UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(MARK  ONE)
[X] ANNUAL  REPORT  PURSUANT  TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT  1934
FOR  THE  FISCAL  YEAR  ENDED  DECEMBER  31,  2002.

                                       OR

[ ] TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF THE SECURITIES
EXCHANGE  ACT  OF  1934
                         COMMISSION FILE NUMBER 1-14012

                              EMERITUS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                            WASHINGTON     91-1605464
                (STATE OR OTHER JURISDICTION     (I.R.S. EMPLOYER
            OF INCORPORATION OR ORGANIZATION)     IDENTIFICATION NO.)

                3131 ELLIOTT AVENUE, SUITE 500, SEATTLE, WA 98121
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (206) 298-2909
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:


         TITLE OF EACH CLASS     NAME OF EACH EXCHANGE ON WHICH REGISTERED
         -------------------     -----------------------------------------
        Common Stock, $.0001 par value     American Stock Exchange, Inc.

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
     Indicate  by  check  mark  whether the Registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
Registrant  was required to file such reports), (2) and has been subject to such
filing  requirements  for  the  past  90  days.  Yes[X]  No[ ]

     Indicate  by check mark that there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or  any  amendment  to  this  Form  10-K.[ ]

     Indicate  by  check mark whether the Registrant is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Act).
                                Yes[ ]           No[X]
     Aggregate  market  value  of  voting  stock  held  by non-affiliates of the
registrant  as  of  June  28,  2002  was  $24,100,140.

     Aggregate  market  value  of  voting  stock  held  by non-affiliates of the
registrant  as  of  February  28,  2003  was  $22,389,919.

     As  of February 28, 2003 10,247,226 shares of the Registrant's Common Stock
were  outstanding.
                      DOCUMENTS INCORPORATED BY REFERENCE:
     The  information  required  by  Part  III  of  Form  10-K  (items 10-13) is
incorporated  herein by reference to the Registrant's definitive Proxy Statement
to  be  filed  on  or  before  April  30,  2003.



<PAGE>
<TABLE>
<CAPTION>

                      EMERITUS CORPORATION

                             INDEX


                             PART I
                                                                    PAGE NO.
                                                                    --------
<S>      <C>                                                         <C>
ITEM 1.  DESCRIPTION OF BUSINESS                                      1
ITEM 2. .DESCRIPTION OF PROPERTY                                     11
ITEM 3. .LEGAL PROCEEDINGS                                           19
ITEM 4. .SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS         20
         EXECUTIVE OFFICERS OF EMERITUS. . .                         20
                             PART II
ITEM 5. .MARKET FOR REGISTRANTCOMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS . . . . . . . .                       23

ITEM 6. .SELECTED CONSOLIDATED FINANCIAL DATA                        24

ITEM 7. .MANAGEMENTDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS . . . . .                       25

ITEM 7A..QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  53

ITEM 8. .FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                 54

ITEM 9. .CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE                       54

                             PART III

ITEM 10..DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT          55
ITEM 11..EXECUTIVE COMPENSATION                                      55

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT AND EQUITY COMPENSATION PLAN INFORMATION         55

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS              55
ITEM 14..CONTROLS AND PROCEDURES                                     55
                             PART IV

ITEM 15..EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
         FORM 8-K.                                                   56
</TABLE>

<PAGE>
                                     PART I

ITEM  1.     DESCRIPTION  OF  BUSINESS

Overview

Emeritus  is  one  of  the  largest  and  most experienced national operators of
assisted  living residential communities.  Assisted living communities provide a
residential  housing  alternative  for  senior  citizens  who need help with the
activities  of  daily  living,  with an emphasis on assisted living and personal
care  services.

At December 31, 2002, we operated 180 assisted living communities, consisting of
approximately  15,800  units with a capacity for 18,900 residents, located in 33
states.  These include 17 communities that we own, 67 communities that we lease,
and  96 communities that we manage, including two in which we hold joint venture
interests.  Under  three  management  agreements  covering  46 of our 96 managed
communities,  we  have  options  to  purchase 38 communities and rights of first
refusal  on three communities that expire June 30, 2003, and options to purchase
five  communities  that  expire  December  31,  2003.

We  strive  to  provide  a  wide  variety  of  assisted  living  services  in  a
professionally managed environment that allows our residents to maintain dignity
and independence.  Our residents are typically unable to live independently, but
do not require the intensive care provided in skilled nursing facilities.  Under
our approach, seniors reside in a private or semi-private residential unit for a
monthly  fee  based on each resident's individual service needs.  We believe our
residential  assisted  living  communities  allow  seniors  to  maintain  a more
independent  lifestyle  than  is  possible  in  the institutional environment of
skilled  nursing  facilities.  In  addition,  we  believe  that  our  services,
including  assisting  residents  with  activities  of  daily  living,  such  as
medication  management,  bathing,  dressing,  personal hygiene, and grooming are
attractive  to  seniors  who  are  inadequately  served  by  independent  living
facilities.

Emeritus's  annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports  on  Form  8-K,  and  amendments  thereto, filed with the Securities and
Exchange  Commission  (SEC) pursuant to Section 13(a) of the Securities Exchange
Act  of  1934,  as  amended,  and  the rules and regulations thereunder are made
available free of charge, on Emeritus's web site, (www.emeritus.com), as soon as
reasonably  practicable  after Emeritus electronically files such material with,
or  furnishes  it to, the SEC.  The information contained on Emeritus's web site
is  not  being  incorporated  herein.


The  Assisted  Living  Industry

We  believe  that  the  assisted  living  industry  is the preferred residential
alternative  for  seniors  who  cannot  live  independently  due  to physical or
cognitive  frailties but who do not require the more intensive medical attention
provided  by  a  skilled  nursing  facility.

Generally,  assisted  living  provides  housing  and  24-hour  personal  support
services  designed  to assist seniors with the activities of daily living, which
include  bathing,  eating,  personal  hygiene,  grooming,  medication reminders,
ambulating,  and  dressing.  Certain assisted living facilities may offer higher
levels  of  personal  assistance for residents with Alzheimer's disease or other
forms  of  dementia.

                                        1
<PAGE>

We  believe  that  a  number  of factors will allow assisted living companies to
continue  as  one  of  the  fastest  growing  choices  for  senior  care:

*     Consumer  Preference.  We  believe  that  assisted  living is preferred by
prospective  residents  as  well  as  their families, who are often the decision
makers  for  seniors.  Assisted  living is a cost-effective alternative to other
types  of  care,  offering  seniors  greater independence while enabling them to
reside  longer  in  a  more  residential  environment.

*     Cost-Effectiveness.  The  average  annual  cost  to care for a Medicare or
Medicaid patient in a skilled nursing home can exceed $40,000.  The average cost
to  care  for a private pay patient in a skilled nursing home can exceed $60,000
per  year  in certain markets.  In contrast, assisting living services generally
cost 30% to 50% less than skilled nursing facilities located in the same region.
We  also  believe  that  the cost of assisted living services compares favorably
with  home  healthcare,  particularly when costs associated with housing, meals,
and  personal  care  assistance  are  taken  into  account.

*     Demographics.  The  target market for our services is generally persons 75
years  and  older  who  represent  the  fastest  growing  segments  of  the U.S.
population.  According  to  the  U.S.  Census  Bureau,  the  portion of the U.S.
population  age  75 and older is expected to increase by 9.8% from approximately
16.9 million in 2001 to approximately 18.6 million by the year 2010.  The number
of persons age 85 and older, as a segment of the U.S. population, is expected to
increase  by 30.4% from approximately 4.4 million in 2001 to over 5.7 million by
the  year  2010.  Furthermore,  the number of persons afflicted with Alzheimer's
disease  is  also  expected  to  grow  in  the  coming  years. According to data
published  by  the  Alzheimer's  Association, this population will increase 127%
from  the  current  4.4 million to 10.0 million people by the year 2010. Because
Alzheimer's  disease  and  other forms of dementia are more likely to occur as a
person  ages, we expect the increasing life expectancy of seniors to result in a
greater  number of persons afflicted with Alzheimer's disease and other forms of
dementia  in  future  years,  absent  breakthroughs  in  medical  research.

*     Changing  Family Dynamics. According to the U.S. Census Bureau, the median
income  of the elderly population is increasing. Currently, more than 54% of the
population  over  the  age of 75 have incomes over $20,000 per year and slightly
more  than  44% have annual incomes of at least $25,000. Accordingly, we believe
that  the  number  of  seniors  and  their  families  who  are  able  to  afford
high-quality  senior  residential  services,  such  as  those we offer, has also
increased.  In  addition, the number of two-income households has increased over
the  last  decade  and the geographical separation of senior family members from
their  adult  children  correlates  with  the  geographic  mobility  of the U.S.
population.  As  a  result, many families that traditionally would have provided
the type of care and services we offer to senior family members are less able to
do  so.

* Supply/Demand Imbalance. While the senior population is growing significantly,
the  supply of skilled nursing beds per thousand is declining. We attribute this
imbalance  to  a  number  of factors in addition to the aging of the population.
Many  states,  in  an  effort  to  maintain  control of Medicaid expenditures on
long-term  care,  have  implemented  more  restrictive  Certificate  of  Need
regulations or similar legislation that restricts the supply of licensed skilled
nursing  facility  beds.  Additionally,  acuity-based reimbursement systems have
encouraged  skilled  nursing  facilities  to  focus  on  higher

                                        2
<PAGE>

acuity  patients.  We  also  believe  that high construction costs and limits on
government reimbursement for construction and start-up expenses have constrained
the growth and supply of traditional skilled nursing beds. We believe that these
factors,  taken  in combination, result in relatively fewer skilled nursing beds
available  for  the increasing number of seniors who require assistance with the
activities  of  daily  living  but  do  not  require  24-hour medical attention.

Competitive  Strengths

We  compete with other assisted living communities located in the areas where we
operate.  These  communities  are  operated  by  individuals, local and regional
businesses, and larger operators of regional and national groups of communities,
including  public companies similar to us. We believe that we have the following
competitive  strengths:

*     State-of-the-Art  Communities.  Of  our  180  operating  communities,  89
communities  have  been built and opened since January 1, 1996.  In addition, we
have  significantly  upgraded  48  of  our  older  communities  to improve their
appearance  and  operating  efficiency.  These  upgrades  include  the  finished
appearance  of  the  communities,  as  well as various improvements to kitchens,
nurse  call  systems,  and  electronic  systems,  including  those  for  data
transmission,  data  sharing,  and  e-mail.

*     Large  Operating  Scale.  We  believe  that  our size gives us significant
advantages  over  smaller operators.  Given the scale of our operations, we have
the  opportunity  to  select the best operating systems and service alternatives
and  to  develop a set of best practices for implementation on a national scale.
We also believe that, because of our size, we are able to purchase such items as
food,  equipment,  insurance,  and  employee  benefits  at  lower  costs, and to
negotiate  more  favorable  financing  arrangements.

*     Lower  Cost  of Communities. As of December 31, 2002, the average cost per
unit  of our communities was approximately $65,300.  We believe that these costs
are  less  than the current replacement costs of these communities and below the
average costs incurred by many other public companies operating in the industry.
We  also believe that these lower capital costs give us opportunities to enhance
margins  and  greater flexibility in designing our rate structure and responding
to  varying  regional  economic  and  regulatory  changes.

*     Geographic  Diversification and Regional Focus. We operate our communities
in  33  states  in all regions of the United States.  We believe that because of
this  geographic  diversification  we  are  less  vulnerable to adverse economic
developments  and industry factors, such as overbuilding and regulatory changes,
that  are  limited  to a particular region.  We believe that this also moderates
the  effects  of  regional  employment  and competitive conditions.  Within each
region,  we  have  focused  on  establishing  a  critical mass of communities in
secondary  markets,  which  enables  us  to  maximize  operating  efficiencies.

*  Experienced Management with Industry Relationships. Daniel R. Baty, our Chief
Executive  Officer,  has  more than 30 years of experience in the long-term care
industry,  ranging  from  independent living to skilled nursing care. We believe
that  his  experience  and  the relationships that he has developed with owners,
operators,  and  sources  of capital have helped us and will continue to help us
develop  operating  efficiencies, investment and joint venture relationships, as
well  as  obtain

                                        3
<PAGE>

sources  of  debt  and equity capital. Mr. Baty also has a significant financial
and  management  interest  in  Holiday  Retirement  Corporation,  an operator of
independent  living facilities, and Columbia-Pacific Group, Inc., an operator of
independent  living  facilities  and assisted living communitiesIn addition, our
operating  vice  presidents have an average of 20 years of experience with major
companies  in  the  long-term  care industry. We believe that this strong senior
leadership,  with  proven  management skills, will allow us to take advantage of
the  opportunities  present  in  the  assisted  living  industry.

Business  Strategy

We  believe  that  there  is a significant demand for alternative long-term care
services  that  are  well-positioned  between  the  limited  services offered by
independent  living  facilities  and  the higher-level medical and institutional
care  offered  by skilled nursing facilities. Our goal is to become the national
leader in the assisted living segment of the long-term care industry through the
following  strategy:

*     Focus  on  Operations  and  Occupancy. Through 1998, we focused on rapidly
expanding  our  operations  in  order to assemble a portfolio of assisted living
communities  with  a  critical  mass  of  capacity.  We  pursued  an  aggressive
acquisition  and  development  strategy  during  that time.  Having achieved our
growth  objective, in 1999 and continuing through 2001, we substantially reduced
our  pace  of acquisition and development activities to concentrate on improving
community  performance through both increased occupancy and revenue per occupied
unit.  Initially,  we focused most of our efforts on increasing occupancy across
our  portfolio.  Having  achieved  a  portion of our total goal by late 1999, we
then  shifted our efforts toward enhancing our rates, particularly in facilities
that  were substantially below industry averages.  This rate strategy has led to
increased  rates  across most of our portfolio.  We believe that continued focus
on  both rates and occupancy will continue to generate the incremental growth in
margins  we  are  striving  to  achieve.

          Expand  Business  through  Management  Agreements.  With  the  current
changes  in  the  capital  markets,  we  may  be  presented  with,  or look for,
opportunities  for revenue growth through the use of management agreements under
which  we  earn  a  fee.  We  will  take advantage of these opportunities if the
managed  communities  fit  into  our  existing areas of operational strength and
appropriate  geographical  proximity to the communities that we currently own or
manage,  and,  therefore  require minimal incremental cost.  We intend to manage
these  new  communities  for a fee based on a percentage of their gross revenue.

     Acquire  Communities  Selectively.  In  1998,  we  reduced  our acquisition
activity  in  part  to  concentrate  on  the  need to improve operations through
occupancy and rate enhancement.  As we achieve these objectives, we expect to be
more  receptive  to acquisition opportunities that meet designated criteria.  We
particularly  expect  to  favor the acquisition of communities that provide more
complete coverage of our existing markets and intend to focus on acquisitions of
communities  that  have  been  originally designed as assisted living facilities
with  a  favorable  current  operating  structure,  and communities that provide
immediate  positive  cash  flow  opportunities  with  minimal impact to existing
operations.  In  2002, as the opportunities arose, we acquired additional leased
communities  and  managed  communities  that satisfy our criteria.  We intend to
continue  to  be  more selective and measured in our acquisition strategy in the
future.

                                        4
<PAGE>

*     Appeal  to  the Middle Market. The market segment most attractive to us is
middle  to  upper-middle  income  seniors  in  smaller  cities  and suburbs with
populations  of  50,000  to  150,000  persons.  We  believe  that  this
"value-sensitive"  segment of the senior community is the largest, broadest, and
most  stable.  We  think  that these markets are receptive to the development of
new  assisted  living  communities  and  the  expansion of existing communities.

                                        5
<PAGE>

Resident  Services

Our  assisted  living communities offer residents a full range of services based
on  individual  resident  needs  in  a  supportive  "home-like"  environment. By
offering  a  full  range  of services, we can accommodate residents with a broad
range  of  service  needs.  The  services  that  we provide to our residents are
designed  to  respond  to their individual needs and to improve their quality of
life.

