**Exhibit
      99.1**









































**FOUR
      SEASONS HOTELS INC.**














**FORM
      51-102F2**


**ANNUAL
      INFORMATION FORM**

















**March** **9,
      2007**























**Table
      of Contents**









Page**Business
                of Four Seasons**
            
            
            **1****Management
                Operations**
            
            
            **2**Hotels
                and Resorts
            
            
            2Management
            
            
            2Sales,
                Marketing, Advertising and Reservations
            
            
            3Branded
                Residential Properties
            
            
            4Management
                Resources
            
            
            4Employees
            
            
            4**Ownership
                Operations**
            
            
            **5****Intellectual
                Property**
            
            
            **5****Business
                and Growth Strategy**
            
            
            **5**Growth
                from Existing Properties
            
            
            6New
                Hotel and Resort Opportunities
            
            
            6Branded
                Residential Properties
            
            
            7Capital
                Deployment
            
            
            7**Competitive
                Strengths**
            
            
            **7**Strong
                Brand Recognition
            
            
            7Superior
                Hotel
                Operating Results
            
            
            8Strategic
                Relationships
            
            
            8Management
                Focus
            
            
            8Global
                Presence
            
            
            8Strong
                Management Team
            
            
            9**Four
                Seasons Portfolio**
            
            
            **9**Description
                of
                Hotels and Resorts
            
            
            9Properties
                under Construction or Development
            
            
            13**Summary
                Hotel Operating Data**
            
            
            **15****Operating
                Risks**
            
            
            **17**Geopolitical,
                Economic and Lodging Industry Conditions
            
            
            17Competition
            
            
            17Dependence
                on
                Management Agreements
            
            
            18Dependence
                on
                Property Owners
            
            
            19Risk
                Associated with Expansion, Growth and New Construction
            
            
            19Investments
                in
                and Advances to Managed and Owned Properties
            
            
            19Debt
                Rating Risks
            
            
            20Government
                Regulation
            
            
            20Political
                Risk
            
            
            21Insurance
            
            
            21Legal
                Proceedings
            
            
            21Currency
                Exposure
            
            
            22Seasonality/Quarterly
                Predictability
            
            
            22Intellectual
                Property
            
            
            23Risks
                Associated with the Four Seasons Branded Residential
                Business
            
            
            23Dependence
                on
                Key Employees
            
            
            23**Material
                Contracts**
            
            
            **23****Corporate
                Information**
            
            
            **24**Description
                of
                Share Capital
            
            
            24Dividends
            
            
            24Rights
                on Dissolution
            
            
            24Voting
                Rights
            
            
            24Take-Over
                Bid
                Protection
            
            
            25Conversion
            
            
            25Modifications,
                Subdivisions and Consolidation
            
            
            26Sale
                of
                Control Agreement
            
            
            26





(i)











PageTransfer
                Agent
                and Registrar
            
            
            26Market
                for Securities
            
            
            26Dividend
                Policy
            
            
            27Convertible
                Senior Notes
            
            
            27Ratings
            
            
            28**Directors
                and Officers**
            
            
            **28****Corporate
                Governance**
            
            
            **31**Approach
                to
                Governance
            
            
            31Code
                of
                Business Conduct and Ethics
            
            
            32The
                Board of Directors
            
            
            32The
                Role of the Board
            
            
            32Board
                Composition
            
            
            33Board
                Process
            
            
            34Board
                Assessment
            
            
            36Committees
                of
                the Board
            
            
            36Composition
                of
                Committees
            
            
            36Audit
                Committee
            
            
            37Pre-Approval
                Policies and Procedures
            
            
            39Audit
                and Audit-Related Fees
            
            
            39Tax
                Fees
            
            
            40All
                other Fees
            
            
            40Human
                Resources Committee
            
            
            40Corporate
                Governance Committee
            
            
            40Special
                Committee
            
            
            41Communicating
                to Shareholders
            
            
            41**Experts**
            
            
            **42****Corporate
                Chart**
            
            
            **42****Additional
                Information**
            
            
            **42**










(ii)





**Forward-Looking
      Statements**




This
      document 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; similar statements concerning
      anticipated future events, results, circumstances, performance or expectations
      that are not historical facts; and statements relating to the proposal to take
      Four Seasons Hotels Inc. private and anticipated financial results. 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 management’s discussion and analysis and in this
      document. (See discussion under “Operating Risks” at page 17 .)
      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. In
      addition, actual results and developments relating to the proposal may differ
      materially from those contemplated by the statements herein, due to, among
      other
      things, the risks that the parties will not proceed with the transaction, that
      the terms of the transaction will differ from those that are currently
      contemplated, and that the transaction will not be successfully completed for
      any reason (including the failure to obtain the required approvals or clearances
      from regulatory authorities and the timing of completion). All forward-looking
      statements in this document 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
      Hotels Inc. (“ FSHI ”),
      its financial or operating results or its securities or any of the properties
      that we manage or in which we may have an interest.







*All
      amounts disclosed in this annual information form (including amounts for prior
      periods) are in US dollars unless otherwise noted. Our consolidated financial
      statements are prepared in accordance with Canadian generally accepted
      accounting principles.*




**Arrangement
      Transaction**




*On
      February 12, 2007, we announced that we had entered into a definitive
      acquisition agreement (the “Acquisition Agreement”) to implement a previously
      announced proposal to take FSHI private at a price of $82.00 cash per Limited
      Voting Share (the “Arrangement Transaction”). Following completion of the
      transaction, FSHI would be owned by affiliates of Cascade Investment, L.L.C.
      (“Cascade”) (an entity owned by William H. Gates III), Kingdom Hotels
      International (“Kingdom”), a company owned by a trust created for the benefit of
      His Royal Highness Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud and his
      family, and Isadore Sharp.* *The
      transaction, which would be implemented by way of a court-approved plan of
      arrangement under Ontario law, has been approved unanimously by our Board (with
      interested directors abstaining) following the report and favourable, unanimous
      recommendation of the Special Committee of independent directors. In doing
      so,
      our Board determined that the Arrangement Transcation is fair to the
      shareholders of FSHI (other than Mr. Sharp, Kingdom, Cascade, their respective
      directors and senior officers and any other “related parties”, “interested
      parties” and “joint actors”) and in the best interests of FSHI and authorized
      the submission of the Arrangement Transaction to shareholders of FSHI for their
      approval at a special meeting of shareholders. Our Board also has determined
      unanimously (with interested directors abstaining) to recommend to FSHI
      shareholders that they vote in favour of the Arrangement
      Transaction.*




*As
      previously* *disclose* *d,
      upon completion of the* *Arrangement
      Transaction, Triples Holdings Limited (which is Mr. Sharp’s family holding
      company) would hold a significant continuing interest in FSHI and Mr. Sharp
      would, as Chairman and Chief Executive Officer, continue to be directly involved
      in all aspects of the operations and the strategic direction of Four Seasons,
      which will remain headquartered in Toronto.* *If
      the Arrangement Transaction is completed, Mr. Sharp will be entitled to realize
      proceeds of approximately $289 million related to a long-term incentive
      agreement that was approved by FSHI’s shareholders before it was put in place in
      1989. (See Description of Share Capital - Sale of Control
      Agreement.)*







(iii)










*A
      meeting of shareholders to consider the Arrangement Transaction is
      anticipated to take place in April. To be implemented, the Arrangement
      Transaction will require approval by two-thirds of the votes cast by
      holders of Limited Voting Shares, voting separately as a class, and approval
      by
      Triples, as the sole holder of the Variable Multiple Voting Shares, voting
      separately as a class. Kingdom, Cascade and Triples have agreed to vote their
      Limited Voting Shares and Variable Multiple Voting Shares to approve the
      Arrangement Transaction. The Arrangement Transaction also will require
      approval by a simple majority of the votes cast by holders of Limited Voting
      Shares, other than Mr. Sharp, Kingdom, Cascade, their respective directors
      and
      senior officers and any other “related parties”, “interested parties” and “joint
      actors”. In addition, the Arrangement Transaction will require approval by
      the Ontario Superior Court of Justice. The Arrangement Transaction also
      will be subject to certain other customary conditions, including receipt of
      a
      limited number of regulatory approvals. The Arrangement Transaction is not
      subject to any financing condition, and FSHI has been advised that commitments
      for the required debt financing have been received. FSHI has received from
      Cascade and Kingdom a limited guaranty of certain obligations of FS Acquisition
      Corp. (the “Purchaser”), the newly-formed company that is the purchaser under
      the Acquisition Agreement. There are certain risks inherent in the Arrangement
      Transaction which are described in the management information circular prepared
      in connection with the special meeting of shareholders, a copy of which will
      be
      available as part of FSHI’s public filings at www.sedar.com and www.sec.gov.
      Among other things, there are risks that the parties will not proceed with
      the
      Arrangement Transaction, that the ultimate terms of the Arrangement Transaction
      will differ from those that currently are contemplated, and that the Arrangement
      Transaction will not be successfully completed for any reason (including the
      failure to obtain the required approvals or clearances from regulatory
      authorities).*




*Copies
      of the Acquisition Agreement and certain related documents have been filed
      with
      Canadian securities regulators and with the United States Securities and
      Exchange Commission and will be available at the Canadian SEDAR website at
      www.sedar.com and at the U.S. Securities and Exchange Commission’s website at
      www.sec.gov. The management information circular in connection with the special
      meeting of shareholders to consider the Arrangement Transaction is
      currently expected to be mailed to shareholders on or about the week of March
      12, 2007.*




*It
      is anticipated that the Arrangement Transaction, if approved by shareholders,
      will be completed in the second quarter of 2007.*




*Given
      the current Arrangement Transaction, it is likely there will be no annual
      meeting and therefore no management information circular in connection
      therewith. As a result, some of the items usually included in the management
      information circular for the annual meeting will instead be included in the
      annual information form this year.*




***This
      annual information form reflects the historical operations of FSHI and is
      drafted from the perspective of FSHI as a continuing public
      entity.***

















(iv)





**Four
      Seasons Hotels Inc.**




Four
      Seasons Hotels Inc. was incorporated under the *Business
      Corporations Act* (Ontario) on January 6, 1978.1 Our
      registered and principal office is located at 1165 Leslie Street, Toronto,
      Ontario, Canada M3C 2K8. Our Limited Voting Shares are listed on the Toronto
      Stock Exchange under the symbol FSH and on the New York Stock Exchange under
      the
      symbol FS.




Business
      of Four Seasons




Four
      Seasons is one of the world’s leading managers of luxury hotels and resorts. We
      endeavour to offer business and leisure travelers the finest accommodations
      and
      experiences beyond compare in each destination in which we operate.




Four
      Seasons has a portfolio of 74 luxury hotel and resort properties (containing
      approximately 18,090 guest rooms), several of which include a residential
      component. These properties are operated primarily under the Four Seasons brand
      name in principal cities and resort destinations in 31 countries in North
      America, the Caribbean, Europe, Asia, Australia, the Middle East and South
      America. In addition, 30 properties are under construction or development in a further 13 countries
      around the world. Of these, 20 new properties are to include a residential
      component. (For a chart summarizing the hotels, resorts, and Four Seasons
      branded residential projects that are managed by us and under construction
      or
      development to be managed by us, see “Four Seasons Portfolio”.)




We
      earn income primarily from our management operations. Under our management
      agreements, we generally oversee, as agent for the property owner, all aspects
      of the day-to-day operations of each hotel and resort. In addition, we generally
      provide owners with advice with respect to the design, construction and
      furnishing of new or renovated hotels, resorts and residences, assistance with
      the refurbishment of hotels and resorts, support and advice with respect to
      information technology systems and database applications, and a centralized
      purchasing system for goods. For providing these services, we generally receive
      a variety of fees, comprised of hotel management fees, including a base fee
      and
      an incentive fee, other fees including purchasing and pre-opening fees, and
      reimbursable costs including a sales and marketing charge, an advertising charge
      and a reservation charge. The base fee usually is calculated as a percentage
      of
      the total revenues of the property. Incentive fees typically are based on the
      property’s profitability. (See “Management Operations”.)




To
      further capitalize on the value of the Four Seasons brand name, we license
      and
      manage Four Seasons branded residential projects, including whole ownership
      and
      fractional ownership. We generally receive fees for the use of the Four Seasons
      brand in connection with the sale of the interests in these projects. In
      addition, we receive fees from the owners of the interests for services provided
      in the ongoing management of these projects.




As
      part of our ongoing business, we make investments in, or advances in respect
      of
      or to owners of, properties with a view to obtaining new management agreements
      or enhancing existing management agreements where we believe the overall returns
      will justify the investment or advance. We generally seek to limit our total
      long-term capital exposure to no more than 20% of the total equity required
      for
      a





1The
      articles of Four Seasons Hotels Inc. were restated in 1986 to consolidate prior
      amendments and were amended in 1989 to subdivide each Subordinate Voting Share
      and each Multiple Voting Share on a 2:1 basis and to create an unlimited number
      of special shares designated as First Preference Shares and Second Preference
      Shares. In 1996 the articles were further amended to re-designate the
      Subordinate Voting Shares as Limited Voting Shares and to create 4,171,924
      special shares designated as Variable Multiple Voting Shares, which replaced
      and
      have substantially the same rights, privileges, restrictions and conditions
      as
      did the Multiple Voting Shares, except that the number of votes per Variable
      Multiple Voting Share generally increases as Limited Voting Shares are issued
      and dividends on the Variable Multiple Voting Shares will be in an amount per
      share equal to 50% of the dividends per Limited Voting Share.













property
      and typically can choose to have our equity interest diluted if additional
      capital is required. We attempt to structure our equity interests separately
      from our management interests to enable us to dispose of equity interests as
      opportunities arise, without affecting our management interests.




**Management
      Operations**




Hotels
      and Resorts




*Management*




We
      are principally a management company. We generally manage our hotels and resorts
      on behalf of our property owners pursuant to separate management agreements
      for
      each property. Under our management agreements, we generally oversee, as agent
      for the property owner, all aspects of the day-to-day operations of the hotels
      and resorts, including sales and marketing, advertising, reservations,
      accounting, purchasing, budgeting and the hiring, training and supervising
      of
      staff. In addition, we generally provide owners with advice with respect to
      information technology systems and development of certain database applications,
      as well as, advice with respect to the design, construction and furnishing
      of
      new or renovated hotels, resorts and residences. We also provide a centralized
      purchasing system for goods. We generally perform these services within the
      guidelines contained in annual operating and capital plans that are submitted
      to
      the owners of the hotels and resorts during the last quarter of the preceding
      year for their review and approval. For providing these services, we generally
      receive a variety of fees, including management fees (comprised of a base fee
      and an incentive fee), other fees (including royalty and management fees from
      our residential business, fees we earn during the development of our hotels
      and
      resorts and other miscellaneous fees) and reimbursed costs (including a sales
      and marketing charge, an advertising charge and a reservation
      charge).




We
      currently have the ability to earn incentive fees in virtually
      all2 of
      the hotels and resorts that we manage. Incentive fees are based on the profits
      of the hotel or resort as determined in accordance with the relevant management
      agreement. In 2006, incentive fees were earned from 49 of our management
      agreements, as compared to 45 3  of
      our management agreements in 2005.




We
      generally supervise purchasing at the hotels and resorts that we manage to
      maintain a uniform quality of goods purchased and to control hotel operating
      costs. We maintain a centralized purchasing system and receive a fee generally
      calculated as a percentage of the cost of goods purchased when this system
      is
      utilized by the hotels and resorts under management.




Although
      the hotel and resort owners are generally responsible for financing and managing
      the development of the hotels and resorts, we typically play a significant
      pre-opening role. We provide advice with respect to the design, construction
      and
      fitting out specifications of the hotels and resorts during the development
      stage to ensure that they meet Four Seasons’ standards, and we earn fees for
      these pre-opening services. We may also assist owners in connection with the
      refurbishment of the hotels and resorts after opening in return for a
      refurbishing fee.




Under
      our management agreements, the hotel or resort owner is responsible for funding
      the hotel’s or resort’s operating costs, capital expenditures and working
      capital requirements, including the salaries and benefits of all employees.
      The
      owner typically is required to set aside a percentage of the gross revenue
      of
      the hotel or resort each year as a reserve for capital expenditures. Those
      percentages typically range





2We
      have
      this ability in 70 of the 74 hotels and resorts that we manage.


3Includes
        The
        Pierre in New York and Four Seasons Hotel Newport Beach, which are no longer
        managed by Four Seasons.





-
            2
            -





from
      3% to 5% of hotel or resort annual gross operating revenues. We propose an
      operating plan and capital expenditure budget to the owner for approval on
      an
      annual basis. All structural changes, major refurbishing programs and major
      repairs generally require the separate approval of owners prior to
      implementation and may be carried out by us or a third party.




Total
      fee revenues are geographically diversified around the world. The United States
      is the only geographic segment that contributed more than 40% of all our fee
      revenues in 2006 and 2005. The diversification of our fee revenues has increased
      significantly over the past 10 years. With the opening of hotels and resorts
      currently under construction and development around the world, we expect
      diversification of our fee revenues to continue in the future.




*Sales,
      Marketing, Advertising and Reservations*




We
      are responsible for the development of overall sales and marketing strategies
      for our portfolio of branded hotels and resorts, which includes enhancing
      international awareness of the Four Seasons brand and developing local market
      potential for specific hotels and resorts. Our marketing efforts are coordinated
      through our headquarters in Toronto and are exclusively targeted at the luxury
      segment of the market worldwide. Our customer mix consists of business
      travelers, groups (including corporate and incentive), and leisure travelers.
      These customer segments accounted for an estimated 32%, 30% and 38%,
      respectively, of total room nights in 2006. ** Our
      corporate marketing staff oversees planning and implementation of hotel and
      resort marketing programs and also the training and development of the global
      sales force and the hotel sales and marketing staff. We also provide
      supplementary oversight sales support to the three Regent hotels in our system
      (see “Intellectual Property”), with core marketing services for the Regent brand
      being provided by Carlson Hospitality Group of Minneapolis.




We
      have a global sales force of approximately 55 sales professionals in 15 offices
      worldwide located in Atlanta, Chicago, Dallas, Dubai, Frankfurt, Hong Kong,
      London, Los Angeles, New York, Paris, San Francisco, Singapore, Sydney, Tokyo,
      and Washington, D.C. Key objectives of our sales force are to attract groups
      and
      corporate business travelers for the hotels and resorts, as well as to establish
      personal contact with nationally recognized travel agencies. In addition, a
      total of approximately 480 sales professionals are employed locally at the
      hotels and resorts that we manage. Our local marketing strategy is concentrated
      on developing rooms and food and beverage business for hotels and resorts
      locally and regionally, and promoting the hotel or resort as a centre of
      community activity with a view to increasing revenues from local
      sources.




We
      also provide an international corporate advertising program that develops and
      places advertising for Four Seasons branded hotels and resorts and oversees
      promotional programs that benefit all the properties. Our advertisements are
      designed to enhance consumer awareness of our luxury services and the value
      that
      such services provide to the business and leisure traveler.




We
      staff one reservation centre for all Four Seasons branded hotels and resorts,
      while Carlson Hospitality Group provides core reservation services for our
      Regent hotels. In addition, our global reservation network provides reservation
      services in the local language in 33 markets in North America, Asia/Pacific,
      Europe and the Middle East. Electronic reservations are another key part of
      our
      global distribution network, as our reservation systems are fully integrated
      with international airline booking systems. The Internet is a growing
      distribution channel which is supported by our website - *www.fourseasons.com* .
      Our website accepts on-line reservations and also refers guests to other
      reservation channels.




We
      receive corporate sales and marketing charges, centralized reservation service
      charges and corporate advertising charges from our hotels and resorts, thereby
      enabling us to recover substantially all of the costs of providing these
      services.









-
            3
            -





**Branded
      Residential Properties**




We
      receive royalty fees for the use of our name in association with the sale of
      Four Seasons branded real estate. These royalties are typically based on the
      sales proceeds of the residences sold. We also manage Four Seasons branded
      and
      serviced residential projects pursuant to management agreements under which
      we
      oversee the management of the day-to-day operations of the completed projects
      in
      return for ongoing management fees from the owners of interests in these
      projects.




**Management
      Resources**




Each
      of our properties is managed by a General Manager and supported by a Regional
      Vice President (who is also a General Manager), and other corporate Vice
      Presidents. The size of each property’s management team and its hourly staff
      varies, based on the size and business volume of the particular property. These
      management teams monitor staffing levels on an ongoing basis to optimize service
      standards and labour productivity at the properties.




