##### 



(LOGO) For immediate release
    
    Exhibit No. 99.1
 FAIRMONT HOTELS & RESORTS INC.
REPORTS SECOND QUARTER RESULTS TORONTO, July 22, 2004 Fairmont Hotels & Resorts Inc. (FHR or the
Company) (TSX/NYSE: FHR) today announced its unaudited financial results for
the second quarter ended June 30, 2004 using Canadian generally accepted
accounting principles. All amounts are expressed in U.S. dollars. Second Quarter 2004 Highlights  
    
    Operating revenues1 increased 20.6 % to $210.3 million;
    
    Revenue per available room (RevPAR) for the comparable owned
portfolio improved 22.7%. Occupancy improved 10.7 points (19.8%) and
average daily rate (ADR) increased 2.5%;
    
    RevPAR for the comparable managed portfolio increased 18.0%, driven by
5.5% ADR growth and a 7.2 point (11.8%) occupancy increase;
    
    EBITDA2 increased 44.0% to $62.5 million;
    
    Net income of $29.0 million and earnings per share (EPS) of $0.37
increased approximately 85% over 2003 levels excluding a favorable
income tax recovery of $24.4 million in the second quarter of 2003. The lodging industry continues to benefit from a widespread recovery in travel
demand. We have enjoyed a remarkable rebound in performance at our Canadian
properties since last year and are pleased to report considerable RevPAR growth
throughout our portfolio, driven by solid occupancy and rate improvements in
most markets, said William R. Fatt, FHRs Chief Executive Officer. Our
overall performance was in line with our expectations for the second quarter,
demonstrating significant improvement over 2003 and continuing momentum from
earlier this year. Second Quarter Ownership Operations Revenues from hotel ownership improved 17.7% to $180.6 million in the second
quarter. The increase was driven by solid performance improvements at our U.S.
and international properties as well as our Canadian portfolio. Most of the
large resorts recorded double-digit revenue growth over 2003, including
considerable improvements at The Fairmont Orchid, The Fairmont Chateau Lake
Louise and The Fairmont Scottsdale Princess. RevPAR of $132.41 was up 22.7% in the second quarter, resulting from the
combination of a 10.7 point improvement in occupancy and a 2.5% increase in
average daily rate (ADR). The U.S. and International owned comparable
portfolio enjoyed considerable improvements in ADR and occupancy of 4.1% and
9.3 points, respectively, resulting in RevPAR growth of 22.5%. Solid occupancy
growth at all of the Canadian owned hotels resulted in a considerable RevPAR
improvement of 23.6%. When compared to the second quarter of 2003, the average
Canadian dollar exchange rate for the quarter appreciated approximately 3%
against the U.S. dollar. Adjusting for the foreign exchange impact, RevPAR for
the Canadian portfolio was up approximately 20%. 1




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##### 



Equity income generated from FHRs investment in Legacy Hotels Real Estate
Investment Trust (Legacy or the Trust) was $2.8 million compared to a loss
of $0.5 million in the same period last year. Legacys portfolio continues to
show significant growth over 2003 levels given its recovery from the impact of
SARS. On June 28, 2004, FHR completed the sale of a land block zoned for residential
use in Vancouvers Coal Harbour. FHR received gross proceeds of $14.1 million
for its 75% interest in the land, recording an $8.3 million profit on the sale.
Overall real estate activities generated $18.1 million in revenues and $8.4
million in EBITDA compared to $12.3 million and $6.6 million, respectively in
2003. Second Quarter Management Operations Fairmont
Revenues under management of $445 million increased 21.7% over 2003, a portion
of which was attributed to the addition of two new management contracts.
Management fee revenues
were up 30.5% to $13.7 million, as a result of higher revenues as well as
considerable improvement in incentive fees. For the Fairmont managed portfolio, RevPAR increased 18.0% to $123.59. RevPAR
for the U.S. and International portfolio showed solid improvement with RevPAR
up 15.1%, resulting from an occupancy gain of 5.1 points combined with an ADR
increase of 6.3%. The Canadian comparable portfolio reported a 22.5% RevPAR
improvement, driven by increases in ADR and occupancy of 6.0% and 9.3 points,
respectively. Adjusting for the foreign exchange impact, RevPAR at the
Canadian portfolio was up approximately 19% over 2003. Delta
In the second quarter, Deltas revenues under management increased 16% to $93
million. Management fee revenues of $3.6 million were up 38% from last year.
During the quarter, RevPAR increased 20.4% resulting from a 3.1% ADR increase
and a 9.7 point improvement in occupancy. Adjusting for the foreign exchange
impact, RevPAR was up approximately 17%. Six months Consolidated Results For the six months ended June 30, 2004, operating revenues increased 10.6% to
$378.5 million from $342.3 million in the prior period. The U.S. and
international properties were the major contributors to this increase led by
The Fairmont Scottsdale Princess. EBITDA of $96.6 million was up 12.9% from
last year. Equity losses generated from FHRs investment in Legacy were $4.5 million
compared to equity losses of $6.8 million in 2003. Legacys portfolio
continues to gain momentum after a challenging year in 2003 given the concerns
relating to SARS. FHR continues to dispose of its undeveloped land. In the first six months of
2004, overall real estate activities generated $21.4 million in revenues and
$8.8 million in EBITDA compared to $31.2 million and $15.9 million in 2003,
respectively. Net income in 2003 included a $24.4 million, or $0.31 per share, income tax
recovery from a favorable tax reassessment recorded in June. As a result,
year-to-date net income of $28.4 million was down 46.0% compared to the prior
year while basic EPS was $0.36 in 2004
compared to $0.66 in 2003. Excluding this tax recovery, net income and EPS
were slightly higher than 2003 levels. 2




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##### 



Capital Expenditures Hotel related capital expenditures for the quarter totaled $24.2 million.
Several projects were completed during the quarter including:  
    