<TABLE>
<CAPTION>

SERVICE LEVEL           TYPE OF RESIDENT                        DESCRIPTION OF CARE PROVIDED
-------------    -------------------------------  --------------------------------------------------------------


<S>                <C>                             <C>
Basic Services. .  All residents--independent,     We offer these basic services to our residents:
          . . . .  assisted living and those with  *  three meals per day,
          . . . .  Alzheimer's and related         *  social and recreational activities,
          . . . .  dementia                        *  weekly housekeeping and linen service,
          . . . .                                  *  building maintenance and grounds keeping,
          . . . .                                  *  24-hour emergency response and security,
          . . . .                                  *  licensed nurses on staff to monitor and coordinate care
          . . . .                                  needs, and
          . . . .                                  *  transportation to appointments, etc.
----------------------------------------------------------------------------------------------------------------------
Assisted living .  Assisted living residents       We cater our assisted living services to each resident based on
services. . . . .                                  his/her individual requirements for more frequent or intensive
          . . . .                                  assistance or increased care or supervision.  We achieve this
          . . . .                                  individualized care, through consultation with the resident, the
          . . . .                                  resident's physician and the resident's family.
          . . . .
          . . . .                                  We determine an individual resident's level of care by the
          . . . .                                  degree of assistance he/she requires in each of several categories.
          . . . .                                  Our categories of care include, but are not limited to:
          . . . .                                  *  medication management and supervision,
          . . . .                                  *  reminders for dining and recreational activities,
          . . . .                                  *  assistance with bathing, dressing and grooming,
          . . . .                                  *  incontinence care and assistance,
          . . . .                                  *  behavior management,
          . . . .                                  *  dietary assistance, and
          . . . .                                  *  miscellaneous services (including diabetic management,
          . . . .                                  prescription medication reviews, transfers, simple treatments, and
          . . . .                                  oxygen set up/maintenance).
----------------------------------------------------------------------------------------------------------------------
Special Care. . .  Residents with Alzheimer's      We have designed our Special Care program to meet the
Program . . . . .  and related dementia            specialized medical, psychological and social needs of our
(Alzheimer's &. .                                  resident afflicted by this condition.  In a manner consistent with
related dementia)                                  our assisted living services, we help structure a service plan for
          . . . .                                  each resident based on his/her individual needs.  Some of the key
          . . . .                                  service areas that we focus on to provide the best care for our
          . . . .                                  residents with Alzheimer's or related dementias center around:
          . . . .                                  *  separate dining program,
          . . . .                                  *  enhanced behavior interpretation and management,
          . . . .                                  *  structured activity planning, and
          . . . .                                  *  partnering with and supporting families through support groups,
          . . . .                                     one on one meetings, and educational forums.

----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                        6
<PAGE>
Service  Revenue  Sources

We rely primarily on our residents' ability to pay our charges for services from
their  own  or  familial  resources  and  expect  that  we  will  do  so for the
foreseeable  future.  Although care in an assisted living community is typically
less  expensive  than  in  a skilled nursing facility, we believe that generally
only  seniors with income or assets meeting or exceeding the regional median can
afford  to  reside  in  our  communities.  Inflation or other circumstances that
adversely  affect  seniors'  ability  to  pay for assisted living services could
therefore  have  an  adverse  effect  on  our  business.

As  third  party  reimbursement  programs and other forms of payment continue to
grow,  we  intend to pursue these alternative forms of payment, depending on the
level  of  reimbursement provided in relation to the level of care provided.  We
also  believe  that  private long-term care insurance will increasingly become a
revenue  source  in  the future, although it is currently small.  All sources of
revenue  other than residents' private resources constitute less than 10% of our
total  revenues.

Management  Activities

At  December  31,  2002,  we  managed and provided administrative services to 94
assisted  living  communities under management agreements that typically provide
for  management  fees  ranging from 3% to 7% of gross revenues.  Management fees
were  approximately  $10.9  million  in  2002.  These management agreements have
terms  ranging from two to five years, and may be renewed or renegotiated at the
expiration  of  the  term.  We have various categories of management agreements,
including:

*    management agreements covering 46 communities in connection with the
     Emeritrust transactions, which we will refer to extensively throughout this
     document and which are detailed as follows:

     *    EMERITRUST I: 25 communities that we began managing in December 1998.
          Until December 31, 2001, we received a base management fee of 5% of
          gross revenues, but were entitled to receive up to 7% depending on the
          cash flow performance of the communities managed. As of January 1,
          2002, however, we started receiving a base management fee of 3% of
          gross revenues, but may receive up to 7% depending on the cash flow
          performance of the communities managed. Additionally, we are required
          by our management contracts to fund cash operating deficits. In May
          2002, we entered into an agreement for a third party to operate one of
          these communities. The new operator has responsibility for all
          economic benefits and detriments and has an option to purchase this
          community from the owner of the community.

     *    EMERITRUST II: 21 communities that we began managing in March 1999,
          consisting of:

          *    EMERITRUST II OPERATING: 16 communities for which we have no
               obligation to fund cash operating deficits. We receive a base
               management fee of 5% of gross revenues, but may receive up to 7%
               depending on the cash flow performance of the communities
               managed.

          *    EMERITRUST II DEVELOPMENT: 5 communities for which we are
               required to fund cash operating deficits. We receive a base
               management fee of 5% of gross revenues, but may receive up to 7%
               depending on the cash flow performance of the communities
               managed.

                                        7
<PAGE>

               Mr. Baty holds an indirect non-controlling interest in
               the entities that own these communities.


*    management agreements covering 30 communities owned by entities controlled
     by Daniel R. Baty ("Baty"), our Chairman and Chief Executive Officer and
     one of its principal shareholders. We generally receive fees ranging from
     4% to 6% of the gross revenues generated by the communities.

*    management agreements covering two communities owned by joint ventures in
     which we have a financial interest. We receive management fees ranging from
     4% to 7% of gross revenues.

*    management agreements covering four communities owned by independent third
     parties. We receive management fees ranging from 4% to 7% of gross
     revenues, or similar arrangements based on occupied capacity.

*    management agreements covering 14 communities owned by Regent Assisted
     Living, Inc. We receive a flat management fee of $8,000 per community with
     opportunities to earn additional fees based on operating cash flow.


Prior  to 1999, we did not have material revenue from management agreements.  If
we exercise our options to purchase the Emeritrust communities prior to June 10,
2003 (December 10, 2003, for the five Emeritrust II Development communities), or
if  the  management  agreements  expire  on those dates and are not renewed, our
revenue  from  management fees will diminish substantially.  Management believes
it  will  renegotiate  and  extend  the  above  agreements.

Marketing  and  Referral  Relationships

Our  operating strategy is designed to integrate our assisted living communities
into the continuum of healthcare providers in the geographic markets in which we
operate.  One  objective  of  this  strategy  is to enable residents who require
additional  healthcare  services  to  benefit  from our relationships with local
hospitals,  physicians, home healthcare agencies, and skilled nursing facilities
in  order  to  obtain  the  most  appropriate  level  of  care. Thus, we seek to
establish  relationships  with  local hospitals, through joint marketing efforts
where  appropriate, and home healthcare agencies, alliances with visiting nurses
associations  and,  on  a  more limited basis, priority transfer agreements with
local,  high-quality  skilled  nursing  facilities.  In  addition  to benefiting
residents,  the  implementation  of this operating strategy has strengthened and
expanded  our  network  of  referral  sources.

Administration

We  employ an integrated structure of management, financial systems and controls
to  maximize  operating  efficiency  and  contain  costs.  In  addition, we have
developed  the  internal  procedures,  policies,  and  standards  we believe are
necessary  for  effective  operation  and  management  of  our  assisted  living
communities.  We  have  recruited  experienced  key  employees  from  several
established  operators  in the long-term care services field and believe we have
assembled  the  administrative,  operational,  and  financial personnel who will
enable  us  to  continue  to  manage  our  operating  strategies  effectively.

                                        8
<PAGE>

We have established Central, Eastern, and Western Operations.  A divisional vice
president  heads  each  division.  Each  division  consists of several operating
regions  headed  by  a  regional  director of operations who provides management
support  services  for each of the communities in his/her respective region.  An
on-site  community  director who, in certain jurisdictions, must satisfy certain
licensing  requirements  supervises day-to-day community operations.  We provide
management  support  services  to each of our residential communities, including
establishing  operating  standards,  recruiting,  training,  and  financial  and
accounting  services.

We  have centralized finance and other operational functions at our headquarters
in  Seattle, Washington, in order to allow community-based personnel to focus on
resident  care.  The  Seattle office establishes certain policies and procedures
applicable  to  the  entire  company,  oversees  our  financial  and  marketing
functions,  manages our acquisition and development activities, and provides our
overall  strategic  direction.

We  use a blend of centralized and decentralized accounting and computer systems
that  link  each community with our headquarters.  Through these systems, we are
able  to  monitor  operating  costs  and  distribute  financial  and  operating
information  to appropriate levels of management in a cost efficient manner.  We
believe  that  our current data systems are adequate for current operating needs
and  provide  the flexibility to meet the requirements of our operations without
disruption  or significant modification to existing systems beyond 2003.  We use
high quality hardware and operating systems from current and proven technologies
to  support  our  current  technology  infrastructure.

Competition

The  number  of  assisted  living  communities  continues  to grow in the United
States.  We  believe that market saturation has had, and could continue to have,
an  adverse  effect  on  our communities and their ability to reach and maintain
stabilized occupancy levels.  Moreover, the senior housing services industry has
been subject to pressures that have resulted in the consolidation of many small,
local  operations  into  larger regional and national multi-facility operations.
We anticipate that our source of competition will come from local, regional, and
national  assisted living companies that operate, manage, and develop residences
within the geographic area in which we operate, as well as retirement facilities
and  communities,  home  healthcare  agencies,  not-for-profit  or  charitable
operators  and,  to a lesser extent, skilled nursing facilities and convalescent
centers.  We  believe  that  quality of service, reputation, community location,
physical appearance, and price will be significant competitive factors.  Some of
our  competitors  may  have  significantly  greater  resources,  experience, and
recognition  within  the  healthcare  community  than  we  do.

Employees

At  December  31,  2002,  we  had  7,950  employees,  including  5,883 full-time
employees,  of  which  approximately  112  were employed at our headquarters and
approximately  4,658  were  employed  in  our  managed communities.  None of our
employees  are  currently  represented by a labor union, and we are not aware of
any  union-organizing  activities  among  our  employees.  We  believe  that our
relationship  with  our  employees  is  satisfactory.

                                        9
<PAGE>

Although we believe that we are able to employ sufficiently skilled personnel to
staff  the  communities we operate or manage, a shortage of skilled personnel in
any  of  the  geographic  areas  in  which we operate could adversely affect our
ability  to  recruit and retain qualified employees and to control our operating
expenses.

                                       10
<PAGE>
ITEM  2.   DESCRIPTION  OF  PROPERTY

Communities

Our  assisted  living  communities generally consist of one-story to three-story
buildings  and include common dining and social areas. Nineteen of our operating
communities  offer  some  independent  living services and three are operated as
skilled nursing facilities. The table below summarizes information regarding our
current  operating  communities  as  of  December  31,  2002.

<TABLE>
<CAPTION>

                                                           EMERITUS
                                                           OPERATIONS       UNITS    BEDS
                  COMMUNITY               LOCATION         COMMENCED         (A)      (B)     INTEREST
-------------------------------------  ------------------- -----------     -------  ------- ------------


<S>                                     <C>                   <C>          <C>      <C>      <C>
 ALABAMA
 Galleria Oaks . . . . . . . . . . . .  Birmingham            Oct-02            71      107  Lease

 ARIZONA
 Arbor at Olive Grove. . . . . . . . .  Phoenix               Jun-94            98      111  Lease
 Desert Flower . . . . . . . . . . . .  Scottsdale            Jan-02           102      108  Manage
 La Villita (2). . . . . . . . . . . .  Phoenix               Jun-94            92       92  Option/Manage
 Loyalton Court of Scottsdale. . . . .  Scottsdale            Jan-02            24       44  Manage
 Loyalton of Flagstaff (3) . . . . . .  Flagstaff             Jun-99            61       67  Option/Manage
 Loyalton of Phoenix (3) . . . . . . .  Phoenix               Jan-99           101      111  Option/Manage
 Scottsdale Royale ~ . . . . . . . . .  Scottsdale            Aug-94            63       63  Own
 Village Oaks at Chandler. . . . . . .  Chandler              Oct-02            66      105  Lease
 Village Oaks at Glendale. . . . . . .  Glendale              Oct-02            66      105  Lease
 Village Oaks at Mesa. . . . . . . . .  Mesa                  Oct-02            66      105  Lease

 CALIFORNIA
 Creston Village . . . . . . . . . . .  Paso Robles           Feb-98           100      110  Lease
 Emerald Hills . . . . . . . . . . . .  Auburn                Jun-98            89       98  Lease
 Fulton Villa. . . . . . . . . . . . .  Stockton              Mar-95            80       80  Own
 Laurel Place  ~(2). . . . . . . . . .  San Bernardino        Apr-96            71       72  Option/Manage
 Loyalton of Folsom. . . . . . . . . .  Folsom                Jan-02            98      113  Manage
 Northbay Retirement . . . . . . . . .  Fairfield             Mar-98           172      189  Lease
 Orchard Park. . . . . . . . . . . . .  Clovis                Jan-02           112      124  Manage
 Regent House at Merced. . . . . . . .  Merced                Jan-02            72       83  Manage
 Regent Senior Living. . . . . . . . .  West Covina           Jan-02           130      144  Manage

                                       11
<PAGE>

                                                           EMERITUS
                                                           OPERATIONS       UNITS    BEDS
                  COMMUNITY               LOCATION         COMMENCED         (A)      (B)     INTEREST
-------------------------------------  ------------------- -----------     -------  ------- ------------
 Sunshine Villa. . . . . . . . . . . .  Santa Cruz            Jan-02           106      116  Manage
 The Terrace (2) . . . . . . . . . . .  Grand Terrace         Mar-96            87       87  Option/Manage
 Villa Del Rey . . . . . . . . . . . .  Escondido             Mar-97            84       84  Own
 Villa Serra . . . . . . . . . . . . .  Salinas               Jan-02           150      150  Manage

 CONNECTICUT
 Cold Spring Commons . . . . . . . . .  Rocky Hill            Apr-97            80       88  Lease

 DELAWARE
 Gardens at Whitechapel (2). . . . . .  Newark                Oct-95           100      110  Option/Manage
 Green Meadows at Dover. . . . . . . .  Dover                 Jul-98            52       63  Lease

 FLORIDA
 Barrington Place (2). . . . . . . . .  Lecanto               May-96            79      120  Option/Manage
 Beneva Park Club (2). . . . . . . . .  Sarasota              Jul-95            96      102  Option/Manage
 College Park Club (2) . . . . . . . .  Bradenton             Jul-95            85       93  Option/Manage
 La Casa Grande. . . . . . . . . . . .  New Port Richey       May-97           200      235  Own
 Madison Glen  (2) . . . . . . . . . .  Clearwater            May-96           135      154  Option/Manage
 Park Club of Brandon (3). . . . . . .  Brandon               Jul-95            88       88  Option/Manage
 Park Club of Fort Myers (3) . . . . .  Ft. Myers             Jul-95            77       82  Option/Manage
 Park Club of Oakbridge (3). . . . . .  Lakeland              Jul-95            88       88  Option/Manage
 River Oaks. . . . . . . . . . . . . .  Englewood             May-97           155      200  Own
 Springtree (2). . . . . . . . . . . .  Sunrise               May-96           179      246  Option/Manage
 Stanford Centre . . . . . . . . . . .  Altamonte Springs     May-97           118      180  Own
 The Colonial Park Club  (3) . . . . .  Sarasota              Aug-96            88       90  Option/Manage
 The Lakes . . . . . . . . . . . . . .  Ft. Myers             Jun-00           154      190  Manage
 The Lodge at Mainlands  (2) . . . . .  Pinellas Park         Aug-96           154      162  Option/Manage
 The Pavillion at Crossing Pointe ~(2)  Orlando               Jul-95           174      190  Option/Manage
 Village Oaks at Conway. . . . . . . .  Orlando               Oct-02            66      103  Lease
 Village Oaks at Melbourne . . . . . .  Melbourne             Oct-02            66      103  Lease
 Village Oaks at Orange Park . . . . .  Orange Park           Oct-02            66      103  Lease
 Village Oaks at Southpoint. . . . . .  Jacksonville          Oct-02            66      103  Lease
 Village Oaks at Tuskawilla. . . . . .  Winter Springs        Oct-02            66      105  Lease

 IDAHO
 Bestland Retirement . . . . . . . . .  Coeur d' Alene        Nov-96            83       86  Manage

