**Exhibit
      99.5**


**Reconciliation
        to United States Generally**
 **Accepted
        Accounting
        Principles**
 **(In
        US dollars)**
 
 **FOUR
        SEASONS HOTELS INC.**
 
 Years
        ended December 31, 2006 and 2005

















**AUDITORS'
        REPORT ON RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING
        PRINCIPLES**
   To
        the
        Board of Directors of Four Seasons Hotels Inc.
  
  On
        March 9, 2007, we reported on the consolidated balance sheets of Four Seasons
        Hotels Inc. as at December 31, 2006 and 2005, and the consolidated statements
        of
        operations, retained earnings and cash flows for the years then ended as
        included in the annual report on Form 40-F. In connection with our audits
        of the
        aforementioned consolidated financial statements, we also have audited the
        related supplemental note entitled "Reconciliation to United States Generally
        Accepted Accounting Principles" included in Form 40-F. This supplemental
        note is the responsibility of the Corporation's management. Our responsibility
        is to express an opinion on this supplemental note based on our
        audits.
  In
        our
        opinion, such supplemental note, when considered in relation to the basic
        consolidated financial statements taken as a whole, presents fairly, in all
        material respects, the information set forth therein as at December 31, 2006
        and
        2005 and for the years then ended.
  
  
  /s/
        KPMG LLP
  Chartered
        Accountants
  
  Toronto,
        Canada
  March
        9, 2007













**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)
 
 
  The
        consolidated financial statements of Four Seasons Hotels Inc. (“FSHI”) (FSHI and
        its subsidiaries are collectively referred to as the “Corporation”) for the
        years ended December 31, 2006 and 2005 (the "Consolidated Financial Statements")
        have been prepared in accordance with generally accepted accounting principles
        as applied in Canada ("Canadian GAAP"). In the following respects, generally
        accepted accounting principles as applied in the United States ("US GAAP")
        differ from those applied in Canada.
  If
        US
        GAAP were employed, net earnings (loss) would be adjusted as
        follows:
 **2006**
                
                2005**Net
                    earnings (loss) based on Canadian GAAP**
                
                **$**
                **50,287**
                
                $
                (28,223
                )**Impact
                    on net earnings (loss) of US GAAP adjustments:**Hotel
                    partnerships and corporations (a)
                
                
                **10,191**
                
                
                5,984Hotel
                    disposition program (b)
                
                
                **17,728**
                
                
                -Future
                    income taxes (c)
                
                
                **194**
                
                
                1,642Convertible
                    notes (d)
                
                
                **6,852**
                
                
                3,806Deferred
                    charges (e)
                
                
                **1,313**
                
                
                803Foreign
                    exchange translation (d)(ii) and (g)
                
                
                **(62**
                **)**
                
                (5,700
                )Pension
                    plan (h)
                
                
                **(77**
                **)**
                
                (1,229
                )Stock-based
                    compensation (j)(i)
                
                
                **(4,480**
                **)**
                
                (240
                )**Net
                    earnings (loss) based on US GAAP**
                
                **$**
                **81,946**
                
                $
                (23,157
                )**Basic
                    earnings (loss) per Limited Voting Share based on US GAAP
                    (i)**
                
                **$**
                **2.34**
                
                $
                (0.63
                )**Basic
                    earnings (loss) per Variable Multiple Voting Share based on US
                    GAAP
                    (i)**
                
                **$**
                **1.17**
                
                $
                (0.33
                )**Diluted
                    earnings (loss) per share based on US GAAP**
                
                **$**
                **2.10**
                
                $
                (0.63
                )






1




**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)
 
   The
        impact of the US GAAP differences discussed above on the Corporation's
        consolidated shareholders' equity is as follows:


**2006**
              
              2005**Shareholders'
                  equity based on Canadian GAAP**
              
              **$**
              **648,475**
              
              $
              546,726**Impact
                  on shareholders' equity of US GAAP adjustments:**Hotel
                  partnerships and corporations (a)
              
              
              **(59,138**
              **)**
              
              (70,493
              )Hotel
                  disposition program (b)
              
              
              **41,177**
              
              
              23,878Future
                  income taxes (c)
              
              
              **12,442**
              
              
              10,843Convertible
                  notes (d)
              
              
              **(57,652**
              **)**
              
              (64,286
              )Deferred
                  charges (e)
              
              
              **(27,580**
              **)**
              
              (28,572
              )Foreign
                  exchange translation (d)(ii) and (g)
              
              
              **35,400**
              
              
              35,442Pension
                  plan (h) and (j)(iii)
              