    The renovation of the meeting rooms and final phase of the
guestrooms at The Fairmont Copley Plaza Boston; and
    
    The construction of the meeting facility at The Fairmont Chateau
Lake Louise. The Company now expects that 2004 capital expenditures will be in the range of
$75  $85 million. Announcements and Corporate Activities On July 15, 2004, FHR sold its real estate interest in The Fairmont Kea Lani
Maui to Host Marriott Corporation for $355 million, resulting in a pre-tax gain
of $109 million. Our third quarter earnings will include an after-tax gain on
the sale of approximately $68 million. The resort will continue to be known as
The Fairmont Kea Lani Maui and will be managed by Fairmont under the existing
long-term management contract, which expires in 2051. This was an attractive time to capitalize on our success with The Fairmont Kea
Lani Maui. It reinforces our strategy of acquiring attractive assets,
realizing the value created through improved performance and then redeploying
the capital to continue growing the Company, said Mr. Fatt. On July 9, 2004, FHR sold The Fairmont Glitter Bay in Barbados to a group of
investors for approximately $31 million. The sale resulted in an after tax
gain of about $8 million that will be reflected in our third quarter earnings.
The resort continues to be managed by the Company as The Fairmont Glitter Bay. FHR expects to reinvest a portion of the proceeds from these sales in
additional hotels over the course of the next year. In addition, FHR will
acquire the remaining interest in the Fairmont management company, increase its
share purchases under its existing share repurchase program and, in the
interim, reduce existing indebtedness, including the repayment of the $120
million mortgage on The Fairmont Kea Lani Maui. During the quarter, FHR repurchased 208,400 shares under its normal course
issuer bid at a total cost of $5.4 million. Under the current normal course
issuer bid, FHR is authorized to purchase up to 3,900,000 of its common shares
for the twelve-month period ending October 5, 2004. Outlook Improving industry fundamentals continue to gain momentum. This trend is
translating into a sustainable recovery for the Company. Our group bookings
are in-line with our 2004 outlook and our tour business for the peak summer
months is ahead of expectations, returning to 2002 levels, said Mr. Fatt. There has been some short-term softness in U.S. travel outside of the United
States. This has affected the performance of Fairmonts Canadian properties
relative to our original expectations. This segment of our business has
rebounded significantly over 2003 levels, and we are encouraged about the
long-term growth potential of our world-class Canadian resorts.  FHRs previous 2004 EBITDA guidance of $210  $220 million has been revised to
reflect the lost earnings from the two recent hotel sales ($13 million), the
short-term softness in U.S. travel into Canada ($6 million), lower real estate
earnings ($2 million) and some modest increases in corporate expenses. FHR now
estimates that 2004 EBITDA will be in the range of $185  $195 million,
including approximately $7 million from real estate activities. 3




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##### 



Including the $76 million gain from the two hotel sales ($0.96 per share), net
income is estimated to be between $132  $138 million and basic EPS to be in
the range of $1.67  1.75, assuming a full-year tax rate of approximately 31%. This is an exciting time for Fairmont. Our solid balance sheet and new
development team position us to further grow the Company and expand the
Fairmont brand. In addition, our recently renovated portfolio of world-class
properties is poised to benefit from the overall recovery in the industry,
said Mr. Fatt. In 2004, our intent remains to add two to four properties to
our portfolio while continuing to seek development opportunities in resort
destinations to increase the exposure of our existing portfolio. FHR has updated its 2004 portfolio seasonality information on the Companys
website to reflect the revised earnings estimates. About Fairmont Hotels & Resorts Inc.
FHR is one of North Americas leading owner/operators of luxury hotels and
resorts. FHRs managed portfolio consists of 82 luxury and first-class
properties with more than 33,000 guestrooms in the United States, Canada,
Mexico, Bermuda, Barbados and the United Arab Emirates. FHR owns Fairmont
Hotels Inc., North Americas largest luxury hotel management company, as
measured by rooms under management, with 44 distinctive city center and resort
hotels such as The Fairmont San Francisco, The Fairmont Banff Springs and The
Fairmont Scottsdale Princess. FHR also owns Delta Hotels, Canadas largest
first-class hotel management company, which manages and franchises 38 city
center and resort properties in Canada. In addition to hotel management, FHR
holds real estate interests in 22 properties and an approximate 35% investment
interest in Legacy Hotels Real Estate Investment Trust, which owns 24
properties. FHR will hold a conference call today, July 22, 2004 at 1:30 p.m. Eastern Time
to discuss its results. To participate, please dial 416.405.9328 or
1.800.387.6216. You will be requested to identify yourself and the
organization on whose behalf you are participating. A recording of this call
will be made available beginning at 4:30 p.m. Eastern Time on July 22, 2004
through to July 29, 2004 by dialing 416.695.5800 or 1.800.408.3053 using the
reservation #3068997. A live audio webcast of the conference call will be
available via FHRs website (www.fairmont.com/investor). An archived recording
of the webcast will remain available on FHRs website following the conference
call. This press release contains certain forward-looking statements relating, but
not limited to, FHRs operations, anticipated financial performance, business
prospects and strategies. Forward-looking information typically contains
statements with words such as anticipate, believe, expect, plan or
similar words suggesting future outcomes. Such forward-looking statements are
subject to risks, uncertainties and other factors, which could cause actual
results to differ materially from future results expressed, projected or
implied by such forward-looking statements. Such factors include, but are not
limited to economic, competitive and lodging industry conditions. FHR disclaims
any responsibility to update any such forward-looking statements. Three months ended
    
    
    
    
    
    Six months endedJune 30
    
    
    
    
    
    June 302004
    
    2003
    
    Variance
    
    2004
    
    2003
    
    VarianceOWNED
HOTELSWorldwide15 properties/ 6,882 roomsRevPAR
    
    
    132.41
    
    
    
    107.87
    
    
    