                                       12
<PAGE>

                                                           EMERITUS
                                                           OPERATIONS       UNITS    BEDS
                  COMMUNITY               LOCATION         COMMENCED         (A)      (B)     INTEREST
-------------------------------------  ------------------- -----------     -------  ------- ------------
 Highland Hills (3). . . . . . . . . .  Pocatello             Oct-96            49       55  Option/Manage
 Juniper Meadows . . . . . . . . . . .  Lewiston              Nov-97            82       90  Own
 Loyalton of Coeur d'Alene  ~(3) . . .  Coeur d' Alene        Mar-96           108      114  Option/Manage
 Ridge Wind (3). . . . . . . . . . . .  Chubbuck              Aug-96            80      106  Option/Manage
 Summer Wind . . . . . . . . . . . . .  Boise                 Sep-95            49       53  Lease
 Willow Park . . . . . . . . . . . . .  Boise                 Jan-02           106      120  Manage

 ILLINOIS
 Canterbury Ridge. . . . . . . . . . .  Urbana                Nov-98           101      111  Lease
 Loyalton of Rockford. . . . . . . . .  Rockford              Jun-00           100      110  Manage

 INDIANA
 Meridian Oaks . . . . . . . . . . . .  Indianapolis          Oct-02            77      111  Lease
 Village Oaks at Fort Wayne. . . . . .  Fort Wayne            Oct-02            66      105  Lease
 Village Oaks at Greenwood . . . . . .  Indianapolis          Oct-02            66      105  Lease

 IOWA
 Silver Pines. . . . . . . . . . . . .  Cedar Rapids          Jan-95            80       80  Own

 KANSAS
 Elm Grove Estates (2) . . . . . . . .  Hutchinson            Apr-97           121      133  Option/Manage

 KENTUCKY
 Stonecreek Lodge. . . . . . . . . . .  Louisville            Apr-97            80       88  Lease

 LOUISIANA
 Kingsley Place at Alexandria. . . . .  Alexandria            May-02            80       96  Manage
 Kingsley Place at Lafayette . . . . .  Lafayette             May-02            80       96  Manage
 Kingsley Place at Lake Charles. . . .  Lake Charles          May-02            80       96  Manage
 Kingsley Place at Shreveport. . . . .  Shreveport            May-02            80       80  Manage

 MARYLAND
 Emerald Estates . . . . . . . . . . .  Baltimore             Oct-99           120      134  Manage
 Loyalton of Hagerstown (3). . . . . .  Hagerstown            Jul-99           100      110  Option/Manage

                                       13
<PAGE>

                                                           EMERITUS
                                                           OPERATIONS       UNITS    BEDS
                  COMMUNITY               LOCATION         COMMENCED         (A)      (B)     INTEREST
-------------------------------------  ------------------- -----------     -------  ------- ------------
 MASSACHUSETTS
 Canterbury Woods. . . . . . . . . . .  Attleboro             Jun-00           130      130  Manage
 Meadow Lodge at Drum Hill . . . . . .  Chelmsford            Aug-97            80       88  Own
 The Lodge at Eddy Pond. . . . . . . .  Auburn                Jan-00           108      110  Own
 The Pines at Tewksbury (3). . . . . .  Tewksbury             Jan-96            49       65  Option/Manage
 Woods at Eddy Pond. . . . . . . . . .  Auburn                Mar-97            80       88  Lease

 MISSISSIPPI
 Loyalton of Biloxi. . . . . . . . . .  Biloxi                Jan-99            83       91  Lease
 Loyalton of Hattiesburg . . . . . . .  Hattiesburg           Jul-99            79       83  Lease
 Ridgeland Pointe. . . . . . . . . . .  Ridgeland             Aug-97            79       87  Joint Venture
 Silverleaf Manor. . . . . . . . . . .  Meridian              Jul-98           101      111  Manage
 Trace Point . . . . . . . . . . . . .  Clinton               Oct-99           100      110  Manage

 MISSOURI
 Autumn Ridge ~. . . . . . . . . . . .  Herculaneum           Jun-97            94       94  Manage

 MONTANA
 Springmeadows Residence . . . . . . .  Bozeman               Apr-97            74       81  Own

 NEVADA
 Concorde. . . . . . . . . . . . . . .  Las Vegas             Nov-96           116      128  Own
 Village Oaks at Las Vegas . . . . . .  Las Vegas             Oct-02            66      105  Lease
 Woodmark at Summit Ridge. . . . . . .  Reno                  Feb-02            94      109  Manage

 NEW JERSEY
 Laurel Lake Estates . . . . . . . . .  Voorhees              Jul-95           117      119  Lease
 Loyalton of Cape May. . . . . . . . .  Cape May              May-01           100      110  Manage

 NEW YORK
 Bassett Manor (1) . . . . . . . . . .  Williamsville         Nov-96           103      105  Lease
 Bassett Park Manor (1). . . . . . . .  Williamsville         Nov-96            78       80  Lease
 Bellevue Manor (1). . . . . . . . . .  Syracuse              Nov-96            90       90  Lease
 Colonie Manor (1) . . . . . . . . . .  Latham                Nov-96            94       94  Lease
 East Side Manor (1) . . . . . . . . .  Fayetteville          Nov-96            80       88  Lease
 Green Meadows at Painted Post (1) . .  Painted Post          Oct-95            73       92  Lease
 Loyalton of Lakewood (3). . . . . . .  Lakewood              Jul-99            83       91  Option/Manage

                                       14
<PAGE>

                                                           EMERITUS
                                                           OPERATIONS       UNITS    BEDS
                  COMMUNITY               LOCATION         COMMENCED         (A)      (B)     INTEREST
-------------------------------------  ------------------- -----------     -------  ------- ------------
 Perinton Park Manor (1) . . . . . . .  Fairport              Nov-96            78       86  Lease
 The Landing at Brockport. . . . . . .  Brockport             Jul-99            84       92  Manage
 The Landing at Queensbury . . . . . .  Queensbury            Nov-99            84       92  Manage
 West Side Manor - Liverpool (1) . . .  Liverpool             Nov-96            78       80  Lease
 West Side Manor - Rochester (1) . . .  Rochester             Nov-96            72       72  Lease
 Woodland Manor (1). . . . . . . . . .  Vestal                Nov-96            60      116  Lease

 NORTH CAROLINA
 Heritage Hills Retirement . . . . . .  Hendersonville        Feb-96            99       99  Own
 Heritage Lodge Assisted Living. . . .  Hendersonville        Feb-96            20       24  Lease
 Pine Park Retirement ~. . . . . . . .  Hendersonville        Feb-96           110      110  Lease
 The Pines of Goldsboro. . . . . . . .  Goldsboro             Sep-98           101      111  Manage

 OHIO
 Brookside Estates (2) . . . . . . . .  Middleberg Heights    Sep-98            99      101  Option/Manage
 Park Lane ~ . . . . . . . . . . . . .  Toledo                Jan-98            92      101  Manage
 The Landing at Canton . . . . . . . .  Canton                Aug-00            84       92  Manage

 OREGON
 Meadowbrook (3) . . . . . . . . . . .  Ontario               Jun-95            53       55  Option/Manage
 Regency Park. . . . . . . . . . . . .  Portland              Jan-02           122      136  Manage
 Regent Court Corvallis. . . . . . . .  Corvallis             Jan-02            24       48  Manage
 Sheldon Park. . . . . . . . . . . . .  Eugene                Jan-02           103      115  Manage

 PENNSYLVANIA
 Green Meadows at Allentown. . . . . .  Allentown             Oct-95            76       97  Lease
 Green Meadows at Latrobe. . . . . . .  Latrobe               Oct-95            84      125  Lease

 SOUTH CAROLINA
 Anderson Place - Cottages (3) . . . .  Anderson              Oct-96            75       75  Option/Manage
 Anderson Place - Nursing Home (3) . .  Anderson              Oct-96            22       44  Option/Manage
 Anderson Place - Summer House #(3). .  Anderson              Oct-96            30       40  Option/Manage
 Bellaire Place (2). . . . . . . . . .  Greenville            May-97            81       89  Option/Manage
 Countryside Park. . . . . . . . . . .  Easley                Feb-96            48       66  Lease
 Countryside Village Assisted Living .  Easley                Feb-96            48       78  Lease
 Countryside Village Health Center # .  Easley                Feb-96            24       44  Lease

                                       15
<PAGE>

                                                           EMERITUS
                                                           OPERATIONS       UNITS    BEDS
                  COMMUNITY               LOCATION         COMMENCED         (A)      (B)     INTEREST
-------------------------------------  ------------------- -----------     -------  ------- ------------
 Countryside Village Retirement. . . .  Easley                Feb-96            72       75  Lease
 Skylyn Health Center #. . . . . . . .  Spartanburg           Feb-96            26       48  Lease
 Skylyn Personal Care. . . . . . . . .  Spartanburg           Feb-96           115      131  Lease
 Skylyn Retirement . . . . . . . . . .  Spartanburg           Feb-96           120      120  Lease
 The Willows at York . . . . . . . . .  York                  Sep-99            82      164  Manage

 TENNESSEE
 Walking Horse Meadows (2) . . . . . .  Clarkesville          Jun-97            50       55  Option/Manage

 TEXAS
 Amber Oaks. . . . . . . . . . . . . .  San Antonio           Apr-97           163      275  Lease
 Beckett Meadows . . . . . . . . . . .  Austin                Oct-02            72       72  Manage
 Cambria Lodge . . . . . . . . . . . .  El Paso               Sep-96            79       87  Lease
 Champion Oaks . . . . . . . . . . . .  Houston               Oct-02            48       84  Lease
 Collin Oaks . . . . . . . . . . . . .  Plano                 Oct-02            78      112  Lease
 Dowlen Oaks  (2). . . . . . . . . . .  Beaumont              Dec-96            79       87  Option/Manage
 Eastman Estates (2) . . . . . . . . .  Longview              Jun-97            70       77  Option/Manage
 Elmbrook Estates (3). . . . . . . . .  Lubbock               Dec-96            79       87  Option/Manage
 Hamilton House. . . . . . . . . . . .  San Antonio           Sep-02           111      123  Lease
 Kingsley Place at Henderson . . . . .  Henderson             May-02            57      101  Manage
 Kingsley Place at Oakwell Farms . . .  San Antonio           May-02            80      160  Manage
 Kingsley Place at Stonebridge Ranch .  McKinney              May-02            80      166  Manage
 Kingsley Place at the Medical Center.  San Antonio           May-02            80      160  Manage
 Lakeridge Place  (2). . . . . . . . .  Wichita Falls         Jun-97            79       87  Option/Manage
 Loyalton of Austin. . . . . . . . . .  Austin                Oct-02            76      111  Lease
 Loyalton of Lake Highlands. . . . . .  Dallas                Oct-02            78      112  Lease
 Meadowlands Terrace (2) . . . . . . .  Waco                  Jun-97            71       78  Option/Manage
 Memorial Oaks . . . . . . . . . . . .  Houston               Oct-02            68      105  Lease
 Myrtlewood Estates  (2) . . . . . . .  San Angelo            May-97            79       87  Option/Manage
 Redwood Springs . . . . . . . . . . .  San Marcos            Apr-97            90       90  Lease
 Saddleridge Lodge  (2). . . . . . . .  Midland               Dec-96            79       87  Option/Manage
 Seville Estates (2) . . . . . . . . .  Amarillo              Mar-97            50       55  Option/Manage
 Sherwood Place. . . . . . . . . . . .  Odessa                Sep-96            79       87  Lease
 Sugar Land Oaks . . . . . . . . . . .  Sugar Land            Oct-02            75      110  Lease
 Tanglewood Oaks . . . . . . . . . . .  Fort Worth            Oct-02            78      112  Lease
 The Palisades . . . . . . . . . . . .  El Paso               Apr-97           158      215  Lease

                                       16
<PAGE>

                                                           EMERITUS
                                                           OPERATIONS       UNITS    BEDS
                  COMMUNITY               LOCATION         COMMENCED         (A)      (B)     INTEREST
-------------------------------------  ------------------- -----------     -------  ------- ------------
 Vickery Towers at Belmont ~ . . . . .  Dallas                Apr-95           301      331  Manage
 Village Oaks at Cielo Vista . . . . .  El Paso               Oct-02            66      105  Lease
 Village Oaks at Farmers Branch. . . .  Farmers Branch        Oct-02            66      105  Lease
 Village Oaks at Hollywood Park. . . .  San Antonio           Oct-02            66      105  Lease
 Woodbridge Estates. . . . . . . . . .  San Antonio           Oct-02            78      112  Lease

 UTAH
 Emeritus Estates (2). . . . . . . . .  Ogden                 Feb-98            83       91  Option/Manage
 Regent at Salt Lake . . . . . . . . .  Salt Lake City        Mar-02           116      116  Manage

 VIRGINIA
 Carriage Hill . . . . . . . . . . . .  Bedford               Sep-94            91      137  Manage
 Cobblestones at Fairmont. . . . . . .  Manassas              Sep-96            75       82  Own
 Loyalton of Staunton (3). . . . . . .  Staunton              Jul-99           101      111  Option/Manage
 Wilburn Gardens . . . . . . . . . . .  Fredericksburg        Jan-99           101      111  Manage

 WASHINGTON
 Arbor Place at Silverlake . . . . . .  Everett               Jun-99           101      111  Manage
 Charlton Place. . . . . . . . . . . .  Tacoma                Jul-98            96      105  Manage
 Cooper George ~ . . . . . . . . . . .  Spokane               Jun-96           140      158  Partnership
 Evergreen Lodge  (3). . . . . . . . .  Federal Way           Apr-96            98      124  Option/Manage
 Fairhaven Estates (3) . . . . . . . .  Bellingham            Oct-96            50       55  Option/Manage
 Garrison Creek Lodge. . . . . . . . .  Walla Walla           Jun-96            80       88  Lease
 Harbour Pointe Shores  (2). . . . . .  Ocean Shores          Feb-97            50       55  Option/Manage
 Hearthside of Issaquah. . . . . . . .  Issaquah              Feb-00            98       98  Own
 Kirkland Lodge at Lakeside. . . . . .  Kirkland              Mar-96            74       84  Own
 Northshore House. . . . . . . . . . .  Kenmore               Jan-02            85       92  Manage
 Regent Court at Kent. . . . . . . . .  Kent                  Jan-02            24       48  Manage
 Renton Villa. . . . . . . . . . . . .  Renton                Sep-93            79       97  Lease
 Richland Gardens. . . . . . . . . . .  Richland              May-98           100      110  Manage
 Seabrook. . . . . . . . . . . . . . .  Everett               Jun-94            60       62  Lease
 Sterling Park . . . . . . . . . . . .  Redmond               Jan-02           154      175  Manage
 The Courtyard at the Willows. . . . .  Puyallup              Sep-97           101      111  Own
 The Hearthstone (3) . . . . . . . . .  Moses Lake            Nov-96            84       92  Option/Manage

 WYOMING
 Park Place (2). . . . . . . . . . . .  Casper                Feb-96            60       60  Option/Manage

 WEST VIRGINIA
 Charleston Gardens. . . . . . . . . .  Charleston            Aug-01           100      132  Manage

                                                                        -----------  -------
 Total Operating Communities                                                15,762   18,865
                                                                        ===========  =======
</TABLE>

                                       17
<PAGE>

--------
     ~     Currently  offers  independent  living  services.
     #     Currently  operates  as  a  skilled  nursing  facility.
(a)     A  unit  is  a  single-  or  double-occupancy  residential living space,
typically  an  apartment  or  studio.
(b)     "Beds"  reflects the actual number of beds, which in no event is greater
than  the maximum number of licensed beds allowed under the community's license.
(1)     We  provide administrative services to the community that is operated by
Painted  Post  Partners  through  a  lease  agreement with an independent party.
(2)     On  December  31,  1998,  an  investor  group acquired these communities
("Emeritrust  I")  from Meditrust. We hold an option or a right of first refusal
to purchase the communities, expiring on June 10, 2003, at a formula price based
on  a  specified  return to the investor group. We manage the communities during
the  option  term.
(3)     On  March  31,  1999,  an  investor  group  acquired  these  communities
("Emeritrust II") from Meditrust. We hold an option to purchase the communities,
expiring  on  June  10,  2003,  or  December  10, 2003, for the five development
communities,  at  a  formula  price  based on a specified return to the investor
group.  We  manage  the  communities  during  the  option  term.


