $   (1.03) $   (0.77)
                       ------------------------------------------------------
                       ------------------------------------------------------
 

    --------------------------------
    (1) These consolidated financial statement schedules should be read in
        conjunction with our consolidated financial statements for that
        period.

    (2) Our strategy has been to focus on hotel management rather than hotel
        ownership. Over the past few years, we have reduced our ownership
        interests such that Four Seasons Hotel Vancouver is our only
        remaining hotel whose results we currently consolidate. As a result,
        commencing January 1, 2006, we have changed the presentation of our
        consolidated statements of operations and no longer segregate our
        Ownership Operations segment from our Management Operations segment.
        Corporate expenses that were previously included in our Ownership
        Operations segment have been reclassified and included in general and
        administrative expenses. The presentation of our 2005 consolidated
        statements of operations have been changed to conform with the
        financial statement presentation adopted for 2006.
 
 

                                SCHEDULE B(1)
                                -------------

    FOUR SEASONS HOTELS INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS

    (Unaudited)
    (In thousands of                             2004
    US dollars except  ------------------------------------------------------
    per share             First      Second     Third      Fourth
    amounts)            Quarter(2) Quarter(2) Quarter(2) Quarter(2)  Total(2)
    -------------------------------------------------------------------------
    Revenues:
      Hotel management
       fees            $  20,140  $  22,939  $  18,278  $  22,026  $  83,383
      Other fees           1,967      4,084      6,438      2,093     14,582
      Foreign exchange
       forward
       contracts           2,720      2,798      2,625      3,058     11,201
      Hotel ownership
       revenues           20,332     28,399     22,383     26,615     97,729
      Reimbursed costs    11,962     13,143     13,535     15,732     54,372
                       ------------------------------------------------------
                          57,121     71,363     63,259     69,524    261,267
                       ------------------------------------------------------
    Expenses:
      General and
       administrative
       expenses          (11,184)   (11,416)   (10,981)   (14,018)   (47,599)
      Hotel ownership
       cost of sales
       and expenses      (24,628)   (26,299)   (23,859)   (25,116)   (99,902)
      Reimbursed costs   (11,962)   (13,143)   (13,535)   (15,732)   (54,372)
                       ------------------------------------------------------
                         (47,774)   (50,858)   (48,375)   (54,866)  (201,873)
                       ------------------------------------------------------

    Operating earnings
     before other
     items                 9,347     20,505     14,884     14,658     59,394
    Depreciation and
     amortization         (2,751)    (2,664)    (3,102)    (3,262)   (11,779)
    Other income
     (expenses), net       3,279     (2,216)   (18,089)     5,120    (11,906)
    Interest income        3,106      2,836      3,706      3,375     13,023
    Interest expense      (1,873)    (1,995)    (3,455)    (3,138)   (10,461)
                       ------------------------------------------------------
    Earnings (loss)
     before income
     taxes                11,108     16,466     (6,056)    16,753     38,271
                       ------------------------------------------------------

    Income tax recovery
     (expense):
      Current             (2,116)    (3,214)       364     (4,099)    (9,065)
      Future                (288)      (493)    (2,830)       103     (3,508)
                       ------------------------------------------------------
                          (2,404)    (3,707)    (2,466)    (3,996)   (12,573)
                       ------------------------------------------------------
    Net earnings
     (loss)            $   8,704  $  12,759  $  (8,522) $  12,757  $  25,698
                       ------------------------------------------------------
                       ------------------------------------------------------

    Basic earnings
     (loss) per
     share             $    0.25  $    0.36  $   (0.24) $    0.35  $    0.72
                       ------------------------------------------------------
                       ------------------------------------------------------

    Diluted earnings
     (loss) per
     share             $    0.24  $    0.34  $   (0.24) $    0.34  $    0.69
                       ------------------------------------------------------
                       ------------------------------------------------------
 

    --------------------------------

    (1) These consolidated financial statement schedules should be read in
        conjunction with our consolidated financial statements for that
        period.