A
      General Manager is responsible for supervising the day-to-day operations of
      a
      single property, is a full-time employee at that property, and is compensated
      in
      part based on the operational performance of that property. Our General Managers
      report directly to one of 17 Regional Vice Presidents or directly to the Senior
      Vice President, Operations - North America, the President, Hotel Operations
      -
      Europe, Middle East and Africa, or the Senior Vice President, Operations -
      Asia/Pacific. Area Directors of Finance and Regional IT Directors, each of
      whom
      is also a full-time employee at a property that we manage, devote a portion
      of
      their time to regional activities and providing assistance to other properties
      that we manage. Corporate Area Directors or Vice Presidents of Human Resources
      and Marketing complete each regional support team. We believe that our regional
      management structure is a key component in our ability to deliver and maintain
      the highest and most consistent standards of product quality and service at
      each
      of our properties in a cost effective manner, especially as we continue to
      expand globally.




From
      the corporate level, we provide each of our properties with the benefits of
      management services delivered by our network of highly experienced executives,
      corporate personnel and area managers. We also provide, or arrange for the
      provision of, assistance and training to each property’s employees for
      administration, operations, rooms and guest service, reservations, maintenance
      and engineering, human resources and benefits. Other services arranged by us
      include assistance with accounting, tax, legal, risk management, treasury,
      information technology, internal audit and credit services.




**Employees**




We
      directly employ and are financially responsible for approximately 515 individuals at the various corporate offices, the worldwide sales offices and
      the worldwide central reservations office. In addition, there are approximately
      32,800 employees located at the 74 hotels and resorts that we manage, several
      of
      which include a residential component. All costs relating to property-based
      employees, including wages, salaries and health and insurance benefits, are
      the
      responsibility of the property owners and are generally paid out of the
      operating cash flow of the property. Management and corporate staff share
      responsibility for the selection and training of property-based employees and
      for ensuring, through progressive career development, an adequate supply of
      mobile, qualified and experienced staff to match the growth of our operations
      internationally. Maintenance of employee communication, motivation and morale
      at
      high levels is necessary to meet the expectations of our clientele. In this
      context, we have devoted significant effort to developing customized hiring
      practices, training and career development programs and approaches.




At
      23 hotels and resorts that we manage, including 11 in North America, various
      groups of employees are covered by collective bargaining agreements.









-
            4
            -





**Ownership
      Operations**




We
      hold ownership interests in, or have made advances in respect of or to owners
      of, 34 of the 74 hotels and resorts and the branded residential projects that
      we
      currently manage, including a 100% leasehold interest in the Four Seasons Hotel
      Vancouver. Our investment strategy as a public company is not to hold any
      additional majority investments in hotels and resorts. However, Four Seasons
      Hotel Vancouver is a long-term leasehold interest that was established at an
      earlier stage in our development and we currently believe that we will operate
      the Vancouver hotel under the existing lease agreement, until its expiry on
      January 31, 2020.4




**Intellectual
      Property**




In
      the highly competitive service industry in which we operate, trademarks, service
      marks and logos are very important in the sales and marketing of those services.
      We have a significant number of trademarks, service marks and logos, and
      significant time and effort are expended each year on surveillance, registration
      and protection of our trademarks, service marks and logos, which we believe
      have
      become synonymous in the lodging industry with a standard of attention to detail
      and an unwavering dedication to excellence.




We
      have an arrangement with Carlson Hospitality Group pursuant to which Carlson
      owns and has the exclusive right to use the Regent name, and related names,
      trademarks, service marks and logos for new development. Pursuant to this
      arrangement, we retain the right to use the Regent name and related marks and
      logos at the three Regent properties we manage and, in consideration for the
      transfer of the ownership rights in the Regent name and related marks and logos,
      we receive fixed annual payments from Carlson. The costs associated with the
      maintenance of the Regent brand and marks are the obligation of
      Carlson.




**Business
      and Growth Strategy**




Our
      core strategic goal is to be recognized as the undisputed global leader in
      luxury lodging. A core strategy underlying that goal is to enhance our industry
      position through a focused, international portfolio expansion and refinement
      program that capitalizes on the strengths of our core management operations
      and
      the value of our brand name. We intend to continue to focus on sustainable
      growth and seek to utilize our competitive strengths to increase earnings,
      cash
      flow, property owners’ returns, and shareholder value. We expect to do this by
      continuing to improve the operating performance of the portfolio of properties
      that we manage ,
      by acquiring new management contracts, by pursuing strategic enhancements to
      established properties and strategic divestitures of properties where
      appropriate opportunities arise, and by capitalizing on opportunities to
      leverage our luxury brand name through complementary business extensions such
      as
      Four Seasons branded residential products.




We
      believe that the strength of our brand name, our global marketing presence
      and
      our operational expertise result in average room revenue per available room
      (RevPAR) 5  premiums and strong operating profitability for luxury hotels and resorts that
      we manage and provide us with a competitive advantage in




4We
        have
        leased and managed Four Seasons Hotel Vancouver since 1976. The lease on
        Four
        Seasons Hotel Vancouver expires in 2020.
  5 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
            -





obtaining
      new management contracts worldwide. RevPAR for Core Hotels 6  in the United States during 2006 was $299, 54 %
      higher than the RevPAR of the United States luxury segment as compiled by Smith
      Travel Research.




**Growth
      from Existing Properties**




We
      believe opportunities will exist for growth within our existing and newly opened
      properties by increasing overall market share and RevPAR, thereby improving
      the
      properties’ profitability and, in turn, our management fee revenues and
      ownership earnings. From fiscal year 2005 to fiscal year 2006, RevPAR for all
      Core Hotels increased by 11.8 %.
      During this period, RevPAR for Core Hotels in the United States, Other
      Americas/Caribbean, Europe, the Middle East and Asia/Pacific increased 10.2%,
      12.6%, 18.9%, 25.3% and 5.0% respectively.
      On a local currency basis, as compared to 2005, RevPAR in 2006 for Other
      Americas/Caribbean, Europe, the Middle East and Asia/Pacific Core Hotels
      increased 10.7%, 17.5%, 23.8% and 3.6% respectively. ****




**Region**
            **Occupancy**
            **Average
                Room Rate**
            **RevPAR**2006
            2005
            2006
            2005
            2006
            2005Worldwide
            69.0%
            68.3%
            $372.36
            $336.59
            $257.03
            $229.80United
                States
            73.6%
            73.0%
            $406.03
            $371.59
            $299.03
            $271.32Other
                Americas/Caribbean
            64.6%
            64.4%
            $376.57
            $335.58
            $243.33
            $216.06Europe
            66.7%
            62.6%
            $596.20
            $534.37
            $397.92
            $334.70Middle
                East
            69.3%
            67.3%
            $258.31
            $212.05
            $178.90
            $142.79Asia/Pacific
            63.9%
            65.0%
            $211.36
            $197.69
            $134.99
            $128.57





**New
      Hotel and Resort Opportunities**




Having
      established a network of luxury hotels in many of the world’s key financial
      centres, we expect our future expansion to occur primarily in locations that
      satisfy our objectives of better servicing the travel needs of our existing
      customer base and attracting new international business travelers to our managed
      hotels and resorts worldwide. We expect that future growth will primarily be
      in
      the form of new hotels and resorts, or the conversion of existing hotels and
      resorts, in Europe, the Middle East, South America and Asia/India, as well
      as
      selected urban and resort locations in the United States and the Caribbean.
      We
      plan to continue to increase the number of resorts that we manage to serve
      the
      leisure travel needs of our customers, which is expected to reduce the
      seasonality of our cash flows. We currently have 30 new properties under construction or development and are evaluating numerous
      other management opportunities in various locations around the
      world.




We
      believe that we will continue to have the opportunity to consider and enter
      into
      appropriate new hotel and resort management agreements as a result of our
      competitive strengths. In 2006, we began operations at Four Seasons Hotel
      Silicon Valley at East Palo Alto, Four Seasons Tented Camp, Golden Triangle,
      Thailand, Four Seasons Lana’i The Lodge at Koele, Four Seasons Hotel Westlake
      Village and Four Seasons Resort Maldives at Landaa Giraavaru. In early 2007,
      we
      began operations at Four Seasons Resort Koh Samui. We expect to open 13 new
      hotels and resorts over the remainder of 2007 and 2008.







6 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 Cost 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.





-
            6
            -





(For
      details on these and other hotels and resorts under construction or advanced
      stages of development, see “Four Seasons Portfolio - Properties under
      Construction or Development”.)




**Branded
      Residential Properties**




As
      part of our program to capitalize on the value of the Four Seasons brand, we
      are
      pursuing opportunities relating to branded and serviced residential projects.
      Typically, these residential projects will be integrated with our managed hotels
      and resorts. (See discussion under “Management Operations - Branded Residential
      Properties”.) During 2006, interests were marketed for initial sale in branded
      and serviced residential projects in Aviara, Scottsdale, Punta Mita, Nevis,
      Houston, Miami, Dublin, Toronto, Seattle, Mauritius, Costa Rica, Sharm el
      Sheikh, Jackson Hole, Marrakech, Vail, Barbados and Bora Bora. We anticipate
      pursuing similar initiatives in a number of our future resort and urban
      developments.




**Capital
      Deployment**




Consistent
      with our business strategy, we do not generally require large amounts of capital
      to maintain existing management agreements or our minority ownership positions.
      To the extent required, we will make investments or advances to secure long-term
      management contracts with a view to expanding or enhancing our management
      business where we believe the overall returns will justify the investment or
      advance. We generally seek to limit our total long-term capital exposure to
      no
      more than 20% of the total equity required for a property and typically can
      choose to have our equity interest diluted if additional capital is required.
      We
      attempt to structure our equity interests separately from our management
      interests so as to be able to dispose of an equity interest as sale
      opportunities arise, without affecting our management interests. We have
      advances outstanding in connection with various properties, including Four
      Seasons Hotel George V Paris, Four Seasons Hotel Sydney, Four Seasons Hotel
      Toronto, Four Seasons Hotel Geneva and Four Seasons Hotel Hampshire. As at
      December 31, 2006 we had $ 358.9 million in cash and cash equivalents and additional financing available under
      our bank credit facilities. (For details of those credit facilities see
“Liquidity and Capital Resources” in Management’s Discussion and Analysis.)




We
      work closely with owners and investors in developing new properties and
      acquiring existing luxury properties that we will manage. Further information
      regarding capital commitments and capital funding for properties under
      development or construction is provided under “Four Seasons Portfolio -
      Properties under Construction or Development”.




**Competitive
      Strengths**




The
      hotel industry is highly competitive. We believe that our competitive position
      is strengthened by our well-recognized and respected luxury brand name and
      our
      broad network of management contracts for luxury properties in strategic markets
      worldwide. We also believe that we have developed a unique service culture,
      depth of management expertise, and multiple capital sources over our more than
      40-year history.




**Strong
      Brand Recognition**




Our
      properties are widely recognized for the exceptional quality of their guest
      facilities, service and atmosphere and have been named more frequently than
      any
      other competitor among the world’s best hotels and travel experiences by *Institutional
      Investor* , *Condé
      Nast Traveler* , *Zagat,
      Travel & Leisure* and others. We believe that our brand name recognition cannot easily be
      replicated by others, as it has been created over more than 40 years through
      the
      exceptional experiences provided by Four Seasons’ global list of unique
      properties of the highest quality.









-
            7
            -





**Superior
      Hotel Operating Results**




We
      generally achieve RevPAR and, we believe operating profit margins, for hotels
      and resorts that we manage that are above the average achieved in the luxury
      segment of the lodging industry. We believe that we attract owners and
      developers of luxury hotels and resorts worldwide as a result of the generally
      superior financial performance of the hotels and resorts that we manage.




**Strategic
      Relationships**




Strategic
      relationships are an important source of financing for the development
      opportunities required to expand our management operations. We have established
      relationships with numerous institutional and private equity sources that invest
      in and develop luxury properties. Several of the existing owners have an
      ownership interest in more than one Four Seasons hotel or resort, including
      three owners that have interests in four or more properties. ****




In
      1994, a company controlled by His Royal Highness Prince Alwaleed Bin Talal
      Bin
      Abdulaziz Al Saud purchased a significant minority position in Four Seasons
      Hotels Inc. Prince Alwaleed or companies controlled by him (collectively,
“Kingdom”), own a majority interest in Four Seasons Hotel George V Paris, Four
      Seasons Hotel Toronto, the Four Seasons Residence Club Scottsdale at Troon
      North
      and Four Seasons Hotel Riyadh, with Four Seasons having made advances in respect
      of the first five properties. Kingdom also has a significant interest in Four
      Seasons Hotel Geneva and in a company that holds interests in the Four Seasons
      Hotel Amman, Four Seasons Resort Sharm el Sheikh, Four Seasons Hotel Cairo
      at
      Nile Plaza and Four Seasons Hotel Damascus. Kingdom has invested, or is expected
      to make investments, either directly or indirectly, in a number of additional
      properties at various stages of development that we expect to manage under
      the
      Four Seasons brand name, such as the Four Seasons hotels or resorts being
      developed in Alexandria, Beirut, Marrakech and Mauritius. All of our
      transactions with Kingdom are conducted at arm’s length and in the ordinary
      course of business.




Kingdom
      is also one of the parties to the Arrangement Transaction. See “Arrangement
      Transaction”.




**Management
      Focus**




We
      are principally a global hotel and resort management company. Management
      agreements for the hotels and resorts that we manage generally are long-term,
      having remaining terms averaging approximately 51 years, including extension
      periods available at our option. The average term of the management contracts
      for the 13 new hotels and resorts we expect to open over the remainder of 2007 and 2008
      is 56 years. (For a chart summarizing, among other things, the hotels and resorts
      under construction or development by Four Seasons that are expected to open
      over
      the remainder of 2007 and 2008 see “Four Seasons Portfolio - Properties under
      Construction or Development”.)




**Global
      Presence**




We
      manage a global portfolio of 74 luxury hotels and resorts, many of which include
      a residential component, in 31 countries with 30 additional properties under construction or development in a further 13
      countries around the world. Of these, 20 new properties are to include a
      residential component. Hotels that we currently manage are located in major
      international financial centres, such as London, New York, Paris, Geneva,
      Chicago, Washington, Los Angeles, Tokyo, Milan, Shanghai, Singapore, Hong Kong,
      Toronto and Sydney, as well as in emerging international markets, such as Dublin
      and Mexico City. We also manage resorts in world-class leisure destinations,
      such as Bali, California, Costa Rica, Hawaii, Mexico, Nevis, Malaysia and
      Whistler and have residential products in active sales and operation in the
      United States, Caribbean and Egypt. We anticipate that we will continue to
      expand in urban and resort destinations where consumer demand warrants a luxury
      property. In 2006, approximately 44%, 14%, 18%, 12% and 12% of all fee revenues
      were derived from hotels and resorts in the United States,







-
            8
            -





Asia/Pacific,
      Europe, Middle East, and Other Americas/Caribbean, respectively. We maintain
      a
      fully integrated global reservation and sales office system that provides
      international sales coverage for our properties.




**Strong
      Management Team**




Our
      corporate executive management team consists of eight individuals who are
      responsible for our global strategic direction and who have an average tenure
      of
      approximately 23 years with Four Seasons. This team is supported by 28 corporate
      Vice Presidents, who are responsible for various aspects of our daily
      operations, as well as by 71 General Managers and Regional Vice Presidents,
      who
      together have an average tenure of approximately 15 years with Four Seasons.
      We
      have a fundamental strategy of developing our senior management team, to the
      extent possible, from within in order to ensure consistency of our service
      culture and work ethic.




**Four
      Seasons Portfolio**




The
      properties that we manage are comprised of luxury hotels and resorts, many
      of
      which include a residential component, whose target customers are principally
      business travelers, corporate and incentive groups and discerning leisure
      travelers. Our urban hotels generally are centrally located in the commercial
      and financial districts of the world’s leading cities in North America, South
      America, Asia, Europe and the Middle East. Our luxury resorts and serviced
      and
      branded residential projects are located in world-class leisure destinations
      and
      provide extensive recreational and meeting facilities to attract upscale leisure
      travelers and groups.




**Description
      of Hotels and Resorts** ****




The
      following table provides an overview of the properties that we currently manage,
      many of which include a residential component:




**Hotel/Resort
                  and Location**
              **Approximate**
                **Number
                  of Rooms**
              **Approximate**
                **Equity
                  Interest****1****United
                  States**Four
                  Seasons Hotel Atlanta,*Georgia*
              245
              -Four
                  Seasons Hotel Austin,*Texas*
              290
              -Four
                  Seasons Resort Aviara,*California*2
              330
              -The
                  Beverly Wilshire (Beverly Hills),*California*
              395
              -Four
                  Seasons Biltmore Resort (Santa Barbara),*California*
              205
              -Four
                  Seasons Hotel Boston,*Massachusetts*2
              275
              -Four
                  Seasons Hotel Chicago,*Illinois*
              345
              -The
                  Ritz-Carlton Hotel Chicago,*Illinois*
              435
              -Four
                  Seasons Resort and Club Dallas at Las Colinas,*Texas*
              400
              -Four
                  Seasons Hotel Houston,*Texas*2
              405
              -Four
                  Seasons Resort Hualalai at Historic Ka’upulehu,*Hawaii*
              245
              -Four
                  Seasons Resort Jackson Hole,*Wyoming*2
              125
              -4Four
                  Seasons Resort Lana’i at Manele Bay,*Hawaii*
              235
              -Four
                  Seasons Lana’i The Lodge at Koele,*Hawaii*
              100
              -Four
                  Seasons Hotel Las Vegas,*Nevada*
              425
              -Four
                  Seasons Hotel Los Angeles,*California*
              285
              -4Four
                  Seasons Resort Maui at Wailea,*Hawaii*
              375
              -Four
                  Seasons Hotel Miami,*Florida*2
              220
              4.7%******3**





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            9
            -





**Hotel/Resort
                  and Location**
              **Approximate**
                **Number
                  of Rooms**
              **Approximate**
                **Equity
                  Interest 1**Four
                  Seasons Hotel New York,*New
                  York*
              370
              -Four
                  Seasons Resort Palm Beach,*Florida*
              210
              -Four
                  Seasons Hotel Philadelphia,*Pennsylvania*
              365
              -Four
                  Seasons Hotel San Francisco,*California*2
              275
              -Four
                  Seasons Resort Scottsdale at Troon North,*Arizona*2
              210
              -4,
                  5Four
                  Seasons Hotel Silicon Valley at East Palo Alto,*California*
              200
              15%3Four
                  Seasons Hotel Washington,*District
                  of Columbia*
              210
              -Four
                  Seasons Hotel Westlake Village,*California*
              270
              -**Other
                  Americas/Caribbean**Four
                  Seasons Hotel Buenos Aires,*Argentina*
              165
              -Four
                  Seasons Resort Carmelo,*Uruguay*2
              45
              -Four
                  Seasons Resort Costa Rica at Peninsula Papagayo,*Costa
                  Rica*2
              155
              11.4%6Four
                  Seasons Resort Great Exuma at Emerald Bay,*The
                  Bahamas*2
              185
              -Four
                  Seasons Hotel Mexico City,*Mexico*
              240
              -Four
                  Seasons Resort Nevis,*West
                  Indies*2
              195
              -Four
                  Seasons Resort Punta Mita,*Mexico*2
              150
              -Four
                  Seasons Hotel Toronto,*Ontario,
                  Canada*
              380
              -Four
                  Seasons Hotel Vancouver,*British
                  Columbia, Canada*
              375
              100%6Four
                  Seasons Resort Whistler,*British
                  Columbia, Canada*2
              275
              -4**Europe**Four
                  Seasons Hotel Gresham Palace Budapest,*Hungary*
              180
              18.3%3Four
                  Seasons Hotel Dublin,*Ireland*2
              195
              -Four
                  Seasons Hotel Geneva,*Switzerland*
              105
              -Four
                  Seasons Hotel Hampshire,*England*
              135
              -4Four
                  Seasons Hotel Istanbul,*Turkey*
              65
              -9Four
                  Seasons Hotel The Ritz Lisbon,*Portugal*
              280
              -Four
                  Seasons Hotel Canary Wharf,*England*
              140
              -Four
                  Seasons Hotel London,*England*
              220
              -4,10Four
                  Seasons Hotel Milan,*Italy*
              120
              -Four
                  Seasons Hotel George V Paris,*France*
              245
              -Four
                  Seasons Hotel Prague,*Czech
                  Republic*
              160
              -4Four
                  Seasons Resort Provence at Terre Blanche,*France*2
              115
              -**Middle
                  East**Four
                  Seasons Hotel Amman,*Jordan*
              190
              -Four
                  Seasons Hotel Cairo at The First Residence,*Egypt*2
              270
              -Four
                  Seasons Hotel Cairo at Nile Plaza,*Egypt*2
              365
              -Four
                  Seasons Hotel Damascus,*Syria*8
              295
              -Four
                  Seasons Hotel Doha,*Qatar*
              230
              -Four
                  Seasons Hotel Riyadh,*Saudi
                  Arabia*
              250
              -Four
                  Seasons Resort Sharm el Sheikh,*Egypt*2
              135
              -**Asia/Pacific**Four
                  Seasons Resort Bali at Jimbaran Bay,*Indonesia*2
              145
              -Four
                  Seasons Resort Bali at Sayan,*Indonesia*
              60
              -Four
                  Seasons Hotel Bangkok,*Thailand*
              355
              -Four
                  Seasons Resort Chiang Mai,*Thailand*
              80
              -Four
                  Seasons Tented Camp, Golden Triangle,*Thailand*
              15
              -









-
            10
            -





**Hotel/Resort
                  and Location**
              **Approximate**
                **Number
                  of Rooms**
              **Approximate**
                **Equity
                  Interest****1**Four
                  Seasons Hotel Hong Kong,*Special
                  Administrative Region of the People’s Republic of China*2
              400
              -Four
                  Seasons Hotel Jakarta,*Indonesia*2
              365
              2%3Four
                  Seasons Resort Koh Samui,*Thailand*
              65
              -The
                  Regent Kuala Lumpur,*Malaysia*****7
              470
              **-**Four
                  Seasons Resort Langkawi,*Malaysia*
              90
              -Four
                  Seasons Resort Maldives at Kuda Huraa,*Maldives*
              95
              -Four
                  Seasons Resort Maldives at Landaa Giraavaru,*Maldives*
              100
              -Four
                  Seasons Hotel Shanghai,*People’s
                  Republic of China*
              440
              10%3,
                  4Four
                  Seasons Hotel Singapore,*Singapore*
              255
              -The
                  Regent Singapore,*Singapore*
              440
              -Four
                  Seasons Hotel Sydney,*Australia*
              530Grand
                  Formosa Regent Taipei,*Taiwan*
              540
              -Four
                  Seasons Hotel Tokyo at Chinzan-so,*Japan*
              285
              -Four
                  Seasons Hotel Tokyo at Marunouchi,*Japan*
              55
              -




1
            In
                the ordinary course, we make investments in, or advances in respect
                of or
                to owners of, properties to obtain new management agreements or to
                enhance
                existing management agreements where we believe the overall returns
                will
                justify the investment or advance. We generally seek to limit our
                total
                long-term capital exposure to no more than 20% of the total equity
                required for a property. For a description of our investments in,
                or
                advances made in respect of or to owners, of properties and other
                commitments in respect of existing properties, including the equity
                investments listed in this chart, see “Balance Sheet Review and Analysis”
                and “Liquidity and Capital Resources” in Management’s Discussion and
                Analysis.