              
              **(4,043**
              **)**
              
              1,884Stock-based
                  compensation (j)(i)
              
              
              **869**
              
              
              -**Shareholders'
                  equity based on US GAAP**
              
              **$**
              **589,950**
              
              $
              455,422




**(a)** **Hotel
        partnerships and corporations:**
  (i)
              The
                  Corporation has minority interests (generally less than 20%) in
                  certain
                  hotel partnerships which, under Canadian GAAP, the Corporation accounts
                  for on a cost basis (see note 1(g) to the Consolidated Financial
                  Statements). Under US GAAP (AICPA Statement of Position 78-9, "Accounting
                  for Investments in Real Estate Ventures"), the Corporation is required
                  to
                  account for its investments in these hotel partnerships using the
                  equity
                  method of accounting, pursuant to which the Corporation records
                  in income
                  its proportionate share of the investee's net earnings or loss.
  During
        2006 and 2005, under Canadian GAAP, the Corporation recorded a write-down
        of,
        and a net gain on the dispositions of, certain investments in hotel partnerships
        and corporations (see notes 12(a) and 12(b) to the Consolidated Financial
        Statements). Under US GAAP, the amount of the write-down and the net gain
        on the
        dispositions differed as the application of equity accounting to certain
        of
        these investments, under US GAAP, resulted in different net book values at
        the
        time of the transactions than under Canadian GAAP.






2




**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)




(ii)
            Prior
                to January 1, 2005, under Canadian GAAP, the Corporation accounted
                for its
                investments in hotel partnerships and corporations, which were acquired
                before May 1, 2003 with the intention that they would be disposed
                of in
                the foreseeable future, by the cost method, irrespective of its percentage
                ownership interest. Effective January 1, 2005, under Canadian GAAP,
                the
                Corporation accounts for these temporary investments based on its
                percentage ownership interest for each investment. Under US GAAP,
                effective January 1, 2002, the Corporation accounts for these
                temporary investments based on its percentage ownership interest
                for each
                investment, as the Financial Accounting Standards Board ("FASB")
                Statement
                of Financial Accounting Standards No. 144, "Accounting for the Impairment
                or Disposal of Long-Lived Assets", eliminated the exception to consolidate
                a temporary controlled subsidiary. As a result, the Corporation
                consolidated one temporary investment and equity accounted one temporary
                investment prior to January 1, 2005 under US
                GAAP.




(iii)
            During
                2004, the Corporation entered into a multi-element arrangement whereby
                the
                Corporation (i) sold its interest in a hotel property, (ii) entered
                into a
                hotel management contract with the purchaser, and (iii) entered into
                a
                guarantee arrangement with the purchaser. Under Canadian GAAP, as
                all
                three elements were entered into with the same party at the same
                time, the
                Corporation applied Abstract EIC-142, ”Revenue Arrangements with Multiple
                Deliverables” (“EIC-142”), issued by the Emerging Issues Committee of the
                Canadian Institute of Chartered Accountants. Pursuant to the requirements
                of EIC-142, the Corporation determined that the sale of the hotel
                property
                should be accounted for as a separate unit of accounting that should
                be
                accounted for in 2004 as the disposal of the hotel property; and
                that the
                hotel management contract and the guarantee arrangement should be
                accounted for as a combined unit of accounting, with the related
                costs and
                revenues being recognized over the term of the hotel management contract
                as management services are
                delivered.




Under
      US GAAP, the Corporation determined that Statement of Financial Accounting
      Standards No. 66, "Accounting for Sales of Real Estate", overrides the US GAAP
      equivalent of EIC-142 (Emerging Issues Task Force (“EITF”) Abstract No. EITF
      00-21, "Revenue Arrangements with Multiple Deliverables") and requires the
      guarantee arrangement to be accounted for as a part of the sale of the hotel
      property. As a result, the Corporation's estimate of the fair value of the
      payments it would likely be required to make under the guarantee arrangement
      was
      accounted for as a reduction of the proceeds received on the sale of the hotel
      property under US GAAP.