    (2) Our strategy has been to focus on hotel management rather than hotel
        ownership. Over the past few years, we have reduced our ownership
        interests such that Four Seasons Hotel Vancouver is our only
        remaining hotel whose results we currently consolidate. As a result,
        commencing January 1, 2006, we have changed the presentation of our
        consolidated statements of operations and no longer segregate our
        Ownership Operations segment from our Management Operations segment.
        Corporate expenses that were previously included in our Ownership
        Operations segment have been reclassified and included in general and
        administrative expenses. The presentation of our 2004 consolidated
        statements of operations have been changed to conform with the
        financial statement presentation adopted for 2006.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                          Three months ended
    (Unaudited)                                                March 31,
    (In thousands of US dollars except per share amounts)  2006         2005
    -------------------------------------------------------------------------

    Revenues:
      Hotel management fees                           $  30,384    $  24,689
      Other fees                                          5,326        3,680
      Hotel ownership revenues                            5,479       20,517
      Reimbursed costs                                   16,435       14,211
                                                      -----------------------

                                                         57,624       63,097
                                                      -----------------------
    Expenses:
      General and administrative expenses               (14,240)     (12,720)
      Hotel ownership cost of sales and expenses         (6,493)     (24,087)
      Reimbursed costs                                  (16,435)     (14,211)
                                                      -----------------------

                                                        (37,168)     (51,018)
                                                      -----------------------

    Operating earnings before other items                20,456       12,079
    Depreciation and amortization                        (2,643)      (3,029)
    Other expenses, net (note 4)                           (833)      (2,710)
    Interest income                                       4,461        3,876
    Interest expense                                     (3,710)      (3,105)
                                                      -----------------------

    Earnings before income taxes                         17,731        7,111
                                                      -----------------------

    Income tax recovery (expense):
      Current                                            (3,129)      (1,924)
      Future                                             (1,219)          15
                                                      -----------------------

                                                         (4,348)      (1,909)
                                                      -----------------------

    Net earnings                                      $  13,383     $  5,202
                                                      -----------------------
                                                      -----------------------

    Basic earnings per share (note 3(a))              $    0.36     $   0.14
                                                      -----------------------
                                                      -----------------------

    Diluted earnings per share (note 3(a))            $    0.36     $   0.14
                                                      -----------------------
                                                      -----------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED BALANCE SHEETS

                                                        As at       As at
                                                       March 31, December 31,
    (In thousands of US dollars)                         2006        2005
    -------------------------------------------------------------------------
                                                     (Unaudited)
    ASSETS

    Current assets:
      Cash and cash equivalents                       $ 245,254    $ 242,178
      Receivables                                        70,048       69,690
      Inventory                                           7,602        7,326
      Prepaid expenses                                    5,440        2,950
                                                      -----------------------

                                                        328,344      322,144

    Long-term receivables                               177,032      175,374
    Investments in hotel partnerships and
     corporations (note 2)                               83,990       99,928
    Fixed assets                                         69,354       64,850
    Investment in management contracts (note 2)         181,358      164,932
    Investment in trademarks and trade names              4,225        4,210
    Future income tax assets                             13,220       14,439
    Other assets                                         34,890       34,324
                                                      -----------------------

                                                      $ 892,413    $ 880,201
                                                      -----------------------
                                                      -----------------------
 

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Accounts payable and accrued liabilities        $  47,097    $  54,797
      Long-term obligations due within one year           3,324        4,853
                                                      -----------------------

                                                         50,421       59,650

    Long-term obligations                               275,308      273,825
    Shareholders' equity (note 3):
      Capital stock                                     254,884      250,430
      Convertible notes                                  36,920       36,920
      Contributed surplus                                11,339       10,861
      Retained earnings                                 174,124      160,741
      Equity adjustment from foreign currency
       translation                                       89,417       87,774
                                                      -----------------------

                                                        566,684      546,726
                                                      -----------------------

                                                      $ 892,413    $ 880,201
                                                      -----------------------
                                                      -----------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Three months ended
    (Unaudited)                                                March 31,
    (In thousands of US dollars)                           2006         2005
    -------------------------------------------------------------------------

    Operating activities:
      Net earnings                                    $  13,383    $   5,202
      Items not affecting cash:
        Stock-based compensation expense                    522          494
        Depreciation and amortization                     2,643        3,029
        Other expenses, net                                 833        2,710
        Future income tax expense (recovery)              1,219          (15)
        Other                                               541          254
      Changes in non-cash working capital               (13,527)     (16,310)
                                                      -----------------------