2
            This
                project includes, or is expected to include, a Four Seasons branded
                residential component.




3
            Freehold
                interest.




4
            In
                addition to providing management services to this property, we have
                a
                guarantee or other off-balance sheet commitment in respect of this
                property. See “Off-Balance Sheet Arrangements” in Management’s Discussion
                and Analysis.




5
            We
                have a preferred profits interest derived from previously existing
                subordinated loans to the resort or property of approximately $17.4
                million in aggregate plus a loan in the amount of $6.0 million to
                an
                entity that owns approximately 85% of the entity that owns the
                hotel.




6
            Leasehold
                interest.




7
            We
                have entered into an agreement to manage a new 140 room Four Seasons
                hotel
                in Kuala Lumpur and have reached agreement with the owner of the
                existing
                Kuala Lumpur hotel to transition out of managing that Regent property
                as
                of May 31, 2007.




8
            The
                Four Seasons Hotel Damascus is located in Damascus, Syria, a country
                that
                is on the U.S. list of state sponsors of terrorism and that is subject
                to
                U.S. regulations (including prohibitions on dealings with specified
                entities) and legislatively mandated penalties (including export
                sanctions
                and ineligibility to receive most forms of U.S. aid or to purchase
                U.S.
                military equipment).




9
            Subject
                to satisfaction of certain conditions, we may invest up to
                $4.08 million to acquire up to an 18% interest in conjunction with a
                proposed expansion and renovation of Four Seasons Hotel Istanbul and
                new management contract related to Four Seasons Hotel Istanbul at the
                Bosphorus.





-
            11
            -






10
              Four
                  Seasons Hotels Limited (“FSHL”) is the tenant of the land and premises
                  constituting Four Seasons Hotel London. FSHL has entered into a
                  sublease
                  of the hotel with the entity on whose behalf we manage the hotel.
                  The
                  annual rent payable by FSHL under the lease is the same as the
                  annual rent
                  that is payable by the sub-tenant pursuant to the
                  sublease.












-
            12
            -







**Properties
      under Construction or Development**




We
      currently have 30 properties under construction or development that are to be operated under
      the
      Four Seasons name. We expect 20 of those properties to include a residential
      branded component. The following table provides an overview of these
      properties: ****




**Hotel/Resort
                  and Location**1, 2
              **Approximate**
                **Number
                  of Rooms**
              **Capital
                  Commitment** 3***Scheduled
                  2007/2008 Openings***Four
                  Seasons Hotel Alexandria,*Egypt*
              125Four
                  Seasons Hotel Beijing,*People’s
                  Republic of China*
              325
              üFour
                  Seasons Hotel Beirut,*Lebanon*
              235
              üFour
                  Seasons Resort Bora Bora,*French
                  Polynesia*4
              105
              üFour
                  Seasons Hotel Florence,*Italy*
              120Four
                  Seasons Hotel Hangzhou,*People’s
                  Republic of China*
              100Four
                  Seasons Hotel Istanbul at the Bosphorus,*Turkey*
              170
              üFour
                  Seasons Hotel Macau,*Special
                  Administrative Region of the People’s Republic of China*4
              370Four
                  Seasons Resort Mauritius,*Republic
                  of Mauritius*4
              120
              üFour
                  Seasons Hotel Moscow,*Russia*4
              185
              üFour
                  Seasons Hotel Mumbai,*India*4
              230
              üFour
                  Seasons Hotel Seattle,*Washington
                  USA*4
              150
              üFour
                  Seasons Resort Seychelles,*Seychelles***4
              65***Beyond
                  2008***Four
                  Seasons Hotel Bahrain,*Bahrain*
              270Four
                  Seasons Hotel Baltimore,*Maryland,**USA*4
              200
              üFour
                  Seasons Resort Barbados,*Barbados*4
              120Four
                  Seasons Resort Cham Island,*Vietnam*
              80Four
                  Seasons Hotel Doha at the Pearl,*Qatar*4
              250
              üFour
                  Seasons Hotel Dubai,*United
                  Arab Emirates*4
              375Four
                  Seasons Hotel Guangzhou,*People’s
                  Republic of China*4
              325Four
                  Seasons Hotel Kuala Lumpur,*Malaysia*4
              275Four
                  Seasons Hotel Kuwait,*Kuwait*
              300Four
                  Seasons Hotel Marrakech,*Morocco*4
              140
              üFour
                  Seasons Hotel Moscow Kamenny Island,*Russia*4
              80
              üFour
                  Seasons Hotel New Orleans,*Louisiana,
                  USA*4
              240
              üFour
                  Seasons Resort Puerto Rico,*Puerto
                  Rico*4
              250
              üFour
                  Seasons Hotel Shanghai at Pudong,*People’s
                  Republic of China*4
              190
              üFour
                  Seasons Hotel St. Petersburg,*Russia*
              200
              üFour
                  Seasons Hotel Toronto,*Ontario,
                  Canada*4
              265
              üFour
                  Seasons Resort Vail,*Colorado,
                  USA*4
              120
              ü




1
            Information
                concerning hotels, resorts and residential projects 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 under “Operating Risks”.







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            13
            -







2
            We
                have made an investment in Orlando, Florida, 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
                aggregate capital commitment for the properties indicated is $129.0
                million, of which nothing has been funded and $24.1 million is expected
                to
                be funded in the remainder of 2007. These amounts include capital
                commitments in respect of Four Seasons branded residential projects
                under
                construction or development.




4
            We
                expect this project to include a Four Seasons branded residential
                component.









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            14
            -





**Summary
      Hotel Operating Data**




The
      following table sets forth certain summary operating data in the years shown
      for
      hotels and resorts that we manage.




**(Unaudited)**
                **2006**
                **2005**
                **2004****All
                    Managed Hotels**1WorldwideNo.
                    of properties
                73
                68
                63No.
                    of rooms
                18,025
                17,300
                16,375United
                    StatesNo.
                    of properties
                26
                23
                24No.
                    of rooms
                7,445
                6,845
                7,110Other
                    Americas/CaribbeanNo.
                    of properties
                10
                10
                10No.
                    of rooms
                2,165
                2,165
                2,160EuropeNo.
                    of properties
                12
                12
                10No.
                    of rooms
                1,960
                1,960
                1,785Middle
                    EastNo.
                    of properties
                7
                7
                5No.
                    of rooms
                1,735
                1,740
                1,210Asia/PacificNo.
                    of properties
                18
                16
                14No.
                    of rooms
                4,720
                4,590
                4,110**Managed
                    Hotels (excluding recently opened properties)**2WorldwideNo.
                    of properties
                62
                56
                51No.
                    of rooms
                15,630
                14,550
                13,560Occupancy3
                69.2%
                68.2%
                66.8%ADR4
                $377
                $329
                $307RevPAR5
                $261
                $224
                $205Gross
                    operating margin6
                32.3%
                30.3%
                29.1%United
                    StatesNo.
                    of properties
                22
                19
                19No.
                    of rooms
                6,670
                5,985
                6,110Occupancy3
                72.9%
                73%
                70.5%ADR4
                $409
                $373
                $346RevPAR5
                $298
                $273
                $244Gross
                    operating margin6
                29.2%
                28.7%
                25.6%Other
                    Americas/CaribbeanNo.
                    of properties
                10
                10
                7No.
                    of rooms
                2,165
                2,165
                1,540Occupancy3
                64.6%
                64.4%
                64.2%ADR4
                $377
                $336
                $280RevPAR5
                $243
                $216
                $180Gross
                    operating margin6
                27.8%
                26.4%
                29.8%EuropeNo.
                    of properties
                11
                10
                8No.
                    of rooms
                1,855
                1,720
                1,490Occupancy3
                66%
                62.6%
                63.5%ADR4
                $587
                $534
                $529RevPAR5
                $387
                $335
                $336Gross
                    operating margin6
                32.7%
                31.5%
                34.7%










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            15
            -








**(Unaudited)**
              **2006**
              **2005**
              **2004**Middle
                  EastNo.
                  of properties
              6
              5
              4No.
                  of rooms
              1,440
              1,215
              850Occupancy3
              69.2%
              67.3%
              65.6%ADR4
              $279
              $212
              $182RevPAR5
              $193
              $143
              $119Gross
                  operating margin6
              49.4%
              44.4%
              37.9%Asia/PacificNo.
                  of properties
              13
              12
              13No.
                  of rooms
              3,500
              3,465
              3,570Occupancy3
              66.5%
              65.3%
              63.4%ADR4
              $246
              $180
              $183RevPAR5
              $164
              $118
              $116Gross
                  operating margin6
              37.5%
              33.2%
              32.3%




1
            Since
                December 31, 2006, we have commenced management of Four Seasons Resort
                Koh
                Samui, Thailand, which has approximately 65 rooms. This property
                is not
                reflected in this table. All room numbers in this table are
                approximate.




2
            Includes
                hotels and resorts that were fully open and that we managed throughout
                a
                particular year and during the last quarter of the prior year. This
                data
                is used when information for more than two years is provided. However,
                if
                a “Managed Hotel” has undergone or is undergoing an extensive renovation
                program during the aforementioned period, it ceases to be included
                as a
                “Managed Hotel” for that particular
                year.




3
            Occupancy
                percentage is defined as the total number of rooms occupied divided
                by the
                total number of rooms available.




4
            ADR
                is defined as average daily room rate per room
                occupied.




5
            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.




6
            Gross
                operating margin represents gross operating profit as a percentage
                of
                gross operating revenue.

















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            16
            -





**Operating
      Risks**




Our
      business is subject to many risks and uncertainties, including those discussed
      below.




**Geopolitical,
      Economic and Lodging Industry Conditions**




We
      focus exclusively on the luxury segment of the lodging industry, which is
      subject to operating risks inherent in the industry. These risks include, among
      other things:




•
            changes
                in general, local and industry-specific economic and financial conditions,
                such as the airline industry,




•
            periodic
                overbuilding in the industry or a specific
                market,




•
            varying
                levels of demand for rooms and related services (including food and
                beverage and function space),




•
            competition
                from other properties,




•
            changes
                in travel patterns,




•
            the
                recurring need for renovation, refurbishment and improvement of hotel
                and
                resort properties,




•
            changes
                in wages, benefits, prices, construction and maintenance, insurance
                and
                operating costs that may result from inflation or
                otherwise,




•
            government
                regulations,




•
            changes
                in taxes and interest rates,




•
            currency
                fluctuations,




•
            the
                availability and cost of financing for operating or capital requirements,




•
            natural
                disasters,




•
            extreme
                weather conditions,




•
            labour
                disputes,




•
            infectious
                diseases, and




•
            war,
                civil unrest, terrorism, international conflict and political
                instability.




We
      operate and have interests in luxury hotels, resorts and serviced and branded
      residential projects in many areas of the world and our revenues are dependent
      upon the results of the individual properties. The conditions listed above
      can
      have, and have from time to time had, a significant adverse impact upon
      individual properties or particular regions. A period of economic recession
      or
      downturn in any of the world’s primary outbound travel markets could materially
      and adversely affect, and have from time to time materially and adversely
      affected, our business, results of operations and financial condition, including
      fee revenue and ownership earnings. An economic downturn generally affects
      ownership results to a significantly greater degree than management results
      due
      to the high fixed costs associated with hotel ownership.




**Competition**




The
      luxury segment of the hotel and resort industry is subject to intense
      competition, both for guests and for the acquisition of new management
      agreements. Competition for guests arises primarily from other luxury hotel
      chains, individual luxury hotels and resorts and a limited number of luxury
      properties operated by larger hotel chains. That competition is primarily based
      on, among other things, brand name







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            17
            -





recognition,
      location, room rates and quality of service and accommodations. Demographic,
      geographic and other changes in specific market conditions could materially
      and
      adversely affect the convenience or desirability of the locales in which hotels
      and resorts that we manage are located.




We
      compete for management opportunities with other operators of luxury hotels.
      We
      believe that our ability to obtain management agreements is based primarily
      on
      the value and quality of our management services, brand name recognition and
      the
      economic advantages to the hotel owner of retaining our management services
      and
      using our brand name. We also believe that an owner’s assessment of the economic
      advantages of retaining our management services and using our brand name is,
      in
      part, a function of the success of the hotels and resorts currently under
      management by us. Competitive factors also include relationships with hotel
      owners and investors, marketing support, reservation system capacity and the
      ability to make investments that may be necessary to obtain management
      agreements. Our failure to compete successfully for expansion opportunities
      or
      to attract and maintain relationships with current hotel owners could materially
      and adversely affect our business, results of operations and financial
      condition.




**Dependence
      on Management Agreements**




Management
      agreements expire in the ordinary course, and may in certain circumstances
      be
      renegotiated and be subject to termination upon the occurrence of specified
      events. Failure to obtain new management agreements or maintain existing
      management agreements could materially and adversely affect our business,
      results of operations and financial condition. We manage hotels and resorts
      for
      various owners subject to the terms of each property’s management agreements.
      Those agreements generally can be terminated by the non-defaulting party upon
      default in payment or unremedied failure to comply with the terms of the
      agreements unless, in most cases, such default or unremedied failure was caused
      by typical *force
      majeure* events. Most of the management agreements are subject to performance tests
      that,
      if not met, could allow the agreements to be terminated by the owner prior
      to
      the expiration of their respective terms. The failure to maintain the standards
      specified in the agreement or to meet the other terms and conditions of an
      agreement, including a performance test, could result in the loss or
      cancellation of a management agreement. Typically, but not in all cases, we
      have
      certain rights to cure a default to avoid termination. Substantially all of
      the
      management agreements include typical *force
      majeure* events, which, if they were to occur would prevent the termination of the
      management agreements. Some management agreements also can be terminated,
      subject in certain cases, to a payment to us, upon a change in use of the
      property or upon a sale by the owner to a new owner who does not wish to retain
      the existing agreement.




In
      the event of bankruptcy involving a property and foreclosure, a management
      agreement may be terminated in most jurisdictions, unless the lender has
      executed a non-disturbance agreement that is enforceable under applicable
      bankruptcy laws. We generally have non-disturbance agreements with the lenders
      to owners of hotels and resorts that we manage. Where no non-disturbance
      agreement is in place or where it is not enforceable under applicable bankruptcy
      laws, the risk of loss of a management agreement increases where the owner
      incurs debt at the property level that cannot be serviced adequately. In some
      jurisdictions, particularly in the United States, management agreements have
      been construed by courts to create an agency relationship that is terminable
      by
      the owner, notwithstanding any provision of the agreement that purports to
      make
      the agreement not terminable under such circumstances. In such circumstances,
      we
      would generally have an unsecured claim for breach of contract against the
      owner
      of the hotel or its trustee in bankruptcy.




Management
      agreements for hotels and resorts we manage have varying remaining terms
      (including extension periods that we may elect) and have remaining terms
      averaging of approximately 51 years. Renewal of management agreements at the
      end
      of their term is the subject of negotiation between us and the relevant owners.
      There can be no assurance that any particular management agreement or agreements
      will be renewed or with respect to the terms and conditions of any
      renewal.









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            18
            -





**Dependence
      on Property Owners**




As
      a result of our strategic decision to focus on management as opposed to
      ownership of hotel and resort properties, our growth opportunities are dependent
      in part on our ability to establish and maintain satisfactory relationships
      and
      enhance those relationships with existing and new property owners. Those growth
      opportunities are also dependent on access to capital by these investors. In
      2006, one owner had an ownership interest in a combination of hotels, resorts
      and serviced and branded residential properties managed by Four Seasons that
      represented in excess of 10% of our fee revenues from management operations.
      A
      failure by us to maintain satisfactory relationships with any owner or owners
      of
      a significant number of properties could have a material adverse effect on
      our
      business, results of operations and financial condition.




**Risk
      Associated with Expansion, Growth and New Construction**




An
      element of our business strategy is to increase the number of hotels and resorts
      under management. That expansion is dependent upon a number of factors,
      including the identification of appropriate management opportunities, competing
      successfully for the management agreements relating to those opportunities,
      availability of financing for new developments and timely completion of
      construction of new hotels and resorts (or the refurbishment of existing
      properties) that are, or are to be, managed by us.




From
      time to time, the hotel industry has experienced periods during which financial
      institutions generally have been reluctant to provide financing for the
      construction of real estate properties, including hotels and resorts. There
      can
      be no assurance that we will be able to obtain financing for projects or that
      the terms on which such financing can be obtained will be acceptable to us.
      The
      inability to obtain financing for a project could cause cancellation of, or
      short-term interruption in, the progress or completion of properties under
      construction or development.




Additionally,
      any construction project entails significant construction risks that could
      delay
      or result in a substantial increase in the cost of construction. The opening
      of
      newly constructed properties, in particular, is contingent upon, among other
      things, receipt of all required licences, permits and authorizations, including
      local land use permits, building and zoning permits, health and safety permits
      and liquor licences. Changes or concessions required by regulatory authorities
      could also involve significant additional costs and delays or prevent completion
      of construction or opening of a project. As a result of the global nature of
      our
      business, these regulatory matters arise in a number of jurisdictions, many
      of
      which have distinctive regulatory regimes.