    22.7
    %
    
    
    135.86
    
    
    
    115.58
    
    
    
    17.5
    %ADR
    
    
    204.36
    
    
    
    199.29
    
    
    
    2.5
    %
    
    
    209.77
    
    
    
    201.26
    
    
    
    4.2
    %Occupancy
    
    
    64.8
    %
    
    
    54.1
    %
    
    10.7
    points
    
    
    64.8
    %
    
    
    57.4
    %
    
    7.4
    points
 4




---



##### 



Three months ended
    
    
    
    
    
    Six months endedJune 30
    
    
    
    
    
    June 302004
    
    2003
    
    Variance
    
    2004
    
    2003
    
    VarianceCanada7 properties/ 3,336 roomsRevPAR
    
    
    106.23
    
    
    
    85.97
    
    
    
    23.6
    %
    
    
    100.08
    
    
    
    86.12
    
    
    
    16.2
    %ADR
    
    
    156.93
    
    
    
    154.61
    
    
    
    1.5
    %
    
    
    155.72
    
    
    
    147.65
    
    
    
    5.5
    %Occupancy
    
    
    67.7
    %
    
    
    55.6
    %
    
    12.1 points
    
    
    64.3
    %
    
    
    58.3
    %
    
    6.0 pointsU.S. and International8 properties/ 3,546 roomsRevPAR
    
    
    156.64
    
    
    
    127.90
    
    
    
    22.5
    %
    
    
    168.82
    
    
    
    142.53
    
    
    
    18.4
    %ADR
    
    
    252.23
    
    
    
    242.37
    
    
    
    4.1
    %
    
    
    258.82
    
    
    
    251.79
    
    
    
    2.8
    %Occupancy
    
    
    62.1
    %
    
    
    52.8
    %
    
    9.3 points
    
    
    65.2
    %
    
    
    56.6
    %
    
    8.6 pointsFAIRMONT MANAGED
HOTELSWorldwide40 hotels/ 19,885 roomsRevPAR
    
    
    123.59
    
    
    
    104.76
    
    
    
    18.0
    %
    
    
    115.29
    
    
    
    100.01
    
    
    
    15.3
    %ADR
    
    
    181.49
    
    
    
    172.08
    
    
    
    5.5
    %
    
    
    178.33
    
    
    
    169.28
    
    
    
    5.3
    %Occupancy
    
    
    68.1
    %
    
    
    60.9
    %
    
    7.2 points
    
    
    64.6
    %
    
    
    59.1
    %
    
    5.5 pointsCanada20 properties/10,099 roomsRevPAR
    
    
    101.20
    
    
    
    82.62
    
    
    
    22.5
    %
    
    
    88.29
    
    
    
    74.62
    
    
    
    18.3
    %ADR
    
    
    146.22
    
    
    
    137.95
    
    
    
    6.0
    %
    
    
    139.05
    
    
    
    129.11
    
    
    
    7.7
    %Occupancy
    
    
    69.2
    %
    
    
    59.9
    %
    
    9.3 points
    
    
    63.5
    %
    
    
    57.8
    %
    
    5.7 pointsU.S. and International20 properties/ 9,786 roomsRevPAR
    
    
    146.19
    
    
    
    127.03
    
    
    
    15.1
    %
    
    
    142.34
    
    
    
    125.38
    
    
    
    13.5
    %ADR
    
    
    218.29
    
    
    
    205.29
    
    
    
    6.3
    %
    
    
    216.31
    
    
    
    207.72
    
    
    
    4.1
    %Occupancy
    
    
    67.0
    %
    
    
    61.9
    %
    
    5.1 points
    
    
    65.8
    %
    
    
    60.4
    %
    
    5.4 pointsDELTA MANAGED HOTELSWorldwide28 properties/ 8,296 roomsRevPAR
    
    
    64.86
    
    
    
    53.88
    
    
    
    20.4
    %
    
    
    59.12
    
    
    
    50.40
    
    
    
    17.3
    %ADR
    
    
    96.11
    
    
    
    93.22
    
    
    
    3.1
    %
    
    
    94.35
    
    
    
    88.20
    
    
    
    7.0
    %Occupancy
    
    
    67.5
    %
    
    
    57.8
    %
    
    9.7 points
    
    
    62.7
    %
    
    
    57.1
    %
    
    5.6 points
 Comparable hotels and resorts are considered to be properties that were fully
open under FHR management for at least the entire current and prior period.
Comparable hotels and resorts statistics exclude properties under major
renovation that would have a significant adverse effect on the properties
primary operations. The following properties were excluded: Owned:
    
    The Fairmont Southampton; The Fairmont Copley Plaza BostonFairmont Managed:
    
    The Fairmont Southampton; The Fairmont Olympic Hotel, Seattle; The Fairmont Turnberry Isle Resort & Club,
MiamiDelta Managed:
    
    None
 5




---



##### 



FHRs 2003 quarterly operating statistics for its 2004 comparable hotel
portfolios as at June 30, 2004 are available on the Companys website
(www.fairmont.com/investor).  1.
    
    Operating revenues excludes other revenues from managed and franchised
properties (consists of direct and indirect costs relating primarily to
marketing and reservation services that are reimbursed by hotel owners on
a cost recovery basis). Management considers that the exclusion of such
revenues provides a meaningful measure of operating performance, however,
it is not a defined measure of operating performance under Canadian GAAP.
It is likely that FHRs calculation of operating revenues is different
than the calculation used by other entities.2.
    