    Cash provided by (used in) operating activities       5,614       (4,636)
                                                      -----------------------

    Investing activities:
      Advances of long-term receivables                  (2,261)     (20,813)
      Receipt of long-term receivables                    7,910          348
      Investments in hotel partnerships and corporations  1,797       (7,180)
      Disposal of hotel partnerships and corporations         -        5,346
      Purchase of fixed assets                           (5,606)      (3,607)
      Investments in trademarks, trade names and
       management contracts                              (3,952)        (131)
      Other assets                                       (1,481)         (51)
                                                      -----------------------

    Cash used in investing activities                    (3,593)     (26,088)
                                                      -----------------------

    Financing activities:
      Long-term obligations including current portion    (1,968)         132
      Issuance of shares                                  4,406        5,617
      Dividends paid                                     (1,657)      (1,558)
                                                      -----------------------

    Cash provided by financing activities                   781        4,191
                                                      -----------------------

    Increase (decrease) in cash and cash equivalents      2,802      (26,533)
    Increase (decrease) in cash and cash equivalents
     due to unrealized foreign exchange gain (loss)         274       (1,680)
    Cash and cash equivalents, beginning of period      242,178      226,377
                                                      -----------------------

    Cash and cash equivalents, end of period          $ 245,254    $ 198,164
                                                      -----------------------
                                                      -----------------------

    Supplementary information:
      Interest received                               $   4,659    $   4,667
      Interest paid                                      (2,596)      (3,000)
      Income taxes paid                                  (1,774)      (3,106)

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                                                          Three months ended
    (Unaudited)                                                March 31,
    (In thousands of US dollars)                           2006         2005
    -------------------------------------------------------------------------

    Retained earnings, beginning of period            $ 160,741    $ 192,129
    Net earnings                                         13,383        5,202
                                                      -----------------------

    Retained earnings, end of period                  $ 174,124    $ 197,331
                                                      -----------------------
                                                      -----------------------

    See accompanying notes to consolidated financial statements.
 
 

    FOUR SEASONS HOTELS INC.

    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

    (Unaudited)
    (In thousands of US dollars except per share amounts)
    -------------------------------------------------------------------------

    In these interim consolidated financial statements, the words "we", "us",
    "our", and other similar words are references to Four Seasons Hotels Inc.
    and its consolidated subsidiaries. These interim consolidated financial
    statements do not include all disclosures required by Canadian generally
    accepted accounting principles ("GAAP") for annual financial statements
    and should be read in conjunction with our most recently prepared annual
    consolidated financial statements for the year ended December 31, 2005.

    1.  Significant accounting policies:

        The significant accounting policies used in preparing these interim
        consolidated financial statements are consistent with those used in
        preparing our annual consolidated financial statements for the year
        ended December 31, 2005, except as disclosed below:

        (a) Non-monetary transactions:
            In June 2005, The Canadian Institute of Chartered Accountants
            ("CICA") issued Section 3831, "Non-Monetary Transactions", which
            introduces new requirements for non-monetary transactions
            initiated on or after January 1, 2006. The amended requirements
            will result in non-monetary transactions being measured at fair
            values unless certain criteria are met, in which case, the
            transaction is measured at carrying value. The implementation of
            Section 3831, on a prospective basis for transactions initiated
            on or after January 1, 2006, did not have an impact on our
            consolidated financial statements for the three months ended
            March 31, 2006.

        (b) Financial instruments:
            In January 2005, the CICA issued Section 1530 "Comprehensive
            Income", Section 3855 "Financial Instruments - Recognition and
            Measurement", and Section 3865 "Hedges". These standards are
            effective for fiscal years beginning on or after October 1, 2006.
            The impact of adoption of these standards is not yet
            determinable, as it will be dependent on our unsettled
            positions, hedging strategies, and market volatility at the time
            of transition.

        (c) Comparative figures:
            Certain 2005 comparative figures have been reclassified to
            conform with the financial statement presentation adopted for
            2006.

    2.  Hotel investment transaction:

        During the three months ended March 31, 2006, we contributed our
        equity interest in a property under our management in exchange for a
        management contract enhancement of approximately the same fair value.
        No gain or loss was recorded in connection with this transaction.