**Investments
      in and Advances to Managed and Owned Properties**




We
      have made investments in, and/or advances in respect of or to owners of, hotels
      and resorts that we manage, to enable us to acquire the management agreements
      for those properties or to enhance the terms of those agreements. Currently,
      we
      hold an ownership interest in, or have made advances in respect of, 34 of the
      74
      hotels and resorts that we manage. We also have one remaining 100% leasehold
      interest in the Four Seasons Hotel Vancouver. We also have made, or expect
      to
      make in the near term, investments in, or advances in respect of or to owners
      of, 18 of the 30 properties
      under construction or development. The book value of total investments and
      advances as at December 31, 2006 was approximately $ 380 million. ****




In
      addition to the risks associated with the operation of a hotel, we are subject
      to risks generally related to owning and leasing real estate in connection
      with
      these properties. These risks include, among others, adverse changes in general
      or local economic conditions, local real estate market conditions, property
      and
      income taxes, interest rates, the availability, cost and terms of financing,
      the
      financial stability of the property owner, liability for long-term lease
      obligations, the availability and costs of insurance coverage, the potential
      for
      uninsured casualty and other losses, the impact of present or future legislation
      or







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            19
            -





regulation
      (including those relating to the environment), adverse changes in zoning laws
      and other regulations, civil unrest, terrorism, war and political instability.
      In addition, these investments in real estate are relatively illiquid and our
      ability to dispose of our ownership interests, particularly our leasehold
      interests, in response to changes in economic or other conditions may be
      limited. Further, advances to owners of properties are typically subordinated
      and, in any event, may be subject to loss in the event of insolvency of the
      owner to which an advance was made. Any of these factors could result in
      material operating losses by us or a particular hotel or resort and possibly
      the
      whole or partial loss of our investment in the property or the inability to
      collect advances outstanding. Holding an interest in a hotel also introduces
      risks associated with funding of capital expenditures and incurring our
      proportionate share of any operating losses. Where cash and working capital
      reserves provided by hotel operations are insufficient, debt service, major
      repairs, renovations, refurbishments, alterations or other capital expenditures
      generally must be funded by the owners of the hotels and resorts, including
      us
      in some cases.




**Debt
      Rating Risks** ****




Our
      corporate rating is currently investment grade (BB+) as rated by Standard &
Poor’s. Our senior unsecured debt is currently rated by three debt rating
      agencies (Standard & Poor’s: BBB-; Moody’s: Baa3 with stable outlook;
      Dominion Bond Rating Service: BBB). In each case our rating is under review
      with
      the possibility of a down grade as a result of the implementation of
      the proposed Arrangement Transaction. A negative change in either
      global economic or political events may result in the rating agencies
      downgrading the rating and/or outlook for many of the lodging companies,
      including us, which would result in an increase in our borrowing costs. In
      addition, pricing of any amounts drawn under our syndicated bank credit
      facilities (which are undrawn but under which $ 1.6 million
      of letters of credit were issued at December 31, 2006) includes a spread to
      LIBOR ranging between 0.875% and 2.25%, depending upon the ratings from Standard
      & Poor’s and Moody’s and certain financial ratios.




**Government
      Regulation**




We
      are subject to laws, ordinances and regulations relating to, among other things,
      taxes, environmental matters, the preparation and sale of food and beverages,
      accessibility for disabled persons and general building and zoning requirements
      in the various jurisdictions in which we manage hotels and resorts. Owners
      and
      managers of hotels and resorts also may be subject to laws governing the
      relationship with employees, including minimum wage requirements, overtime,
      working conditions and work permit requirements. In addition, the properties
      we
      manage (and in,
      or in respect of which, we may have made advances or investments) may be located in countries (such as Syria), which may from time to time be
      subject to international trade restrictions, regulations or other forms of
      economic or political sanction. Compliance with these laws can affect the
      revenues and profits of properties managed by us or could materially and
      adversely affect our business, results of operations and financial
      condition.




Four
      Seasons, as the current or previous owner or operator of certain hotels, could
      be liable for investigation and clean-up of contamination and other corrective
      or remedial action under various laws, ordinances and regulations relating
      to
      environmental matters. These laws often impose liability without regard to
      whether the owner or operator knew of, or was responsible for, the condition
      requiring environmental response and whether the party is currently or formerly
      the owner or manager of the property. The presence of contamination from
      hazardous or toxic substances, or the failure to properly remediate a
      contaminated property, may affect the ability to use the property for its
      intended purpose, to sell or rent the property, or to borrow using the property
      as collateral. Persons who arrange for the disposal or treatment of hazardous
      or
      toxic substances also may be liable for the cost of removal or remediation
      of
      substances at the disposal or treatment facility. In connection with the
      operation and ownership of various properties, we could be held liable for
      the
      cost of remedial action with respect to environmental matters. We are not aware
      of any potential material environmental liabilities for which we will be
      responsible with respect to any of the properties which we currently manage
      or
      previously managed.







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            -





Pursuant
      to the management agreements to which we are a party, the owner is responsible
      for the costs and expenses of the employees at each hotel and for all costs,
      expenses and liabilities incurred in connection with the operation of the hotel,
      including compliance with government regulations. However, as the manager,
      we
      may be contingently liable for certain liabilities in respect of which we do
      not
      maintain insurance, including certain workers’ compensation claims,
      environmental liabilities and, in respect of hotels in the United States, claims
      arising under the *Americans
      with Disabilities Act* .




We
      generally obtain indemnities from the owners of the hotels that we manage in
      respect of these liabilities. The value of those indemnities is dependent upon,
      among other things, the financial condition of the owners who have provided
      them.




**Political
      Risk**




We
      currently manage and in some cases have an ownership interest in hotels and
      resorts in 31 countries and currently have development plans to open hotels
      and
      resorts in 13 additional countries around the world. In certain of these
      countries, from time to time, the related assets and revenues may be exposed
      to
      political and other risks associated with foreign investment. In some
      jurisdictions, at certain times, there may be a risk that we may have difficulty
      enforcing our contractual rights relating to our assets including our
      non-disturbance agreements and any security relating to our loan receivables
      if
      due process of law is not respected.




**Insurance**




Our
      management agreements require the hotels and resorts that we manage to be
      insured against property damage, business interruption and liability at the
      expense of the owner of the property. Under these policies we are also typically
      insured against loss of fee income in the event of a temporary business
      interruption at any of the hotels and resorts that we manage. We also maintain
      our own insurance coverage in respect of liability, in excess of that obtained
      at the property level. In addition, we obtain indemnities from the owners of
      the
      hotels and resorts that we manage in respect of damages caused by acts,
      omissions and liabilities of the employees of the property or of Four Seasons,
      other than damages resulting from certain actions of Four Seasons and certain
      senior management personnel. Insurance premiums are continuing to increase
      and
      underwriters are imposing increasingly restrictive terms and conditions. All
      lines of coverage generally have been affected; however, commercial properties
      generally continue to be the most difficult to insure. Exposures for terrorism,
      cyber perils and toxic mould are now common exclusions. If we were held liable
      for amounts exceeding the limits of our insurance coverage or for claims outside
      the scope of that coverage or if the indemnities were insufficient for any
      reason, including as a result of the owner’s or indemnitor’s financial
      condition, our business, results of operations and financial condition could
      be
      materially and adversely affected.




**Legal
      Proceedings**




In
      the ordinary course of our business, we are named as a defendant in legal
      proceedings resulting from incidents taking place at properties we manage or
      in
      which we have an ownership interest. We maintain comprehensive liability
      insurance and also require owners to maintain adequate insurance coverage as
      described above under “Insurance”. We believe such coverage to generally be of a
      nature and amount sufficient to ensure that we are adequately protected from
      suffering material financial loss as a result of such claims.









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            21
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**Currency
      Exposure**




We
      have entered into management agreements with respect to hotels throughout the
      world and accordingly, earn revenue and make investments and advances in many
      foreign currencies. Our most significant currency is US dollars, as
      approximately half of our revenues and assets currently are US
      dollar-denominated, as are the majority of our investment commitments. However,
      we incur the majority of our costs in Canadian dollars and our most significant
      liability (which is related to our convertible senior notes) is a Canadian
      dollar obligation.




In
      2005, we adopted US dollars as our reporting currency. This means that our
      Canadian dollar consolidated financial statements are translated into US dollars
      for reporting purposes. Our consolidated statements of operations, consolidated
      statements of cash provided by operations and consolidated statements of cash
      flow are translated using the weighted average exchange rates for the period,
      and assets and liabilities are converted from Canadian dollars into US dollars
      at the foreign exchange rate applicable at the balance sheet date.




We
      have not changed our functional currency, which remains Canadian dollars, or
      the
      functional currencies of any of our subsidiaries. As a result, while US dollar
      reporting will minimize the currency fluctuations related to the majority of
      our
      US dollar management fee revenues, it will not eliminate the impact of foreign
      currency fluctuations related to our management fees in other currencies, or
      our
      general and administrative expenses, which are incurred primarily in Canadian
      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.




We
      endeavour to match foreign currency revenues to costs and investment commitments
      to provide a natural hedge against currency fluctuations, although there can
      be
      no assurance that these measures will be effective in the management of those
      risks. We also endeavour to manage our currency exposure through, among other
      things, the use of foreign exchange forward contracts. As at December 31, 2006,
      we held $ 39.1
      million in foreign exchange forward contracts for the sale of US dollars into
      Canadian dollars to meet our operating needs. In
      addition, certain currencies are subject to exchange controls or are not freely
      tradeable and as a result are relatively illiquid. We attempt to minimize our
      foreign currency risk by monitoring our cash position, keeping fee receivables
      current, monitoring the political and economic climate and considering whether
      to insure convertibility risk in each country in which we manage a property.
      In
      certain properties, the foreign currency risk is further mitigated by pricing
      room rates in US dollars. However, no assurances can be given as to whether
      our
      strategies relating to currency exposure will be successful or that foreign
      exchange fluctuations will not materially adversely affect our business, results
      of operations and financial condition.




**Seasonality** **/Quarterly
      Predictability**




Our
      hotels and resorts are generally affected by normally recurring seasonal
      patterns and, for most of the properties, demand is typically lower in December
      through March than during the remainder of the year.




Management
      operations are seasonal in nature, as fee revenues are affected by the
      seasonality of hotel and resort revenues and operating results. Urban hotels
      generally experience lower revenues and operating results in the first quarter,
      which has a negative impact on management revenues. However, this negative
      impact on management revenues generally is offset, to some degree, by increased
      travel to resorts in that quarter and may be offset to a greater extent as
      the
      portfolio of resort properties that we manage increases. However, seasonality
      can be affected by specific local events that can cause, and from time to time
      have caused, unanticipated disruptions to the operations of certain of the
      properties we manage.







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            22
            -





In
      addition, certain management fees, in particular incentive fees and residential
      royalty fees, are difficult to predict both in terms of timing and amount and
      can be impacted to a greater extent than other elements of our business by
      economic cycles, interest rate levels and other external factors. Although
      the
      majority of our management fees are based on the total revenues of the
      properties we manage and as a result are easier to predict, fluctuations in
      our
      incentive fees and residential royalty fees can cause volatility in our
      earnings, particularly as measured from quarter to quarter.




Our
      hotel ownership position is also affected by seasonal fluctuations, with lower
      revenue, operating profit and cash flow in the first quarter; ownership
      positions typically incur an operating loss in the first quarter of each year.
      Typically, the third quarter has been the strongest quarter for the Four Seasons
      Hotel Vancouver.




**Intellectual
      Property**




In
      the highly competitive service industry in which we operate, trademarks, service
      marks and logos are very important in the sales and marketing of those services.
      We have a significant number of trademarks, service marks and logos, and
      significant time and effort are expended each year on surveillance, registration
      and protection of our trademarks, service marks and logos. The loss or
      infringement of any of our trademarks, service marks or logos could have a
      material and adverse effect on our business, results of operations and financial
      condition.




**Risks
      Associated with the Four Seasons Branded Residential
      Business**




We
      currently license and manage Four Seasons branded residential projects,
      including whole ownership and fractional ownership, in many of our existing
      hotel and resort locations. We are expanding our presence in the luxury segment
      of the whole ownership and fractional ownership business with a number of other
      projects under development. Our ability to successfully develop and sell
      interests in the residential units that are built, and the various fees earned
      by us from each residential project, could be materially and adversely affected
      by one or any combination of the factors described in this “Operating Risks”
section. Although we believe that we are in compliance in all material respects
      with applicable laws and regulations to which the marketing, sale and operation
      of Four Seasons branded residential projects are currently subject, changes
      in
      these requirements or a determination by a regulatory authority that we are
      not
      in compliance could materially and adversely affect our business, results of
      operations and financial condition.




**Dependence
      on Key Employees**




Our
      success depends in part on the continued service of our senior executives,
      who
      have an average tenure of approximately 23 years with Four Seasons. In
      particular, our senior management is responsible for the development and/or
      maintenance of ongoing relationships with new and existing investors in the
      properties that are managed by us. The unanticipated departure of individuals
      responsible for those relationships could have a material and adverse effect
      on,
      among other things, relationships affecting properties that are, or that may
      be,
      managed by us.




**Material
      Contracts**




Except
      for the following, since January 1, 2002, we did not enter into any material
      contracts, other than contracts in the ordinary course of business that still
      are in effect and material to FSHI:




•
            Indenture
                dated as of June 18, 2004 between FSHI and the Bank of Nova Scotia
                Trust
                Company of New York, as trustee, under which we may from time to
                time
                issue unsecured debentures, notes or other evidences of indebtedness
                in an
                unlimited amount, issuable in series,







-
            23
            -










•
            a
                First Supplemental Indenture dated as of June 18, 2004 relating to
                the
                issue of our 1.875% Convertible Senior Notes due 2024 in the aggregate
                principal amount of $250,000,000, all of which were issued pursuant
                to a
                prospectus supplement dated June 14, 2004 to a prospectus of FSHI
                dated
                April 6, 2004,




•
            Acquisition
                Agreement dated February 9, 2007 in connection with the Arrangement
                Transaction,




•
            Voting
                Agreement dated February 9, 2007 among FS Acquisition Corp., FSHI,
                Kingdom, Cascade and Triples in connection with the Arrangement
                Transaction, and




•
            Limited
                Guaranty made as of February 9, 2007 by each of Kingdom and Cascade
                in
                favour of FSHI in connection with the Arrangement
                Transaction.




See
      “Corporate Information - Convertible Senior Notes” for details of the terms of
      convertibility of the Convertible Senior Notes. Copies of the documents referred
      to above are available on *www.sedar.com* .




**Corporate
      Information**




**Description
      of Share Capital**




Our
      authorized share capital consists of an unlimited number of First Preference
      Shares, issuable in series, an unlimited number of Second Preference Shares,
      issuable in series, 3,725,698 Variable Multiple Voting Shares and an unlimited
      number of Limited Voting Shares. At March 9, 2007, 3,725,698 Variable Multiple
      Voting Shares, 33,774,038 Limited
      Voting Shares and options to purchase 3,548,799 Limited
      Voting Shares were outstanding.




The
      following is a summary of the material attributes of our Variable Multiple
      Voting Shares and Limited Voting Shares.




*Dividends*




The
      dividends declared and paid on our Variable Multiple Voting Shares will be
      in
      amounts per share equal to 50% of the dividends declared and paid on our Limited
      Voting Shares, regardless of whether the number of votes attaching to the
      Variable Multiple Voting Shares is further increased.




*Rights
      on Dissolution*




In
      the event of the liquidation, dissolution or winding up of FSHI, the holders
      of
      Limited Voting Shares and Variable Multiple Voting Shares will be entitled,
      share for share, to receive, on a *pro
      rata* basis, all of the assets of FSHI remaining after payment of all of its
      liabilities, subject to the preferential rights of any shares ranking prior
      to
      the Limited Voting Shares and Variable Multiple Voting Shares.




*Voting
      Rights*




The
      holders of Limited Voting Shares and Variable Multiple Voting Shares will be
      entitled to receive notice of any meeting of our shareholders and to attend
      and
      vote thereat, except those meetings where only the holders of shares of another
      class or of a particular series are entitled to vote. Each Limited Voting Share
      will entitle the holder to one vote. Each Variable Multiple Voting Share
      currently entitles the holder to that number of votes that results in the
      aggregate votes attaching to the Variable Multiple Voting Shares representing
      approximately 64.55% of
      the votes attaching to the Variable Multiple Voting Shares and the Limited
      Voting Shares, in the aggregate. The number of votes attaching to the Variable
      Multiple Voting Shares adjusts concurrently with the issue of additional Limited
      Voting Shares in order to maintain this voting control. Holders of Limited
      Voting Shares are entitled, voting separately as a class, to elect two members
      of our board of directors annually.







-
            24
            -





Under
      the provisions attaching to the Variable Multiple Voting Shares, beginning
      with
      the annual meeting held in 2000 and every three years thereafter, the continued
      application of this adjusting mechanism is subject to ratification by the
      holders of our Limited Voting Shares. The adjusting mechanism was last ratified
      by shareholders at the annual and special meeting of shareholders in 2006.
      If
      the maintenance of the adjustment mechanism is not confirmed by a simple
      majority of the votes cast by the holders of Limited Voting Shares (other than
      “prescribed holders” of Limited Voting Shares), any issue of Limited Voting
      Shares after that time (other than the issue of Limited Voting Shares pursuant
      to a right, option or similar obligation granted prior to that time) will not
      result in a further adjustment in the number of votes attaching to the Variable
      Multiple Voting Shares. Additionally, the continued application of the
      adjustment mechanism will be subject to ratification after any transfer of
      Variable Multiple Voting Shares that results in a person other than a member
      of
      the Sharp Family (as defined in the articles of FSHI) holding Variable Multiple
      Voting Shares or after Isadore Sharp ceases to be the Chief Executive Officer.
      For these purposes, the “prescribed holders” of Limited Voting Shares shall be:
      (a) any person or company that beneficially owns, directly or indirectly,
      Variable Multiple Voting Shares; (b) any person or company that
      beneficially owns, directly or indirectly, securities carrying more than 20%
      of
      the votes attaching to all of our outstanding voting securities; (c) any
      associate, insider or affiliate (as defined in the *Securities
      Act* (Ontario)) of any person or company referred to in (b); (d) any of our
      affiliates (as defined in the *Securities
      Act* (Ontario)); (e) any person or company that, alone or in concert with
      others, effectively controls FSHI; and (f) if all of (b), (d) and (e) are
      inapplicable, all directors and officers of FSHI and their associates (as
      defined in the *Securities
      Act* (Ontario)). To our knowledge, the prescribed holders are Triples Holdings
      Limited, Isadore Sharp and Rosalie Sharp.




Pursuant
      to the terms of a Voting Agreement, each of Kingdom and Cascade has agreed
      to
      vote the Limited Voting Shares owned by it in favour of the Arrangement
      Transaction, and Triples has agreed to vote all of the Variable Multiple Voting
      Shares owned by it in favour of the Arrangement Transaction, subject in each
      case to the terms and conditions contained in the Voting Agreement.




*Take-Over
      Bid Protection*




Variable
      Multiple Voting Shares will be converted automatically into Limited Voting
      Shares upon any transfer thereof, except (i) a transfer within the
      immediate family of Isadore Sharp (so long as the family beneficially owns
      a
      majority of the outstanding Variable Multiple Voting Shares) or (ii) a
      transfer of a majority of the outstanding Variable Multiple Voting Shares to
      a
      purchaser who has offered to purchase all outstanding Variable Multiple Voting
      Shares and will, as a result, have acquired a majority of the outstanding
      Variable Multiple Voting Shares and who offers to purchase all outstanding
      Limited Voting Shares for a per share consideration equal to that offered for
      the Variable Multiple Voting Shares.




Triples
      Holdings Limited, which owns all of the outstanding Variable Multiple Voting
      Shares, has entered into an agreement with Montreal Trust Company of Canada,
      as
      trustee for the benefit of the holders of the Limited Voting Shares, that has
      the effect of preventing transactions that otherwise would deprive the holders
      of Limited Voting Shares of rights under applicable provincial take-over bid
      legislation to which they would have been entitled if the Variable Multiple
      Voting Shares had been Limited Voting Shares.




*Conversion*




Variable
      Multiple Voting Shares are convertible into Limited Voting Shares on a
      one-for-one basis at any time at the option of the holder.







-
            25
            -










*Modifications,
      Subdivisions and Consolidation*




Modifications
      to the provisions attaching to the Variable Multiple Voting Shares as a class,
      or to the Limited Voting Shares as a class, will require the separate
      affirmative vote of two-thirds of the votes cast at a meeting of the holders
      of
      the shares of the respective class. No subdivision or consolidation of the
      Variable Multiple Voting Shares or of the Limited Voting Shares may take place
      unless the Limited Voting Shares or the Variable Multiple Voting Shares, as
      the
      case may be, are concurrently subdivided or consolidated in the same proportion.
      If we propose to grant rights to holders of shares of any class, as a class,
      to
      acquire additional voting or participating securities (or securities convertible
      into voting or participating securities), the holders of the Limited Voting
      Shares and the Variable Multiple Voting Shares shall for the purposes of that
      distribution be deemed to be holders of shares of the same class.