    EBITDA is defined as earnings before interest, taxes and amortization.
Income from investments and other is included in EBITDA. Management
considers EBITDA to be a meaningful indicator of hotel operations and uses
it as the primary measurement of operating segment profit and loss.
However, it is not a defined measure of operating performance under
Canadian generally accepted accounting principles (Canadian GAAP). It
is likely that FHRs calculation of EBITDA is different than the
calculations used by other entities. EBITDA is represented on the
consolidated statements of income as operating income before undernoted
items. Reconciliation of EBITDA to net income: Three months ended June 30
    
    Six months ended June 30In millions of dollars
    
    2004
    
    2003
    
    2004
    
    2003EBITDA
    
    $
    62.5
    
    
    $
    43.4
    
    
    $
    96.6
    
    
    $
    85.6Deduct:Amortization
    
    
    18.0
    
    
    
    17.2
    
    
    
    37.5
    
    
    
    33.5Interest expense, net
    
    
    9.0
    
    
    
    8.3
    
    
    
    19.0
    
    
    
    14.2Income tax expense (recovery)
    
    
    6.5
    
    
    
    (22.2
    )
    
    
    11.7
    
    
    
    (14.7
    )Net income
    
    $
    29.0
    
    
    $
    40.1
    
    
    $
    28.4
    
    
    $
    52.6
 Contacts:
    
    M. Jerry Patava
    
    Emma ThompsonExecutive Vice President
and Chief Financial Officer
    
    Executive Director Investor Relations
Tel: 416.874.2485Tel: 416.874.2450
    
    Email: investor@fairmont.comWebsite: www.fairmont.com
 6




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##### 



Summary of Hotel Portfolios At June 302004
    
    2003OWNED HOTELSWorldwideNo. of Properties
    
    
    17
    
    
    
    17No. of Rooms
    
    
    7,861
    
    
    
    7,787CanadaNo. of Properties
    
    
    7
    
    
    
    7No. of Rooms
    
    
    3,336
    
    
    
    3,268U.S. and InternationalNo. of Properties
    
    
    10
    
    
    
    10No. of Rooms
    
    
    4,525
    
    
    
    4,519FAIRMONT MANAGED
HOTELSWorldwideNo. of Properties
    
    
    44
    
    
    
    42No. of Rooms
    
    
    21,643
    
    
    
    20,732CanadaNo. of Properties
    
    
    21
    
    
    
    21No. of Rooms
    
    
    10,422
    
    
    
    10,361U.S. and InternationalNo. of Properties
    
    
    23
    
    
    
    21No. of Rooms
    
    
    11,221
    
    
    
    10,371DELTA MANAGED HOTELSWorldwideNo of Properties
    
    
    38
    
    
    
    39No. of Rooms
    
    
    11,163
    
    
    
    11,677
 7




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##### 



Fairmont Hotels & Resorts Inc.
Consolidated Balance Sheets
(Stated in millions of U.S. dollars) ASSETS June 30
    
    December 312004
    
    2003(Unaudited)Current assetsCash and cash equivalents
    
    $
    47.8
    
    
    $
    31.7Accounts receivable
    
    
    83.6
    
    
    
    64.1Inventory
    
    
    14.5
    
    
    
    14.2Prepaid expenses and other
    
    
    20.7
    
    
    
    24.6Assets held for sale (note 3)
    
    
    271.1
    
    
    
    437.7
    
    
    
    134.6Investments in partnerships and
corporations (note 5)
    
    
    69.0
    
    
    
    53.1Investment in Legacy Hotels Real Estate
Investment Trust
    
    
    96.9
    
    
    
    105.9Non-hotel real estate
    
    
    91.4
    
    
    
    95.1Property and equipment
    
    
    1,381.9
    
    
    
    1,656.2Goodwill
    
    
    140.5
    
    
    
    132.0Intangible assets
    
    
    214.3
    
    
    
    216.7Other assets and deferred charges (note 5)
    
    
    102.0
    
    
    
    109.4$
    2,533.7
    
    
    $
    2,503.0LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable and accrued liabilities
    
    $
    111.8
    
    
    $
    124.0Dividends payable
    
    
    3.2
    
    
    
    3.2Current portion of long-term debt (note 3)
    
    
    201.5
    
    
    
    117.8Liabilities related to assets held for
sale (note 3)
    
    
    10.6
    
    
    
    327.1
    
    
    
    245.0Long-term debt (note 4)
    
    
    471.7
    
    
    
    539.8Other liabilities
    
    
    88.7
    
    
    
    91.4Future income taxes
    
    
    97.7
    
    
    
    80.9985.2
    
    
    
    957.1Shareholders Equity (note 6)
    
    
    1,548.5
    
    
    
    1,545.9$
    2,533.7
    
    
    $
    2,503.0




---



##### 



Fairmont Hotels & Resorts Inc.
Consolidated Statements of Income
(Stated in millions of U.S. dollars, except per share amounts)
(Unaudited) Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003RevenuesHotel ownership operations
    
    $
    180.6
    
    
    $
    153.5
    
    
    $
    336.0
    
    
    $
    293.9Management operations
    
    
    11.6
    
    
    
    8.6
    
    
    
    21.1
    
    
    
    17.2Real estate activities
    
    
    18.1
    
    
    
    12.3
    
    
    
    21.4
    
    
    
    31.2Operating revenues
    
    
    210.3
    
    
    
    174.4
    
    
    
    378.5
    
    
    
    342.3Other revenues from managed and
franchised properties
    
    
    8.9
    
    
    
    7.5
    
    
    
    17.8
    
    
    
    14.5219.2
    
    
    
    181.9
    
    
    
    396.3
    
    
    
    356.8ExpensesHotel ownership operations
    
    
    135.3
    
    
    
    118.2
    
    
    
    252.0
    
    
    
    223.7Management operations
    
    
    6.3
    
    
    
    7.0
    
    
    
    12.9
    
    
    
    11.0Real estate activities
    
    
    9.7
    
    
    
    5.7
    
    
    
    12.6
    
    
    
    15.3Operating expenses
    
    
    151.3
    
    
    
    130.9
    
    
    
    277.5
    
    
    
    250.0Other expenses from managed
and franchised properties
    
    
    9.1
    
    
    