3


**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)


(iv)
            Summarized
                balance sheet information of the equity method investments, presented
                on a
                100% basis, is as follows:


**2006**
            
            2005Current
                assets
            
            **$**
            **17,848**
            
            $
            74,607Long-term
                assets, net
            
            
            **7,840**
            
            
            242,356**$**
            **25,688**
            
            $
            316,963Current
                liabilities
            
            **$**
            **7,943**
            
            $
            117,990Long-term
                obligations
            
            
            **10,811**
            
            
            172,154Equity
            
            
            **6,934**
            
            
            26,819**$**
            **25,688**
            
            $
            316,963




During
        2006, the
        Corporation disposed of its ownership interests in three investments, which
        were
        being accounted for by the equity method.
  Summarized
        results of
        operations of the equity method investments, presented on a 100% basis, are
        as
        follows:


**2006**
              
              2005Revenues
              
              **$**
              **161,656**
              
              $
              182,649Expenses
              
              
              **(158,871**
              **)**
              
              (190,308
              )**Net
                  earnings (loss)**
              
              **$**
              **2,785**
              
              $
              (7,659
              )




The
        proportionate taxable income or loss of all hotel partnerships is included
        in
        the taxable income or loss of their respective partners. Accordingly, no
        provisions for income taxes on such entities are included in the above
        statements.






4




**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)
 
   **(b)** **Hotel
        disposition program:**




On
      the
      sale by the Corporation of its equity interest in one of its hotels in 1995,
      C$27.8 million ($23,853) of the gain was deferred for US GAAP purposes, and
      is being recognized in proportion to the cash payments received on the cash
      flow
      bond received as consideration on the sale. The Corporation did not recognize
      any of the deferred gain in 2005 as no principal payments were received on
      the
      cash flow bond. The principal and interest on the cash flow bond were fully
      repaid in December 2006 (see note 3(a) to the Consolidated Financial
      Statements). As a result, a gain on sale of C$20.1 million ($17,728) was
      recognized in 2006 under US GAAP.




**(c)** **Future
      income taxes:**




The
      income tax adjustment from Canadian GAAP to US GAAP results from the differences
      between US GAAP and Canadian GAAP in calculating earnings (loss) before
      income taxes.




**(d)**  **Convertible
      notes:**




**(i)**
            **Convertible
                senior notes:**




In
      2004, FSHI issued $250,000 (principal amount) senior notes convertible into
      Limited Voting Shares (“LVS”) of FSHI for net proceeds of $241,332 (see note
      10(a) to the Consolidated Financial Statements). Under Canadian GAAP, the notes
      were bifurcated into a debt component (representing the principal value of
      a
      bond of $211,754, which was estimated based on the present value of a $250,000
      bond maturing in 2009, yielding 5.33% per annum, compounded semi-annually,
      and
      paying a coupon of 1.875% per annum) and an equity component (representing
      the
      value of the conversion
      feature of the notes). Accordingly, net proceeds were allocated $211,754 to
      long-term obligations
      and $ 36,920 to
      shareholders' equity. The offering expenses and underwriters' commission relating
      to the debt component of the notes of $ 7,019 were
      recorded in "Other assets".




Under
      US GAAP, gross proceeds of $250,000 were recorded as long-term obligations,
      yielding 1.875% per annum. The total offering expenses and underwriters'
      commission relating to the notes of $8,345 were recorded in "Other assets".
      Accordingly, lower interest expense of $6,822 was recognized in 2006 (2005
      -
      $6,572) under US GAAP.















5





**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)







**(ii)**
            **Currency
                and interest rate swap:**




In
      April 2005, FSHI entered into a currency and interest rate swap agreement to
      July 30, 2009, pursuant to which the Corporation had agreed to receive
      interest at a fixed rate of 5.33% per annum on an initial notional amount of
      $215,842 and pay interest at a floating rate of six-month Canadian bankers'
      acceptance, in arrears, plus 1.1% per annum on an initial notional amount of
      C$269.2 million. On July 30, 2009, FSHI had agreed to pay C$311.8 million and
      receive $250,000 under the swap (see note 10(c) to the Consolidated Financial
      Statements). Under Canadian GAAP, FSHI had designated the swap as a fair value
      hedge of the convertible senior notes, which resulted in an effective accounting
      interest rate on the hedged notes of six-month Canadian bankers' acceptances,
      in
      arrears, plus 1.1%. In addition, foreign exchange translation gains and losses
      on the notional amount of the swap were recognized on a monthly basis,
      offsetting the respective monthly translation losses and gains recognized on
      the
      notes.




In
      December 2006, FSHI terminated 80% of the notional amount of the currency
      component of the swap relating to the final exchange of principal by making
      a
      payment of $21,000. Under Canadian GAAP, the loss of C$4.6 million ($4,020)
      was
      deferred for accounting purposes and is being amortized over the period to
      July
      30, 2009, which is the maturity date of the swap agreement.




Under
      the amended swap, FSHI will pay C$62.4 million and receive $50,000 on July
      30,
      2009. There were no other changes to the original swap, including the notional
      amounts relating to the exchange of interest.