Executive  Offices

Our  executive  offices  are  located  in  Seattle,  Washington,  where we lease
approximately  26,500  square feet of space. Our lease agreement includes a term
of  10  years,  expiring  July  2006,  with  two  five-year  renewal  options.

                                       18
<PAGE>

ITEM  3.   LEGAL  PROCEEDINGS

In August 2000, Emeritus began arbitration proceedings with Corio Inc. ("Corio")
in  connection  with  a contract dispute.  In 1999, we entered into an agreement
with  Corio, pursuant to which Corio would plan, implement, and finalize our new
accounting  software  program.  In  March  2000,  Emeritus  canceled  the
implementation  of  the  program prior to its completion. Corio asserted a claim
for breach of contract for $1.4 million, requesting payment of the full contract
value.  Both  parties  contacted AAA Arbitration as specified in the leasing and
service  contract,  and  the  dispute was settled in February 2001 for $500,000,
representing  reimbursement for actual expenditures incurred by Corio.  Payments
of  $150,000  and  $300,000  were  made  in  2002  and  2001, respectively.  The
remaining  payment is to be remitted in 2003.  This balance has been accrued and
is included in the consolidated financial statements for the year ended December
31,  2002.

From  time  to  time  we are subject to lawsuits and other matters in the normal
course  of  business,  including  claims  related  to  general  and professional
liability.  Reserves  for  these  claims  have been accrued based upon actuarial
and/or  estimated  exposure,  taking  into  account  self-insured  retention  or
deductibles, as applicable.  While we cannot predict the results with certainty,
we  do  not  believe  that any liability from any such lawsuits or other matters
will have a material effect on our financial position, results of operations, or
liquidity.

                                       19
<PAGE>
ITEM  4.   SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

Emeritus  did not submit any matter to a vote of its security holders during the
fourth  quarter  of  its  fiscal  year  ended  December  31,  2002.


EXECUTIVE  OFFICERS  OF  EMERITUS

The  following  table presents certain information about our executive officers.
There  are  no  family  relationships  between any of the directors or executive
officers.

<TABLE>
<CAPTION>



        Name           Age                      Position
---------------------  ---  -------------------------------------------------
<S>                    <C>  <C>
Daniel R. Baty. . . .   59  Chairman of the Board and Chief Executive Officer
Raymond R. Brandstrom   50  Vice President of Finance, Secretary, and Chief
                            Financial Officer
Gary S. Becker. . . .   55  Senior Vice President of Operations
Martin D. Roffe . . .   55  Vice President, Financial Planning
Suzette McCanless . .   54  Vice President, Operations - Eastern Division
Russell G. Kubik. . .   49  Vice President, Operations - Central Division
P. Kacy Kang. . . . .   35  Vice President, Operations - Western Division
Kellie S. Murray. . .   49  Vice President of Human Resources
Susan A. Scherr . . .   54  Vice President of Signature Services
</TABLE>
                                       20
<PAGE>


Daniel  R.  Baty,  one of Emeritus's founders, has served as its Chief Executive
Officer and as a director since its inception in 1993 and became Chairman of the
Board  in  April 1995.  Mr. Baty also has served as the Chairman of the Board of
Holiday  Retirement  Corporation  since  1987  and served as its Chief Executive
Officer  from 1991 through September 1997.  Since 1984, Mr. Baty has also served
as  Chairman  of  the  Board of Columbia Pacific Group, Inc. and, since 1986, as
Chairman  of the Board of Columbia Management, Inc.  Both of these companies are
wholly  owned  by  Mr.  Baty  and  are  engaged in developing independent living
facilities  and  providing  consulting  services  for  that  market.

Raymond  R.  Brandstrom,  one  of  Emeritus's founders, has served as a director
since  its  inception  in 1993 and as Vice Chairman of the Board from March 1999
until  March  2000.  From  1993  to  March  1999,  Mr. Brandstrom also served as
Emeritus's President and Chief Operating Officer.  In March 2000, Mr. Brandstrom
was  elected Vice President of Finance, Chief Financial Officer and Secretary of
Emeritus.  From  May  1992  to May 1997, Mr. Brandstrom served as Vice President
and  Treasurer  of  Columbia  Winery, a company affiliated with Mr. Baty that is
engaged  in  the  production  and  sale  of  table  wines.

Gary S. Becker joined Emeritus as Western Division Director in January 1997, was
promoted  to  Vice President, Operations-Western Division in September 1999, and
then  promoted to Senior Vice President of Operations in March 2000.  Mr. Becker
has  29  years  of  health  care  management  experience.  From  October 1993 to
December  1996  he  was Vice President of Operations for the Western Division of
SunBridge  Healthcare  Corporation,  the nursing home division of Sun Healthcare
Group,  Inc.  Sun  Healthcare  Group,  Inc.  is  one of the largest providers of
long-term,  subacute  and  related  specialty health care services in the United
States.

Martin D. Roffe joined Emeritus as Director of Financial Planning in March 1998,
and  was  promoted to Vice President of Financial Planning in October 1999.  Mr.
Roffe  has  30  years  experience  in the acute care, long-term care, and senior
housing  industries.  Prior  to  joining  Emeritus, from May 1987 until February
1996, Mr. Roffe served as Vice President of Financial Planning for the Hillhaven
Corporation,  where  he  also  held  the  previous  positions of Sr. Application
Analyst  and  Director  of  Financial  Planning.  Hillhaven Corporation operated
nursing  centers,  pharmacies  and  retirement  housing  communities.

Suzette  McCanless joined Emeritus as Eastern Division Director of Operations in
March  1997 and was promoted to Vice President of Operations - Eastern Division,
in  September  1999.  Mrs.  McCanless  has  22  years  of health care management
experience.  Prior to joining Emeritus, from July 1996 to February 1997, she was
Group  Vice  President  for  Beverly  Enterprises, Inc., where she also held the
previous  positions  of  Administrator  and Regional Director of Operations. The
business  of  Beverly  Enterprises,  Inc.  consists  principally  of  providing
healthcare  services,  including  the  operation of nursing facilities, assisted
living  centers,  hospice  and home care centers, outpatient therapy clinics and
rehabilitation  therapy  services.

Russell  G.  Kubik joined Emeritus as Central Division Director of Operations in
April 1997 and was promoted to Vice President, Operations - Central Division, in
September  1999.  Mr.  Kubik  has 18 years of health care management experience.
Prior  to  joining  Emeritus,  from  1994  to 1997, Mr. Kubik served as Regional
Director of Operations for Sun Healthcare Group, Inc. in the Seattle/Puget Sound
area.  Mr.  Kubik  also  worked  as  Regional Director of Operations for Beverly
Enterprises,  Inc.  in  Washington  and  Idaho.

P. Kacy Kang joined Emeritus as Regional Director of Operations in June 1997 and
was  promoted  to  Senior Director of Operations - Western Division, in February
2001.  Mr.  Kang  was  then  promoted  to  Vice

                                       21
<PAGE>

President  of  Operations  -  Western  Division in August 2001. Prior to joining
Emeritus,  Mr.  Kang  operated nursing and rehabilitation facilities for Beverly
Enterprises, Inc. from 1991 to 1994 and for Sun Healthcare Group, Inc. from 1994
through  1997.

Kellie  S.  Murray  joined  Emeritus as Director of Human Resources in September
1999.  She was promoted to Vice President of Human Resources in April 2001.  Ms.
Murray  has  18  years of health care and human resources management experience.
From  January  1995  to September 1999 she was Vice President of Human Resources
for  the  Western  Group  of  SunBridge Healthcare Corporation, the nursing home
division  of  Sun  Healthcare Group, Inc.  Prior to that she was Human Resources
Manager  for  Virginia  Mason  Medical  Center.

Susan A. Scherr joined Emeritus as a Regional Support Specialist in October 1997
and  was promoted to Director of Signature Services and a member of the Emeritus
Senior  Management  team  in  December  1999.  In  April  2001  she  became Vice
President  of Signature Services, providing leadership and direction to Emeritus
through  Sales  and  Marketing,  Education  and  Training,  Dining Services, and
Wellness and Activities Programming.  Ms. Scherr brings to Emeritus more than 18
years'  experience  in  the  assisted  living,  acute  and  skilled  care,  and
hospice/home  health  care  industries.  Prior to her association with Emeritus,
she  worked  with SunBridge Healthcare Corporation, the nursing home division of
Sun  Healthcare  Group,  Inc.  and  Jerry Erwin & Associates, an assisted living
company.

                                       22
<PAGE>
                                     PART II

ITEM  5.     MARKET  FOR  THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Our common stock has been traded on the American Stock Exchange under the symbol
"ESC"  since  November  21,  1995,  the date of our initial public offering. The
following  table  sets  forth for the periods indicated the high and low closing
prices  for  our  common  stock  as  reported  on  AMEX.

<TABLE>
<CAPTION>
                        High      Low
                      --------  -------
<S>                    <C>      <C>
2002
First Quarter . . . .  $5.2200  $2.0500
Second Quarter. . . .  $5.0000  $3.8000
Third Quarter . . . .  $4.5000  $1.7000
Fourth Quarter. . . .  $5.6800  $1.7000

2001
First Quarter . . . .  $1.7500  $0.9000
Second Quarter. . . .  $2.6000  $0.8000
Third Quarter . . . .  $2.5000  $1.4500
Fourth Quarter. . . .  $2.3200  $1.6000

2000
First Quarter . . . .  $7.0000  $4.2500
Second Quarter. . . .  $4.1875  $2.5000
Third Quarter . . . .  $3.5000  $2.1250
Fourth Quarter. . . .  $2.0000  $1.1250
</TABLE>

As  of  February  28, 2003, the number of record holders of our Common Stock was
139.

We  have never declared or paid any dividends on our Common Stock, and expect to
retain  any  future  earnings  to  finance  the  operation  and expansion of our
business.  Future  dividend  payments  will depend on our results of operations,
financial condition, capital expenditure plans and other obligations and will be
at the sole discretion of our Board of Directors. Certain of our existing leases
and  lending  arrangements  contain  provisions that restrict our ability to pay
dividends,  and  it  is  anticipated  that  the  terms of future leases and debt
financing  arrangements  may  contain similar restrictions. Therefore, we do not
anticipate  paying  any  cash  dividends  on our Common Stock in the foreseeable
future.

                                       23
<PAGE>
ITEM  6.   SELECTED  CONSOLIDATED  FINANCIAL  DATA

The selected data presented below under the captions "Consolidated Statements of
Operations  Data"  and  "Consolidated Balance Sheet Data" for, and as of the end
of,  each  of  the  years  in  the five-year period ended December 31, 2002, are
derived  from  the  consolidated  financial  statements of Emeritus Corporation,
which  financial statements have been audited by KPMG LLP, independent auditors.
The  consolidated financial statements as of December 31, 2002 and 2001, and for
each of the years in the three-year period ended December 31, 2002, are included
elsewhere  in  this  document.

<TABLE>
<CAPTION>


                                                               Year  Ended  December  31,
                                                 -----------------------------------------------------
                                                   2002       2001       2000       1999       1998
                                                 ---------  ---------  ---------  ---------  ---------
<S>                                              <C>        <C>        <C>        <C>        <C>
Consolidated Statements of Operations Data:             (In thousands, except per share data)
Total operating revenues. . . . . . . . . . . .  $153,129   $140,577   $125,192   $122,642   $151,820
Total operating expenses. . . . . . . . . . . .   152,132    133,076    125,905    125,330    173,823
                                                 ---------  ---------  ---------  ---------  ---------
Income (loss) from operations . . . . . . . . .       997      7,501       (713)    (2,688)   (22,003)
Net other expense . . . . . . . . . . . . . . .    (7,220)   (11,735)   (21,223)   (18,349)    (9,033)
                                                 ---------  ---------  ---------  ---------  ---------
Net loss. . . . . . . . . . . . . . . . . . . .    (6,223)    (4,234)   (21,936)   (21,037)   (31,036)

Preferred stock dividends . . . . . . . . . . .     7,343      6,368      5,327      2,250      2,250
                                                 ---------  ---------  ---------  ---------  ---------
 Net loss to common shareholders. . . . . . . .  $(13,566)  $(10,602)  $(27,263)  $(23,287)  $(33,286)
                                                 =========  =========  =========  =========  =========

Net loss per common share -- basic and diluted.  $  (1.33)  $  (1.04)  $  (2.69)  $  (2.22)  $  (3.17)
                                                 =========  =========  =========  =========  =========
Weighted average number of
 common shares outstanding--
 basic and diluted. . . . . . . . . . . . . . .    10,207     10,162     10,117     10,469     10,484
                                                 =========  =========  =========  =========  =========

Consolidated Operating Data:
Communities in which we have an interest. . . .       180        133        135        129        113
Number of units . . . . . . . . . . . . . . . .    15,762     12,248     12,412     11,726      9,972

                                                                       December 31,
                                                 -----------------------------------------------------
                                                     2002       2001       2000       1999       1998
                                                 ---------  ---------  ---------  ---------  ---------
Consolidated Balance Sheet Data:                                      (In thousands)
Cash and cash equivalents . . . . . . . . . . .  $  6,960   $  9,811   $  7,496   $ 12,860   $ 11,442
Working capital (deficit) . . . . . . . . . . .   (26,485)   (12,100)   (81,167)     6,828       (977)
Total assets. . . . . . . . . . . . . . . . . .   162,833    168,428    178,079    198,370    192,870
Long-term debt, less current portion. . . . . .   119,887    131,070     60,499    128,319    119,674
Convertible debentures. . . . . . . . . . . . .    32,000     32,000     32,000     32,000     32,000
Redeemable preferred stock. . . . . . . . . . .    25,000     25,000     25,000     25,000     25,000
Shareholders' deficit . . . . . . . . . . . . .   (85,066)   (74,141)   (65,803)   (37,290)   (45,964)
</TABLE>

                                       24
<PAGE>

ITEM  7.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION
AND  RESULTS  OF  OPERATIONS

OVERVIEW

Emeritus  is  a Washington corporation organized by Daniel R. Baty and two other
founders  in  1993.  In  November 1995, we completed our initial public offering
and  began  our  expansion  strategy.

Through  1998,  we  focused  on  rapidly  expanding  our  operations in order to
assemble  a  portfolio  of  assisted  living communities with a critical mass of
capacity.  We  pursued an aggressive acquisition and development strategy during
that  time,  acquiring 35 and developing 10 communities in 1996, acquiring 7 and
developing 20 communities in 1997, and developing 5 communities in 1998.  During
1999  and  continuing  through  2001,  we  substantially  reduced  our  pace  of
acquisition  and  development  activities  to  concentrate  on  improving  our
operations  and increasing occupancy and our average revenue per unit.  In 2002,
along  with  a focus on operations, we selectively acquired, leased, and managed
additional  communities.

In  our  consolidated  portfolio,  our rate enhancement program brought about an
increase  in  average  monthly revenue per occupied unit to $2,577 for 2002 from
$2,405  for 2001.  This represents an average revenue increase of $172 per month
per  occupied  unit,  or 7.2%.  The average occupancy rate decreased to 80.9% in
2002  from  84.1%  in  2001.

In  our  total  operated portfolio, which includes managed communities, our rate
enhancement  program  brought  about  an increase in average monthly revenue per
occupied  unit  to  $2,557  for  2002  from $2,294 for 2001.  This represents an
average  revenue  increase  of  $263 per month per occupied unit, or 11.5%.  The
average  occupancy  rate  decreased  slightly to 80.8% in 2002 from 81.6% during
2001.

We  intend  to  continue  a  selective  growth  strategy  through  acquiring and
developing  new  communities  with operating characteristics consistent with our
current  emphasis on stabilizing occupancy and enhancing our operating model and
service  offerings.

                                       25
<PAGE>

The following table sets forth a summary of our property interests.