    8.0
    
    
    
    18.2
    
    
    
    14.9160.4
    
    
    
    138.9
    
    
    
    295.7
    
    
    
    264.9Income (loss) from equity investments
and other
    
    
    3.7
    
    
    
    0.4
    
    
    
    (4.0
    )
    
    
    (6.3
    )Operating income before undernoted items
    
    
    62.5
    
    
    
    43.4
    
    
    
    96.6
    
    
    
    85.6Amortization
    
    
    18.0
    
    
    
    17.2
    
    
    
    37.5
    
    
    
    33.5Interest expense, net
    
    
    9.0
    
    
    
    8.3
    
    
    
    19.0
    
    
    
    14.2Income before income tax expense
    
    
    35.5
    
    
    
    17.9
    
    
    
    40.1
    
    
    
    37.9Income tax expense (recovery)Current
    
    
    2.6
    
    
    
    1.2
    
    
    
    5.5
    
    
    
    6.5Future
    
    
    3.9
    
    
    
    (23.4
    )
    
    
    6.2
    
    
    
    (21.2
    )6.5
    
    
    
    (22.2
    )
    
    
    11.7
    
    
    
    (14.7
    )Net income
    
    $
    29.0
    
    
    $
    40.1
    
    
    $
    28.4
    
    
    $
    52.6Weighted average number of common
shares outstanding (in millions) (note 6)Basic
    
    
    79.1
    
    
    
    79.4
    
    
    
    79.1
    
    
    
    79.3Diluted
    
    
    79.9
    
    
    
    80.1
    
    
    
    79.9
    
    
    
    80.0Basic earnings per common share
    
    $
    0.37
    
    
    $
    0.51
    
    
    $
    0.36
    
    
    $
    0.66Diluted earnings per common share
    
    $
    0.36
    
    
    $
    0.50
    
    
    $
    0.36
    
    
    $
    0.66




---



##### 



Fairmont Hotels & Resorts Inc.
Consolidated Statements of Cash Flows
(Stated in millions of U.S. dollars)
(Unaudited) Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003Cash provided by (used in)Operating activitiesNet Income
    
    $
    29.0
    
    
    $
    40.1
    
    
    $
    28.4
    
    
    $
    52.6Items not
affecting cash
Amortization of property and equipment
    
    
    17.3
    
    
    
    16.6
    
    
    
    36.1
    
    
    
    32.2Amortization of intangible assets
    
    
    0.7
    
    
    
    0.6
    
    
    
    1.4
    
    
    
    1.3(Income) loss from equity investments and other
    
    
    (3.7
    )
    
    
    (0.4
    )
    
    
    4.0
    
    
    
    6.3Future income taxes
    
    
    3.9
    
    
    
    (23.4
    )
    
    
    6.2
    
    
    
    (21.2
    )Unrealized foreign exchange loss
    
    
    10.2
    
    
    
    
    
    
    
    10.2
    
    
    
    Distributions from investments
    
    
    
    
    
    
    4.4
    
    
    
    
    
    
    
    4.4Other
    
    
    (3.5
    )
    
    
    (10.4
    )
    
    
    (1.0
    )
    
    
    (7.7
    )Changes in non-hotel real estate
    
    
    0.5
    
    
    
    2.7
    
    
    
    0.3
    
    
    
    10.1Changes in non-cash working capital items (note 7)
    
    
    (45.3
    )
    
    
    (22.9
    )
    
    
    (36.3
    )
    
    
    (34.6
    )9.1
    
    
    
    7.3
    
    
    
    49.3
    
    
    
    43.4Investing activitiesAdditions to property and equipment
    
    
    (24.2
    )
    
    
    (19.8
    )
    
    
    (44.0
    )
    
    
    (35.6
    )Acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.0Investments in partnerships and corporations
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.7
    )Collection of loans receivable
    
    
    0.1
    
    
    
    
    
    
    
    8.9
    
    
    
    Issuance of loans receivable
    
    
    (2.0
    )
    
    
    
    
    
    
    (7.0
    )
    
    
    (26.1
    )
    
    
    (20.4
    )
    
    
    (42.1
    )
    
    
    (30.3
    )Financing activitiesIssuance of long-term debt
    
    
    2.8
    
    
    
    23.2
    
    
    
    82.7
    
    
    
    146.7Repayment of long-term debt
    
    
    (2.0
    )
    
    
    (1.0
    )
    
    
    (65.6
    )
    
    
    (143.5
    )Issuance of common shares
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.1Repurchase of common shares
    
    
    (5.4
    )
    
    
    (11.8
    )
    
    
    (5.4
    )
    
    
    (16.8
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    (3.2
    )
    
    
    (2.4
    )(4.3
    )
    
    
    10.5
    
    
    
    9.1
    
    
    
    (15.9
    )Effect of exchange rate changes on cash
    
    
    (0.1
    )
    
    
    2.0
    
    
    
    (0.2
    )
    
    
    3.5Increase (decrease) in cash
    
    
    (21.4
    )
    
    
    (0.6
    )
    
    
    16.1
    
    
    
    0.7Cash and cash equivalents  beginning of period
    
    
    69.2
    
    
    
    50.3
    
    
    
    31.7
    
    
    
    49.0Cash and cash equivalents   end of period
    
    $
    47.8
    
    
    
    49.7
    
    
    $
    47.8
    
    
    $
    49.7




---



##### 



Fairmont Hotels & Resorts Inc.
Consolidated Statements of Retained Earnings
(Stated in millions of U.S. dollars)
(Unaudited) Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003Balance  Beginning of period
    
    $
    77.5
    
    
    $
    49.8
    
    
    $
    78.1
    
    
    $
    38.5Net income
    
    
    29.0
    
    
    
    40.1
    
    
    
    28.4
    
    
    
    52.6106.5
    
    
    
    89.9
    
    
    
    106.5
    
    
    
    91.1Repurchase of common shares
(note 6)
    
    
    (2.2
    )
    
    
    (4.3
    )
    
    
    (2.2
    )
    
    
    (5.5
    )Dividends
    
    
    (3.2
    )
    
    
    (2.4
    )
    
    
    (3.2
    )
    
    
    (2.4
    )Balance  End of period
    
    $
    101.1
    
    
    $
    83.2
    
    
    $
    101.1
    
    
    $
    83.2




---



##### 



Fairmont Hotels & Resorts Inc.
Notes to Consolidated Financial Statements
(Stated in millions of U.S. dollars)
(Unaudited)  1.
    
