What is a REIT?
A real estate investment trust (REIT) is a corporation that:

• Combines the capital of many investors to acquire or provide financing for real estate;
• Offers the benefits of a real estate portfolio under professional management;
• Generally does not pay corporate federal income tax; which means nearly all of its income can be distributed to stockholders
• Must pay distributions to investors of at least 90 percent of its taxable income

Why Invest in REITS?
Diversification across a variety of asset classes and securities is always essential for investors. Non-traded REITs are a recognized investment alternative that may (but are not guaranteed to) provide:

• Portfolio diversification
• Historically low correlations to fluctuations in equity markets
• A hedge against inflation
• An array of return characteristics ranging from income to growth

The Real Estate Matrix

The Real Estate Matrix provides a framework for classifying real estate investments. CNL Lifestyle Properties falls within the United States, Income & Growth category for the Real Estate Matrix. The REIT is designed to have a portfolio with a focus on properties within the United States with income and growth potential. Please consult with your financial advisor for more information regarding the Real Estate Matrix.

Investing in real estate or REITs may not be suitable for all investors. Investors should consult a financial professional to determine whether risks associated with an investment in the shares, including potential illiquidity, underlying investments, and liquidation at less than the original amount invested are compatible with investment objectives.

CNL Lifestyle Properties is about investing in the activities that are important to all of us. The company monitors lifestyle trends driven by demographics, develops strong relationships with significant industry leaders, and invests in income-producing properties. These properties are diversified by geography, operator and lifestyle sector.

Specific properties that may be included in the CNL Lifestyle Properties
portfolio are:

Ski & Mountain Lifestyle
Investment opportunities in this industry can generally be categorized as one of the following: metropolitan day ski areas, regional ski areas or destination resorts.

Golf
Golf courses may generally be divided into daily fee, private and semi-private courses.

Attractions
Our assets in this category include theme and amusement parks, waterparks and family entertainment centers.

Marinas
Marinas may generally be divided into inland and coastal marinas.

Additional Lifestyle Properties
In addition to properties in the ski and mountain lifestyle, golf, and attractions industries, we may acquire any lifestyle properties we believe to be consistent with our investment objectives and are likely to be utilized by the changing demographics of the population that will seek lifestyle recreational and related activities.

Baby Boomers, those born between 1946 and 1964, currently are one of the single largest and most dominant demographic influence in the United States. Baby Boomers represent approximately 77 million of 310 million Americans. According to the U.S. Census Bureau, in 2010 more than 76 million Americans will turn 55 or older.

Generation Xers and Echo Boomers also represent a significant portion of the population. Generation Xers or Gen Xers, born between 1965 and 1976, account for approximately 50 million Americans. Echo Boomers, the demographic group born between 1977 and 1994, represent approximately 77 million Americans.

* Source: U.S. Census Bureau, 2010 data extrapolated from 2000 Census

CNL Lifestyle Properties, Inc.’s July Distribution Rate is $0.0521 per share, which equates to a 6.25% annual distribution rate.*

This distribution is payable by September 30, 2010 to stockholders of record at the close of business on July 1, 2010.

Since its launch in 2004, CNL Lifestyle Properties has declared distributions monthly and paid them on a quarterly basis. The company intends to continue to make quarterly distributions to stockholders. The amount of distributions declared to stockholders will be determined by the board of directors and is dependent upon a number of factors, including sources of cash available for distribution such as current year and inception to date cumulative cash flows, FFO and MFFO; expected future long-term stabilized cash flows, FFO and MFFO; the proportion of distributions paid in cash compared to that which is being reinvested through our reinvestment program; and other factors such as the avoidance of distribution volatility, our objective of continuing to qualify as a REIT, capital requirements and the general economic environment.

The chart below depicts CNL Lifestyle Properties’ annualized distribution per quarter. To calculate this, the average distribution rate for the three months was multiplied by 12 months.

† A one-time special distribution of $0.035 per share declared and paid on June 30, 2009 is not included in Q2 ‘09

From 2005, CNL Lifestyle Properties, Inc’s first full year of operations, through 2008, the company’s distributions were covered by cash flows from operating activities. Beginning in 2009, a portion of the company’s cash distributions have been funded from current and excess prior year cash flows from operating activities as well as borrowings. There can be no assurance that distributions will be sustained at current levels.

Funds generated from operations include net income as calculated in accordance with generally accepted accounting principles adjusted so that depreciation allowances are not treated as an expense and payment of principle due on debt is deducted. The company has historically made, and may continue to utilize, advances under its revolving line of credit to fund a portion of the company’s cash distributions if operating cash flows are not sufficient to cover distributions or are used for other purposes. The company also may fund distributions from loan proceeds it received directly or through its joint venture arrangements. However, the company does not pay distributions from its offering proceeds.

* No assurance can be made that distributions will be sustained at current levels.

An investment in CNL Lifestyle Properties is subject to significant risks. A more detailed description of the risk factors is found in the section of the prospectus entitled “Risk Factors.” Investors should read the prospectus and carefully consider the investment objectives, risks, charges and expenses prior to investing.

CNL Lifestyle Properties, Inc. invests using sound investment principles to achieve its investment objectives and help ensure the long-term health of the company. This conservative management strategy* is anchored by three principles**:

Financial Strength
CNL Lifestyle Properties strives for the financial strength to achieve its investment objectives such as, continually pay distributions to investors and the flexibility to acquire properties that add value to its portfolio. This is evident in the low funds from operations (FFO) payout ratio and low leverage in the non-traded REIT space. FFO is a figure used by REITs to define the cash flows from their operations, and is often used to determine the ability to pay distributions to shareholders.***

Leasing Structure
CNL Lifestyle Properties’ long-term triple-net leasing structures help to ensure a steady source of income to the REIT.** This strategy includes security deposits and cross-defaulted provisions, where appropriate. With cross-defaulted provisions, tenants who operate multiple properties may use funds from profitable properties to subsidize underperforming ones. Similarly, if a tenant defaults under one property lease, the company may place them in default under all of their leases, providing additional leverage in resolving an unfavorable situation.

Diversified Portfolio
CNL Lifestyle Properties strives to maintain a diversified portfolio of lifestyle real estate assets that reflect demographic trends and shifting utilization patterns. This approach positions the REIT to more easily endure seasonal or market fluctuations. In addition, the REIT establishes long-term relationships with operating partners who are generally considered to be significant industry leaders.

* CNL Lifestyle Properties’ board of directors has the authority to change these general strategies and make exceptions to them without notice. There is no assurance that these strategies will result in a steady or increased return on an investment in the shares or that its FFO payout ratio and distribution policy will remain the same. There are risks involved in investing in unlisted REITs. An investment in CNL Lifestyle Properties is subject to significant risks. A more detailed description of the risk factors is found in the section of the prospectus entitled “Risk Factors.” Investors should read the prospectus and carefully consider the investment objectives, risks, charges and expenses prior to investing.

** In light of the uncertainty arising from the current economic and real estate environments, there can be no assurance that CNL Lifestyle Properties’ strategy and ability to pay distributions will not be adversely affected by tenant defaults, bankruptcies or disagreements related to its leases.

*** Calculated from publicly reported information as of September 30, 2008, FFO is defined by the National Association of Real Estate Investment Trusts as net income (loss), computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures and subsidiaries. FFO should not be considered as an alternative to net income (loss) or as an indication of CNL Lifestyle Properties’ liquidity, nor is it indicative of funds available to fund the company’s cash needs, including its ability to make distributions. There can be no assurance that distributions can be continued at current levels or that the FFO payout ratio will not increase in future periods.

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