<TABLE>
<CAPTION>
                                                                  As  of  December  31,
                                         ----------------------------------------------------------------------
                                                  2002                    2001                    2000
                                         ----------------------  ----------------------  ----------------------
                                         Buildings     Units     Buildings     Units     Buildings     Units
                                         ----------  ----------  ----------  ----------  ----------  ----------
<S>                                      <C>         <C>         <C>         <C>         <C>         <C>
Owned (1) . . . . . . . . . . . . . . .         17       1,687           16       1,579         16       1,579
Leased (1)(4) . . . . . . . . . . . . .         67       5,279           42       3,444         45       3,700
Managed/Admin Services. . . . . . . . .         94       8,577           70       6,620         69       6,528
Joint Venture/Partnership . . . . . . .          2         219            5         605          5         605
                                         ----------  ----------  ----------  ----------  ----------  ----------
     Operated Portfolio . . . . . . . .        180      15,762          133      12,248        135      12,412

     Percentage increase (decrease) (2)       35.3%       28.7%      (1.5%)      (1.3%)        4.7%        5.9%

New Developments (3). . . . . . . . . .          -           -            -           -          2         200
                                         ----------  ----------  ----------  ----------  ----------  ----------
     Total. . . . . . . . . . . . . . .        180      15,762          133      12,248        137      12,612
                                         ----------  ----------  ----------  ----------  ----------  ----------

     Percentage increase (decrease) (2)       35.3%       28.7%      (2.9%)      (2.9%)        0.1%        0.6%
</TABLE>

--------
(1)  Included  in  our  consolidated  portfolio  of  communities.
(2)  The  percentage  increase  (decrease)  indicates  the change from the prior
period.
(3)  The  communities  under development at December 31, 2000, were developed by
third  parties,  but  are  currently
       managed  by  Emeritus.
(4)  The  leased communities are all operating leases, in which the revenues and
expenses  from  these  communities are included in the Consolidated Statement of
Operations  but  the assets and liabilities are not included in the Consolidated
Balance  Sheets.

                                       26
<PAGE>

We rely primarily on our residents' ability to pay our charges for services from
their  own  or  familial  resources  and  expect  that  we  will  do  so for the
foreseeable  future.  Although care in an assisted living community is typically
less  expensive  than  in  a skilled nursing facility, we believe that generally
only  seniors with income or assets meeting or exceeding the regional median can
afford  to  reside  in  our  communities.  Inflation or other circumstances that
adversely  affect  seniors'  ability  to  pay for assisted living services could
therefore  have  an  adverse  effect  on  our  business.  All  sources  of
resident-related revenue other than residents' private resources constitute less
than  10%  of  our  total  revenues.

We  have  incurred  net operating losses since our inception, and as of December
31,  2002, we had an accumulated deficit of approximately $155.3 million.  These
losses  resulted  from  a  number  of  factors,  including:

     * occupancy levels at our communities that were lower for longer periods
     than we originally anticipated and have declined in the last two years;

     * financing costs that we incurred as a result of multiple financing and
     refinancing transactions; and

     * administrative and corporate expenses that we incurred to facilitate our
     growth and maintain operations.

During  1998,  we  decided  to reduce acquisition and development activities and
dispose  of  selected communities that had been operating at a loss.  We believe
that  slowing  our  acquisition and development activities has enabled us to use
our  resources  more  efficiently  and increase our focus on enhancing community
operations.  In  2002, along with a focus on operations, we selectively acquired
additional  communities  and  new  management  contracts.

EMERITRUST  TRANSACTIONS

In  two separate transactions during the fall of 1998 and the spring of 1999, we
arranged for two investor groups to purchase an aggregate of 41 of our operating
communities and five communities under development for a total purchase price of
approximately  $292.2  million.  Of the 46 communities involved, 43 had been, or
were  proposed  to be leased to us by Meditrust Company LLC under sale/leaseback
financing  arrangements,  and  three  had been owned by us.  The first purchase,
consisting  of  25  communities, which we call the Emeritrust I communities, was
completed  in  December  1998  and  the  second  purchase,  consisting  of  21
communities,  16  of  which  we call the Emeritrust II Operating communities and
five  of  which we call the Emeritrust II Development communities, was completed
in  March  1999.

Of  the  $168.0  million purchase price for the Emeritrust I communities, $138.0
million  was  financed  through  a  three-year  first  mortgage  loan  with  an
independent  party  and $30.0 million was financed through subordinated debt and
equity  investments  from the investor group, which includes Daniel R. Baty, our
Chief  Executive Officer, who is also a director and a principal shareholder. Of
the  $124.2  million  purchase price for the Emeritrust II Operating communities
and  Emeritrust  II  Development  communities,  approximately

                                       27
<PAGE>

$99.6  million  was  financed  through  three-year  first  mortgage  loans  with
independent  third  parties  and $24.6 million was financed through subordinated
debt  and  equity  investments from the investor group, which includes Mr. Baty.

The  investor  groups  retained  us  to  manage  all  of the communities through
December  31,  2001,  and  granted us options to purchase the communities during
2001.  During 2000, the Emeritrust I communities failed to comply with covenants
under  the  $138 million mortgage loan and in 2001 it became clear that we would
not  be  able  to  purchase the communities under the options.  As a result, the
mortgage  loans  were  restructured and the management agreements and options to
purchase were extended to June 30, 2003 (to December 31, 2003 in the case of the
five  Emeritrust II Development communities).  The discussion below reflects the
terms  of  these  arrangements  as  modified.

From  January 1, 2002, through June 30, 2003, we will receive for the Emeritrust
I  communities  a  base  management fee of 3% of gross revenues generated by the
communities  and  an additional management fee of 4%, payable out of 50% of cash
flow.  The availability of operating cash flow to pay management fees is subject
to  first  meeting  mandatory  owner  distribution  requirements,  which include
repayment  of  fees  and expenses related to restructuring the mortgage loan and
subsequent  extension  in  September  2002.    For  the  Emeritrust II Operating
communities  and the Emeritrust II Development communities, we have received and
continue  to  receive  a  base  management  fee  of  5% of gross revenues and an
additional management fee of 2%, payable to the extent that the communities meet
certain  cash flow standards.  Prior to January 1, 2002, the management fees for
the  Emeritrust  I  communities  were  computed  in  this  fashion.

Under  the  management  agreements,  we  are obligated to reimburse the investor
groups  for  cumulative  cash  operating losses greater than $4.5 million in the
case  of  the  Emeritrust  I  communities  and  $2.5  million in the case of the
Emeritrust  II  Development  communities.  Since  these  thresholds  have  been
exceeded,  we are currently responsible for most cash operating losses generated
by  these  communities if they occur.  There is no such funding arrangement with
respect to the Emeritrust II Operating communities.  Our funding obligations for
the  Emeritrust I communities have been $184,000, $1.3 million, and $4.9 million
for  2002,  2001  and  2000,  respectively.  Our  funding  obligations  for  the
Emeritrust  II  Development  communities  have  been $137,000, $310,000 and $1.6
million  in  2002,  2001,  and  2000,  respectively.

Although the amounts of our funding obligation each year include management fees
earned  by  us  under  the  management  agreements,  we  do  not recognize these
management fees as revenue in our financial statements to the extent that we are
funding  the  cash  operating  losses  that  include  them.  Correspondingly, we
recognize  the  funding  obligation  under  the  agreement,  less the applicable
management  fees,  as  an expense in our financial statements under the category
"Other,  net."  Conversely, if the applicable management fees exceed our funding
obligation,  we  recognize  the  management  fees less the funding obligation as
management  fee  revenue  in  our consolidated financial statements.  Management
fees  earned  for  the  Emeritrust  I  communities  have been $2.0 million, $4.0
million,  and  $2.1 million in 2002, 2001, and 2000, respectively, of which $1.8
million,  $2.8  million, and zero, have been recognized in 2002, 2001, and 2000,
respectively.  Management  fees  earned  for  the  Emeritrust  II  Development
communities  have  been  $764,000,  $766,000,  and  $360,000, of which $699,000,
$673,000,  and  $174,000  have  been  recognized  in  2002,  2001,  and  2000,
respectively.  Management  fees  earned  for  the  Emeritrust  II  Operating
communities  have  been $1.9 million earned and recognized in each of the years,
2002,  2001,  and  2000.

                                       28
<PAGE>

We have an option to purchase 43 of the 46 Emeritrust communities and a right of
first  refusal  with  respect  to the remaining three communities, both of which
expire  June  30, 2003 for the Emeritrust Operating communities and December 31,
2003,  for the Emeritrust Development communities.  The option must be exercised
with  respect  to  all  communities or may not be exercised at all.  If investor
groups  require  Mr.  Baty  to  purchase  certain  of  the communities, upon the
conditions  described  below, we have the right to exercise our option within 60
days of receiving notice of this action.  The option price for the 43 Emeritrust
communities  is  equal  to the original cost of the communities of approximately
$292  million, plus an amount that would provide the investor groups with an 18%
rate  of  return,  compounded  annually,  on  their original investment of $54.6
million (less any cash distributions received).  In connection with the exercise
of  the option, we are also obligated to pay certain costs and fees.  Based upon
current  market  conditions and valuations, we believe the option purchase price
for  these  facilities  exceeds  their  current  fair  market  value.

The  management  agreements,  including  the  options  to  purchase  the related
communities,  are  subject  to  various  termination  provisions,  including
cross-default  provisions among all three groups of communities.  The management
agreement  for  the  Emeritrust  I  communities  may  be  terminated  if  cash
distributions  to  the  investor  group  do  not  meet  certain levels or if the
communities  fail to meet certain coverage requirements under the mortgage loan.
In  addition,  certain of the communities have been refinanced and, accordingly,
our  ability  to  exercise  the  option  will depend on whether we can assume or
refinance  the debt secured by these communities.  Termination of the management
agreements  or  failure  to  exercise  the  options  could result in the loss of
management  fees  and  the  substantial decrease in the number of communities we
operate.

Under  related  agreements, the investor groups may require Mr. Baty to purchase
between  ten  and  twelve  of  the  Emeritrust  communities,  depending  on  the
occurrence  of  any  one  of  the  following events:  (a) we do not exercise our
option  to  purchase  the  communities before the option expires, (b) we default
under  the management agreements, (c) Mr. Baty's net worth falls below a certain
threshold,  (d)  we  experience a change of control or (e) Mr. Baty ceases to be
our  chief  executive  officer.  If Mr. Baty is required to purchase some of the
communities,  he  will  also  have  the option to purchase all of the Emeritrust
communities  on  the  same  terms  under  which  we  are  entitled  purchase the
communities, subject to our prior right to do so within a specified time period.

The  management  agreements  and  related  options to purchase these communities
expire  June  30,  2003, (except that management agreements with respect to five
communities  would  continue  until December 31, 2003).  Because we are not in a
position to exercise the options to acquire the communities prior to expiration,
we  are  currently  in  discussions with the owners of the communities and their
lenders  to  extend  the  management  agreements  and related options.  While we
believe that these arrangements will be extended, we cannot guarantee that these
discussions  will  be  successful or, if the arrangements are extended, what the
terms will be.  If we are unsuccessful, we could lose the management fee revenue
from  these  communities  and  future  rights  with  respect  to  them.

                                       29
<PAGE>

OTHER  TRANSACTIONS

In  January  2002, we entered into management and accounting services agreements
with  Regent  Assisted  Living,  Inc.  of Portland, Oregon, to manage or provide
administrative  services to 18 of their communities.  The agreements provide for
us  to  receive  a fixed base management/service fee with some agreements having
provisions  for  incentive  fees  based upon improved community performance.  In
February  2002,  two of the communities were sold to an entity controlled by Dan
Baty;  we  have continued to manage these communities under agreements providing
for  5%  of  gross  revenues.  In  March  2002, we began managing one additional
Regent  community.  In  April  2002, one community that we had been managing for
Regent  was  sold to another entity and our management agreement terminated.  In
September  2002,  we purchased Regent's leasehold interest in one community that
we  had  been managing which is discussed below.  In October 2002, one community
that  we  had  been  managing  was  sold  to  another  entity and our management
agreement  terminated.  Management  fees  recognized  from  managing  the Regent
communities  were  approximately  $1.5  million  for the year ended December 31,
2002.

In  February 2002, we reached an agreement with GE Healthcare Financial Services
("GE")  to refinance three of the properties in the $71.8 million portfolio that
previously  was financed by Deutsche Bank AG and matured December 14, 2001.  The
new  loan  of $30.6 million was to mature February 2004 and provided for monthly
principal  payments  of  approximately  $40,000 in addition to interest at LIBOR
plus  4%.  These  terms  have  since  been  modified  as  it was included in the
December  6,  2002,  refinancing  transaction,  which  is discussed below.  This
refinancing  in  turn satisfied the extension agreement dated May 31, 2001, with
Deutsche  Bank  AG  to  extend  the maturity date of the remaining debt of $46.3
million  secured  by seven properties in the original portfolio to May 31, 2003,
provided  that  we  pay  to  the  lender  a  fee  equal to 1% of the outstanding
portfolio  balance  at  May  31,  2002.

In  March 2002, we entered into a 15-year master lease arrangement with HC REIT,
Inc. for four communities, two of which we previously held an ownership interest
in  and  two  of  which  we  previously  leased  from another lessor.  An entity
controlled  by  Baty  held  a  50%  economic interest in one of the communities.
Prior to the lease transaction, we purchased the Baty entity's economic interest
for his investment basis of $2.1 million plus a 9% return, a $2.95 million total
payment.  The  other  community  in which we had an interest was 50% owned by an
outside  investor.  Also  prior  to  the  lease  transaction,  we  purchased the
remaining  50%  interest in this community for $2.65 million.  The remaining two
communities  were  both  under  operating  leases  with  a  different  lessor.
Subsequent  to  the  two  purchase  transactions, we entered into a master lease
arrangement  for all four communities and recognized a net loss of approximately
$530,000,  which  is  recorded in "Other, net" in the consolidated statements of
operations.  The loss is primarily comprised of write-offs of existing loan fees
and  lease  acquisition  costs  for  the four buildings.  Additionally, we had a
deferred  gain  on  sale  associated with the transaction that approximates $1.8
million  and  new  lease  acquisition  costs  of $1.0 million, that will both be
amortized  over  the  lease  period  of  15  years.

On  April  1, 2002, in conjunction with the HC REIT master lease transaction, we
received  $6.7  million  in  proceeds  from a $6.8 million debt issuance under a
separate  loan  agreement  with  HC  REIT.  The  loan

                                       30
<PAGE>

agreement  requires  interest-only  payments and bears interest at 12% per annum
with  fixed  annual  increases  of  50  basis  points  for  a term of 36 months.

In  April  2002, we entered into agreements to acquire the ownership interest of
one community and the leasehold interest of seven communities for the assumption
of  the  mortgage debt relating to the owned community and the lease obligations
relating to the leased communities.  The eight communities, comprising 617 units
in  Louisiana  and Texas, had been previously operated by Horizon Bay Management
L.L.C.  In  May  2002, we assigned our rights under these agreements to entities
wholly  owned  by  Mr.  Baty  and  entered  into five-year management agreements
expiring  April  30, 2007, with the Baty entities providing for a management fee
of  5%  of  gross  revenue.  As a part of these agreements, we have the right to
reacquire  the  one  community and seven leased communities at any time prior to
April  30,  2007, by assuming the mortgage debt and lease obligations and paying
the  Baty entities the amount of any cash investment in the communities, plus 9%
per  annum.  In  the  original agreements of acquisition with the Baty entities,
Horizon  Bay agreed to fund operating losses of the communities to the extent of
$2.3  million  in  the first twelve months and $1.1 million in the second twelve
months  following  the  closing.  Under  the management agreements with the Baty
entities,  we have agreed to fund any operating losses in excess of these limits
over the five-year management term.  In late 2002, the Baty entities and Horizon
Bay altered their agreement relating to operating losses whereby (i) Horizon Bay
paid  the Baty entities $2 million and (ii) the Baty entities waived any further
funding  by Horizon of operating losses of the communities.  This alteration did
not  change  our  funding  commitment.

In  August  of 2002, we terminated the management agreement with an entity owned
by Mr. Baty, for a 214-unit facility in Cincinnati, Ohio.  In the same month, we
exercised  our  purchase  option  to  acquire  a  108-unit  facility  in Auburn,
Massachusetts,  from Hanseatic Corporation.  The cost to exercise the option was
approximately $10.4 million, which consists of the option price of $10.2 million
and  approximately  $200,000  in transaction costs.  We financed the transaction
using  $8.3  million  in  debt  financing  provided  by  GE Healthcare Financial
Services  and  approximately  $2.1  million  in  cash.  The debt financing bears
interest  at  LIBOR  plus  3.85%,  with  a  floor of 6.5%, and is secured by the
mortgage  and  the  assignment  of  leases.