    Fairmont Hotels & Resorts Inc. (FHR) has operated and owned hotels and resorts for over 116 years and currently manages properties principally under the Fairmont and Delta brands. At June 30, 2004, FHR managed or franchised 82 luxury and first-class hotels. FHR owns 83.5% of Fairmont Hotels Inc. (Fairmont), which at June 30, 2004, managed 44 properties in major city centers and key resort destinations throughout Canada, the United States, Mexico, Bermuda,
Barbados and the United Arab Emirates. Delta Hotels Limited (Delta), a wholly owned subsidiary of FHR, managed or franchised 38 Canadian hotels and resorts at June 30, 2004.In addition to hotel and resort management, as at June 30, 2004, FHR had hotel ownership interests ranging from approximately 15% to 100% in 24 properties, located in Canada, the United States, Mexico, Bermuda, Barbados and the United Arab Emirates. FHR also has an approximate 35% equity interest in Legacy Hotels Real Estate Investment Trust (Legacy), which owns 24 hotels and resorts across Canada and the United States. FHR also owns real estate properties that are suit
able for either commercial or residential development, and has a vacation ownership product.Results for the three and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the full year due to seasonal and short-term variations. Revenues are typically higher in the second and third quarters versus the first and fourth quarters of the year.2.
    
    These interim consolidated financial statements do not include all disclosures as required by Canadian generally accepted accounting principles
(GAAP) for annual consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2003 presented in the annual report. The accounting policies used in the preparation of these interim consolidated financial statements are consistent with the accounting policies used in the December 31, 2003 audited consolidated financial statements, except as discussed below.Hedging Relationships
Effective January 1, 2004, FHR implemented new guidance on accounting for hedging relationships. The new guidelines specify the circumstances in which hedge accounting is appropriate, including the identification, documentation, designation and effectiveness of hedges and also the discontinuance of hedge accounting. The adoption of this accounting guidance did not have an impact on the Companys financial statements.Generally Accepted Accounting Principles and General
Standards of Financial Statement Presentation
The Canadian Institute of Chartered Accountants has issued new accounting standards surrounding GAAP and financial statement presentation. These standards lay out a framework for the application of GAAP and the fair presentation of financial standards in accordance with GAAP and are effective for years beginning January 1, 2004. No changes to accounting principles or financial statement presentation were required as FHR was already in full compliance with these new standards.Assets Held for Sale
Long-lived assets are classified as held for sale when specific GAAP criteria are met. Assets held for sale are measured at the lower of their carrying amounts and fair values less costs to dispose and are no longer amortized. Assets classified as held for sale and liabilities related to these assets are reported separately on the balance sheet. A component of FHR that is held for sale is reported as a discontinued operation if the operations and cash flows of the component will be eliminated from ongoing operations as a result of the sale and FHR will not have a significant continuing involvement in the operations of the component after the sale.3.
    
    In June 2004, FHR finalized an agreement with Host Marriott Corporation to sell The Fairmont Kea Lani Maui for cash proceeds of $355.0.
As such, the assets and the liabilities of The Fairmont Kea Lani Maui have been reclassified to Assets held for sale and Liabilities related to assets held for sale, respectively. As at June 30, 2004, The Fairmont Kea Lani Maui had property and equipment with a carrying value of $242.4 and a working capital deficit of $2.5. The transaction closed on July 15, 2004 and the mortgage of $120.0 on this property was repaid. As of June 30, 2004, the mortgage was classified on
 the balance sheet as current portion of long-term debt. The
after-tax gain on the sale of approximately $68.0 will be recognized
in the third quarter. The resort will continue to be managed by
Fairmont under a long-term management contract. The assets and
liabilities of this property are currently included in the hotel
ownership segment (note 8).In June 2004, FHR finalized an agreement to sell The Fairmont
Glitter Bay for cash proceeds of approximately $31.0. As such, the assets
and the liabilities of The Fairmont Glitter Bay have been reclassified
to Assets held for sale and Liabilities related to assets
held for sale respectively. As at June 30, 2004, The Fairmont
Glitter Bay had property and equipment with a carrying value of $20.6.
The transaction closed on July 9, 2004 and the mortgage of $5.2 on
this property was repaid. The after-tax gain on the sale of approximately $8.0 will be recognized in the third quarter. As of June 30, 2004, the mortgage was classified on the balance sheet as current portion of long-term debt. The resort will continue to be managed by Fairmont under a long-term management contract. The assets and liabilities of this property are currently included in the hotel ownership segment (note 8).4.
    
    In March 2004, FHR entered into a new $400 unsecured credit facility due March 2007. The interest rate is floating and is calculated based on the borrowers choice of prime rate, bankers acceptance or LIBOR plus a spread.5.
    
    In April 2004, FHR finalized an agreement to invest $15.6 for a 14.5% interest in The Fairmont Dubai. This investment is accounted
for using the equity method. In the quarter, $15.6 was reclassified from Other assets and deferred charges to Investments in partnerships and corporations.




---



##### 



Fairmont Hotels & Resorts Inc.
Notes to Consolidated Financial Statements
(Stated in millions of U.S. dollars)
(Unaudited)  6.
    