As
      a
      result of the partial termination of the swap, FSHI ceased hedge accounting
      as
      at this date under Canadian GAAP. The unrealized loss relating to the remaining
      notional amount of the currency component of the swap of C$1.2 million ($1,005)
      and the unrealized loss relating to the notional amount of the interest
      component of the swap of C$2.1 million ($1,794) were deferred for accounting
      purposes and are being amortized over the period to July 30, 2009 (see note
      10(c) to the Consolidated Financial Statements).




Under
      Canadian GAAP, the amended swap is being marked-to-market on a monthly basis
      with the resulting changes in fair values being recognized in “Other expenses,
      net”.










6







**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)







Under
      US GAAP, Statement of Financial Accounting Standards No. 133, "Accounting for
      Derivative Instruments and Hedging Activities" ("FAS 133") establishes
      accounting and reporting standards for derivatives and hedging. It requires
      that
      all derivatives be recognized as either assets or liabilities at fair value
      and
      establishes criteria for the use of hedge accounting.




Under
      US GAAP, the currency and interest rate swap did not meet the requirements
      of
      FAS 133 in order to hedge the convertible senior notes and, as a result, was
      marked-to-market. Accordingly, interest expense in 2006 decreased by $1,719
      (2005 - increased by $1,188) and foreign exchange gain in 2006 decreased by
      $278
      (2005 - foreign exchange loss increased by $6,511) under US GAAP.





**(iii)**
            **Interest
                rate
                swap:**




In
      connection with the convertible senior notes issued in 2004, FSHI entered into
      an interest rate swap agree ment
      with an initial notional amount of $211,754, pursuant to which FSHI had agreed to
      receive interest at a fixed rate of 5.33% per annum and pay interest at
      six-month LIBOR, in arrears, plus 0.4904%
      (see note 10(b)
      to the Consolidated Financial Statements). Under
      Canadian GAAP,
      FSHI had designated
      the interest rate swap as a fair value hedge of the notes, which resulted in
      an
      effective accounting interest rate on the hedged notes to the date of
      termination of the swap of six- month
      LIBOR, in arrears, plus 0.4904%. Subsequently in 2004, FSHI terminated the
      interest rate swap agreement
      and received proceeds of $9,000 . Under
      Canadian GAAP, the gain of C$9.3 million ($7,383) was deferred and is being
      amortized over the period to July 30, 2009, which would have been the remaining
      swap term,
      as a reduction to interest expense.




Under
      US GAAP, the interest rate swap did not meet the requirements in order to hedge
      the convertible notes
      and, as a result, was being marked-to-market. Accordingly, additional interest
      expense of $1,689 was
      recognized in 2006 (2005 - $ 1,578 )
      under
      US GAAP. In addition, a gain on the marked-to-market adjustments and termination
      of the swap of $9,000 was recognized in 2004 under US GAAP.










7







**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)






**(e)**  **Deferred
      charges:**




The
      Corporation defers expenditures directly related to the negotiation, structuring
      and execution of new management contracts and, if the property is opened,
      amortizes these deferred costs on a straight-line basis generally over a 10-year
      period (see note 1(i) to the Consolidated Financial Statements). Under US GAAP,
      such start-up costs are expensed.




**(f)** **Investment
      in management contracts and investment in trademarks:**




On
      a
      Canadian GAAP basis, amortization expense of approximately $10,400 related
      to
      intangible assets with finite lives was recorded during the year ended December
      31, 2006 (2005 - $6,700). Amortization expense relating to these assets is
      expected to be $7,000 in each of the fiscal years 2007 through
      2011.




**(g)** **Foreign
      exchange translation:**




Under
      US GAAP, the US dollar amount of convertible notes allocated to long-term
      obligations is higher than under Canadian GAAP ((d)(i)). The US dollar monetary
      liabilities are, therefore, higher under US GAAP, which resulted in an increase
      in the foreign exchange gain in 2006, under US GAAP, of $216 (2005 -
      $811).




**(h)** **Pension
      plan:**




Under
      Canadian GAAP, the Corporation, effective January 1, 2000, changed its
      accounting policy relating to the accounting for future employee benefits,
      including pension benefits, to comply with the new Canadian GAAP standard for
      accounting for pension plans. The Corporation adopted the new standard for
      pension benefits retroactively, without restating the financial statements
      of
      prior periods.