In September of 2002, we purchased the leasehold interest in a 111-unit facility
located  in  San Antonio, Texas, from Regent Assisted Living.  Regent had a cash
security  deposit on this property of approximately $742,000, which was replaced
with  a  letter  of  credit  from  us.  We  also  paid  $408,000  in  additional
consideration  to  purchase  RAL's  leasehold  interest.  Total  cash  paid  was
approximately  $1.2  million  after  transaction  costs.  Healthcare  Property
Investors provided 5-year debt financing of $800,000 with interest-only payments
at  an  effective  rate  of  15%  per  annum.

In  October  of  2002,  we  purchased  $2.9 million of mezzanine debt secured by
interests  in  three  communities  leased by us; interest receivable on the debt
will  partially  offset  lease  payments  as  our lease payments are used to pay
interest  on  the debt.  Also in October of 2002, an entity controlled by Daniel
R.  Baty  acquired  a  72-unit  assisted  living  and dementia care community in
Austin,  Texas,  which  Emeritus  is  managing.  The  management  agreement  is
effective  until  terminated  by either party with written notice according to a
specified  notice  period.  The  management agreement consists of a fee of 5% of
revenue  or  $5,000  per  month,  whichever  is  greater.

                                       31
<PAGE>

On  October 1, 2002, we entered into a lease agreement with Fretus Investors LLC
("Fretus"),  for 24 assisted living communities (the "Properties") in six states
containing  an  aggregate  of  approximately  1,650  units.  Fretus acquired the
Properties  from  Marriott  Senior  Living  Services,  a  subsidiary of Marriott
International.  Fretus  is  a  private  investment joint venture between Fremont
Realty Capital ("Fremont"), which holds a 65% stake, and an Entity controlled by
Mr. Baty and in which he holds a 36% interest, which holds a 35% minority stake.
Mr.  Baty  is guarantor of a portion of the debt and controls the entity that is
the  administrative member of Fretus.  Fretus, in turn, leased the Properties to
us.  We  have  no  obligation  with  respect  to  the  properties other than our
responsibilities under the lease, which includes an option to purchase solely at
our  discretion.

The Fretus lease is for an initial 10-year period with two 5-year extensions and
includes  an  opportunity  for  us  to  acquire the Properties during the third,
fourth, or fifth year and the right under certain circumstances for the lease to
be cancelled as to one or more properties upon the payment of a termination fee.
The  lease is a net lease, with base rental equal to (i) the debt service on the
outstanding  senior  mortgage granted by Fretus, and (ii) an amount necessary to
provide  a  12%  annual return on equity to Fretus.  The initial senior mortgage
debt is for $45.0 million and interest is accrued at LIBOR plus 3.5%, subject to
a  floor  of  6.25%.  The  Fretus  equity is approximately $24.8 million but may
increase  as a result of additional capital contributions for specified purposes
and  will decrease as a result of cash distributions to investors.  Based on the
initial senior mortgage terms and Fretus equity, current rental is approximately
$500,000 per month.  In addition to the base rental, the lease also provides for
percentage  rental  equal  to  a  percentage  (ranging from 7% to 8.5%) of gross
revenues  in  excess  of  a  specified threshold, commencing with the thirteenth
month  of  the  lease.  Total  rent  expense  as  of  December  31,  2002,  was
approximately  $1.5  million.  The  Properties  in  this  acquisition  are  all
purpose-built  assisted  living  communities  in  which  we  plan  to offer both
assisted  and  memory  loss  services  in  selected  communities.

On  December  6, 2002, we completed the refinancing of $77.8 million of existing
mortgage debt related to 11 assisted living communities.  The refinance included
seven  communities  representing  $39.3 million of mortgage debt maturing in May
2003  (the  remaining  balance  owed  to Deutsch Bank AG described above), three
communities  that  were  previously  refinanced  in March 2002 for $30.2 million
maturing  in  March 2004, and a single community repurchased in August 2002 with
existing  debt  of  $8.3  million.

The  refinance was facilitated by a four-year $58.0 million first mortgage which
matures  on  December  5, 2006, provided by GE Healthcare Financial Services and
$16.0  million  of five-year subordinated financing which matures on December 5,
2007,  provided  by Health Care Property Investors, Inc. ("HCPI"), a real estate
investment  trust.  The  GE  debt  is  a  LIBOR-based  loan which has an initial
interest  rate  of  6.5%  with  a  25-year  amortization period and includes the
opportunity  for a nine-month extension option.  The GE debt includes an earnout
provision  of an additional $7.0 million available to us under certain operating
performance  levels  of the communities which GE will disburse to us in order to
pay  down  the  subordinated  HCPI  debt.  The  HCPI debt provides for a current
interest  payment  of 12.0% and an accrual of additional interest at 1.75% to be
paid  upon  repayment  of  the  principal.

As  part  of  the refinancing agreement, we transferred all long-term assets and
liabilities  related  to  the above properties to Emeritus Realty Corporation, a
wholly-owned  subsidiary  of  Emeritus  included  in  the consolidated financial
statements.  Notwithstanding  consolidation for financial statement purposes, it
is
                                       32
<PAGE>

management's  intention  that  Emeritus  Realty  Corporation be a separate legal
entity  wherein  the assets and liabilities are not available to pay other debts
or  obligations  of the consolidated Company and the consolidated Company is not
liable  for  the  liabilities  of  Emeritus  Realty  Corporation.

We  also  recorded  a  gain  of  approximately $5.1 million related to discounts
received  upon the payoff of existing financing, offset by certain costs related
to  the transaction.  This refinancing extends the maturity for the entire $77.8
million  for  four  years.

In  January  2003,  we  reached  an  agreement  with  General  Motors Acceptance
Corporation  ("GMAC")  to  extend  a $6.8 million note set to mature February 1,
2003.  The  original  $6.8  million note has been bifurcated into a $6.2 million
Note  A  and  a  $560,000 Note B.  The new notes of $6.8 million mature March 1,
2006,  and  provide  for  monthly principal payments of approximately $22,000 in
addition  to interest at LIBOR plus 4.5% and LIBOR plus 7.75%, respectively.  As
a result of this refinancing, we have reclassified the long-term portion of $6.6
million  principal  balance  to long-term debt from current portion of long-term
debt  in  our  December  31,  2002,  consolidated  financial  statements.

Additionally,  related  to  the  GMAC extension, the original Seller note for $1
million  was  also extended.  The original Seller note principal balance for the
year  ended  December  31,  2002, was $921,000 with a maturity of March 1, 2003.
This  amendment  extends  the  principal maturity to March 1, 2006, and requires
$12,500  monthly principal and interest payments, with interest accruing at 12%.
Additionally,  we  have also made a $200,000 principal paydown in February 2003.
As  a  result,  we have reclassified the long-term portion of $656,000 principal
balance  to  long-term  debt  from  current  portion  of  long-term debt in our,
December  31,  2002,  consolidated  financial  statements.

                                       33
<PAGE>

RESULTS  OF  OPERATIONS

Summary  of  Significant  Accounting  Policies  and  Use  of  Estimates

Emeritus's  discussion  and  analysis  of its financial condition and results of
operations  are  based  upon Emeritus's consolidated financial statements, which
have  been  prepared in accordance with accounting principles generally accepted
in  the  United  States.  The preparation of these financial statements requires
Emeritus  to  make  estimates  and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and liabilities.  On an ongoing basis, Emeritus evaluates its estimates,
including  those  related  to  resident  programs  and  incentives,  bad  debts,
investments,  intangible  assets,  income  taxes,  financing  operations,
restructuring,  long-term  service  contracts,  contingencies,  self  insured
retention,  health  insurance,  and litigation.  Emeritus bases its estimates on
historical  experience  and on various other assumptions that are believed to be
reasonable  under  the  circumstances,  the  results of which form the basis for
making  judgments  about  the carrying values of assets and liabilities that are
not  readily  apparent from other sources.  Actual results may differ from these
estimates  under  different  assumptions  or  conditions.

Emeritus  believes the following accounting policies are most significant to the
judgments  and  estimates  used in the preparation of its consolidated financial
statements.  Revisions  in such estimates are charged to income in the period in
which  the  facts  that  give  rise  to  the  revision  become  known.

*     Emeritus  utilizes  third-party  insurance  for  losses  and  liabilities
associated  with  general and professional liability insurance claims subject to
established  self-insured retention levels on a per occurrence basis.  Losses up
to  these  self-insured  retention  levels  are  accrued  based upon actuarially
determined  estimates  of  the  aggregate  liability  for  claims  incurred.

*     For health insurance, Emeritus self-insures up to a certain level for each
occurrence  above  which  a  catastrophic insurance policy covers any additional
costs.  Health  insurance expense is accrued based upon historical experience of
the  aggregate  liability  for  claims  incurred.  If  these  estimates  are
insufficient,  additional  charges  may  be  required.

*     Emeritus  maintains  allowances for doubtful accounts for estimated losses
resulting from the inability of its residents to make required payments.  If the
financial condition of Emeritus's residents were to deteriorate, resulting in an
impairment  of  their  ability  to  make  payments,  additional  charges  may be
required.

*     Emeritus  holds shares in ARV Assisted Living, Inc. amounting to less than
5%  of  its  shares.  ARV  is  publicly  traded  and has a volatile share price.
Emeritus  records  an  investment  impairment  charge  when  it  believes  this
investment  has  experienced  a  decline  in value that is other than temporary.
Future adverse changes in market conditions or poor operating results underlying
this  investment  could result in losses or an inability to recover the carrying
value  of  the investment that may not be reflected in this investment's current
carrying  value,  thereby possibly requiring an impairment charge in the future.

*  Emeritus  records  a valuation allowance to reduce its deferred tax assets to
the amount that is more likely than not to be realized, which at this time shows
a  net  asset  valuation  of  zero. While Emeritus has considered future taxable
income  and  ongoing  prudent  and  feasible  tax  planning

                                       34
<PAGE>

strategies  in  assessing  the  need  for  the valuation allowance, in the event
Emeritus  were  to  determine  that it would be able to realize its deferred tax
assets  in the future in excess of its net recorded amount, an adjustment to the
deferred  tax  asset  would increase income in the period such determination was
made.

The  following  table  sets forth, for the periods indicated, certain items from
our  Consolidated Statements of Operations as a percentage of total revenues and
the  percentage  change  of  the  dollar  amounts  from  period  to  period.


<TABLE>
<CAPTION>

                                                Percentage  of  Revenues                   Year-to-Year
                                               Years  Ended  December 31,         Percentage Increase(Decrease)
                                     ----------------------------------------  ----------------------------------
                                         2002          2001          2000         2001-2002         2000-2001
                                     ------------  ------------  ------------  ----------------  ----------------
<S>                                  <C>           <C>           <C>           <C>               <C>
Revenues. . . . . . . . . . . . . .        100.0%        100.0%        100.0%              8.9%             12.3%
Expenses:
     Community operations . . . . .         61.3          57.5          61.4              16.1               5.2
     General and administrative . .         13.8          12.7          13.9              18.2               2.5
     Depreciation and amortization.          4.7           5.2           5.9              (0.5)             (1.7)
     Facility lease expense . . . .         19.6          19.3          19.4              10.5              11.8
                                     ------------  ------------  ------------  ----------------  ----------------
         Total operating expenses .         99.4          94.7         100.6              14.3               5.7
                                     ------------  ------------  ------------  ----------------  ----------------
Income from operations. . . . . . .          0.6           5.3          (0.6)            (86.7)              N/A
Other income (expense)
     Interest income. . . . . . . .          0.3           0.7           0.8             (58.9)             (1.0)
     Interest expense . . . . . . .         (7.7)         (9.4)        (12.0)            (11.8)            (11.7)
     Other, net . . . . . . . . . .          2.7           0.4          (5.7)            606.5               N/A
                                     ------------  ------------  ------------  ----------------  ----------------
         Net other expense. . . . .         (4.7)         (8.3)        (16.9)            (38.5)            (44.7)
                                     ------------  ------------  ------------  ----------------  ----------------

         Net loss . . . . . . . . .        (4.1%)        (3.0%)       (17.5%)             47.0%           (80.7%)
                                     ============  ============  ============  ================  ================
</TABLE>

                                       35
<PAGE>

Comparison  of  the  Years  Ended  December  31,  2002  and  2001
-----------------------------------------------------------------

Total  Operating Revenues:  Total operating revenues for the year ended December
31,  2002,  increased by  $12.5 million to $153.1 million from $140.6 million in
2001, or 8.9%.  Approximately $9.7 million of the increase reflects revenue from
24 communities that we began leasing in late 2002.  The balance of the change in
revenue  is primarily the result of increases in the average monthly revenue per
unit  due  to  our  rate  enhancement program and additional managed communities
throughout  2002  compared to 2001.  Average monthly revenue per unit was $2,577
for  2002  compared  to  $2,405  for  2001,  an  increase of approximately 7.2%.
Management  fees  increased by $2.2 million in the year ended December 31, 2002,
compared  to  2001.  This  is  primarily  due  to  the  addition  of  24 managed
communities  in  2002  compared  to  2001,  as  well as, increases in contingent
management fees from certain existing managed communities.  These increases were
partially offset by a decrease in the occupancy rate of 3.2 percentage points to
80.9%  for  2002  from  84.1%  for  2001.

Community  Operations:  Community operating expenses for the year ended December
31, 2002, increased  $13.0 million to $93.8 million from $80.8 million for 2001,
or 16.1%.  Approximately $9.7 million of the increase reflects operating expense
from  24 communities that we began leasing in October 2002.  The balance of this
change  was  due  to increases in personnel costs and above average increases in
liability,  health,  and  workers'  compensation  insurance premiums.  Community
operating expenses as a percentage of total operating revenue increased to 61.3%
in  2002  from 57.5% in 2001, primarily as a result of these increased expenses.

General  and  Administrative:  General and administrative (G&A) expenses for the
year ended December 31, 2002, increased $3.2 million to $21.1 million from $17.9
million  for  2001,  or  18.2%.  We  experienced increases of approximately $2.7
million  in  personnel  costs  related  to  acquisitions,  health  and  workers'
compensation  insurance,  and  other  acquisition  related  expenses.  As  a
percentage  of  total  operating  revenues,  G&A expenses increased to 13.8% for
2002,  compared  to 12.7% for 2001, primarily as a result of higher expenses due
to  additional  communities in our consolidated portfolio.  Since more than half
of  the  communities  we  operate  are  managed,  G&A expense as a percentage of
operating  revenues  for  all communities, including managed communities, may be
more  meaningful for industry wide comparisons.  These percentages were 6.0% and
6.6%  for  2002  and  2001,  respectively.

Depreciation and Amortization:  Depreciation and amortization for the year ended
December  31,  2002, and 2001, were approximately $7.2 million and $7.3 million,
respectively.  In  2002,  this  represents  4.7%  of  total  operating  revenues
compared  to  5.2% for 2001.  The decrease as a percentage of revenues is due to
increased  revenues  from  leased  communities.

Facility  Lease  Expense: Facility lease expense for the year ended December 31,
2002,  was  $30.0  million compared to $27.1 million for the year ended December
31, 2001, representing an increase of $2.9 million, or 10.5%. Approximately $1.5
million  of  the  increase  reflects  rental expense from 24 communities that we
began  leasing  in  October 2002. Approximately $848,000 of the increase was the
result  of  a  sale/leaseback transaction related to four communities, offset by
the  disposition  of  one  leased  community  and  the  repurchase  of  a leased
community.  The  balance  of  the  increase  is primarily attributable to rental
increases

                                       36
<PAGE>

based on community performance under certain of our leases in 2002. We leased 67
communities  as  of December 31, 2002, compared to 42 communities as of December
31,  2001. Facility lease expense as a percentage of revenues increased to 19.6%
from  19.3%  for  the  years  ended  December  31, 2002, and 2001, respectively.

Interest  Income:  Interest  income  for  the  year ended December 31, 2002, was
$403,000  versus  $980,000  for  the  year  ended  December  31,  2001.  This is
primarily  attributable  to  declining  interest  rates.

Interest  Expense:  Interest  expense  for the year ended December 31, 2002, was
$11.7  million  compared  to $13.3 million for the year ended December 31, 2001.
This  decrease  of  $1.6 million, or 11.8%, is primarily attributable to reduced
amount  of  outstanding  debt  in  2002  compared  to  2001,  as  a  result  of
sales/leaseback  and  refinancing  transactions  and lower interest rates on our
variable  rate  debt.  As  a  percentage  of  total operating revenues, interest
expense  decreased  to  7.7%  from 9.4% for the year ended December 31, 2002 and
2001,  respectively,  reflecting  increased  revenues  in conjunction with lower
interest  rates.