    3.  Shareholders' equity:

        As at March 31, 2006, we have 3,725,698 outstanding Variable Multiple
        Voting Shares ("VMVS"), 33,029,478 outstanding Limited Voting Shares
        ("LVS"), and 4,394,243 outstanding stock options (weighted average
        exercise price of C$59.65 ($51.11)).

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

                                               Three months ended
                                                    March 31,
                                           2006                  2005
    -------------------------------------------------------------------------

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

    Basic earnings per share
     amounts                      $ 13,383  36,685,329  $  5,202  36,608,763
    Effect of assumed dilutive
     conversions:
    Stock option plan                    -     583,483         -   1,535,543
    -------------------------------------------------------------------------

    Diluted earnings per share
     amounts                      $ 13,383  37,268,812  $  5,202  38,144,306
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

            The diluted earnings per share calculation excluded the effect of
            the assumed conversions of 1,535,776 stock options to LVS, under
            our stock option plan, during the three months ended March 31,
            2006 (2005 - 9,000 stock options), as the inclusion of these
            options would have resulted in an anti-dilutive effect. There
            was no dilution in 2006 and 2005 relating to our convertible
            senior notes.

        (b) Stock-based compensation:
            We use the fair value-based method to account for all employee
            stock options granted or modified on or after January 1, 2003.
            Accordingly, options granted prior to that date continue to be
            accounted for using the settlement method.

            There were 41,650 stock options granted in the three months ended
            March 31, 2006 at a weighted average exercise price of C$62.61
            ($53.65). The fair value of stock options granted in the three
            months ended March 31, 2006 was estimated using the Black-Scholes
            option pricing model with the following assumptions: risk-free
            interest rates ranging from 4.09% to 4.17%; semi-annual dividend
            per LVS of C$0.055; volatility factor of the expected market
            price of our LVS of 27%; and expected lives of the options
            ranging between four and seven years, depending on the level of
            the employee who was granted stock options. For the options
            granted in the three months ended March 31, 2006, the weighted
            average fair value of the options at the grant dates was C$21.49
            ($18.41). 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. There
            were no stock options granted in the three months ended March 31,
            2005.

            Pro forma disclosure is required to show the effect of the
            application of the fair value-based method to employee stock
            options granted during 2002, which were not accounted for using
            the fair value-based method. For the three months ended March 31,
            2006 and 2005, if we had applied the fair value-based method to
            options granted during 2002, our net earnings and basic and
            diluted earnings per share would have been adjusted to the pro
            forma amounts indicated below:

                                                          Three months ended
                                                               March 31,
                                                           2006         2005
            -----------------------------------------------------------------

            Stock-based compensation expense           $   (522)    $   (494)
                                                       ----------------------
                                                       ----------------------

            Net earnings, as reported                  $ 13,383     $  5,202
            Increase in stock-based compensation
             expense that would have been recorded
             if all outstanding stock options granted
             during 2002 had been expensed                 (646)        (691)
                                                       ----------------------

            Pro forma net earnings                     $ 12,737     $  4,511
                                                       ----------------------

            Earnings per share:
              Basic, as reported                       $   0.36     $   0.14
              Basic, pro forma                             0.35         0.12
              Diluted, as reported                         0.36         0.14
              Diluted, pro forma                           0.34         0.12
                                                       ----------------------

    4.  Other expenses, net:
                                                          Three months ended
                                                               March 31,
                                                           2006         2005
        ---------------------------------------------------------------------

        Foreign exchange loss                          $   (528)    $   (393)
        Asset provisions and write downs                   (305)      (1,931)
        Loss on disposition of assets                         -         (386)
                                                       ----------------------

                                                       $   (833)    $ (2,710)
                                                       ----------------------
                                                       ----------------------

        The net foreign exchange loss in 2006 and 2005 related primarily to
        the foreign currency translation gains and losses on unhedged net
        asset and liability positions, primarily in US dollars, euros, pounds
        sterling and Australian dollars, and local currency foreign exchange
        gains and losses on net monetary assets incurred by our designated
        foreign self-sustaining subsidiaries.