Under
      Canadian GAAP, the transitional provisions relating to the new Canadian GAAP
      standard for accounting for pension plans permitted the impact of the change
      of
      the new standard to be accounted for retroactively, without restatement of
      prior
      years' financial statements. As a result, the Corporation recorded in 2000
      a
      charge to retained earnings, representing the difference between the amount
      accrued by the Corporation under the prior accounting standard and the actuarial
      obligation as measured under the new standard, which included the net
      unamortized actuarial losses as at December 31, 1999. Under US GAAP, the net
      unamortized actuarial losses as at December 31, 1999 are amortized, on a
      straight-line basis, over the expected average remaining service life of
      employees expected to receive benefits under the plans.





8







**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)







Effective
      for fiscal years ending after December 15, 2006, under US GAAP, an entity is
      required to recognize the overfunded or underfunded status of a defined benefit
      plan (other than a multiemployer plan) as an asset or liability and recognize
      as
      a component of other comprehensive income, net of tax, the plan’s actuarial and
      experience gains and losses and the prior service costs and credits ((j)(iii)).
      Under Canadian GAAP, the plan’s actuarial and experience gains and losses and
      the prior service costs and credits are included with the funded status of
      the
      plan as an asset or liability.




During
      2005, the Corporation transitioned the majority of its senior executives and
      hotel and resort general managers from an unfunded defined benefit retirement
      plan to a fully funded retirement plan based on a defined contribution format
      (see note 14(b) to the Consolidated Financial Statements). Under US GAAP, the
      net unamortized actuarial losses as at December 31, 1999, relating to the
      employees transitioned out of the defined benefit retirement plan, which
      remained unamortized as at the date of transition, were recognized as an expense
      in 2005.




**(i)** **Basic
      earnings (loss) per share:**




Under
      US GAAP, the Corporation applies the two-class method as required by the EITF
      in
      Abstract No. EITF 03-6, “Participating Securities and the Two-Class Method under
      FASB Statement No. 128”, which requires the basic earnings (loss) per share for
      each class of shares to be calculated assuming that 100% of the Corporation’s
      earnings are distributed as dividends to each class of shares based on their
      contractual rights. For purposes of this calculation, the Corporation has
      allocated earnings to the LVS and Variable Multiple Voting Shares (“VMVS”) based
      on its current dividend policy, which is that dividends declared and paid on
      the
      VMVS are in amounts per share equal to 50% of the dividends per share declared
      and paid on the LVS, notwithstanding that the VMVS rank equally with the LVS
      as
      to distributions on liquidation, dissolution or winding-up of FSHI (see note
      11(a) to the Consolidated Financial Statements).




Under
      Canadian GAAP, such a requirement is not prescribed.










9




**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)




**(j)** **New
      U.S. accounting standards adopted in 2006:**




**(i)**
            **Share-based
                payment:**




Effective
      January 1, 2006, the Corporation adopted Statement of Financial Accounting
      Standards No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”), issued by
      the FASB, using the modified prospective application, which is one of the
      transitional alternatives permitted under FAS 123R. Under the modified
      prospective application, FAS 123R applies to new stock options granted and
      stock
      options modified, repurchased or cancelled on or after January 1, 2006, and
      the
      portion of stock options for which the requisite service has not been rendered
      that are outstanding as of January 1, 2006. Options granted, or modified, on
      or
      after January 1, 2006 are measured at the grant-date fair value and recognized
      as stock compensation expense over the option’s requisite service period in
      accordance with the provisions of FAS 123R, with a corresponding increase to
      contributed surplus. When these stock options are exercised, the proceeds,
      together with the amount recorded in contributed surplus, are recorded in
      capital stock. Options for which the requisite service has not been rendered
      that are outstanding as of January 1, 2006 are measured at the grant-date fair
      value as previously determined under Statement of Financial Accounting Standards
      No. 123, as originally issued (“FAS 123”), adjusted for the estimated number of
      outstanding options for which the requisite service is not expected to be
      rendered. Under FAS 123, forfeitures were accounted for as they occur. Under
      the
      modified prospective application, prior periods are not restated.




As
      permitted under FAS 123, share appreciation rights were accounted for using
      the
      intrinsic value method. Under FAS 123R, share appreciation rights are accounted
      for using the fair value-based method.




FAS
      123R eliminated an entity’s ability to account for share-based compensation
      transactions using the intrinsic value method of accounting in APB Opinion
      No.
      25, “Accounting for Stock Issued to Employees”, which was permitted under FAS
      123. Compared to the intrinsic value method of accounting in APB Opinion No.
      25,
      the modified prospective application of adopting FAS 123R effective January
      1,
      2006 resulted in an increase in stock-based compensation expense of $6,785,
      a
      decrease in net earnings of $6,785 and a decrease in basic and diluted earnings
      per share of $0.19 and $0.16, respectively, in 2006. Adoption of FAS 123R did
      not have any impact on cash provided by operating activities based on US GAAP
      or
      cash used in financing activities based on US GAAP in 2006.