*Sale
      of Control Agreement*




At
      a special meeting held on December 19, 1989, the shareholders of FSHI approved
      an agreement (the “ **Sale
      of Control Agreement** ”)
      pursuant to which Isadore Sharp surrendered (a) an option, which had been
      granted to him on December 6, 1985, to acquire 500,000 Limited Voting Shares
      at
      an exercise price of C$12.60 per share (which, as a result of a share “split” in
      1990 would have entitled Mr. Sharp to acquire 1,000,000 Limited Voting Shares
      at
      an exercise price of C$6.30 per share) and (b) the right to receive additional
      options in subsequent years, and, in exchange,  FSHI and its principal
      operating subsidiary, Four Seasons Hotels Limited, agreed that Four Seasons
      Hotels Limited would make a payment to Mr. Sharp upon an arm’s-length
      sale of control of FSHI. The Sale of Control Agreement contemplates that this
      payment will be comprised of two components, the first component will be equal
      to the product of (a) the excess of the per share consideration paid in respect
      of the sale-of-control transaction (the “Transaction Consideration”) over
      C$6.30, and (b) the number (the “Share Number”) that is 5% of the aggregate
      number of Variable Multiple Voting Shares and Limited Voting Shares issued
      and
      outstanding on the date of the sale-of-control transaction. The second component
      will be equal to the product of (x) the excess of the Transaction Consideration
      over C$20.84, and (y) the Share Number, provided that the second component
      will
      be payable only if the Transaction Consideration is equal to or greater than
      125% of the weighted average trading price of all board lots of Limited Voting
      Shares traded on the TSX during the period beginning six months and ending
      one
      month before the first public announcement of the sale-of-control transaction.
      Pursuant to the Sale of Control Agreement, the Board may make adjustments if
      the
      Board determines that it would be equitable to do so in the event that FSHI
      takes any action affecting the Limited Voting Shares and/or the Variable
      Multiple Voting Shares.




The
      right to receive the two payments may be transferred among members of Mr.
      Sharp’s family, their holding companies and trusts. Upon the death of Mr. Sharp,
      the right to the payments passes to his legal or personal representatives,
      heirs
      or permitted assigns.


Pursuant
        to the Arrangement Transaction, Mr. Sharp will receive the amount payable
        to him
        calculated in accordance with the Sale of Control Agreement in full satisfaction
        of all obligations to him under the Sale of Control Agreement. If the
        Arrangement Transaction is consummated, based on an acquisition price of
        $82.00
        for each Limited Voting Share and Variable Multiple Voting Share, and using
        the
        noon rate of exchange as quoted by the Bank of Canada for the conversion
        of
        United States dollars into Canadian dollars on February 23, 2007, Mr. Sharp
        would receive approximately C$334,806,500 or approximately US$289 million
        in
        satisfaction of the obligations to him under the Sale of Control
        Agreement.


**Transfer
      Agent and Registrar**




The
      registrar and transfer agent for our Limited Voting Shares in Canada is
      Computershare Trust Company of Canada, Toronto, Ontario, Canada.




**Market
      for Securities**




Our
      Limited Voting Shares are listed on the Toronto and New York stock exchanges.
      The following table sets forth the high and low closing prices and trading
      volumes of the Limited Voting Shares as reported by these exchanges during
      the
      periods indicated, according to published reports:







-
            26
            -





**NYSE**
              **TSX****Price
                  Range**
              
              **Price
                  Range****2006**
              **High
                  US$**
              **Low
                  US$**
              **Volume**
              **High
                  C$**
              **Low
                  C$**
              **Volume**January
              59.13
              49.86
              5,627,400
              67.73
              57.69
              534,073February
              59.55
              56.02
              2,913,500
              68.56
              64.22
              456,534March
              57.35
              50.40
              4,991,900
              64.95
              58.40
              463,879April
              55.02
              49.80
              3,613,100
              62.04
              58.05
              543,800May
              67.80
              53.03
              9,930,400
              75.11
              58.87
              836,465June
              64.80
              58.98
              5,527,700
              71.57
              66.00
              344,952July
              61.76
              52.51
              3,888,100
              69.12
              59.83
              353,684August
              63.60
              53.46
              6,374,300
              70.93
              60.50
              1,344,889September
              65.40
              61.98
              3,533,400
              73.16
              68.80
              471,735October
              64.97
              60.19
              4,118,500
              73.79
              67.50
              693,089November
              84.25
              63.32
              16,738,500
              95.35
              71.45
              2,159,040December
              82.36
              80.51
              2,797,000
              95.71
              92.17
              371,275


On
      March 9, 2007 the last reported sale prices of the Limited Voting Shares on
      the
      NYSE and TSX were $81.20 and C$95.23  per
      share, respectively.




**Dividend
      Policy**




It
      is FSHI’s policy to pay a semi-annual dividend to holders of the Limited Voting
      Shares and Variable Multiple Voting Shares. In each of the years 2004, 2005
      and
      2006 FSHI paid semi-annual cash dividends of C$0.055 per Limited Voting Share
      and C$0.0275 per Variable Multiple Voting Share. There are no restrictions
      currently that prevent FSHI from continuing to pay dividends on this basis.
      Pursuant to the Acquisition Agreement, FSHI agreed not to declare, set aside
      or
      pay any dividend or other distribution or payment (whether in cash, shares
      or
      property) in respect of the Limited Voting Shares or Variable Multiple Voting
      Shares owned by any person other than regularly scheduled semi-annual cash
      dividends, consistent with past practice. FSHI does not expect to change its
      dividend policy before the closing of the Arrangement Transaction.




**Convertible
      Senior Notes**




On
      June 18, 2004, we completed a public offering of $250 million principal amount
      of 1.875% convertible senior notes due July 30, 2024. The notes will be
      convertible into Limited Voting Shares at an initial conversion rate of 13.9581
      shares per $1,000 principal amount in certain circumstances, including those
      in
      which the Limited Voting Shares have traded for more than 130% of the conversion
      price for a specified period, the notes have had a trading price of less than
      95% of the market price of the Limited Voting Shares into which they may be
      converted for a specified period, the notes have been called for redemption,
      or
      a specified corporate transaction or a fundamental change has
      occurred.




If
      the Arrangement Transaction is completed, FSHI will be required to make an
      offer
      to repurchase the notes at a purchase price equal to the principal amount of
      the
      notes plus a make whole premium, and an amount equal to any accrued and unpaid
      interest to, but not including, the date of repurchase. FSHI must make this
      offer by providing a notice to the trustee and the holders of notes within
      30
      days of the completion of the Arrangement Transaction.




The
      Purchaser has informed FSHI that it currently expects to commence an offer
      to
      purchase all of the outstanding notes prior to the effective time of the
      Arrangement Transaction. The terms of any such offer have not yet been
      finalized, and will be determined by the Purchaser in the event that it decides
      to proceed with the offer. If the Purchaser proceeds with the offer, the notes
      owned by the Purchaser and its subsidiaries will be transferred to FSHI for
      cancellation pursuant to the Arrangement Transaction.









-
            27
            -





**Ratings**




Our
      $250 million of convertible senior notes have been assigned the following
      ratings:




Standard
      & Poor’s: BBB-. As defined by Standard & Poor’s, an obligation rated BBB
      exhibits adequate protection parameters. However, adverse economic conditions
      or
      changing circumstances are more likely to lead to a weakened capacity of the
      obligor to meet its financial commitment on the obligation. The rating is
      modified by a minus sign, which is used to show relative standing within this
      rating category. Moody’s Investors Service: Baa3 with a stable rating outlook.
      As defined by Moody’s, obligations rated Baa are subject to moderate credit
      risk. They are considered medium-grade and as such may possess certain
      speculative characteristics. The modifier 3 indicates a ranking in the lower
      end
      of the rating category. The rating outlook means the rating is not likely to
      change in the medium term (18 to 36 months).




Dominion
      Bond Rating Service (“DBRS”): BBB with a stable rating trend. As defined by
      DBRS, long-term debt rated BBB is of adequate credit quality. Protection of
      interest and principal is considered acceptable, but the entity is fairly
      susceptible to adverse changes in financial and economic conditions, or there
      may be other adverse conditions present which reduce the strength of the entity
      and its rated securities. The absence of either a “high” or “low” designation
      indicates the rating is in the middle of the rating category. The rating trend
      is designed to give the investor an understanding of DBRS’ opinion regarding the
      outlook for the rating.




Credit
      ratings are meant to give an indication of the risk that a borrower will not
      fulfill its full obligations in a timely manner, with respect to both interest
      and principal commitments. The ratings are current opinions of the relative
      credit risk of fixed-income obligations with an original maturity of one year
      or
      more. Such ratings reflect both the likelihood of default and any financial
      loss
      suffered in the event of default. Credit ratings may be changed, suspended,
      or
      withdrawn as a result of changes in, or unavailability of, such information,
      or
      based on other circumstances. The issued credit rating is not a recommendation
      to purchase, sell, or hold a financial obligation, inasmuch as it does not
      comment as to market price or suitability for a particular
      investor.




**Directors
      and Officers**




The
      following table sets forth certain information regarding each of FSHI’s
      executive officers and directors:




**Name
                  and Residence**
              **Position
                  with FSHI**
              **Principal
                  Occupation**
              **Shareholdings****No.
                  of**
                **Variable**
                **Multiple**
                **Voting
                  Shares**
              **No.
                  of**
                **Limited**
                **Voting**
                **Shares**Isadore
                  Sharp
                *Ontario,
                  Canada*
              Chairman,
                  Chief Executive Officer
              Chairman
                  and Chief Executive Officer, Four Seasons Hotels Limited
              3,725,698
              NilWilliam
                  D.
                Anderson1, 2, 3
                *Quebec,
                  Canada*
              Director
              Corporate
                  Director
              Nil
              500Brent
                  Belzberg1,
                  3
                *Ontario,
                  Canada*
              Director
              Senior
                  Managing Partner, Torquest Partners Inc.4
              Nil
              1,900H.
                  Roger Garland2
                *Ontario,
                  Canada*
              Director
              Corporate
                  Director
              Nil
              81,418







-
            28
            -





**Name
                  and Residence**
              **Position
                  with FSHI**
              **Principal
                  Occupation**
              **Shareholdings****No.
                  of**
                **Variable**
                **Multiple**
                **Voting
                  Shares**
              **No.
                  of**
                **Limited**
                **Voting**
                **Shares**Nan-b
                  de Gaspé Beaubien1,
                  5, 6
                *Quebec,
                  Canada*
              Director
              President,
                  Business Families Foundation7and Co-Chair, Philbeau Inc.8
              Nil
              4,000Charles
                  S. Henry6,
                  9
                *New
                  York, USA*
              Director
              President,
                  Hotel Capital Advisers, Inc.10
              Nil
              2,500Heather
                  Munroe-
                Blum1,
                  6
                *Quebec,
                  Canada*
              Director
              Principal
                  and Vice Chancellor, McGill University11
              Nil
              1,250Ronald
                  W. Osborne2,
                  3
                *Ontario,
                  Canada*
              Director
              Chairman
                  of the Board, Sun Life Financial Inc.12
              Nil
              1,000J.
                  Robert S. Prichard5,
                  6
                *Ontario,
                  Canada*
              Lead
                  Director
              President
                  and Chief Executive Officer, Torstar Corporation13
              Nil
              20,000Lionel
                  H. Schipper1,
                  2
                *Ontario,
                  Canada*
              Director
              President,
                  Schipper Enterprises Inc.8
              Nil
              52,953Anthony
                  Sharp
                *Ontario,
                  Canada*
              Director
              President,
                  Sharpwise Ltd.14
              Nil
              26,927Simon
                  M. Turner1,
                  9
                *New
                  York, USA*
              Director
              Principal,
                  Hotel Capital Advisers, Inc.10
              Nil
              2,500Sarah
                  Cohen
                *Ontario,
                  Canada*
              Senior
                  Vice President, Corporate Counsel and Assistant Secretary
              Senior
                  Vice President, Corporate Counsel and Assistant Secretary, Four
                  Seasons
                  Hotels Limited
              Nil
              NilJohn
                  M. Davison
                *Ontario,
                  Canada*
              Executive
                  Vice President, Chief Financial Officer
              Executive
                  Vice President, Chief Financial Officer, Four Seasons Hotels
                  Limited
              Nil
              700Craig
                  O. Reith
                *Ontario,
                  Canada*
              Vice
                  President, Finance and Treasurer
              Vice
                  President, Finance and Treasurer, Four Seasons Hotels
                  Limited
              Nil
              11,331Kathleen
                  Taylor
                *Ontario,
                  Canada*
              President
                  and Chief Operating Officer
              President
                  and Chief Operating Officer
              Nil
              2,041Randolph
                  Weisz
                *Ontario,
                  Canada*
              Executive
                  Vice President, Business Administration, General Counsel and Secretary
              Executive
                  Vice President, Business Administration, General Counsel and Secretary,
                  Four Seasons Hotels Limited
              Nil
              Nil





1
            Member
                of the Human Resources Committee.




2
            Member
                of the Audit Committee.




3
            Member
                of the Special Committee.




4
            Private
                equity fund manager.




5
            Elected
                by the holders of the Limited Voting
                Shares.




6
            Member
                of the Corporate Governance
                Committee.




7
            Non-profit
                foundation.







-
            29
            -










8
            Investment
                holding company.




9
            Nominee
                of Kingdom, which has the right pursuant to an agreement with Triples
                Holdings Limited and Isadore Sharp to elect two directors to the
                FSHI
                Board of Directors.




10
            Hotel
                investment advisory firm.




11
            Educational
                institute.




12
            Insurance
                company.




13
            Media
                and publishing company.




14
            Real
                estate/resort development company. Prior to August 25, 1999, Mr.
                Sharp was
                Executive Vice-President of Vacation Ownership of Four Seasons Hotels
                Limited.




Isadore
      Sharp has served as a director of FSHI and its predecessor corporation since
      January 9, 1978. H. Roger Garland was elected to the board of directors of
      FSHI’s predecessor corporation on October 1, 1985. Lionel H. Schipper was
      appointed to the board of directors on February 18, 1988. Charles S. Henry
      was
      appointed to the board of directors on November 11, 1994. J. Robert S. Prichard
      was appointed to the board of directors on March 6, 1996. Nan-b de Gaspé
Beaubien was elected to the board of directors on May 23, 1997. Anthony Sharp
      was appointed to the board of directors on August 25, 1999. Simon M. Turner
      was
      re-appointed to the board of directors on February 14, 2002. Brent Belzberg
      and
      Heather Munroe-Blum were appointed to the board of directors on November 7,
      2002. Ronald W. Osborne was elected to the board of directors on May 21, 2003.
      William D. Anderson was elected to the board of directors on May 25,
      2005.




All
      of the directors will hold office until the next annual meeting of shareholders,
      or until their successors are elected or appointed.




All
      our executive officers and directors have held their principal occupations
      for
      more than five years with the exception of the following. William Anderson
      was
      President of BCE Ventures Inc. until December 31, 2005. Heather Munroe-Blum
      was
      a Professor at the University of Toronto prior to December 31, 2002 and was
      Vice-President, Research and International Relations at the University of
      Toronto prior to June 1, 2002. Ronald W. Osborne was President and Chief
      Executive Officer of Ontario Power Generation prior to December 4, 2003.
      Kathleen Taylor was President, Worldwide Business Operations prior to January
      1,
      2007. Randolph Weisz was Senior Vice President and General Counsel of Four
      Seasons Hotels Limited prior to August 6, 2002. Sarah Cohen was Vice President,
      Corporate Counsel and Assistant Secretary of Four Seasons Hotels Limited prior
      to September, 2006. Craig O. Reith was Vice President, Finance and Assistant
      Treasurer of Four Seasons Hotels Limited prior to May 17, 2005. John Davison
      was
      Senior Vice President of Four Seasons Hotels Limited prior to August 23, 2005,
      an independent consultant prior to August 26, 2002.




Heather
      Munroe-Blum served on the board of directors of Livent Inc. from June 1998
      through November 27, 1998. On November 18, 1998, Livent Inc. filed a voluntary
      petition under Chapter 11 of the US Bankruptcy Code. On November 19, 1998,
      Livent Inc. filed for protection under the *Companies
      Creditors Arrangement Act* .
      Additionally, on August 28, 1998 the Ontario Securities Commission made an
      order
      pursuant to section 127(5) of the *Securities
      Act* (Ontario)
      that trading in securities of Livent Inc. cease immediately for a period of
      15
      days on the grounds that there was not sufficient information in the marketplace
      on which investors could make informed decisions as to the purchase or sale
      of
      the securities of Livent Inc. That order was extended, with the consent of
      Livent Inc., on September 11, 1998. That cease trade order was revoked by the
      Ontario Securities Commission on November 19, 1998.




Ronald
      W. Osborne served on the board of directors of Nortel Networks Corporation
      and
      Nortel Networks Limited (collectively, the “Nortel Companies”) from April 1996
      to September 1997 and from June 2005 to June 2006. On March 10, 2006 the Nortel
      Companies announced the need to restate certain previously reported financial
      results and that the filing of certain 2005 financial statements would be







-
            30
            -





delayed.
      The Ontario Securities Commission issued a management cease trade order on
      April
      10, 2006, prohibiting all of the directors, officers and certain current and
      former employees from trading in securities of the Nortel Companies until two
      business days following the receipt by the Ontario Securities Commission of
      all
      of the filings the Nortel Companies are required to make pursuant to Ontario
      securities laws. The British Columbia Securities Commission and Quebec
      Securities Commission also issued similar orders. Mr. Osborne was not subject
      to
      the orders issued by the British Columbia Securities Commission and the Quebec
      Securities Commission. The Ontario Securities Commission lifted the cease trade
      order effective June 8, 2006. The British Columbia Securities Commission and
      the
      Quebec Securities Commission also lifted their cease trade orders shortly
      thereafter. Mr. Osborne served on the board of directors of Air Canada from
      May
      of 1999 to September 30, 2004. In September of 2004, Air Canada completed a
      court-sanctioned restructuring process and implemented a plan of arrangement
      under the corporate and insolvency laws of Canada.




Kathleen
      Taylor was formerly a director of The T. Eaton Company Limited which, in 1999,
      completed a court-sanctioned reorganization pursuant to a plan of compromise
      and
      arrangement under the corporate and insolvency laws of Ontario and Canada,
      respectively. As a result of this situation, trading of the common shares of
      Eaton’s was suspended by the Toronto Stock Exchange on August 23, 1999 and the
      common shares were ultimately delisted in connection with the implementation
      of
      the reorganization.




Our
      directors and executive officers, as a group, own beneficially, directly or
      indirectly, or exercise control or direction over, the following number of
      Limited Voting Shares and Variable Multiple Voting Shares:




**Description
                  of Class**
              **Number
                  of Shares**
              **Percentage
                  of Class**Limited
                  Voting Shares
              209,020
              0.619%Variable
                  Multiple Voting Shares
              3,725,698
              100%




**Corporate
      Governance**




**Approach
      to Governance**




Our
      corporate governance policies, procedures and practices are designed to ensure
      that:




•
            the
                business and affairs of Four Seasons are conducted with the highest
                standards of ethical conduct and in the best interests of our shareholders
                and other stakeholders, and




•
            the
                Board can fulfill its statutory mandate to supervise the management
                of the
                business and affairs of FSHI.




The
      Board and its Committees have refined our governance polices, procedures and
      practices in the context of the significant regulatory initiatives in North
      America that have been adopted to enhance governance practices of public
      companies generally. Those initiatives include the rules and policies that
      have
      been adopted by the Ontario Securities Commission and other Canadian Securities
      Administrators, the revised listing standards adopted by the New York Stock
      Exchange and the various requirements that have come into force under the *Sarbanes-Oxley
      Act of 2002* and
      related rules that have been adopted by the U.S. Securities and Exchange
      Commission. The Board and its Committees also review our governance policies,
      procedures and practices on a regular basis to ensure that they are effective
      for FSHI.




We
      believe that our corporate governance policies, procedures and practices, which
      are described below, are in substantive compliance with the guidelines, rules
      and requirements that are applicable to FSHI and are appropriate for FSHI in
      the
      current circumstances.







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            31
            -





We
      believe that there are no significant differences in our corporate governance
      practices from those required to be followed by U.S. domestic issuers (including
      the NYSE listing standards), other than the membership on each of our Corporate
      Governance Committee and Human Resources Committee of one director who may
      be
      deemed not to be independent for certain purposes and the approval of the Chief
      Executive Officer’s compensation level, upon the recommendation of the Human
      Resources Committee, by the independent directors and those two other directors.
      As discussed below under “Committees of the Board of Directors”, we believe that
      the continued involvement of those directors on those Committees and their
      participation in the process of approving the Chief Executive Officer’s
      compensation is of significant benefit to the Committees, the Board and FSHI
      and
      does not compromise the independence of those Committees or the process for
      the
      approval of the Chief Executive Officer’s compensation.




We
      recognize that our policies, procedures and practices cannot be static and
      have
      refined them over the past year. We also recognise that further refinements
      may
      be necessary as applicable legal and regulatory requirements and the
      circumstances of FSHI evolve. We intend to continue to ensure that our system
      and culture of corporate governance meet the legitimate expectations of our
      shareholders as well as applicable legal and regulatory
      requirements.