Other,  net:  Other, net increased by $3.5 million to $4.1 million in income for
the  year  ended  December  31,  2002,  from  $581,000 income for the year ended
December  31,  2001.  The  amount for the year 2002 includes a $5.1 million gain
related  to  discounts we received upon the payoff of existing financing, offset
by  certain  costs  related  to  the  transaction.  This  gain  is  offset  by
approximately  $1.2  million  in  write-offs  of existing loan fees related to a
sales/leaseback  transaction  and  a  refinancing  transaction and write-offs of
approximately $600,000 related to capitalized development transaction costs that
do  not  have  future realizable value.  The amount for the year 2001 included a
deficit-funding  obligation  of  $335,000  arising  from  our  management of the
Emeritrust  communities,  losses  of  $313,000 associated with our investment in
Senior  Healthcare  Partners, LLC, and a net gain of $1.1 million on sale of two
communities.

Preferred  dividends:  For  the  year  ended  December  31,  2002  and 2001, the
preferred  dividends  were  approximately  $7.3  million  and  $6.4  million,
respectively.  For  the last ten quarters we have not declared cash dividends on
our  preferred  stock  but  have  been  accruing  such  accumulated  and  unpaid
dividends.  The terms of our preferred stock provide that accumulated and unpaid
dividends  accrue  at a higher rate than dividends that are paid currently.  The
amount  of  dividends attributable to such higher rates is $2.1 million for both
2002  and  2001,  respectively.  In addition, because the board of directors did
not  declare  dividends  on  our  Series  A  Stock  for  more than six quarters,
effective  January  1,  2002,  such  dividends  were  calculated on a compounded
cumulative  basis, retroactive to our last payment, until they are paid current.
Had  we  been  required  to pay the higher rate for the Series A Stock, both our
preferred  dividends  and  net  loss to common shareholders would have increased
$275,000  and  $19,000 for 2001 and 2000, respectively.  This combined amount of
$294,000  was  recognized in 2002 as well as an additional cumulative compounded
dividend  of  $622,000  for  2002.

                                       37
<PAGE>

Comparison  of  the  Years  Ended  December  31,  2001  and  2000
-----------------------------------------------------------------

Total  Operating Revenues:  Total operating revenues for the year ended December
31,  2001,  increased by  $15.4 million to $140.6 million from $125.2 million in
2000,  or  12.3%.  Approximately  $4.1  million of the increase reflects revenue
from  four  communities  that  we first leased in late 2000, reduced by revenues
from  leased communities we disposed of in late 2001.  The balance of the change
in  revenue  is primarily the result of increases in the average monthly revenue
per  unit due to our rate enhancement program.  Average monthly revenue per unit
was  $2,405  for 2001 compared to  $2,213 for 2000, an increase of approximately
8.7%.  These  increases  were  partially  offset  by  a  small  decrease  in the
occupancy  rate of 1.7 percentage points to 84.1% for 2001 from 85.8%  for 2000.
An  increase in management fee revenue of $4.2 million contributed significantly
to increased revenue.  Improved performance of managed communities allowed us to
recognize  base  management  fees  and  performance-driven contingent management
fees.  Concurrently,  our  net funding obligation for the Emeritrust communities
was  greatly  reduced  (see  Other,  net  below).

Community  Operations:  Community operating expenses for the year ended December
31,  2001, increased  $4.0 million to $80.8 million from $76.8 million for 2000,
or  5.2%.  Approximately $1.8 million of the increase reflects operating expense
from  four  communities  that we first leased in late 2000, reduced by operating
expense  from  leased  communities  we disposed of in late 2001.  The balance of
this  change was due to increases in personnel costs and above average increases
in utility costs and liability insurance premiums.  Community operating expenses
as a percentage of total operating revenue decreased to 57.5% in 2001 from 61.4%
in  2000,  primarily  as  a  result  of  increased  revenues.

General  and  Administrative:  General and administrative (G&A) expenses for the
year  ended  December  31,  2001, increased $435,000 to $17.9 million from $17.4
million  for  2000,  or  2.5%. This comparison reflects the effect of abnormally
high  expenses in 2000 for professional consulting fees and for certain employee
benefits.  Excluding these items, we experienced increases of approximately $1.5
million  in  personnel costs, liability insurance and utilities. As a percentage
of  total operating revenues, G&A expenses decreased to 12.7% for 2001, compared
to  13.9% for 2000, primarily as a result of increased revenues. Since more than
half  of  the communities we operate are managed, G&A expense as a percentage of
operating  revenues  for  all communities, including managed communities, may be
more  meaningful  for industry wide comparisons. These percentages were 6.6% and
7.2%  for  2001  and  2000,  respectively.

Depreciation and Amortization:  Depreciation and amortization for the year ended
December  31,  2001  and 2000, were approximately $7.3 million and $7.4 million,
respectively.  In  2001,  this  represents  5.2%  of  total  operating revenues,
compared  to  5.9% for 2000.  The decrease as a percentage of revenues is due to
increased  revenues.

Facility  Lease  Expense: Facility lease expense for the year ended December 31,
2001,  was  $27.1  million compared to $24.3 million for the year ended December
31, 2000, representing an increase of $2.8 million, or 11.5%. Approximately $1.8
million  of  the  increase  reflects  rental from four communities that we first
leased in late 2000, reduced by rental from leased communities we disposed of in
late  2001.  The  balance  of  the  increase is primarily attributable to rental
increases  based  on  community  performance  under certain of our leases and to
higher  rental  on  two  leased  communities  that  were  refinanced  through
sale/leaseback  transactions.  We leased 42 communities as of December 31, 2001,
compared  to  45  communities  as  of

                                       38
<PAGE>

December  31, 2000. Facility lease expense as a percentage of revenues decreased
to  19.3%  from  19.4%  for  the  years  ended  December  31,  2001  and  2000,
respectively.

Interest  Income:  Interest  income  for  the  year ended December 31, 2001, was
$980,000  versus  $990,000  for  the  year  ended  December  31,  2000.  This is
primarily  attributable  to  declining  interest  rates.

Interest  Expense:  Interest  expense  for the year ended December 31, 2001, was
$13.3  million  compared  to $15.1 million for the year ended December 31, 2000.
This  decrease  of  $1.8  million,  or 11.9%, is primarily attributable to lower
interest  rates  on  our variable rate debt.  As a percentage of total operating
revenues,  interest  expense  decreased  to  9.4%  from 12.0% for the year ended
December  31,  2001  and  2000,  respectively,  reflecting increased revenues in
conjunction  with  lower  interest  rates.

Other,  net:  Other,  net  increased  by $7.7 million to $581,000 income for the
year  ended  December  31,  2001,  from  $7.1 million expense for the year ended
December  31,  2000.  The  amount  for  the year 2001 included a deficit-funding
obligation  of  $335,000  arising  from  our  management  of  the  Emeritrust
communities,  losses  of  $313,000  associated  with  our  investment  in Senior
Healthcare  Partners,  LLC,  and  a  net  gain  of  $1.1  million on sale of two
communities.  The amount for the year 2000 includes a deficit funding obligation
of  $3.7  million  arising  from  our  management of the Emeritrust communities,
write-offs  of  $1.5 million relating to receivables and capitalized development
transaction  costs  that do not have future realizable value, losses of $557,000
associated  with  our  investment  in Senior Healthcare Partners, LLC, and other
items  aggregating  $1.3  million.

Preferred  dividends:  For  the  year  ended  December  31,  2001  and 2000, the
preferred  dividends  were  approximately  $6.4  million  and  $5.3  million,
respectively.  For  the  last  ten  quarters  we  have not paid dividends on our
preferred  stock  but  have been accruing such accumulated and unpaid dividends.
The  terms  of our preferred stock provide that accumulated and unpaid dividends
accrue  at  a higher rate than dividends that are paid currently.  The amount of
dividends  attributable  to  such  higher rates is $2.1 million and $600,000 for
2001  and  2000,  respectively.  In  addition, because we have failed to pay the
dividends on our Series A Stock for more than six quarters, effective January 1,
2002,  such  dividends  were  calculated  on  a  compounded  cumulative  basis,
retroactive  to  our  last  payment,  until  they are paid current.  Had we been
required  to  pay  the  higher  rate  for the Series A Stock, both our preferred
dividend  expense  and  net  loss  to  common  shareholders would have increased
$275,000  and  $19,000  for  2001  and  2000,  respectively.


                                       39
<PAGE>

Same  Community  Comparison

Three  months  ended  December  31,  2002,  and  2001:
------------------------------------------------------

We operated 59 owned or leased communities on a comparable basis during both the
three months ended December 31, 2002 and 2001.  The following table sets forth a
comparison  of  same  community  results  of  operations,  excluding general and
administrative  expenses, for the three months ended December 31, 2002 and 2001.

<TABLE>
<CAPTION>

                                        Three Months ended December 31,
                                               (In thousands)
                                -------------------------------------------------
                                                            Dollar     % Change
                                   2002          2001       Change   Fav / (Unfav)
                               ------------  ------------  --------  -------------
<S>                           <C>           <C>           <C>       <C>
Revenue. . . . . . . . . . .  $    33,516   $    31,806   $ 1,710            5.4%
Community operating expenses      (21,674)      (19,289)   (2,385)         (12.4)
                              ------------  ------------  --------  -------------
  Community operating income       11,842        12,517      (675)          (5.4)
Depreciation & amortization.       (1,572)       (1,617)       45            2.8
Facility lease expense . . .       (6,806)       (6,479)     (327)          (5.0)
                              ------------  ------------  --------  -------------
    Operating income . . . .        3,464         4,421      (957)         (21.6)
Interest expense, net. . . .       (2,363)       (2,244)     (119)          (5.3)
                              ------------  ------------  --------  -------------
    Net income . . . . . . .  $     1,101   $     2,177   $(1,076)        (49.4%)
                              ============  ============  ========  =============
</TABLE>

The  same communities represented $33.5 million or 71.4% of our total revenue of
$46.9 million for the fourth quarter of 2002.  Same community revenues increased
by  $1.7  million  or  5.4%  for  the  quarter ended December 31, 2002, from the
comparable  period  in  2001.  This  was  primarily due to rate increases, which
increased  revenue  per  unit by 5.6%, partially offset by a decrease in average
occupancy  to  82.3%  in  the  fourth  quarter  of 2002 from 83.2% in the fourth
quarter  of  2001.  For  the  quarter  ended  December  31, 2002, our net income
decreased  to  $1.1 million from $2.2 million for the comparable period of 2001,
primarily  as  a  result of increased community operating expenses mainly due to
higher  health  and  workers'  compensation  insurance costs in 2002 compared to
2001.

                                       40
<PAGE>
Year  ended  December  31,  2002,  and  2001:
---------------------------------------------

We operated 59 owned or leased communities on a comparable basis during both the
twelve  months ended December 31, 2002 and 2001.  The following table sets forth
a  comparison  of  same  community  results of operations, excluding general and
administrative  expenses,  for  2002  and  2001.

<TABLE>
<CAPTION>
                                           Year  Ended  December  31,
                                                (In  thousands)
                               -------------------------------------------------
                                                            Dollar     % Change
                                   2002          2001       Change   Fav / (Unfav)
                               ------------  ------------  --------  -------------
<S>                           <C>           <C>           <C>       <C>
Revenue. . . . . . . . . . .  $   130,956   $   126,103   $ 4,853            3.8%
Community operating expenses      (83,394)      (76,199)   (7,195)          (9.4)
                              ------------  ------------  --------  -------------
  Community operating income       47,562        49,904    (2,342)          (4.7)
Depreciation & amortization.       (6,098)       (6,391)      293            4.6
Facility lease expense . . .      (27,405)      (25,040)   (2,365)          (9.4)
                              ------------  ------------  --------  -------------
    Operating income . . . .       14,059        18,473    (4,414)         (23.9)
Interest expense, net. . . .       (9,108)      (10,606)    1,498           14.1
                              ------------  ------------  --------  -------------
    Net income . . . . . . .  $     4,951   $     7,867   $(2,916)        (37.1%)
                              ============  ============  ========  =============
</TABLE>


The same communities represented $131.0 million or 85.5% of our total revenue of
$153.1  million  for  the year ended December 31, 2002.  Same community revenues
increased by $4.9 million or 3.8% for the year ended December 31, 2002, from the
year  ended  December  31, 2001.  The increase in revenue is attributable to our
rate  enhancement  program,  which  resulted  in  same community average monthly
revenue  per  unit increasing to $2,568 for 2002, from $2,425 for 2001.  This is
an  increase of $143 or 5.9%.  These results were partially offset by a decrease
in  occupancy  to 81.9% in 2002 from 84.2% in 2001.  For the year ended December
31,  2002,  our net income decreased to $5.0 million from $7.9 million for 2001,
primarily  as  a  result of increased community operating expenses mainly due to
higher  health  and  workers'  compensation  insurance costs in 2002 compared to
2001.  Net  income  was  also  reduced by an increase in additional rent expense
from  existing  leases  due  to  contingent  rent expense and increased by lower
interest  expense  related  to  the  December  2002,  refinancing  (see  "Other
Transactions").

                                       41
<PAGE>

LIQUIDITY  AND  CAPITAL  RESOURCES

For  the year ended December 31, 2002, net cash provided by operating activities
was  $3.9  million  compared  to  $3.6  million  of  cash  provided in operating
activities  for  the  prior  year.  The  primary component of the operating cash
provided  in  the  year  ended  December  31,  2002, was an increase in deferred
revenue  of  $2.9  million  and an increase in other liabilities of $3.5 million
offset  by  an  increase  in  prepaid expenses of $2.5 million and a decrease in
accrued  interest  of  $1.3  million.

Net  cash provided by investing activities amounted to $3.2 million for the year
ended  December  31,  2002, and was comprised primarily of proceeds from sale of
property  and  equipment  related  to  refinancing  of  four communities through
sale/leaseback  transactions,  which  was partially offset by the acquisition of
property,  equipment,  new  leases,  and  lease  improvements.

For  the year ended December 31, 2002, net cash used in financing activities was
$9.9  million primarily from short-term and long-term debt repayments and other
financing  costs,  offset  by  proceeds from long-term borrowings.  For the year
ended  December 31, 2001, net cash used in financing activities was $3.8 million
primarily  from  short-term  and  long-term  debt  repayments.

We  have  incurred  significant  operating losses since our inception and have a
working  capital  deficit  of  $26.5  million,  although $2.9 million represents
deferred  revenue  and  $13.5  million  of  preferred  dividends  is due only if
declared  by  the  Company's  board  of directors.  In 2001 and 2002 we reported
positive  net  cash  from operating activities in our consolidated statements of
cash  flows.  At  times  in the past, however, we have been dependent upon third
party  financing  or  disposition  of  assets  to  fund operations and we cannot
guarantee  that, if necessary in the future, such transactions will be available
timely  or  at  all,  or  on  terms  attractive  to  us.

In  2002, we refinanced substantially all of our debt obligations, extending the
maturities  of  such financings to dates in 2005 or thereafter, at which time we
will  need  to  refinance  or  otherwise repay the obligations. Many of our debt
instruments  and  leases  contain "cross-default" provisions pursuant to which a
default  under  one  obligation  can  cause  a  default  under one or more other
obligations  to the same lender or lessor.  Such cross-default provisions affect
16  owned  assisted living properties and 64 operated under leases. Accordingly,
any  event  of  default  could  cause a material adverse effect on our financial
condition  if  such  debt  or  leases  are  cross-defaulted.

Management  believes that the Company will be able to sustain positive operating
cash  flow  at  least through 2003 and will have adequate cash for all necessary
investing  and  financing activities including required debt service and capital
expenditures.