10





**FOUR
          SEASONS HOTELS INC.**
 **Reconciliation
          to United States Generally Accepted Accounting Principles
          (continued)**
  Years
          ended December 31, 2006 and 2005
 (In
          thousands of US dollars except per share amounts)


Under
      Canadian GAAP, stock options granted or modified on or after January 1, 2003
      are
      accounted for under the Canadian Institute of Chartered Accountants Handbook
      Section 3870, “Stock-Based Compensation and Other Stock-Based Payments”, with
      prior option grants accounted for using the settlement method. As a result,
      additional stock compensation expense of $4,480 was recorded under US GAAP
      in
      2006.




In
      2005, stock options were accounted for in accordance with Accounting Principles
      Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”,
      under US GAAP. Had compensation for the Corporation’s stock-based compensation
      plan been determined based on the fair value at the grant dates for stock
      options issued under the plan after December 31, 1994, the Corporation’s US GAAP
      net loss, US GAAP basic loss per share and US GAAP diluted loss per share,
      for
      2005, would have been adjusted to the pro forma amounts indicated
      below:


2005Net
                  loss based on US GAAP, as reported
              
              $
              (23,157
              )Deduct
                  pro forma stock option expense
              
              
              (11,415
              )Pro
                  forma net loss
              
              $
              (34,572
              )Loss
                  per share:Basic,
                  as reported
              
              $
              (0.63
              )Basic,
                  pro forma
              
              
              (0.94
              )Diluted,
                  as
                  reported
              
              
              (0.63
              )Diluted,
                  pro
                  forma
              
              
              (0.94
              )








11


**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)




**(ii)** **Real
      estate time-sharing transactions:**




The
      FASB issued Statement of Financial Accounting Standards No. 152, "Accounting
      for
      Real Estate Time-Sharing Transactions: an Amendment of FASB Statements No.
      66
      and 67" ("FAS 152"), which amends FASB Statement No. 66, "Accounting for Sales
      of Real Estate", to reference accounting and reporting guidance for real estate
      time-sharing transactions that is provided in AICPA Statement of Position 04-02,
      "Accounting for Real Estate Time-Sharing Transactions" ("SOP 04-02"). FAS 152
      also amends FASB Statement No. 67, "Accounting for Costs and Initial Rental
      Operations of Real Estate Projects" ("FAS 67"), so that the guidance in FAS
      67
      about incidental operations and costs incurred to sell real estate projects
      does
      not apply to real estate time-sharing transactions. The implementation of both
      FAS 152 and SOP 04-02 effective January 1, 2006 did not have an impact on the
      Reconciliation to United States Generally Accepted Accounting Principles of
      the
      Corporation for the year ended December 31, 2006.




**(iii)**
            **Defined
                benefit pension and other postretirement
                plans:**




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“FAS
      158”), which requires an entity to (i) recognize the overfunded or underfunded
      status of a defined benefit plan (other than a multiemployer plan), measured
      as
      the difference between the fair value of the plan assets and the benefit
      obligation, as an asset or liability; and recognize as a component of other
      comprehensive income, net of tax, the plan’s actuarial and experience gains and
      losses and the prior service costs and credits (the “recognition provisions”);
      and (ii) measure the funded status of a defined benefit plan as of the year-end
      date (the “measurement provisions”). The implementation of the recognition
      provisions of FAS 158 resulted in additional pension liability of $5,854
      recorded on the balance sheet and a charge, net of taxes, of $4,402 to
      accumulated other comprehensive income under US GAAP. The measurement provisions
      of FAS 158 will be effective for fiscal years ending after December 15, 2008.
      The Corporation has not yet determined the impact of adopting the measurement
      provisions of FAS 158.




Under
      Canadian GAAP, the plan’s actuarial and experience gains and losses and the
      prior service costs and credits are included with the funded status of the
      plan
      as an asset or liability.







12






**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)







**(iv)**  **Effects
      of prior year misstatements:**




In
      September 2006, the staff of the Securities and Exchange Commission (“SEC”)
      issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
      Misstatements when Quantifying Misstatements in Current Year Financial
      Statements” (“SAB 108”), which addresses staff’s views on how uncorrected errors
      in previous years should be considered when quantifying errors in current year
      financial statements. SAB 108 requires SEC registrants to consider the effect
      of
      all carryover and reversing effects of prior year misstatements when quantifying
      errors in current year financial statements. SAB 108 does not change the SEC
      staff's previous guidance on evaluating the materiality of errors. The adoption
      of SAB 108, using the dual method approach for quantifying errors in financial
      statements effective January 1, 2006, did not have an impact on the
      Corporation’s Reconciliation to United States Generally Accepted Accounting
      Principles for the year ended December 31, 2006.