        As at March 31, 2006, we have foreign exchange forward contracts in
        place to sell forward $24,579 of US dollars to receive Canadian
        dollars at a weighted average forward exchange rate of 1.156 maturing
        over the period to June 2006. These contracts are being marked-to-
        market on a monthly basis with the resulting changes in fair values
        being recorded as a foreign exchange gain or loss. This resulted in a
        $67 foreign exchange loss being recorded in the three months ended
        March 31, 2006.

        Subsequent to March 31, 2006, we have sold forward an additional
        $28,784 of US dollars to receive Canadian dollars at a weighted
        average forward exchange rate of 1.137 maturing over the period to
        October 2007.

    5.  Pension benefit expense:

        The pension benefit expense for the three months ended March 31, 2006
        was $944 (2005 - $621).

    6.  Segmented information:

        Our strategy has been to focus on hotel management rather than hotel
        ownership. Over the past few years, we have reduced our ownership
        interests such that Four Seasons Hotel Vancouver is our only
        remaining hotel whose results we currently consolidate. As a result,
        commencing January 1, 2006, corporate expenses have been included in
        general and administrative expenses in the consolidated statements of
        operations for the three months ended March 31, 2006. Corporate
        expenses for the three months ended March 31, 2005 that previously
        were included in our Ownership Operations segment have been
        reclassified to the Management Operations segment and included in
        general and administrative expenses in the consolidated statements of
        operations.

                                                    Three Months Ended
                                                      March 31, 2006
                                          -----------------------------------
                                          Management   Ownership
                                          Operations   Operations     Total
        ---------------------------------------------------------------------

        Revenues:
          Hotel management fees           $ 30,384     $      -     $ 30,384
          Other fees                         5,326            -        5,326
                                          -----------------------------------
                                            35,710            -       35,710
          Hotel ownership revenues               -        5,479        5,479
          Reimbursed costs                  16,435            -       16,435
                                          -----------------------------------
                                            52,145        5,479       57,624
                                          -----------------------------------
        Expenses:
          General and administrative
           expenses                        (14,240)           -      (14,240)
          Hotel ownership cost of
           sales and expenses                    -       (6,493)      (6,493)
          Reimbursed costs                 (16,435)           -      (16,435)
                                          -----------------------------------
                                           (30,675)      (6,493)     (37,168)
                                          -----------------------------------
        Operating earnings (loss)
         before other items               $ 21,470     $ (1,014)    $ 20,456
                                          -----------------------------------
                                          -----------------------------------

                                                    Three Months Ended
                                                      March 31, 2005
                                          -----------------------------------
                                          Management   Ownership
                                          Operations   Operations     Total
        ---------------------------------------------------------------------

        Revenues:
          Hotel management fees           $  24,689    $      -     $ 24,689
          Other fees                          3,680           -        3,680
                                          -----------------------------------
                                             28,369           -       28,369
          Hotel ownership revenues                -      20,517       20,517
          Reimbursed costs                   14,211           -       14,211
                                          -----------------------------------
                                             42,580      20,517       63,097
                                          -----------------------------------
        Expenses:
          General and administrative
           expenses                         (12,720)          -      (12,720)
          Hotel ownership cost of
           sales and expenses                     -     (24,087)     (24,087)
          Reimbursed costs                  (14,211)          -      (14,211)
                                          -----------------------------------
                                            (26,931)    (24,087)     (51,018)
                                          -----------------------------------
        Operating earnings (loss)
         before other items               $  15,649    $ (3,570)    $ 12,079
                                          -----------------------------------
                                          -----------------------------------
 
 