**Code
      of Business Conduct and Ethics**




We
      believe that director, management and employee honesty and integrity are
      important factors in ensuring good corporate governance, which in turn improves
      corporate performance and benefits all shareholders. To that end, we have
      adopted a Code of Business Conduct and Ethics that applies to all directors,
      officers and employees of Four Seasons, its subsidiaries and affiliates, other
      persons in similar relationships with those entities, and all employees at
      hotels and resorts managed by us. Our Code of Business Conduct and Ethics is
      available to all directors, officers and employees and can be viewed on our
      website at *www.fourseasons.com* ** or
      at *www.sedar.com* .
      The Code of Business Conduct and Ethics addresses such matters as conflicts
      of
      interest, protection and proper use of our assets, confidential information,
      fair dealing, compliance with laws, rules and regulations and the reporting
      of
      illegal and unethical behaviour.




We
      encourage personnel who become aware of a conflict or potential conflict or
      departures from the Code of Business Conduct and Ethics to bring it to the
      attention of a supervisor or department head. We also have established
      additional procedures for confidential and anonymous reporting of complaints
      concerning accounting, internal accounting controls and auditing matters. Our
      Board of Directors requires every director and executive officer to disclose
      any
      direct or indirect conflict of interest that he or she has, and formal
      confirmation of compliance with the Code of Business Conduct and Ethics is
      obtained annually from each director and executive officer.




Any
      waivers of the Code of Business Conduct and Ethics for directors or members
      of
      our Management Committee may only be granted by the Board. The Board has not
      granted any such waivers in 2006.




**The
      Board of Directors**




*The
      Role of the Board*




In
      fulfilling its statutory mandate and discharging its duty of stewardship of
      FSHI, the Board assumes responsibility for, among other things:




•
            reviewing
                and approving the strategic planning and business objectives that
                are
                submitted by management and monitoring the implementation by management
                of
                the strategic plan,







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            32
            -










•
            reviewing
                the principal business risks for FSHI and overseeing, with the assistance
                of the Audit Committee, the implementation and monitoring of appropriate
                risk management systems and monitoring of risks,




•
            ensuring,
                with the assistance of the Corporate Governance Committee, the effective
                functioning of the Board and its Committees in compliance with applicable
                corporate governance requirements of applicable legislation, and
                that such
                compliance is reviewed periodically by the Corporate Governance
                Committee,




•
            ensuring
                internal control and management information systems are in place,
                evaluated as part of the internal audit process and reviewed periodically
                on the initiative of the Audit
                Committee,




•
            assessing
                the performance of executive officers, including monitoring the
                establishment of appropriate systems for succession planning (including
                the development of policies and principles for Chief Executive Officer
                selection and performance reviews and policies regarding succession
                in an
                emergency or upon retirement of the Chief Executive Officer) and
                periodically monitoring the compensation levels of such executive
                officers
                based on the determinations made by the Human Resources
                Committee,




•
            ensuring
                that we have in place a policy for effective communication with
                shareholders, other stakeholders and the public generally,
                and




•
            reviewing
                and, where appropriate approving, the recommendations made by the
                various
                Committees including the selection of nominees for election to the
                Board,
                appointment of directors to fill vacancies on the Board, appointment
                of
                members of the various Committees and establishing theform
                andamount of director compensation.




This
      mandate and specific expectations of directors that are intended to promote
      the
      discharge by the directors of their responsibilities and the efficient conduct
      of the Board are outlined in the Board’s Corporate Governance Guidelines (which
      includes the Board Charter), which are attached as Schedule A and can be viewed
      at our website at *www.fourseasons.com* .




*Board
      Composition*




Consistent
      with applicable legal and regulatory requirements and prevailing best practices,
      the Board and its Committees give careful consideration to their size,
      composition and independence, which they believe are appropriate for FSHI.




The
      Corporate Governance Committee, among other things, develops and recommends
      to
      the Board criteria for selecting new directors, assists the Board by identifying
      individuals qualified to become members of the Board, and recommends to the
      Board nominees for election to the Board in annual meetings and directors to
      be
      appointed to each Committee and as the Chair of each Committee. In doing so,
      the
      Corporate Governance Committee applies a number of criteria in assessing
      individuals that may be qualified to become directors and members of Committees,
      including:




•
            their
                judgement, character, expertise, skills and knowledge that may be
                useful
                to the oversight of Four Seasons’
business,




•
            their
                diversity of viewpoints, backgrounds, experiences and other demographics,




•
            their
                business and other relevant experience,
                and







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            33
            -










•
            the
                extent to which the interplay of their expertise, skills, knowledge
                and
                experience with that of other members of the Board will build a board
                that
                is effective, collegial and responsive to the needs of Four
                Seasons.




These
      criteria are applied in respect of each individual director, and in respect
      of
      the Board and each Committee as a whole.




To
      assist in determining the independence of directors for purposes that include
      compliance with applicable legal and regulatory requirements and policies,
      the
      Board has adopted categorical standards, which are part of the Board’s Corporate
      Governance Guidelines, which are attached to this circular and may be viewed on our website at *www.fourseasons.com* .
      A director who qualifies as “independent” under these standards is:




•
            a
                director who has no direct or indirect material relationship with
                FSHI,
                being a relationship that could, in the view of the Board, reasonably
                interfere with his or her independent judgment, and




•
            “independent”
                for the purposes of the NYSE listing standards and the corporate
                governance policies of the Canadian Securities
                Administrators.




Members
      of the Audit Committee also must satisfy additional independence standards
      as
      contemplated by the rules made by certain of the Canadian Securities
      Administrators and the SEC (and adopted by the NYSE), which result in them
      being
“independent” for those purposes as well.




Based
      upon information provided by each of the directors, the Corporate Governance
      Committee and the Board have affirmatively determined that the following
      8 **** of
      the 12 directors are “independent” under these standards: Messrs. Henry and
      Turner are deemed not to be independent under the listing standards of the
      NYSE
      as a result of each of them being a director of a company that owns a hotel
      that
      is managed by Four Seasons and that made payments in 2006 to Four Seasons and
      its subsidiaries of more than the greater of $1 million or 2% of FSHI’s
      consolidated gross revenues. The Corporate Governance Committee and the Board
      have determined that Anthony Sharp should not be considered to be an
“independent” director as a result of his familial relationship to Isadore
      Sharp, and that Isadore Sharp should not be considered to be “independent” as a
      result of his being the Chief Executive Officer of Four Seasons.




*Board
      Process*




In
      addition to having two-thirds of the Board comprised of independent directors,
      we have adopted a variety of structures to allow for the independence of the
      Board from management, including the consideration of transactions and
      agreements in respect of which a director or executive officer has a material
      interest. Those structures include the appointment of a “lead director” (who is
      an “independent” director) with a formal mandate to assist the Board in
      fulfilling its duties effectively, efficiently and independent of management,
      the practice of having the non-management members of the Board meet as a group
      in executive sessions (with no members of management present) after every
      regularly scheduled meeting of the Board and otherwise as those directors may
      determine, following which the independent directors meet in executive session
      (with no members of management or non-independent directors present) and members
      of the Board having the opportunity to initiate discussions with senior
      management without the Chief Executive Officer present so that they may freely
      discuss any concerns they may have, and the ongoing monitoring of the
      relationship between the Board and management by the Corporate Governance
      Committee. The position description of the lead director, which has been
      approved by the Board, is available on our website at *www.fourseasons.com* .
      The Board believes that it has functioned, and continues to function,
      independently of management.







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            34
            -










Consistent
      with recommended governance practices, the Board and the Chief Executive Officer
      have developed position descriptions that define the limits of management’s
      responsibilities. In this regard, the Board has adopted a job description and
      statement of functions for the Chief Executive Officer that delegates to him
      the
      responsibility for overseeing the day-to-day management of Four Seasons’
business in accordance with strategic plans and operating and capital
      expenditure budgets approved by the Board. The Chief Executive Officer reports
      formally to the Board, as well as less formally through discussions with members
      of the Board, to advise the Board on a timely basis of courses of action that
      are being considered by management and are being followed. The Board exercises
      its responsibility for oversight through the approval of all significant
      decisions and initiatives affecting Four Seasons. The Board is satisfied that
      the Chief Executive Officer has reported to, and sought the consent of, the
      Board where necessary and appropriate.




Management,
      working with the Board and the Corporate Governance Committee, provides an
      orientation program and education program for new directors to familiarize
      them
      with FSHI and its business. On a continuing basis, management provides periodic
      presentations for the Board to ensure that directors are aware of major business
      trends and industry practices, and directors are free to contact the Chief
      Executive Officer and other members of the Management Committee at any time
      to
      discuss any aspect of our business. The provision of lodging and food and
      beverage privileges at properties we manage in accordance with industry practice
      (which do not compromise the independence of our directors) also encourages
      direct, on-site experience by directors with our business.




The
      Board is scheduled to meet six **** times
      a year and meets more frequently, if required. During 2006, the Board held
      six
      meetings and six meetings of the directors who are independent for purposes
      of
      the corporate governance policies of the Canadian Securities Administrators
      (two
      of whom may not be considered to be independent under the listing standards
      of
      the NYSE). The Board expects all directors to attend the annual general meeting,
      although this expectation is not documented in a formal, written policy; all
      directors attended the 2006 annual general meeting of shareholders. In 2006,
      the
      directors listed below attended in person or by telephone the number of meetings
      of the Board of Directors and its Committees shown in the following
      table. ****




**Number
                of Meetings Attended During 2006****Board
                of Directors**
            **Independent
                Directors**
            **Committees**William
                D. Anderson
            6
            6
            17Nan-b
                de Gaspé Beaubien
            6
            6
            9Brent
                Belzberg
            6
            6
            13H.
                Roger Garland
            6
            6
            2Charles
                S. Henry
            6
            0
            5Heather
                Munroe-Blum
            6
            6
            7Ronald
                W. Osborne
            6
            6
            13J.
                Robert S. Prichard
            6
            6
            5Lionel
                H. Schipper
            6
            6
            8Anthony
                Sharp
            6
            0
            0Isadore
                Sharp
            6
            0
            0Simon
                M. Turner
            6
            0
            4










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            35
            -










**Summary
                of Board and Committee Meetings Held in 2006:**Board
                of Directors
            6Independent
              Directors
            6Audit
                Committee
            4Human
                Resources Committee
            4Corporate
                Governance Committee
            5Special
                Committee
            9




Since
      January 1, 2007, the Board has held three meetings and there have been three meetings of the independent directors. Each of these meetings, in addition
      to
      all Committee meetings held since January 1, 2007, was attended in person or
      by
      telephone by all of the respective directors.




*Board
      Assessment*




Annually,
      under the supervision of our Corporate Governance Committee, our directors
      conduct a formal annual evaluation of the performance and effectiveness of
      the
      Board and each of its Committees. This annual evaluation includes an assessment
      of the individual directors and their attributes that contribute to an effective
      Board. A written evaluation process is complemented with individual interviews
      with a member of the Corporate Governance Committee. The resulting data is
      analyzed by the Corporate Governance Committee and the Board and is used to
      assist in refinements to our ongoing governance process. The Board **** has
      not conducted its annual assessment for 2006 but it will conduct its annual
      assessment at a later date if necessary.




**Committees
      of the Board**




The
      Board has established three standing Committees to assist it in discharging
      its
      mandate. The roles of the Committees as part of our governance process are
      outlined below, and their charters may be viewed on our website at *www.fourseasons.com* .
      Each Committee reviews and assesses its mandate at least annually and has the
      authority to retain special legal, accounting or other advisors. Each Committee
      is chaired by an “independent” director. The Board has approved a position
      description for the chairs of these committees, which are available on our
      website at *www.fourseasons.com* *.*




*Composition
      of Committees*




The
      members of the Committees are appointed annually by the Board upon the
      recommendation of the Corporate Governance Committee. In considering the
      composition of each Committee, the Corporate Governance Committee and the Board
      consider, among other things, the expertise, experience and independence that
      the members bring to the Committee individually and as a group.




All
      of the directors who currently are members of the Committees and were members
      of
      the Committees in 2006 are “independent” directors except that in 2006, the
      Human Resources Committee and the Corporate Governance Committee also included
      a
      director who was a nominee of Kingdom Investments Inc. As discussed above,
      Messrs. Turner and Henry may not be considered “independent” as a result of
      certain deeming provisions under the governance standards of the NYSE and rules
      made by the Canadian Securities Administrators and the SEC. The Corporate
      Governance Committee and the Board believe that the continued involvement of
      Mr.
      Henry and Mr. Turner has been, and will continue to be of significant benefit
      to
      the Committees on which they may serve, the Board and FSHI as a result of the
      expertise and experience that they bring to that process and the perspective
      that they bring to the issues considered by the Committees as representatives
      of
      a significant shareholder and does not compromise the independence of those
      Committees.







-
            36
            -





The
      Board, upon the recommendation of the Corporate Governance Committee, has
      determined that the Chair of the Audit Committee, Mr. Osborne, is a “financial
      expert” for the purposes of a rule made under the *Sarbanes-Oxley
      Act of 2002* and that all members of the Audit Committee are “financially literate” and
      independent as contemplated by the rule made by certain of the Canadian
      Securities Administrators and the governance standards of the NYSE. The SEC
      has
      indicated that the designation of Mr. Osborne as an audit committee financial
      expert does not make Mr. Osborne (and others who may be similarly designated)
      an
“expert” for any purpose, impose any duties, obligations or liabilities on Mr.
      Osborne that are greater than those imposed on members of the Audit Committee
      and Board of Directors who do not carry this designation or affect the duties,
      obligations or liability of any other members of the Audit Committee. When
      considering criteria for determinations of financial literacy, the Board looks
      at the ability to read and understand a balance sheet, an income statement
      and
      cash flow statement of a breadth and level of complexity of accounting issues
      generally comparable to the issues expected to be raised by FSHI financial
      statements.




None
      of the members of the Audit Committee may serve on the audit committee of more
      than three public companies in addition to FSHI without the prior approval
      of
      the Audit Committee and the Corporate Governance Committee. None of the members
      of the Audit Committee serves on the audit committee of more than three other
      public companies.




*Audit
      Committee*




Members
      - Ronald W. Osborne (Chair), William D. Anderson, Roger Garland and Lionel
      H.
      Schipper.




Ronald
      W. **** Osborne
      (Chair), B.A., F.C.A. - Mr. Osborne is a former partner and employee of a
      prominent Canadian Chartered Accountants firm and its Brazilian affiliate and
      has held positions as President, Chief Executive Officer and Chief Financial
      Officer at four large Canadian companies. Mr. Osborne currently serves on the
      board of a number of Canadian public companies and community organizations.
      In
      addition to serving as the Chair of the Audit Committee at FSHI, Mr. Osborne
      is
      the Chair of the Audit Committee at one of Canada’s largest real estate
      investment trusts and a member of the Audit Committee at two other Canadian
      public companies.




Lionel
      H. Schipper, C.M., Q.C. - Mr. Schipper received his B.A. and L.L.B. from the
      University of Toronto and is a former partner of a major Toronto law firm,
      where
      he specialized in corporate finance and securities law. Since retiring from
      the
      firm he has been actively involved in the investment business as President
      of a
      private firm. Mr. Schipper has for more than 20 years served as a director
      of
      numerous public companies some of whose shares have been listed on the New
      York
      Stock Exchange and the Toronto Stock Exchange. Mr. Schipper currently serves
      on
      the board of directors of two other Canadian public companies and on the board
      of directors and audit committee of one United States public company, is the
      Vice-Chair of the Centre for Research in Neurodegenerative Diseases at the
      University of Toronto and is an Honourary Director of the Baycrest Centre
      Foundation.




William
      Anderson, C.A. - Mr. Anderson is a corporate director. Mr. Anderson was the
      president of BCE Ventures Inc. until December 31, 2005 and has held positions
      as
      the Chief Financial Officer at BCE Inc., Bell Canada and Bell Cablemedia plc.
      Mr. Anderson is a former partner of KPMG LLP (having left the firm in 1989).
      He
      also is a director of TransAlta Corporation, Bell Canada International Inc.,
      Gildan Activewear Inc. and MDS Inc.




H.
      Roger Garland, C.A. - Mr. Garland received his B.A. from the University of
      Toronto and commenced his professional career with PricewaterhouseCoopers LLP,
      qualifying as a Chartered Accountant in 1966. Following eight years of
      experience in treasury, finance and accounting with AGT Data Systems Ltd. and
      ERCO Ltd., Mr. Garland joined Citibank in Toronto. During the next seven years,
      he held positions as Vice-President, Corporate Banking (Canada), Vice-President
      Corporate Banking (Switzerland), Vice-President, Mortgage Lending (Toronto)
      and
      Chief of Staff for Citicorp (Canada). In 1981, Mr. Garland







-
            37
            -





joined
      FSHI as Senior Vice-President, Finance and was appointed to the board of
      directors in 1984. One year later, he was appointed Executive Vice-President
      and
      Chief Financial Officer of FSHI. In 1995, Mr. Garland assumed the role of
      Vice-Chairman of FSHI. In this role, he managed the planning and direction
      of
      the development, acquisition and asset management activities of the company.
      Mr.
      Garland retired from FSHI as of December 31, 2000. Mr. Garland currently serves
      on the boards of a number of Canadian public and private companies and income
      funds and community organizations and is the Chairman of the board of Soulpepper
      Theatre Company.




The
      Audit Committee assists the Board in, among other things, its oversight and
      evaluation of:




•
            the
                quality and integrity of our financial
                statements,




•
            compliance
                by FSHI with legal and regulatory requirements in respect of financial
                disclosure,




•
            the
                qualification, independence and performance of our independent auditor,
                and




•
            the
                performance of the Chief Financial Officer ;and




•
            internal
                auditor.




In
      addition, the Audit Committee provides an avenue for communication between
      the
      internal auditor, the independent auditor, financial management, other employees
      and the Board concerning accounting and auditing matters.




The
      Audit Committee is directly responsible for the appointment, compensation,
      retention (and termination) and oversight of the independent auditor (including
      oversight of the resolution of any disagreements between management and the
      independent auditor regarding financial reporting) for the purpose of preparing
      audit reports or performing other audit, review or attest services. The Audit
      Committee has the primary oversight responsibility for our financial reporting,
      risk management and internal controls. It has the sole authority to hire and
      fire the independent auditor, approve significant non-audit relationships with
      our independent auditor and the terms of and fees for audit and non-audit
      engagements. The Audit Committee has unrestricted access to our personnel and
      documents and to our independent auditor and takes advantage of such access
      as
      it deems necessary. The Audit Committee meets to review and discuss the annual
      and quarterly financial statements and accompanying management’s discussion and
      analysis and recommends their approval to the Board. It is not, however, the
      responsibility of the Audit Committee to determine that our financial statements
      are complete and accurate and in accordance with generally accepted accounting
      principles (“GAAP”), which is the responsibility of management, or to plan and
      conduct audits of our financial statements, which is the responsibility of
      the
      independent auditor. The Audit Committee assesses the independence of the
      independent auditor and the independent auditor’s other relationships with FSHI,
      reviews the scope and planning of the external audit, the form of audit report
      and any correspondence from or comment by the independent auditor regarding
      financial reporting and internal controls. The Audit Committee has adopted
      policies and procedures regarding services provided by the independent auditor
      that, among other things, require the pre-approval by the Audit Committee of
      the
      audit and non-audit services performed by the independent auditor. The Audit
      Committee also will review the hiring by FSHI of partners or managers of the
      independent auditor who have been involved in a recent audit.




The
      Audit Committee reviews significant accounting policies and principles and
      is
      updated regularly about current accounting issues and developments and has
      explained to it, among other things, the various alternatives available under
      GAAP (and the consequences of those alternatives) that could result in lower
      revenues and/or profits and higher asset write-offs and/or greater liabilities.
      The Audit Committee updates the Board of the foregoing as necessary. The Audit
      Committee reviews the competence of key partners and managers of the independent
      auditor. In addition, the Audit Committee reviews relevant analyst reports
      and
      press accounts of our accounting practices and disclosures.







-
            38
            -





The
      Audit Committee considers the appointment and replacement by management of
      the
      senior internal auditing personnel and reviews the scope of internal audit
      work
      plans each year. The Audit Committee reviews the significant reports to
      management prepared by the internal auditor and management’s responses and
      discusses with the internal auditor the adequacy of Four Seasons’ internal
      accounting controls and its financial, auditing and accounting organizations
      and
      personnel.




The
      Audit Committee has implemented employee complaint procedures for accounting
      and
      auditing matters, pursuant to which directors, officers and employees of FSHI,
      its subsidiaries and the properties they manage are encouraged to talk to
      supervisors, managers or other appropriate personnel about observed illegal
      or
      unethical behaviour and when in doubt about the best course of action in a
      particular situation. Confidential complaint procedures have been established
      to
      facilitate the submission of complaints relating to any questionable accounting,
      internal accounting controls or auditing matters.




