CNL Hotels & Resorts Inc. ("CNL") is involved in the ownership and operation of hotel and resort properties.

The securities class action lawsuit was commenced against CNL (f/k/a CNL Hospitality Properties, Inc.), CNL Hotel Development Company, CNL Hospitality Corp., CNL Financial Group, Inc., CNL Real Estate Group, Inc., Five Arrows Realty Securities II, LLC, CNL Hospitality Partners, L.P., RFS Partnership, L.P., and certain of its officers and directors. The Complaint charges Defendants with violations of the federal securities laws, including Sections 11, 12 and 15 of the Securities Act of 1933, and Sections 14(a) and 20 of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. In addition, by virtue of the Defendants' conduct, the Complaint alleges that Defendants have also breached their fiduciary duties owed to the proposed Class.

Specifically, the Complaint alleges, among other things, that Defendants utilized improper accounting practices and other manipulative devices to carry out a systematic scheme of materially inflating CNL's reported income and, thereby, created and maintained the appearance that CNL generated sufficient cash flow from operations to consistently pay dividends to shareholders at the levels promised in CNL's Prospectuses.

In a press release dated May 12, 2006, the Federal District Court located in Orlando, Florida granted preliminary approval of the settlement of the lawsuit captioned In re CNL Hotels & Resorts, Inc. Securities Litigation, Case No. 6:04-cv-1231-Orl-31KRS. The Court scheduled a hearing on July 26, 2006 to determine whether the proposed Settlement should be approved by the Court as fair, reasonable, and adequate, and to consider the fee and expense application of Plaintiffs' Counsel. The Purchaser Class claims are proposed to be settled by Settling Defendants' payment of $35,000,000, payable in three annual installments (January 2007 to January 2009). These monies, after payment of fees and expenses, will be distributed pursuant to a Plan of Allocation to all eligible members of the Purchaser Class.

According to a press release dated August 7, 2006, on August 1, 2006, the Federal District Court located in Orlando, Florida granted final approval of the settlement of the class action lawsuit captioned In re CNL Hotels & Resorts, Inc. Securities Litigation, Case No. 6:04-cv-1231-Orl-31KRS. The law firm of Chimicles & Tikellis LLP served as lead litigation Counsel. Labaton Sucharow & Rudoff LLP and Wolf Haldenstein Adler Freeman & Herz LLP represented the Proxy Class and Purchaser Class, respectively, as co-lead Counsel. (Collectively, "Plaintiffs' Counsel.") Following a final approval hearing held on July 26, 2006, the Court approved the Settlement as fair, reasonable, and adequate, and rendered its approval of an award of attorneys' fees and costs to Plaintiffs' Counsel.