Canadian
      GAAP does not prescribe any particular method of evaluating uncorrected
      errors.




**(k)**  **Recent
      U.S. accounting standards issued but not yet adopted:**




**(i)**  **Uncertainty
      in income taxes:**




In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”), which
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with FASB Statement No. 109,
“Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. FIN 48 also
      provides guidance on derecognition, classification, interest and penalties,
      accounting in interim periods, disclosure, and transition. The evaluation of
      a
      tax position in accordance with FIN 48 is a two-step process. The first step
      is
      recognition where the enterprise determines whether it is more likely than
      not
      that a tax position will be sustained upon examination, including resolution
      of
      any related appeals or litigation processes, based on the technical merits
      of
      the position. The second step is measurement where the tax position to be
      recognized is measured as the largest amount of benefit that is greater than
      50
      percent likely of being realized upon ultimate settlement. FIN 48 is effective
      for fiscal years beginning after December 15, 2006. The Corporation has not
      yet
      determined the impact of the adoption of FIN 48.


13


**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)







**(ii)** **Fair
      value measurements:**




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (“FAS 157”), which defines fair value,
      establishes a framework for measuring fair value in GAAP, and requires enhanced
      disclosures about fair value measurements. FAS 157 applies when other accounting
      pronouncements require or permit fair value measurements; it does not require
      new fair value measurements. FAS 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and interim periods
      within those years. The impact of the adoption of FAS 157 will depend upon
      the
      fair value measurements required at the time of adoption.




**(iii)**
            **Conversion
                of an instrument that became convertible upon the issuer's exercise
                of a
                call option:**




The
      FASB ratified a consensus reached by the EITF in Abstract No. EITF 05-1,
      "Accounting for the Conversion of an Instrument That Became Convertible upon
      the
      Issuer's Exercise of a Call Option", in which the EITF reached a consensus
      that
      the issuance of equity securities to settle a debt instrument, which became
      convertible on the issuer's exercise of a call option, should be accounted
      for
      as a conversion if the debt instrument contained a substantive conversion
      feature as of its issuance date. Absent a substantive conversion feature, it
      should be accounted for as a debt extinguishment. The consensus is effective
      for
      periods beginning after June 28, 2006, with early application permitted in
      periods for which financial statements have not yet been issued. Retrospective
      application to previously issued financial statements is not permitted. The
      Corporation does not believe that the accounting for the conversion of its
      convertible senior notes as a result of the exercise of its call option would
      be
      different under Canadian and US GAAP.




**(l)** **Consolidated
      statements of cash flows:**




(i)
            For
                Canadian GAAP purposes, the Corporation's consolidated statements
                of cash
                flows only show the total change in non-cash operating assets and
                liabilities. US GAAP requires the statements to show the details
                of
                changes in non-cash operating assets and liabilities.




In
      addition, the above adjustments to US GAAP earnings relating to deferred charges
      (e) would also affect cash provided by operating activities and cash used in
      investing activities.


14




**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)







Under
      Canadian GAAP, the amount paid on partial termination of the currency and
      interest rate swap is recorded as cash used in operating activities. Under
      US
      GAAP, the amount paid is recorded as cash used in investing activities
      ((d)(ii)).




As
      a
      result, cash provided by operating activities would be presented as follows
      on a
      US GAAP basis:


**2006**
              
              2005Net
                  earnings (loss) based on US GAAP
              
              **$**
              **81,946**
              
              $
              (23,157
              )Adjustments:Stock-based
                  compensation expense
              
              
              **9,735**
              
              
              2,564Depreciation
                  and amortization
              
              
              **11,562**
              
              
              8,456Unrealized
                  foreign exchange loss (gain)
              
              
              **(1,281**
              **)**
              
              30,332Provision
                  for
                  loss
              
              
              **3,074**
              
              
              32,284Gain
                  on
                  disposition of assets
              
              
              **(28,092**
              **)**
              
              (10,675
              )Loss
                  on
                  retirement benefit plan transition
              
              
              **-**
              
              
              35,467Equity
                  loss (gain) and distributions from hotel investments
              