Our
      Board of Directors has approved a written charter for the Audit Committee,
      the
      text of which is set out in Schedule “B”. Our Audit Committee charter may also
      be viewed on our website at *www.fourseasons.com* .




The
      Audit Committee charter provides that the Committee will meet at least quarterly
      and will meet separately with management periodically and will meet with the
      internal auditor and the independent auditor as appropriate. All meetings of
      the
      Committee include a session at which only members of the Committee are present.
      The Audit Committee met four **** times
      in 2006.




The
      Audit Committee has reviewed and discussed the audited financial statements
      with
      management, and has discussed with the independent auditors the matters required
      to be discussed. The Audit Committee has also received the written disclosures
      and the letter from, and discussed them with, the independent accountants,
      as
      required by applicable securities laws. The Audit Committee has recommended
      to
      the Board that the audited financial statements be included in FSHI’s annual
      report on Form 40-F for the last fiscal year for filing with the SEC.




**Pre-Approval
      Policies and Procedures**




The
      Audit Committee has considered whether the provision of services by KPMG LLP
      other than audit services is compatible with maintaining the independence of
      KPMG LLP. The Audit Committee has determined that the provision of certain
      services is consistent with that independence and has adopted a policy that
      restricts us from engaging KPMG LLP for certain categories of non-audit services
      and requires pre-approval by the Audit Committee of audit services and other
      services that KPMG LLP is not restricted by this policy from providing. The
      services provided by, and fees paid to, KPMG LLP in 2006 were in compliance
      with
      this policy.




**Audit
      and Audit-Related Fees** ****




Audit
      fees charged by KPMG LLP totalled C$1,430,939 in 2006 and C$736,056 in 2005.




Audit-related
      fees charged by KPMG LLP totalled C$164,200 in 2006 and C$234,209 in 2005.
      Audit-related fees include fees for assurance and related services that are
      reasonably related to the performance of the audit or review of our annual
      financial statements and are not reported as part of audit fees, including
      audit
      of employee retirement benefit plan, advice with respect to internal controls
      and other assurance reports.









-
            39
            -





**Tax
      Fees**




Fees
      charged by KPMG LLP for tax services, including tax compliance, tax advice
      and
      tax planning, totalled approximately C$509,477 in 2006 and C$111,824 **** in
      2005. These services consisted of tax compliance (including the review of tax
      returns, assistance with questions regarding tax audits and preparation of
      certain employee tax returns), and tax planning and advisory services relating
      to common forms of domestic and international taxation.




**All
      other Fees**




Fees
      charged by KPMG LLP for other services not described above totalled nil in
      2006
      and nil in 2005.




*Human
      Resources Committee*




Members:
      Lionel H. Schipper (Chair), William D. Anderson, Nan-b de Gaspé Beaubien, Brent
      Belzberg, Heather Munroe-Blum and Simon Turner.




The
      Human Resources Committee assists the Board in discharging its responsibility
      relating to compensation of executives and approving and evaluating the
      compensation plans, policies and programs of senior executives or that otherwise
      are of significance to FSHI. The Human Resources Committee has the specific
      responsibility for the review and approval of corporate goals and objectives
      relevant to the compensation of the Chief Executive Officer, evaluation of
      his
      performance against those goals and objectives, and making recommendations
      to
      the Board in respect of his compensation in the context of his performance.
      As
      outlined in the charter of the Human Resources Committee, the Committee also
      has
      responsibility for making recommendations with respect to retirement benefit
      plans, incentive and equity-based compensation plans and ensuring that programs
      related to manpower planning, management development, succession planning,
      career path planning and performance evaluation are effectively integrated
      with
      FSHI’s strategy. The Human Resources Committee also is responsible for producing
      an annual report on executive compensation.




The
      Human Resources Committee charter provides that the Committee will meet at
      least
      twice a year and more frequently as circumstances require. All meetings of
      the
      Committee include a session at which only members of the Committee are present.
      The Human Resources Committee met four times in 2006.




*Corporate
      Governance Committee*




Members:
      J. Robert S. Prichard (Chair and Lead Director), Nan-b de Gaspé Beaubien,
      Charles S. Henry and Heather Munroe-Blum.




In
      addition to making recommendations as to the size of the Board, standards for
      director independence, nominees for election as directors and the composition
      of
      Committees, the Corporate Governance Committee is intended to enhance our
      corporate governance process through the development and recommendation to
      the
      Board of appropriate corporate governance guidelines, administering the Code
      of
      Business Conduct and Ethics, assisting the Board and the Committees in their
      annual review of their performance and their charters and their oversight of
      the
      evaluation of management’s performance, reviewing and making recommendations to
      the Board with respect to the compensation of directors, reviewing and making
      recommendations with respect to succession plans and undertaking such other
      initiatives that may be necessary or desirable to enable the Board to provide
      effective corporate governance. The Corporate Governance Committee also reviews
      the compensation and remuneration of the Board with a view to ensuring that
      it
      realistically reflects the responsibilities involved in being an effective
      director. The Corporate Governance Committee has been granted the authority
      and
      direction to take such other initiatives as are needed to help the Board address
      corporate governance issues and to approve the engagement of independent
      advisors for individual directors at the expense of FSHI, if the need should
      arise.







-
            40
            -





The
      Corporate Governance Committee charter establishes policies with respect to
      the
      role and responsibility of the Corporate Governance Committee in identifying
      new
      directors consistent with criteria approved by the Board. The Corporate
      Governance Committee does not have a specific policy with respect to the
      consideration of director candidates recommended by shareholders. The Board
      believes that the Corporate Governance Guidelines (as set out in Schedule “A”
attached hereto) establishes appropriate criteria for selecting new directors.
      The Corporate Governance Committee will consider director candidates received
      by
      shareholders in a manner consistent with its consideration of all other director
      candidates.




The
      Corporate Governance Committee charter provides that the Committee will meet
      at
      least twice a year and more frequently as circumstances require. All meetings
      of
      the Committee include a session at which only members of the Committee are
      present. The Corporate Governance Committee met five times in 2006.




*Special
      Committee*




Members:
      Ronald W. Osborne (Chair), William D. Anderson and Brent Belzberg.




In
      connection with the Arrangement Transaction, the Board established the Special
      Committee. The mandate of the Special Committee was to consider the
      proposed transaction and the structure and terms and conditions of the proposed
      transaction, to supervise the conduct of, and engage in negotiations or
      discussions on behalf of FSHI with respect to, the proposed transaction, to
      make
      recommendations to the Board regarding the proposed transaction and the process
      related thereto, and to supervise the preparation of a formal valuation of
      the Limited Voting Share in connection with the proposed
      transaction.




Since
      its formation on November 5, 2006, the Special Committee has met a total of
      13
      times in connection with the Arrangement Transaction.




**Communicating
      to Shareholders**




The
      Board is committed to an effective communications policy for the benefit of
      all
      stakeholders, including shareholders, debt holders, suppliers, guests,
      governmental authorities, employees and members of the investment community.
      In
      addition to its timely and continuous disclosure obligations under applicable
      law, the Board also has a formal policy for dealing with analysts, shareholders
      and the financial press so as to facilitate the dissemination of information.




These
      practices are intended to provide timely disclosure of material information
      in a
      manner that is broadly accessible on a non-exclusionary basis by all market
      participants. To facilitate this open communication and to avoid selective
      disclosure, FSHI holds regular information meetings or calls after the release
      of quarterly and annual results and holds meetings or calls in association
      with
      the release of other information by FSHI. All such meetings and calls are open
      to the public. Details of the notice of time, place, general substance and
      method of accessing any such meeting or call and instructions as to where and
      how long the public will be able to access transcripts or replays are broadly
      disseminated. To increase accessibility, all such information is also available
      through our website.




Shareholders
      may communicate directly with non-management directors, through the Lead
      Director, by writing to: Lead Director of the Board of Directors, Four Seasons
      Hotels Inc., 1165 Leslie Street, Toronto, Ontario, M3C 2K8.











-
            41
            -







**Experts**




Our
      auditors, KPMG LLP, who have prepared the auditors report to our shareholders
      on
      our consolidated financial statements for the year ended December 31, 2006
      are
      independent within the meaning of the Rules of Professional Conduct of the
      Institute of Chartered Accountants.




**Corporate
      Chart**




The
      following chart illustrates our corporate structure, and includes corporations
      in which we have a significant interest, either directly or indirectly, and
      their jurisdictions of incorporation or organization.




**Four
                Seasons Hotels Inc.**
              *(Ontario
                Corporation)*|**Four
                Seasons Hotels Limited**A
              *(Ontario
                Corporation)*
            100%B|
              |
            **Four
                Seasons Hotels and Resorts B.V.**C
              *(Netherlands
                Corporation)*
            100%B||
              |
            **Four
                Seasons Hotels and Resorts Asia Pacific Pte Ltd.**C
              *(Singapore
                Corporation)*
            100%D||
              |
            **Four
                Seasons Hotels (Barbados) Ltd.**
              *(Barbados
                Corporation)*
            100%B||
              |
            **Four
                Seasons Hotels (U.S.) Inc.**
              *(Delaware
                Corporation)*
            100%B




Notes




A.
            The
                management of Four Seasons hotels in North America is generally carried
                out by Four Seasons Hotels Limited.


B.
            Direct.


C.
            The
                management of Four Seasons hotels outside North America and Regent
                hotels
                is generally carried out by Four Seasons Hotels and Resorts B.V.
                and Four
                Seasons Hotels and Resorts Asia Pacific Pte
                Ltd.


D.
            Indirect.




**Additional
      Information**




Additional
      financial information is provided in our Consolidated Financial Statements
      for
      the year ended December 31, 2006 and related Management’s Discussion and
      Analysis. Such information and other information about us may be found at *www.sedar.com* .




-
              42
              -





**SCHEDULE
      “A”**














**FOUR
      SEASONS HOTELS INC.**




**CORPORATE
      GOVERNANCE GUIDELINES**




**INTRODUCTION**




The
      Board of Directors of the Company is committed to fulfilling its statutory
      mandate to supervise the management of the business and affairs of the Company
      with the highest standards of ethical conduct and in the best interests of
      the
      shareholders of the Company. The Board of Directors, acting on the
      recommendation of its Corporate Governance Committee, has adopted these
      corporate governance guidelines to promote the effective functioning of the
      Board of Directors and its committees, to promote the interests of shareholders,
      and to establish a common set of expectations as to how the Board of Directors,
      its various committees, individual directors and management should perform
      their
      functions.




GUIDELINES




Board
      Responsibilities




The
      business and affairs of the Company are managed by or under the supervision
      of
      the Board of Directors in accordance with applicable legislation, regulatory
      requirements and policies of the Canadian Securities Administrators. The
      responsibility of the Board of Directors is to provide direction and oversight.
      The Board approves the strategic direction of the Company and oversees the
      performance of the Company's business and management. The management of the
      Company is responsible for presenting strategic plans to the Board for review
      and approval and for implementing the Company's strategic
      direction.




In
      performing their duties, the primary responsibility of the directors is to
      exercise their business judgment in what they reasonably believe to be the
      best
      interests of the Company. In discharging that obligation, directors should
      be
      entitled to rely on the honesty and the integrity of the Company's senior
      executives and outside advisors and auditors. The directors also should be
      entitled to have the Company purchase reasonable directors' and officers'
      liability insurance on their behalf, and to the benefits of indemnification
      to
      the fullest extent permitted by applicable law and to exculpation as provided
      by
      applicable law.




In
      fulfilling its statutory mandate and discharging its duty of stewardship of
      the
      Company, the Board of Directors assumes responsibility for those matters set
      forth in its Charter (which also is its mandate), a copy of which is attached
      as **Schedule
      1** .




Board
      Size




It
      is the current view of the Board of Directors that the Board should consist
      of
      no more than 15 members to facilitate its effective functioning.







*As
            in effect March*  *2006*


-
      2
      -





Chairman
      of the Board and Chief Executive Officer




The
      Board of Directors believes that so long as the roles of Chairman and Chief
      Executive Officer are held by the same individual, there should be a "lead
      director" appointed by the Board of Directors from among its independent
      members, who should also serve as chair of the Corporate Governance Committee.
      The Lead Director and the Chief Executive Officer should carry out their
      responsibilities in accordance with their written position
      descriptions.




Selection
      of Directors




As
      provided in the Corporate Governance Committee’s Charter, the Corporate
      Governance Committee will be responsible for identifying and recommending to
      the
      Board of Directors individuals qualified to become members of the Board of
      Directors, based primarily on the following criteria:




•
            judgment,
                character, expertise, skills and knowledge useful to the oversight
                of the
                Company's business,




•
            diversity
                of viewpoints, backgrounds, experiences and other
                demographics,




•
            business
                or other relevant experience, and




•
            the
                extent to which the interplay of the individual's expertise, skills,
                knowledge and experience with that of other members of the Board
                of
                Directors will build a board that is effective, collegial and responsive
                to the needs of the Company.




The
      Corporate Governance Committee also will be responsible for initially assessing
      whether a candidate would be independent (and in that process applying the
      Categorical Standards for Determining Independence of Directors (that are
      appended to the Board of Directors Charter) and advising the Board of Directors
      of that assessment.




The
      Board of Directors, taking into consideration the recommendations of the
      Corporate Governance Committee, will be responsible for selecting the nominees
      for election to the Board of Directors, for appointing directors to fill
      vacancies, and determining whether a nominee or appointee is
      independent.




Continuation
      as a Director




Directors
      (other than the Chairman) who have passed their 72 nd birthday will not be eligible for re-election unless a specific determination
      to
      the contrary is made by the Board of Directors upon the recommendation of the
      Corporate Governance Committee.




When
      a director's principal occupation or business association changes substantially
      from the position he or she held when originally invited to join the Board
      of
      Directors (determined by reference to factors such as country of principal
      residence, industry affiliation, etc.), that director should tender a letter
      of
      proposed resignation to the chair of the Corporate Governance Committee. The
      Corporate Governance Committee will review that director's continuation on
      the
      Board of Directors and recommend to the Board of Directors whether, in light
      of
      all the circumstances, the Board of Directors should accept the proposed
      resignation or request that the director continue to serve.







*As
            in effect March*  *2006*


- 3
      -





Committee
      Membership




Each
      of the Audit Committee, the Human Resources Committee and the Corporate
      Governance Committee will be composed of no fewer than three members, each
      of
      whom will satisfy the membership criteria set out in the relevant committee
      charter. Members of committees will be appointed by the Board of Directors
      upon
      the recommendation of the Corporate Governance Committee. A director may serve
      on more than one committee and committee membership may be rotated periodically
      as necessary or advisable. The Board of Directors, taking into account the
      recommendation of the Corporate Governance Committee, will designate one member
      of each committee as chairperson of that committee. As set out above, at such
      times as there is a Lead Director, he or she shall serve as the chairperson
      of
      the Corporate Governance Committee. Committee chairpersons shall carry out
      their
      responsibilities in accordance with their respective written position
      descriptions. Committee chairpersons may be rotated periodically as
      well.




**Evaluating
      Board and Committee Performance**




The
      Board of Directors and each committee will conduct an annual self-evaluation
      as
      provided in its respective charter.




Board
      and Committee Meetings




The
      Board and each committee should meet as provided in its respective
      charter.




An
      agenda for each meeting of the Board of Directors and each committee meeting
      will be provided to each director and each member of the relevant committee.
      Any
      director or member of a committee may suggest the inclusion of subjects on
      the
      agenda of meetings of the Board of Directors or a committee. Each director
      and
      each member of a committee is free to raise at a meeting of the Board of
      Directors or a committee meeting, respectively, subjects that are not on the
      agenda for that meeting.




Materials
      provided to the directors for meetings of the Board of Directors and committee
      meetings should provide the information needed for the directors and members
      of
      the committee, respectively, to make informed judgments or engage in informed
      discussions.




To
      ensure strong communication with the Chief Executive Officer, the
      non-management **** directors
      will meet with the Chief Executive Officer (with no other members of management
      present) before every regularly scheduled Board meeting. To ensure free and
      open
      discussion and communication among directors, the non-management **** directors
      will meet in executive session (with no members of management present) after
      every regularly scheduled meeting of the Board of Directors and otherwise as
      those directors determine, following which the independent directors will meet
      in executive session (with no members of management or non-independent directors
      present). The Chair of the Corporate Governance Committee will preside at these
      executive sessions, unless the directors present at such meetings determine
      otherwise. Any interested party may communicate directly with the Chair, who
      may
      invite such person to address an executive session.




Unless
      the Chair of a committee otherwise determines, the agenda, materials and minutes
      for each committee meeting will be available on request to all directors, and
      all directors will be free to attend any committee meeting. All meetings of
      a
      committee will have a session in which the members of the committee will meet
      with no non-committee members present and, at any time in a meeting of a
      committee, directors who are not members may be asked to leave the meeting
      to
      ensure free and open discussion and communication among members of the
      committee. Directors who are not members of a committee will not be compensated
      for attending meetings of that committee.




Director
      Compensation




As
      provided for in the Corporate Governance Committee’s Charter, the form and
      amount of director compensation will be determined by the Board of Directors
      upon the recommendation of the Corporate Governance Committee.







*As
            in effect March*  *2006*


- 4
      -





Expectations
      of Directors




The
      Board of Directors has developed a number of specific expectations of directors
      to promote the discharge by the directors of their responsibilities and to
      promote the efficient conduct of the Board of Directors.




***Commitment
      and Attendance.*** All
      directors should strive to attend all meetings of the Board of Directors and
      the
      committees of which they are members. Attendance by telephone or video
      conference may be used when necessary to facilitate a director's
      attendance.




***Participation
      in Meetings.*** Each
      director should be sufficiently familiar with the business of the Company,
      including its financial statements and capital structure, and the risks and
      the
      competition it faces, to ensure active and effective participation in the
      deliberations of the Board of Directors and of each committee on which he or
      she
      serves.




***Loyalty
      and Ethics.*** In
      their roles as directors, all directors owe a duty of loyalty to the Company.
      This duty of loyalty mandates that the best interests of the Company take
      precedence over any other interest possessed by a director. Directors should
      conduct themselves in accordance with the Company's Code of Business Conduct
      and
      Ethics.




***Interlocking
      Directorships.*** No
      director should serve on more than two other public company boards of directors
      on which another director of the Company serves.




***Contact
      with Management and Employees.*** All
      directors should be free to contact the Chief Executive Officer and other
      members of the Company’s Management Committee at any time to discuss any aspect
      of the Company's business. The Board of Directors expects that there will be
      frequent opportunities for directors to meet with the Chief Executive Officer
      and other members of management in meetings of the Board of Directors and
      committees, or in other formal or informal settings.




***Confidentiality.*** The
      proceedings and deliberations of the Board of Directors and its committees
      are
      confidential. Each director will maintain the confidentiality of information
      received in connection with his or her service as a director.




Orientation
      and Continuing Education




Management,
      working with the Board of Directors, will provide an orientation and education
      program for new directors to familiarize them with the Company and its business,
      as well as the expected contribution of individual directors. All new directors
      will participate in this program, which should be completed within four months
      of a director first joining the Board of Directors. In addition, management
      will
      schedule periodic presentations for the Board of Directors to ensure they are
      aware of major business trends and industry practices as and when
      required.












*As
              in effect March*  *2006*





**Schedule
      1**









**FOUR
      SEASONS HOTELS INC.**




**BOARD
      OF DIRECTORS CHARTER**




**PURPOSE**




The
      Board of Directors is elected by the Company’s shareholders to supervise the
      management of the business and affairs of the Company, in the best interests
      of
      the Company. The Board of Directors shall:




•
            Review
                and approve the strategic plan and business objectives of the Company
                that
                are submitted by management and monitor the implementation by management
                of the strategic plan. During at least one meeting each year, the
                Board of
                Directors will review the Company’s long term strategic plans and the
                principal issues that the Company expects to face in the
                future.




•
            Review
                the principal business risks for the Company and oversee, with the
                assistance of the Audit Committee, the implementation and monitoring
                of
                appropriate risk management systems and the monitoring of
                risks.




•
            Ensure,
                with the assistance of the Corporate Governance Committee, the effective
                functioning of the Board of Directors and its committees in compliance
                with the corporate governance requirements of applicable legislation,
                and
                that such compliance is reviewed periodically by the Corporate Governance
                Committee.




•
            Ensure
                internal controls and management information systems for the Company
                are
                in place, are evaluated as part of the internal auditing process
                and
                reviewed periodically on the initiative of the Audit
                Committee.