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

                                             Three months ended
                                                  March 31,
    (Unaudited)                               2006         2005     Variance
    -------------------------------------------------------------------------
    Worldwide
      No. of Properties                         56           56            -
      No. of Rooms                          14,290       14,290            -
      Occupancy(2)                           69.2%        66.5%      2.7pts.
      ADR(3)                               $368.99      $344.12         7.2%
      RevPAR(4)                            $255.48      $228.70        11.7%
      Gross operating margin(5)              32.4%        29.9%      2.5pts.
    United States
      No. of Properties                         20           20            -
      No. of Rooms                           6,195        6,195            -
      Occupancy(2)                           74.6%        71.7%      2.9pts.
      ADR(3)                               $403.65      $372.81         8.3%
      RevPAR(4)                            $300.97      $267.25        12.6%
      Gross operating margin(5)              30.2%        28.1%      2.1pts.
    Other Americas/Caribbean
      No. of Properties                         10           10            -
      No. of Rooms                           2,165        2,165            -
      Occupancy(2)                           66.9%        63.3%      3.6pts.
      ADR(3)                               $453.44      $424.08         6.9%
      RevPAR(4)                            $303.41      $268.35        13.1%
      Gross operating margin(5)              36.9%        35.2%      1.7pts.
    Europe
      No. of Properties                         10           10            -
      No. of Rooms                           1,720        1,720            -
      Occupancy(2)                           58.7%        51.9%      6.8pts.
      ADR(3)                               $522.22      $510.95        2.2%
      RevPAR(4)                            $306.52      $265.23       15.6%
      Gross operating margin(5)              25.0%        21.3%     3.7 pts.
    Middle East
      No. of Properties                          5            5            -
      No. of Rooms                           1,215        1,215            -
      Occupancy(2)                           70.5%        70.8%    (0.3)pts.
      ADR(3)                               $258.34      $224.81        14.9%
      RevPAR(4)                            $182.13      $159.25        14.4%
      Gross operating margin(5)              52.1%        49.5%      2.6pts.
    Asia/Pacific
      No. of Properties                         11           11            -
      No. of Rooms                           2,995        2,995            -
      Occupancy(2)                           65.0%        64.7%      0.3pts.
      ADR(3)                               $202.83      $197.70         2.6%
      RevPAR(4)                            $131.90      $128.00         3.0%
      Gross operating margin(5)              32.6%        30.2%      2.4pts.
    -----------------------------------------------------------
    1   The term "Core Hotels" means hotels and resorts under management for
        the full year of both 2006 and 2005. However, if a "Core Hotel" has
        undergone or is undergoing an extensive renovation program in one of
        those years that materially affects the operation of the property in
        that year, it ceases to be included as a "Core Hotel" in either year.
        Changes from the 2005/2004 Core Hotels are the additions of Four
        Seasons Resort Scottsdale at Troon North, Four Seasons Resort
        Whistler, Four Seasons Resort Costa Rica at Peninsula Papagayo, Four
        Seasons Hotel Gresham Palace Budapest, Four Seasons Resort Provence
        at Terre Blanche and Four Seasons Hotel Cairo at Nile Plaza, and the
        deletion of The Regent Kuala Lumpur. All room numbers in this table
        are approximate.
    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,
        calculated as the weighted average for each region. In 2004 and 2005,
        ADR was calculated as straight average for each region.
    4   RevPAR is defined as average room revenue per available room. It is
        a non-GAAP financial measure and does not have any standardized
        meaning prescribed by GAAP and is therefore unlikely to be comparable
        to similar measures presented by other issuers. We use RevPAR because
        it is a commonly used indicator of market performance for hotels and
        resorts and represents the combination of the average daily room rate
        and the average occupancy rate achieved during the period. RevPAR
        does not include food and beverage or other ancillary revenues
        generated by a hotel or resort. RevPAR is the most commonly used
        measure in the lodging industry to measure the period-over-period
        performance of comparable properties. Our calculation of RevPAR may
        be different than the calculation used by other lodging companies.
    5   Gross operating margin represents gross operating profit as a
        percentage of gross operating revenue.
 
 

    FOUR SEASONS HOTELS INC.

    SUMMARY OF HOTEL OPERATING DATA - ALL MANAGED HOTELS

                                                   As at
                                                  March 31,
    (Unaudited)                               2006         2005     Variance
    -------------------------------------------------------------------------

    Worldwide
      No. of Properties                         70           65            5
      No. of Rooms                          17,515       16,530          985

    United States
      No. of Properties                         24           24            -
      No. of Rooms                           7,045        7,105          (60)

    Other Americas/Caribbean
      No. of Properties                         10           10            -
      No. of Rooms                           2,165        2,165            -

    Europe
      No. of Properties                         12           11            1
      No. of Rooms                           1,960        1,855          105

    Middle East
      No. of Properties                          7            5            2
      No. of Rooms                           1,740        1,215          525

    Asia/Pacific
      No. of Properties                         17           15            2
      No. of Rooms                           4,605        4,190          415

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

    FOUR SEASONS HOTELS INC.

    REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS

                                                          Three months ended
    (Unaudited)                                                March 31,
    (In thousands of US dollars)                           2006         2005
    -------------------------------------------------------------------------

    Revenues under management(1)                      $ 692,342    $ 601,563
                                                      -----------------------
                                                      -----------------------

    -----------------------------
    1   Revenues under management consist of rooms, food and beverage,
        telephone and other revenues of all the hotels and resorts which we
        manage. Approximately 59% of the fee revenues (excluding reimbursed
        costs) we earned 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 2006/2007 openings
    ----------------------------
    Four Seasons Hotel Alexandria, Egypt(x)                              125
    Four Seasons Hotel Beirut, Lebanon                                   235
    Four Seasons Hotel Florence, Italy                                   120
    Four Seasons Hotel Istanbul at the Bosphorus, Turkey                 170
    Four Seasons Resort Lana'i at Koele, Hawaii, USA(3)                  100
    Four Seasons Resort Maldives at Landaa Giraavaru, Maldives           100
    Four Seasons Hotel Mumbai, India(x)                                  235
    Four Seasons Hotel Westlake Village, California, USA                 270

    Beyond 2007
    -----------
    Four Seasons Hotel Bahrain, Bahrain                                  250
    Four Seasons Hotel Baltimore, Maryland, USA(x)                       200
    Four Seasons Resort Barbados, Barbados(x)                            120
    Four Seasons Hotel Beijing, People's Republic of China               325
    Four Seasons Resort Bora Bora, French Polynesia                      105
    Four Seasons Hotel Dubai, United Arab Emirates(x)                    375
    Four Seasons Hotel Kuala Lumpur, Malaysia(x)                         140
    Four Seasons Hotel Macau, Special Administrative Region of
     the People's Republic of China(x)                                   400
    Four Seasons Hotel Marrakech, Morocco(x)                             140
    Four Seasons Resort Mauritius, Republic of Mauritius(x)              120
    Four Seasons Hotel Moscow, Russia(x)                                 195
    Four Seasons Hotel Moscow Kamenny Island, Russia(x)                   80
    Four Seasons Hotel New Orleans, Louisiana, USA(x)                    240
    Four Seasons Resort Puerto Rico, Puerto Rico(x)                      250
    Four Seasons Hotel Seattle, Washington, USA(x)                       150
    Four Seasons Resort Seychelles, Seychelles(x)                         55
    Four Seasons Hotel Shanghai at Pudong, People's Republic of China(x) 230
    Four Seasons Hotel Taipei, Taiwan(x)                                 275
    Four Seasons Hotel Toronto, Ontario, Canada(x)                       265
    Four Seasons Resort Vail, Colorado, USA(x)                           120

    (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 our 2005 Annual Report.

    2   We have made an investment in Orlando, in which we expect to include
        a Four Seasons Residence Club and/or a Four Seasons branded
        residential component.  The financing for this project has not yet
        been completed and therefore a scheduled opening date cannot be
        established at this time.

    3   The Lodge at Koele is currently managed by Four Seasons and is
        expected to be rebranded as Four Seasons Resort Lana'i at Koele in
        2006 when the necessary renovations are completed.
 

Additional Information

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

Additional information about us (including our most recent annual information form, annual MD&A and our audited financial statements for the year ended December 31, 2005) is available on our website at www.fourseasons.com/investor, and on SEDAR at www.sedar.com.

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

    (2) The term "Core Hotels" means hotels and resorts under management for
        the full year of both 2006 and 2005. However, if a "Core Hotel" has
        undergone or is undergoing an extensive renovation program in one of
        those years that materially affects the operation of the property in
        that year, it ceases to be included as a "Core Hotel" in either year.
        Changes from the 2005/2004 Core Hotels are the additions of Four
        Seasons Resort Scottsdale at Troon North, Four Seasons Resort
        Whistler, Four Seasons Resort Costa Rica at Peninsula Papagayo, Four
        Seasons Hotel Gresham Palace Budapest, Four Seasons Resort Provence
        at Terre Blanche and Four Seasons Hotel Cairo at Nile Plaza, and the
        deletion of The Regent Kuala Lumpur.

    (3) Gross operating profit is defined as gross operating revenues less
        operating expenses.