    Shareholders equity June 30,
    
    December 31,2004
    
    2003Common shares
    
    $
    1,199.6
    
    
    $
    1,202.2Other equity
    
    
    19.2
    
    
    
    19.2Contributed surplus
    
    
    142.3
    
    
    
    142.3Foreign currency translation adjustments
    
    
    86.3
    
    
    
    104.1Retained earnings
    
    
    101.1
    
    
    
    78.1$
    1,548.5
    
    
    $
    1,545.9
  The diluted weighted-average number of common shares outstanding is calculated as follows: Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003(in millions)
    
    (in millions)Weighted-average number of common shares
outstanding  basic
    
    
    79.1
    
    
    
    79.4
    
    
    
    79.1
    
    
    
    79.3Stock options
    
    
    0.8
    
    
    
    0.7
    
    
    
    0.8
    
    
    
    0.7Weighted-average number of common shares
outstanding  diluted
    
    
    79.9
    
    
    
    80.1
    
    
    
    79.9
    
    
    
    80.0
  Under a normal course issuer bid, FHR may repurchase for cancellation up to approximately 3.9 million, or approximately 5% of its outstanding common shares. During the six months ended June 30, 2004, FHR repurchased 208,400 shares (208,400 during the
second quarter) for total consideration of $5.4 ($5.4 for the second quarter), of which, $3.2 was charged to common shares and $2.2 was charged to retained earnings. During the six months ended June 30, 2004, FHR issued 38,568 shares (21,378 shares for
the second quarter) pursuant to the Key Employee Stock Option Plan. $0.6 was credited to common shares ($0.3 for the second quarter) for proceeds from options exercised. At June 30, 2004, 78,944,445 common shares were outstanding (2003  79,046,316).During the six months ended June 30, 2004, 10,000 stock options were granted (nil in the second quarter). Assuming FHR elected to recognize the cost of its stock-based compensation based on the estimated fair value of stock options granted after January
1, 2002 but before January 1, 2003, net income and basic and diluted earnings per share would have been: Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003Reported net income
    
    $
    29.0
    
    
    $
    40.1
    
    
    $
    28.4
    
    
    $
    52.6Net income assuming fair value method used
    
    $
    28.9
    
    
    $
    39.6
    
    
    $
    28.2
    
    
    $
    51.9Basic earnings per share
    
    $
    0.37
    
    
    $
    0.50
    
    
    $
    0.36
    
    
    $
    0.65Diluted earnings per share
    
    $
    0.36
    
    
    $
    0.49
    
    
    $
    0.35
    
    
    $
    0.65
  7.
    
    Changes in non-cash working capital: Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003Decrease (increase) in current assetsAccounts receivable
    
    $
    (25.9
    )
    
    $
    (0.2
    )
    
    $
    (25.2
    )
    
    $
    (9.9
    )Inventory
    
    
    (0.9
    )
    
    
    0.3
    
    
    
    (1.3
    )
    
    
    (0.5
    )Prepaid expenses and other
    
    
    (8.9
    )
    
    
    (9.1
    )
    
    
    (7.9
    )
    
    
    (10.0
    )Increase (decrease) in current liabilitiesAccounts payable and accrued liabilities
    
    
    (9.6
    )
    
    
    (13.9
    )
    
    
    (1.9
    )
    
    
    (14.2
    )$
    (45.3
    )
    
    $
    (22.9
    )
    
    $
    (36.3
    )
    
    $
    (34.6
    )




---



##### 



Fairmont Hotels & Resorts Inc.
Notes to Consolidated Financial Statements
(Stated in millions of U.S. dollars)
(Unaudited)  8.
    
    Segmented InformationFHR has five reportable operating segments in two core business activities, ownership and management operations. The segments are hotel ownership, investment in Legacy, real estate activities, Fairmont and Delta. Hotel ownership consists of real estate interests ranging from approximately 15% to 100% in 24 properties. The
investment in Legacy consists of an approximate 35% equity interest in Legacy, which owns 24 hotels and resorts across Canada and the United States. Real estate activities consists primarily of two large undeveloped land blocks in Toronto and Vancouver and a vacation ownership product. Fairmont is a North American luxury hotel
and resort management company and Delta is a Canadian first-class hotel and resort management company.The performance of all segments is evaluated primarily on earnings before interest, taxes and amortization (EBITDA), which is defined as income before interest, income taxes and amortization. EBITDA includes income from investments and other. Amortization, interest and income taxes are not allocated to the individual
segments. All transactions among operating segments are conducted at fair market value.The following tables present revenues, EBITDA, total assets and capital expenditures for FHRs reportable segments: Three months ended June 30, 2004Ownership
    
    ManagementReal estate
    
    
    
    
    
    
    
    
    
    Inter-segmentHotel Ownership
    
    Legacy
    
    activities
    
    Fairmont
    
    Delta
    
    elimination (a)
    TotalOperating revenues
    
    $
    180.6
    
    
    $
    
    
    
    $
    18.1
    
    
    $
    13.7
    
    
    $
    3.6
    
    
    $
    (5.7
    )
    
    $
    210.3Other revenues from managed and franchised properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.2
    
    
    
    2.7
    
    
    
    
    
    
    
    8.9219.2Income (loss) from equity investments and other
    
    
    0.9
    
    
    
    2.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.7EBITDA (b)
    
    
    40.5
    
    
    
    2.8
    
    
    
    8.4
    
    
    
    8.4
    
    
    
    2.6
    
    
    
    (0.2
    )
    
    
    62.5Total assets (c)
    
    
    1,925.2
    
    
    
    96.9
    
    
    
    95.9
    
    
    
    363.6
    
    
    
    73.2
    
    
    
    (21.1
    )
    
    
    2,533.7Capital expenditures
    
    
    23.9
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    24.2
 Three months ended June 30, 2003Ownership
    
    ManagementReal estate
    
    
    
    
    
    
    
    
    