              
              **(447**
              **)**
              
              1,516Future
                  income taxes
              
              
              **5,311**
              
              
              (14,395
              )Other
              
              
              **(217**
              **)**
              
              2,741Amount
                  paid relating to retirement benefit plan transition
              
              
              **-**
              
              
              (36,029
              )Change
                  in non-cash working capital:Accounts
                  and
                  notes receivable
              
              
              **4,739**
              
              
              (977
              )Inventory
              
              
              **(7,402**
              **)**
              
              (212
              )Prepaid
                  expenses and other assets
              
              
              **(405**
              **)**
              
              (426
              )Accounts
                  payable and accrued liabilities
              
              
              **17,835**
              
              
              (734
              )Foreign
                  currency translation effect on non-cash working capital
              
              
              **891**
              
              
              (2,206
              )**Cash
                  provided by operating activities based on US GAAP**
              
              **$**
              **97,249**
              
              $
              24,549






15




**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)


(ii) As
        a
        result of the above adjustments, the major captions on the Corporation's
        consolidated statements of cash flows on a Canadian GAAP basis are reconciled
        to
        a US GAAP basis as follows:


**2006**
              
              2005**Cash
                  provided by operating activities based on Canadian
                  GAAP**
              
              **$**
              **77,972**
              
              $
              26,477Amount
                  paid relating to partial termination of currency and interest rate
                  swap
              
              
              **21,000**
              
              
              -Deferred
                  charges
              
              
              **(1,723**
              **)**
              
              (1,928
              )**Cash
                  provided by operating activities based on US GAAP**
              
              **$**
              **97,249**
              
              $
              24,549**Cash
                  provided by (used in) investing activities based on Canadian
                  GAAP**
              
              **$**
              **6,587**
              
              $
              (10,276
              )Amount
                  paid relating to partial termination of currency and interest rate
                  swap
              
              
              **(21,000**
              **)**
              
              -Deferred
                  charges
              
              
              **1,723**
              
              
              1,928Disposition
                  of temporary controlled subsidiary
              
              
              **-**
              
              
              (3,131
              )**Cash
                  used in investing activities based on US GAAP**
              
              **$**
              **(12,690**
              **)**
              $
              (11,479
              )**Cash
                  provided by financing activities based on Canadian and US
                  GAAP**
              
              **$**
              **29,828**
              
              $
              3,943**Increase
                  in cash and cash equivalents based on US GAAP**
              
              **$**
              **114,387**
              
              $
              17,013






16




**FOUR
        SEASONS HOTELS INC.**
 **Reconciliation
        to United States Generally Accepted Accounting Principles
        (continued)**
  Years
        ended December 31, 2006 and 2005
 (In
        thousands of US dollars except per share amounts)
 
  **(m)**  **Comprehensive
        income:**
  Statement
        of Financial Accounting Standards No. 130 ("FAS 130") establishes standards
        under US GAAP for reporting and displaying comprehensive income and its
        components (revenues, expenses, gains and losses) in a full set of
        general-purpose financial statements. FAS 130 requires that all items that
        are
        required to be recognized under accounting standards as components of
        comprehensive income be reported in a financial statement that is displayed
        with
        the same prominence as other financial statements.
  FAS
        130
        requires companies to (i) classify items of other comprehensive income by
        their
        nature in a financial statement, and (ii) display the accumulated balance
        of
        other comprehensive income separately from capital stock, contributed surplus
        and retained earnings in the shareholders' equity section of the balance
        sheet.
  The
        statements of comprehensive income (loss) for the years ended December 31,
        2006
        and 2005 would be presented as follows on a US GAAP basis:
 **2006**
              
              2005Net
                  earnings (loss) based on US GAAP
              
              **$**
              **81,946**
              
              $
              (23,157
              )Other
                  comprehensive gain (loss), net of income taxes:Foreign
                  currency translation gain (loss)
              
              
              **16,876**
              
              
              (12,411
              )**Comprehensive
                  income (loss) based on US GAAP**
              
              **$**
              **98,822**
              
              $
              (35,568
              )
  The
        accumulated
        other comprehensive income balances for the years ended December 31, 2006
        and 2005 would be presented as follows on a US GAAP basis:
 Balance,
                  December 31, 2004
              
              $
              73,059Foreign
                  currency translation loss
              
              
              (12,411
              )Balance,
                  December 31, 2005
              
              
              60,648Foreign
                  currency translation gain
              
              
              16,876Pension
                  liability - adoption of FAS 158
              
              
              (4,402
              )**Balance,
                  December 31, 2006**
              
              **$**
              **73,122**
 
 
 17