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

    (5) Reimbursed costs include the reimbursement of all out-of-pocket
        costs, including sales and marketing and advertising charges.

    (6) Operating earnings before other items is equal to net earnings plus
        (i) income tax expense plus (ii) interest expense less (iii) interest
        income plus (iv) other expenses, net plus (v) depreciation and
        amortization. It is a non-GAAP financial measure and does not have
        any standardized meaning prescribed by GAAP and is therefore unlikely
        to be comparable to similar measures presented by other issuers. We
        consider operating earnings before other items to be a meaningful
        indicator of operations and use it as a measure to assess our
        operating performance. It is included because we believe it can be
        useful in measuring our ability to service debt, fund capital
        expenditures and expand our business. Operating earnings before other
        items is also used by investors, analysts and our lenders as a
        measure of our financial performance.

    (7) Quarterly and year-to-year computations of per share amounts are made
        independently. The sum of per share amounts for the quarters may not
        agree with per share amounts for the year.

                                 (x) (x) (x)

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

                                 (x) (x) (x)

This news release contains "forward-looking statements" within the meaning of applicable 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. Various factors and assumptions were applied or taken into consideration in arriving at these statements, which do not take into account the effect that non-recurring or other special items announced after the statements are made may have on our business. These statements are not guarantees of future performance and, accordingly, you are cautioned not to place undue reliance on these statements. These statements are subject to numerous risks and uncertainties, including those described in our annual information form and management's discussion and analysis for the year ended December 31, 2005 and in this document. (See discussion under "Operating Risks" beginning on page 17 of our Annual Information Form and page 45 of our Management's Discussion and Analysis for the year ended December 31, 2005, which are available on our website at www.fourseasons.com and on SEDAR at www.sedar.com.) Those risks and uncertainties include adverse factors generally encountered in the lodging industry; the risks associated with world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions and infectious diseases; general economic conditions, fluctuations in relative exchange rates of various currencies, supply and demand changes for hotel rooms and residential properties, competitive conditions in the lodging industry, the risks associated with our ability to maintain and renew management agreements and expand the portfolio of properties that we manage, relationships with clients and property owners and the availability of capital to finance growth. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. All forward looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this document and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Four Seasons, its financial or operating results or its securities or any of the properties that we manage or in which we may have an interest.

                                 (x) (x) (x)

We will hold a conference call today at 11 a.m. (Eastern Daylight Time) to discuss the first quarter financial results. The details are:

To access the call dial: 1 (800) 428-5596 (U.S.A. and Canada)

                             1 (416) 620-2419 (outside U.S.A. and Canada)
 

To access a replay of the call, which will be available for one week after the call, dial: 1 (800) 558-5253, Reservation Number 21289532.

A live web cast of the call will also be available by visiting www.fourseasons.com/investor.

This web cast will be archived for one month following the call.

Dedicated to continuous innovation and the highest standards of hospitality, Four Seasons invented luxury for the modern traveller. From elegant surroundings of the finest quality, to caring, highly personalised 24-hour service, Four Seasons embodies a true home away from home for those who know and appreciate the best. The deeply instilled Four Seasons culture is personified in its employees - people who share a single focus and are inspired to offer great service. Founded in 1960, Four Seasons has followed a targeted course of expansion, opening hotels in major city centers and desirable resort destinations around the world. Currently with 70 hotels in 31 countries, and more than 25 properties under development, Four Seasons will continue to lead luxury hospitality with innovative enhancements, making business travel easier and leisure travel more rewarding. For more information on Four Seasons, visit www.fourseasons.com.

.
Contact:

Four Seasons Hotels and Resorts

.
Also See: Four Seasons Reports a Net Loss of $28.2 million for the Full Year Ending Dec 31, 2005, Compared to Net Income of $25.7 in 2004; Takes $35.5 million Charge in Switching theSenior Executives and Hotel General Managers from an Unfunded Defined Benefit Retirement Plan to a Fully Funded Defined Contribution Retirement Plan / March 2006
Four Seasons Hotels Inc. Earns $5.2 million for 1st Qtr, Down from $8.7 million a Year-ago, Includes $2.3 million Foreign-exchange Loss; Six Consecutive Quarters of RevPAR Growth / Hotel Operating Statistics / May 2005


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