    Inter-segmentHotel Ownership
    
    Legacy
    
    activities
    
    Fairmont
    
    Delta
    
    Elimination (a)
    TotalOperating revenues
    
    $
    153.5
    
    
    $
    
    
    
    $
    12.3
    
    
    $
    10.5
    
    
    $
    2.6
    
    
    $
    (4.5
    )
    
    $
    174.4Other revenues from managed and franchised properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.8
    
    
    
    1.7
    
    
    
    
    
    
    
    7.5181.9Income (loss) from equity investments and other
    
    
    0.9
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4EBITDA(b)
    
    
    31.7
    
    
    
    (0.5
    )
    
    
    6.6
    
    
    
    4.2
    
    
    
    1.9
    
    
    
    (0.5
    )
    
    
    43.4Total assets (c)
    
    
    2,087.3
    
    
    
    102.1
    
    
    
    105.6
    
    
    
    348.0
    
    
    
    77.0
    
    
    
    (265.4
    )
    
    
    2,454.6Capital expenditures
    
    
    19.4
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    19.8
 Six months ended June 30, 2004Ownership
    
    ManagementReal estate
    
    
    
    
    
    
    
    
    
    Inter-segmentHotel Ownership
    
    Legacy
    
    activities
    
    Fairmont
    
    Delta
    
    Elimination (a)
    TotalOperating revenues
    
    $
    336.0
    
    
    $
    
    
    
    $
    21.4
    
    
    $
    26.2
    
    
    $
    6.1
    
    
    $
    (11.2
    )
    
    $
    378.5Other revenues from managed and franchised properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.7
    
    
    
    5.1
    
    
    
    
    
    
    
    17.8396.3Income (loss) from equity investments and other
    
    
    0.5
    
    
    
    (4.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.0
    )EBITDA (b)
    
    
    73.3
    
    
    
    (4.5
    )
    
    
    8.8
    
    
    
    15.3
    
    
    
    4.1
    
    
    
    (0.4
    )
    
    
    96.6Total assets (c)
    
    
    1,925.2
    
    
    
    96.9
    
    
    
    95.9
    
    
    
    363.6
    
    
    
    73.2
    
    
    
    (21.1
    )
    
    
    2,533.7Capital expenditures
    
    
    43.5
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    44.0




---



##### 



Fairmont Hotels & Resorts Inc.
Notes to Consolidated Financial Statements
(Stated in millions of U.S. dollars)
(Unaudited)  8.
    
    Segmented Information (continued) Six months ended June 30, 2003Ownership
    
    Management
    
    Inter-segmentHotel Ownership
    
    Legacy
    
    Real estate activities
    
    Fairmont
    
    Delta
    
    Elimination (a)
    
    TotalOperating revenues
    
    $
    293.9
    
    
    $
    
    
    
    $
    31.2
    
    
    $
    20.9
    
    
    $
    5.7
    
    
    $
    (9.4
    )
    
    $
    342.3Other revenues from managed
and franchised properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.6
    
    
    
    3.9
    
    
    
    
    
    
    
    14.5356.8Income (loss) from equity
investments and other
    
    
    0.5
    
    
    
    (6.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.3
    )EBITDA (b)
    
    
    61.3
    
    
    
    (6.8
    )
    
    
    15.9
    
    
    
    11.2
    
    
    
    4.4
    
    
    
    (0.4
    )
    
    
    85.6Total assets (c)
    
    
    2,087.3
    
    
    
    102.1
    
    
    
    105.6
    
    
    
    348.0
    
    
    
    77.0
    
    
    
    (265.4
    )
    
    
    2,454.6Capital expenditures
    
    
    35.0
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    35.6
  (a)
    
    Revenues represent management fees that are charged by Fairmont of $5.6 (2003  $4.4) and $11.1 (2003-$9.3) for the three and six months ended June 30, 2004 respectively, and Delta of $0.1 (2003  $0.1) and $0.1 (2003-$0.1) for the three and six months ended June 30, 2004 respectively, to the hotel ownership operations, which are eliminated on
consolidation. EBITDA represents expenses not reimbursed relating to marketing and reservation services performed by FHR under the terms of its hotel management and franchise agreements. Total assets represent the elimination of inter-segment loans net of corporate assets.(b)
    
    The following costs are not allocated to the individual segments in evaluating net income: Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003Amortization
    
    $
    18.0
    
    
    $
    17.2
    
    
    $
    37.5
    
    
    $
    33.5Interest expense, net
    
    
    9.0
    
    
    
    8.3
    
    
    
    19.0
    
    
    
    14.2Income tax expense (recovery)
    
    
    6.5
    
    
    
    (22.2
    )
    
    
    11.7
    
    
    
    (14.7
    )
  (c)
    
    Hotel ownership assets include $63.6 (2003  $46.7) of investments accounted for using the equity method.  9.
    
    As required under the terms and conditions of the 3.75% convertible senior notes due 2023, the debt and the common shares issuable upon conversion of the shares were registered on Form F-10 with the United States Securities and Exchange Commission on April 6, 2004.10.
    
    At June 30, 2004, FHR has a payable to Legacy of $7.0 in connection with various management contracts, and reciprocal loan agreements with Legacy for $86.6.
A subsidiary of FHR has a 25% participation amounting to $10.7 in the first mortgage on The Fairmont Olympic Hotel, Seattle.11.
    
    FHR has recorded pension and other post employment benefit expenses as
follows: Three months ended June 30
    
    Six months ended June 302004
    
    2003
    
    2004
    
    2003(in millions)
    
    (in millions)Pension
    
    $
    0.5
    
    
    $
    0.1
    
    
    $
    1.0
    
    
    $
    0.1Other post-employment benefits
    
    
    0.1
    
    
    
    
    
    
    
    0.2
    
    
    
    $
    0.6
    
    
    $
    0.1
    
    
    $
    1.2
    
    
    $
    0.1