•
            Assess
                the performance of the Company’s executive officers, including monitoring
                the establishment of appropriate systems for succession planning
                (including the development of policies and principles for Chief Executive
                Officer selection and performance review and policies regarding succession
                in an emergency or upon retirement of the Chief Executive Officer)
                and for
                periodically monitoring the compensation levels of such executive
                officers
                based on determinations and recommendations made by the Human Resources
                Committee.




•
            Ensure
                that the Company has in place a policy for effective communication
                with
                shareholders, other stakeholders and the public
                generally.




•
            Review
                and, where appropriate, approve the recommendations made by the various
                committees of the Board of Directors, including, without limitation,
                to:
                select nominees for election to the Board; appoint directors to fill
                vacancies on the Board; appoint members of the various committees
                of the
                Board; and, establish the form and amount of director
                compensation.







*As
            in effect March*  *2006*


-
      2
      -





**COMPOSITION**




The
      Board of Directors collectively should possess a broad range of skills,
      expertise, industry and other knowledge, and business and other experience
      useful to the effective oversight of the Company’s business. The Board shall be
      comprised of that number of individuals which will permit the Board’s effective
      functioning. The appointment and removal of directors of the Board shall occur
      in accordance with the Company’s by-laws. A majority of the Board of Directors
      of the Company should meet the independence requirements of applicable
      legislation, regulatory requirements and policies of the Canadian Securities
      Administrators. The Board of Directors has adopted a set of categorical
      standards for determining whether directors satisfy those requirements for
      independence. A copy of those standards is attached as Appendix A. A majority
      of
      the Board of Directors shall be "resident Canadians", as contemplated by the *Business
      Corporations Act* (Ontario).




**MEETINGS**




The
      Board of Directors shall meet at least four times each year and more frequently
      as circumstances require. All members of the Board of Directors should strive
      to
      be at all meetings. The Board of Directors may meet separately, periodically,
      without management, and may request any member of the Company’s Management
      Committee or the Company’s outside counsel or independent auditor to attend
      meetings of the Board or with advisors thereto.




**COMMITTEES**




The
      Board of Directors may delegate authority to individual directors and committees
      where the Board determines it is appropriate to do so. The Board of Directors
      expects to accomplish a substantial amount of its work through committees and
      shall form at least the following three committees: the Audit Committee; the
      Human Resources Committee; and the Corporate Governance Committee. The Board
      of
      Directors may, from time to time, establish or maintain additional standing
      or
      special committees as it determines to be necessary or appropriate. Each
      committee should have a written charter and should report regularly to the
      Board
      of Directors, summarizing the committee’s actions and any significant issues
      considered by the committee.




**INDEPENDENT
      ADVICE**




In
      discharging its mandate, the Board of Directors shall have the authority to
      retain (and authorize the payment by the Company of) and receive advice from
      special legal, accounting or other advisors as the Board determines to be
      necessary to permit it to carry out its duties.




**ANNUAL
      EVALUATION**




At
      least annually, the Board of Directors through the Corporate Governance
      Committee shall, in a manner it determines to be appropriate:




•
            Conduct
                a review and evaluation of the performance of the Board of Directors
                and
                its members and committees, including the compliance of the Board
                with
                this Charter. This evaluation will focus on the contribution of the
                Board
                of Directors to the Company and specifically focus on areas in which
                the
                directors and management believe that the contribution of the Board
                of
                Directors could be improved.




•
            Review
                and assess the adequacy of this
                Charter.











*As
              in effect March*  *2006*










**FOUR
      SEASONS HOTELS INC.**




**Appendix
      A**




**CATEGORICAL
      STANDARDS FOR DETERMINING**




**INDEPENDENCE
      OF DIRECTORS**




For
      a director to be considered independent:




•
            under
                the policies of the Canadian Securities Administrators, he or she
                must
                have*no
                direct or indirect material relationship with the Company,*being
                a relationship that could, in the view of the Board of Directors,
                reasonably interfere with the exercise of a Director’s independent
                judgement, and




•
            under
                the rules of the New York Stock Exchange, the Board of Directors
                must
                affirmatively determine that the director has*no
                material relationship (directly or indirectly) with the
                Company*.




The
      Board of Directors, upon the recommendation of the Corporate Governance
      Committee, has considered the types of relationships that could reasonably
      be
      expected to be relevant to the independence of a director of the Company. The
      Board of Directors has determined that:




(i) A
      director’s interests and relationships arising solely from his or her (or any
      immediate family members’1 . )
      shareholdings in the Company are not, in and of themselves, a bar to
      independence.




(ii)
            Unless
                a specific determination to the contrary is made by the Corporate
                Governance Committee as a result of there being another direct or
                indirect
                material relationship with the Company, a director will be independent
                unless currently, or at any time within the past three years, he
                or she or
                any immediate family member:




•
            Employment:
                Is (or has been) an officer or employee (or, in the case of an immediate
                family member, an executive officer) or (in the case of the director
                only)
                an affiliate2of the Company or any of its subsidiaries or affiliates (collectively,
                the
                “**Company
                Group**”);







1A
      (i)
      spouse, parent, child, sibling, mother-in-law, father-in-law, son-in-law,
      daughter-in-law, brother-in-law, sister-in-law, or (ii) any person (other than
      domestic employees) who shares that director’s home.




2A
        company is a subsidiary of another company if it is controlled, directly
        or
        indirectly, by that other company (through one or more intermediaries or
        otherwise). An “affiliate” of a person is a person that, directly or indirectly
        through one or more intermediaries, controls, or is controlled by, or is
        under
        common control with the first person.







*As
            in effect March*  *2006*


-
      2
      -




• Direct
      Compensation :
      Receives (or has received) more than C$75,000 during any twelve-month period
      in
      direct **** compensation
      from the Company Group (other than director fees and committee fees and pension
      or other forms of deferred compensation for prior service, provided it is not
      contingent on continued service)3 ;




•
            Auditor
                Relationship.
                Is (or has been) a partner or employee of a firm that is the Company’s
                internal or independent auditor (provided that in the case of an
                immediate
                family member, he or she participates in its audit, assurance or
                tax
                compliance (but not tax planning practice)) and if during that time,
                he or
                she or an immediate family member was a partner or employee of that
                firm
                but no longer is such, he or she or the immediate family member personally
                worked on the Company’s audit;




•
            Material
                Commercial Relationship.
                Has (or has had), or is an executive officer, employee or significant
                shareholder of a person that has (or has had), a significant commercial
                relationship with the Company Group as a result of which that person
                makes
                payments to, or receives payments from, the Company Group for property
                or
                services in any fiscal year that, in aggregate, account for more
                than 2%
                or US$1,000,000 (whichever is greater) of that person's consolidated
                gross
                revenues;




•
            Cross-Compensation
                Committee Link.
                Is employed as an executive officer of another entity whose compensation
                committee (or similar body) during that period of employment included
                a
                current executive officer of the
                Company.







3Employment
      as
      an interim chair or an interim Chief Executive Officer need not preclude a
      director from being considered independent following the end of that employment.
      Receipt of compensation by an immediate family member need not preclude a
      director from being considered independent if that family member is a
      non-executive employee.


















*As
              in effect March*  *2006*





**SCHEDULE
      “B”**














**FOUR
      SEASONS HOTELS INC.**




**AUDIT
      COMMITTEE CHARTER**




**PURPOSE**




The
      Audit Committee is appointed by the Board of Directors of the Company to assist
      the Board of Directors in its oversight and evaluation of:




•
            the
                quality and integrity of the financial statements of the Company,




•
            the
                compliance by the Company with legal and regulatory requirements
                in
                respect of financial disclosure,




•
            the
                qualification, independence and performance of the Company’s independent
                auditor, and




•
            the
                performance of the Company's Chief Financial Officer and internal
                auditor.




In
      addition, the Audit Committee provides an avenue for communication between
      the
      internal auditor, the independent auditor, financial management, other employees
      and the Board of Directors concerning accounting and auditing
      matters.




The
      Audit Committee is directly responsible for the appointment, compensation,
      retention (and termination) and oversight of the work of the independent auditor
      (including oversight of the resolution of any disagreements between management
      and the independent auditor regarding financial reporting) for the purpose
      of
      preparing audit reports or performing other audit, review or attest services
      for
      the Company.




The
      Audit Committee is not responsible for:




•
            planning
                or conducting audits,




•
            certifying
                or determining the completeness or accuracy of the Company’s financial
                statements or that those financial statements are in accordance with
                generally accepted accounting principles, or




•
            guaranteeing
                the report of the Company’s independent auditor.




The
      fundamental responsibility for the Company’s financial statements and disclosure
      rests with management. It is not the duty of the Audit Committee to conduct
      investigations, to itself resolve disagreements (if any) between management
      and
      the independent auditor or to assure compliance with applicable legal and
      regulatory requirements.







*As
            in effect March 2006*


-
      2
      -





In
      discharging its obligations under this Charter, the Audit Committee shall act
      in
      accordance with its fiduciary duties.




**REPORTS**




The
      Audit Committee shall report to the Board of Directors of the Company on a
      regular basis and, in any event, before the public disclosure by the Company
      of
      its quarterly and annual financial results. The reports of the Audit Committee
      shall include any issues of which the Audit Committee is aware with respect
      to
      the quality or integrity of the Company’s financial statements, its compliance
      with legal or regulatory requirements, and the performance and independence
      of
      the Company’s internal auditor and independent auditor.




The
      Audit Committee also shall prepare, as required by applicable law, any audit
      committee report required for inclusion in the Company's publicly filed
      documents.




**COMPOSITION**




The
      members of the Audit Committee shall be three or more individuals who are
      appointed (and may be replaced) by the Board of Directors of the Company on
      the
      recommendation of the Company's Corporate Governance Committee. The appointment
      of members of the Audit Committee shall take place annually at the first meeting
      of the Board of Directors of the Company after a meeting of shareholders at
      which directors are elected, provided that if the appointment of members of
      the
      Audit Committee is not so made, the directors who are then serving as members
      of
      the Audit Committee shall continue as members of the Audit Committee until
      their
      successors are appointed. The Board of Directors may appoint a member to fill
      a
      vacancy that occurs in the Audit Committee between annual elections of
      directors. Any member of the Audit Committee may be removed from the Audit
      Committee by a resolution of the Board of Directors. Each of the members of
      the
      Audit Committee shall meet the Company’s categorical standards for director
      independence and shall be financially literate (or acquire that familiarity
      within a reasonable period after appointment) in accordance with applicable
      legislation and stock exchange requirements. At least one member of the Audit
      Committee shall be a “financial expert” with accounting or related financial
      management expertise, as contemplated by applicable legislation and stock
      exchange requirements. No member of the Audit Committee shall:




• accept
      (directly or indirectly) any consulting, advisory or other compensatory fee
      from
      the Company or any of its subsidiaries1 (other than remuneration for acting in his or her capacity as a director or
      committee member) or be an “affiliated person”2  of the Company or any of its subsidiaries, or




•
            concurrently
                serve on the audit committee of more than three other public companies
                without the prior approval of the Audit Committee, the Corporate
                Governance Committee and the Board of Directors and their determination
                that such simultaneous service would not impair the ability of the
                member
                to effectively serve on the Audit Committee (which determination
                shall be
                disclosed in the Company’s annual management information circular).




A
      majority of the members of the Audit Committee shall be "resident Canadians",
      as
      contemplated by the *Business
      Corporations Act* (Ontario).





1 A
      company is
      a subsidiary of another company if it is controlled, directly or indirectly,
      by
      that other company (through one or more intermediaries or
      otherwise).


2 An
        “affiliate” of a person is a person that, directly or indirectly through one or
        more intermediaries, controls, or is controlled by, or is under common control
        with the first person.





*As
            in effect March 2006*


- 3
      -





**RESPONSIBILITIES**




**Independent
      Auditor**




The
      Audit Committee shall:




•
            Recommend
                the appointment and the compensation of, and, if appropriate, terminate
                the independent auditor, subject to such Board of Directors and
                shareholder approval as is required under applicable legislation
                and stock
                exchange requirements.




•
            Obtain
                confirmation from the independent auditor that it ultimately is
                accountable, and will report directly, to the Audit Committee and
                the
                Board of Directors of the Company.




•
            Oversee
                the work of the independent auditor, including the resolution of
                any
                disagreements between management and the independent auditor regarding
                financial reporting.




•
            Pre-approve
                all audit and non-audit services (including all internal control-related
                services) provided by the independent auditor (subject to any restrictions
                on such non-audit services imposed by applicable legislation, regulatory
                requirements and policies of the Canadian Securities
                Administrators).




•
            Adopt
                such policies and procedures as it determines appropriate for the
                pre-approval of the retention of the independent auditor by the Company
                and any of its subsidiaries for any audit or non-audit services,
                including
                procedures for the delegation of authority to provide such approval
                to one
                or more members of the Audit
                Committee.




•
            At
                least annually, review the qualifications, performance and independence
                of
                the independent auditor. In doing so, the Audit Committee shall,
                among
                other things, undertake the measures set forth inAppendix
                A.




•
            Provide
                notice to the independent auditor of every meeting of the Audit
                Committee.




**The
      Audit Process, Financial Statements and Related Disclosure**




The
      Audit Committee shall:




•
            Meet
                with management and/or the independent auditor to review and
                discuss,




-
            the
                planning and staffing of the audit by the independent
                auditor,




-
            before
                public disclosure, the Company’s annual audited financial statements and
                quarterly financial statements, the Company's accompanying disclosure
                of
                Management’s Discussion and Analysis and earnings press releases and make
                recommendations to the Board of Directors as to their approval and
                dissemination of those statements and
                disclosure,




-
            financial
                information and earnings guidance provided to analysts and rating
                agencies: this review need not be done on a case by case basis but
                may be
                done generally (consisting of a discussion of the types of information
                disclosed and the types of presentations made) and need not take
                place in
                advance of the disclosure,







*As
            in effect March 2006*


- 4
      -







-
            any
                significant financial reporting issues and judgments made in connection
                with the preparation of the Company’s financial statements, including any
                significant changes in the selection or application of accounting
                principles, any major issues regarding auditing principles and practices,
                and the adequacy of internal controls that could significantly affect
                the
                Company’s financial statements,




-
            all
                critical accounting policies and practices
                used,




-
            all
                alternative treatments of financial information within GAAP that
                have been
                discussed with management, ramifications of the use of such alternative
                disclosures and treatments, and the treatment preferred by the independent
                auditor,




-
            the
                use of “*pro
                forma*”
                or “adjusted” non-GAAP information,




-
            the
                effect of new regulatory and accounting pronouncements,




-
            the
                effect of any material off-balance sheet structures, transactions,
                arrangements and obligations (contingent or otherwise) on the Company’s
                financial statements,




-
            any
                disclosures concerning any weaknesses or any deficiencies in the
                design or
                operation of internal controls or disclosure controls made to the
                Audit
                Committee in connection with certification of forms by the Chief
                Executive
                Officer and/or the Chief Financial Officer for filing with applicable
                securities regulators, and




-
            the
                adequacy of the Company’s internal accounting controls and management
                information systems and its financial, auditing and accounting
                organizations and personnel (including any fraud involving an individual
                with a significant role in internal controls or management information
                systems) and any special steps adopted in light of any material control
                deficiencies.




•
            Establish
                and periodically assess, adequate procedures for the review of disclosures
                of financial information extracted or derived from the Company's
                financial
                statements.




•
            Review
                with management, the Company’s guidelines and policies with respect to
                risk assessment and the Company’s major financial risk exposures and the
                steps management has taken to monitor and control such
                exposures.




•
            Review
                with the independent auditor,




-
            the
                quality, as well as the acceptability of the accounting principles
                that
                have been applied,




-
            any
                problems or difficulties the independent auditor may have encountered
                during the provision of its audit services, including any restrictions
                on
                the scope of activities or access to requested information and any
                significant disagreements with management, any management letter
                provided
                by the independent auditor or other material communication (including
                any
                schedules of unadjusted differences) to management and the Company’s
                response to that letter or communication,
                and




-
            any
                changes to the Company’s significant auditing and accounting principles
                and practices suggested by the independent auditor, internal auditor
                or
                other members of management.







*As
            in effect March 2006*


- 5
      -





**Internal
      Audit Function**




The
      Audit Committee shall:




•
            Review
                the experience and qualifications, and consider the appointment and
                replacement by management, of the senior internal auditing
                personnel.




•
            Review
                the scope of internal audit work plans for the
                year.




•
            Review
                the significant reports to management prepared by the internal auditor
                and
                management’s responses, including a summary report of major findings by
                the internal auditor (including an explanation of the factors considered
                in determining the audit scope), major risk factors, a list and the
                circumstances of any occurrences of fraud that have been identified,
                and
                confirmation that no limitations have been placed on the scope for,
                or
                nature of, the internal audit.




•
            Discuss
                with the independent auditor the internal audit
                function.




•
            Discuss
                with the internal auditor the adequacy of the Company's internal
                accounting controls and its financial, auditing and accounting
                organizations and personnel.




**Compliance**




The
      Audit Committee shall:




•
            Obtain
                reports from management and the Company’s senior internal auditing
                personnel that the Company’s subsidiary/foreign affiliated entities are in
                conformity with applicable legal requirements and the Company's Code
                of
                Business Conduct and Ethics including disclosures of insider and
                affiliated party transactions.




•
            Review
                with management and the independent auditor any correspondence with
                regulators or governmental agencies and any employee complaints or
                published reports, which raise material issues regarding the Company’s
                financial statements or accounting policies.




•
            Advise
                the Board of Directors of the Company with respect to the Company’s
                policies and procedures regarding compliance with applicable laws
                and
                regulations and with the Company’s Code of Business Conduct and
                Ethics.




•
            Review
                with the Company’s General Counsel legal matters that may have a material
                impact on the financial statements, the Company’s compliance policies and
                any material reports or inquiries received from regulators or governmental
                agencies.




•
            Establish
                procedures for,




-
            the
                receipt, retention and treatment of complaints regarding accounting,
                internal accounting controls or auditing matters,
                and




-
            the
                confidential, anonymous submission by employees of the Company with
                concerns regarding any accounting or auditing
                matters.




**D** **elegation**




To
      avoid any confusion, the Audit Committee responsibilities identified above
      are
      the sole responsibility of the Audit Committee and may not be allocated to
      a
      different committee.







*As
            in effect March 2006*


- 6
      -





**MEETINGS**




The
      Audit Committee shall meet at least quarterly and more frequently as
      circumstances require. All members of the Audit Committee should strive to
      be at
      all meetings. The Audit Committee shall meet separately, periodically, with
      management, the internal auditor and the independent auditor and may request
      any
      member of the Company’s Management Committee or the Company’s outside counsel or
      independent auditor to attend meetings of the Audit Committee or with any
      members of, or advisors to, the Audit Committee. The Audit Committee also may
      meet with the investment bankers, financial analysts and rating agencies that
      provide services to, or follow, the Company.




The
      Audit Committee may form and delegate authority to individual members and
      subcommittees of the Audit Committee where the Audit Committee determines it
      is
      appropriate to do so.




**INDEPENDENT
      ADVICE**




In
      discharging its mandate, the Audit Committee shall have the authority to retain
      (and authorize the payment by the Company of) and receive advice from special
      legal, accounting or other advisors as the Audit Committee determines to be
      necessary to permit it to carry out its duties.







*As
            in effect March 2006*


- 7
      -





**ANNUAL
      EVALUATION**




At
      least annually, the Audit Committee shall:




•
            Conduct
                a review and evaluation of the performance of the Audit Committee
                and its
                members, including the compliance of the Audit Committee with this
                Charter.




•
            Review
                and assess the adequacy of its Charter and recommend to the Board
                of
                Directors any improvements to this Charter that the Audit Committee
                determines to be appropriate.












*As
              in effect March 2006*





**Appendix
      A**




•
            Review
                the experience and qualifications of the senior members of the independent
                auditor’s team.




•
            Discuss
                with the independent auditor its internal quality-control
                procedures.




•
            Confirm
                with the independent auditor that it is in compliance with applicable
                legal, regulatory and professional standards relating to auditor
                independence.




•
            Confirm
                with the independent auditor that it is a participating audit firm
                of the
                Canadian Public Accountability Board in compliance with all restrictions
                or sanctions imposed on it (if
                any).




•
            Review
                and approve clear policies for the hiring by the Company of partners,
                employees and former partners and employees of the present and former
                independent auditor.




•
            Review
                periodic reports from the independent auditor regarding its independence
                and consider whether there are any non-audit services or relationships
                that may affect the objectivity and independence of the independent
                auditor and, if so, recommend that the Board of Directors of the
                Company
                take appropriate action to satisfy itself of the independence of
                the
                independent auditor.




•
            Obtain
                and review such report(s) from the independent auditor as may be
                required
                by applicable legal and regulatory
                requirements.