                                       42
<PAGE>

The  following table summarizes our contractual obligations at December 31, 2002
(In  thousands):

<TABLE>
<CAPTION>

                                           Payments Due by Period
                         --------------------------------------------------------------
                                       Less than 1                             After 5
                            Total        year        1 - 3 years  4 - 5 years   years
-----------------------  -----------  ------------  ------------  ----------- ---------
<S>                      <C>          <C>           <C>           <C>          <C>
Contractual Obligations
Long-Term Debt. . . . .  $   123,491  $      3,604  $     14,657  $    74,000  $ 31,230
Operating Leases. . . .  $   289,738  $     27,568  $     55,772  $    53,603  $152,795
</TABLE>


 RECENT  ACCOUNTING  PRONOUNCEMENTS

In  June  2001,  FASB  issued  SFAS  No.  143,  Accounting  for Asset Retirement
Obligations.  SFAS  No.  143 requires the Company to record the fair value of an
asset  retirement  obligation  as a liability in the period in which it incurs a
legal  obligation  associated  with the retirement of tangible long-lived assets
that  result  from the acquisition, construction, development, and/or normal use
of  the  assets.  The  Company  also  records  a  corresponding  asset  that  is
depreciated  over  the life of the asset.  Subsequent to the initial measurement
of  the  asset retirement obligation, the obligation will be adjusted at the end
of  each  period  to  reflect  the  passage of time and changes in the estimated
future  cash  flows underlying the obligation.  The Company is required to adopt
SFAS  No.  143 on January 1, 2003.  Management is currently assessing the impact
of  SFAS No. 143, to determine the effect on the Company's financial statements.

In  April  2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4,  44  and  64,  Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS  No.  145  amends  existing  guidance  on reporting gains and losses on the
extinguishment  of  debt  to  prohibit the classification of the gain or loss as
extraordinary,  as  the use of such extinguishments have become part of the risk
management  strategy  of many companies. SFAS No. 145 also amends SFAS No. 13 to
require  sale-leaseback  accounting  for  certain  lease modifications that have
economic  effects similar to sale-leaseback transactions.  The provisions of the
Statement  related  to  the  rescission  of Statement No. 4 is applied in fiscal
years  beginning after May 15, 2002.  Earlier application of these provisions is
encouraged.  The  provisions  of  the Statement related to Statement No. 13 were
effective  for transactions occurring after May 15, 2002, with early application
encouraged.  We  adopted  SFAS  No.  145  in the fourth quarter of 2002 and have
included  the  extraordinary gain on refinancing long-term debt in other income.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit  or  Disposal  Activities.  SFAS No. 146 addresses financial accounting and
reporting  for  costs  associated with exit or disposal activities and nullifies
Emerging  Issues Task Force (EITF) Issue 94-3, Liability Recognition for Certain
Employee  Termination  Benefits  and  Other  Costs  to  Exit  an  Activity.  The
provisions  of this Statement are effective for exit or disposal activities that
are  initiated  after  December  31,  2002,  with  early application encouraged.
Management  cannot  determine  the  impact  of  SFAS  No.  146  on the Company's
financial  statements  as  it  will  be  applied  prospectively.

                                       43
<PAGE>

In  November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and  Disclosure  Requirements  for  Guarantees, Including Indirect Guarantees of
Indebtedness  to  Others, an interpretation of FASB Statements No. 5, 57 and 107
and  a  rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements  about  its  obligations under guarantees issued.  The Interpretation
also  clarifies  that  a  guarantor  is required to recognize, at inception of a
guarantee,  a  liability  for  the fair value of the obligation undertaken.  The
initial  recognition  and  measurement  provisions  of  the  Interpretation  are
applicable to guarantees issued or modified after December 31, 2002, and are not
expected  to  have a material effect on the Company's financial statements.  The
disclosure  requirements  are  effective  for financial statements of interim or
annual  periods  ending  after  December  15,  2002.

In  December  2002,  the  FASB  issued  SFAS No. 148, Accounting for Stock-Based
Compensation  -  Transition  and  Disclosure, an amendment of FASB Statement No.
123.  This  Statement  amends FASB Statement No. 123, Accounting for Stock-Based
Compensation,  to  provide  alternative  methods  of  transition for a voluntary
change  to  the  fair  value  method  of  accounting  for  stock-based  employee
compensation.  In addition, this Statement amends the disclosure requirements of
Statement  No.  123  to require prominent disclosures in both annual and interim
financial  statements.  Certain of the disclosure modifications are required for
fiscal  years  ending  after December 15, 2002, and are included in the notes to
these  consolidated  financial  statements.

In  January  2003,  the  FASB  issued  Interpretation  No.  46, Consolidation of
Variable  Interest  Entities,  an  interpretation  of  ARB  No.  51.  This
Interpretation  addresses  the consolidation by business enterprises of variable
interest  entities as defined in the Interpretation.  The Interpretation applies
immediately  to  variable  interests in variable interest entities created after
January  31,  2003,  and  to  variable  interests  in variable interest entities
obtained  after  January  31,  2003.  For  nonpublic  enterprises,  such  as the
Company,  with  a variable interest in a variable interest entity created before
February  1, 2003, the Interpretation is applied to the enterprise no later than
the  end  of  the  first  annual reporting period beginning after June 15, 2003.
Management  is  currently  evaluating  the  impact of this Interpretation on the
Company's  financial  statements.


IMPACT  OF  INFLATION

To  date,  inflation  has  not  had a significant impact on Emeritus.  Inflation
could,  however,  affect  our  future  revenues  and operating income due to our
dependence  on  the  senior resident population, most of whom rely on relatively
fixed  incomes  to pay for our services.  The monthly charges for the resident's
unit  and  assisted  living  services  are  influenced  by  the  location of the
community and local competition.  Our ability to increase revenues in proportion
to  increased  operating expenses may be limited.  We typically do not rely to a
significant  extent  on  governmental  reimbursement  programs.  In  pricing our
services,  we  attempt  to  anticipate  inflation  levels,  but  there can be no
assurance  that  we  will  be  able  to respond to inflationary pressures in the
future.

                                       44
<PAGE>

RISK  FACTORS

Our  business, results of operations and financial condition are subject to many
risks,  including,  but  not  limited  to,  those  set  forth  below:

The  following  important  factors,  among  others, could cause actual operating
results  to differ materially from those expressed in forward-looking statements
included  in  this report and presented elsewhere by our management from time to
time.  Do  not  place  undue reliance on these forward-looking statements, which
speak  only  as of the date of this report.  A number of the matters and subject
areas  discussed  in  this  report  refer  to  potential  future  circumstances,
operations  and  prospects,  and therefore, are not historical or current facts.
The  discussion  of  such matters and subject areas is qualified by the inherent
risks  and  uncertainties  surrounding future expectations, which may materially
differ  from  our  actual  future  experience  involving any one or more of such
matters  and  subject  areas as a result of various factors, including: possible
excess  assisted living capacity in our market areas affecting our occupancy and
pricing  levels;  uncertainties  in increasing occupancy and pricing, generally;
effective  management  of  costs  and  the  effects of cost increases beyond our
control,  such  as  utilities  and  insurance;  the  difficulty  in reducing and
eliminating  continuing  operating losses; vulnerability to defaults in our debt
and  lease  financing  as  a result of noncompliance with various covenants; the
effects  of  cross-default  terms;  competition;  and  uncertainties relating to
construction,  licensing,  environmental,  and  other  matters  that  affect
acquisition,  disposition  and  development  of assisted living communities.  We
have  attempted  to  identify, in context, certain of the factors that may cause
actual  future  experience  and  results to differ from our current expectations
regarding the relevant matter or subject area.  We are not obligated to publicly
release  the  results  of any revisions to these forward-looking statements that
may  be made to reflect events or circumstances after the date of this report or
to  reflect the occurrence of unanticipated events.  These and other factors are
discussed  in  more  detail  below.

We  have incurred losses since we began doing business and may continue to incur
losses  for  the  foreseeable  future. We organized and began operations in July
1993 and have operated at a loss since we began doing business.  For 2002, 2001,
and  2000,  we  recorded  net losses before preferred dividends of $6.2 million,
$4.2 million, and $22.0 million, respectively.  We believe that the historically
aggressive  growth  of  our  portfolio through acquisitions and developments and
related financing activities were among the causes of these losses.  To date, at
many  of  our  communities, we have been generally unable to stabilize occupancy
and rate structures to levels that result in positive cash flow and earnings for
the  company  as a whole.  Our operations may not become profitable in line with
our  current  expectations  or  may  not  become  profitable  at  all.

If we cannot generate sufficient cash flow to cover required interest, principal
and  lease  payments,  we  risk  defaults  on  our debt agreements and operating
leases.  At December 31, 2002, we had total debt of $123.5 million, with minimum
principal  payments  of about $3.6 million due in 2003. At December 31, 2002, we
were  obligated  under long-term operating leases requiring minimum annual lease
payments  of  which  $27.6 million is payable in 2003. In addition, we will have
approximately  $3.6  million  and  $11.1  million  in  principal  amount of debt
repayment  obligations that become due in 2004 and 2005, respectively. If we are
unable  to  generate  sufficient cash flow to make such payments as required and
are  unable  to  renegotiate  payments  or  obtain  additional  equity  or  debt
financing, a lender could foreclose on our communities secured by the respective
indebtedness  or,  in the case of an operating lease, could terminate our lease,
resulting  in

                                       45
<PAGE>

loss  of income and asset value. In some cases, our indebtedness is secured by a
particular  community  and a pledge of our interests in a subsidiary entity that
owns  that  community.  In the event of a default, a lender could avoid judicial
procedures  required  to foreclose on real property by foreclosing on our pledge
instead,  thus  accelerating  its  acquisition  of  that community. Furthermore,
because  of  cross-default  and cross-collateralization provisions in certain of
our  mortgage and sale/leaseback agreements, if we default on one of our payment
obligations,  we could adversely affect a significant number of our communities.

Because  we  are  highly  leveraged,  we  may not be able to respond to changing
business  and  economic  conditions  or  continue  with selected acquisitions. A
substantial  portion of our future cash flow will be devoted to debt service and
lease  payments.  In  the past, we have frequently been dependent on third party
financing and disposition of assets to fund these obligations in full and we may
be  required  to do so in the future.  In addition, we are periodically required
to  refinance  these obligations as they mature.  These circumstances reduce our
flexibility  and  ability  to  respond to our business needs, including changing
business  and  financial  conditions  such  as  increasing  interest  rates  and
opportunities  to  expand  our  business  through  selected  acquisitions.

We  may be unable to increase or stabilize our occupancy rates that would result
in  positive  earnings.  In  previous  years  we  had  difficulty increasing our
occupancy levels.  Our historical losses have resulted, in part, from lower than
expected  occupancy  levels  at  our  newly  developed and acquired communities.
Although  we have reduced our acquisition and development activity, we have been
unable  to  increase occupancy levels as we had anticipated and, during the last
year,  occupancy levels declined.  We cannot guarantee that our occupancy levels
will  increase.

We  will  occasionally  seek  additional  funding  through  public  or  private
financing, including equity financing. We may not find adequate equity, debt, or
sale/leaseback  financing  when  we  need it or on terms acceptable to us.  This
could  affect  our ability to finance our operations or refinance our properties
to  avoid  the  consequences  of  default  and  foreclosure  under  our existing
financing  as  described  above.  In  addition,  if we raise additional funds by
issuing  equity  securities,  our  shareholders may experience dilution of their
investment.

We  may  be  unable  to  obtain  the  additional  capital we will need to retain
important  segments  of our operating communities. We manage 46 of our operating
communities  under  short-term management agreements expiring June 30, 2003, for
the  41  communities,  which we have referred to throughout this document as the
Emeritrust I and Emeritrust II Operating communities, and December 31, 2003, for
the  remaining five Emeritrust II Development communities.  We also have options
to  purchase  43  communities, and a right of first refusal to purchase three of
these  communities  prior  to  December  10,  2003,  for  the five Emeritrust II
Development  communities,  and  June 10, 2003, for the remaining 41 communities.
Based  on  formulas in the options, the purchase prices of the communities would
be  substantially greater than the original purchase prices paid by the investor
groups  that  currently  own them, depending on when the purchase occurs and the
performance  of  the  communities.  If  we  are unable to obtain the capital and
related  mortgage financing necessary to complete these purchases, we could lose
control  of  these  communities  and the right to operate them, which represents
about  24.0%  of  our  total  operating  capacity.  The  loss of these operating
communities  would have a material adverse effect on our revenues and results of
operations.

                                       46
<PAGE>

If we fail to comply with financial covenants contained in our debt instruments,
our  lenders  may  accelerate  the related debt. From time to time, we failed to
comply with certain covenants in our financing agreements.  In the future we may
not  be  able  to comply with these covenants, which generally relate to matters
such  as  cash flow, and debt coverage ratios.  If we fail to comply with any of
these  requirements,  our  lenders  could accelerate the related indebtedness so
that  it becomes due and payable prior to its stated due date.  We may be unable
to  pay  or  refinance  this  debt  if  it  becomes  due.

Our liability insurance may be insufficient to cover the liabilities we face. In
recent  years,  participants  in  the  long-term-care  industry  have  faced  an
increasing  number of lawsuits alleging negligence, malpractice or related legal
theories.  Many of these suits involve large claims and significant legal costs.
We expect that we occasionally will face such suits because of the nature of our
business.  We  currently  maintain  insurance  policies  with  coverage  and
self-insured  retention (with respect to general and professional liability) and
deductibles  (with respect to auto liability and property damage claims) we deem
appropriate  based  on  the  nature  and  risks  of  our  business,  historical
experience,  industry  standards,  and  the availability of insurance.  We could
incur  liability  in  excess  of our insurance coverage or experience claims not
covered  by  our  insurance,  including  punitive  damages.  Claims  against us,
regardless of their merit or eventual outcome, may also undermine our ability to
attract  residents or expand our business and would require management to devote
time  to  matters  unrelated  to  the  operation of our business.  Our liability
insurance  policies  must  be renewed annually, and we may not be able to obtain
liability  insurance  coverage  in  the  future  or, if available, on acceptable
terms.  During  the  past  several  years,  retained  losses  relating  to  high
self-insured  retention  and annual premiums have increased significantly, which
have  substantially  compounded  our  costs associated with insurance and claims
defense.

We  face  risks associated with selective acquisitions. We intend to continue to
seek  selective  acquisition  opportunities.  However,  we  may  not  succeed in
identifying  any  future  acquisition opportunities or completing any identified
acquisitions.  The  acquisition  of  communities  presents  a  number  of risks.
Existing  residences  available  for  acquisition may frequently serve or target
different market segments than those we presently serve.  It may be necessary in
these  cases  to  re-position  and renovate acquired residences or turn over the
existing resident population to achieve a resident care level and income profile
that  is  consistent  with  our  objectives.  In  the past, these obstacles have
delayed  the  achievement of acceptable occupancy levels and increased operating
and  capital  expenditures.  As  a  consequence,  we  currently  plan  to target
assisted  living communities with established operations, which could reduce the
number  of acquisitions we can complete and increase the expected cost.  Even in
these  acquisitions, however, we may need to make staff and operating management
personnel  changes  to  successfully  integrate  acquired  communities  into our
existing  operations.  We  may not succeed in repositioning acquired communities
or in effecting any necessary operational or structural changes and improvements
on  a timely basis.  We also may face unforeseen liabilities attributable to the
prior  operator  of the acquired communities, against whom we may have little or
no  recourse.

We  expect  competition  in  our  industry  to  increase,  which could cause our
occupancy  rates  and  resident  fees to decline. The long-term care industry is
highly  competitive,  and  given  the  relatively  low  barriers  to  entry  and
continuing  health  care cost containment pressures, we expect that our industry
will become increasingly competitive in the future. We believe that the industry
is  experiencing  over-capacity  in several of our markets, thereby intensifying
competition  and  adversely  affecting  occupancy  levels  and  pricing.  We

                                       47
<PAGE>

compete  with  other  companies  providing  assisted  living services as well as
numerous  other  companies providing similar service and care alternatives, such
as  home  healthcare  agencies,  independent  living  facilities,  retirement
communities,  and  skilled  nursing  facilities. We expect that competition will
increase  from  new  market  entrants,  as  assisted  living  residences receive
increased  market  awareness  and  more states decide to include assisted living
services  in  their  Medicaid  programs.  Many  of  these  competitors  may have
substantially  greater financial resources than we do. Increased competition may
limit  our  ability to attract or retain residents or maintain our existing rate
structures. This could lead to lower occupancy rates or lower rate structures in
our  communities.

We  also  cannot  predict  the  effect  of  the healthcare industry trend toward
managed  care  on  the assisted living marketplace. Managed care, an arrangement
whereby  service  and care providers agree to sell specifically defined services
to public or private payers in an effort to achieve more efficiency with respect
to  utilization  and cost, is not currently a significant factor in the assisted
living  marketplace.  However,  managed  care  plans  sponsored  by  insurance
companies  or  HMOs  may  in the future affect pricing and the range of services
provided  in  the  assisted  living  marketplace.

If  development  of  new  assisted  living  facilities  outpaces  demand, we may
experience  decreased  occupancy,  depressed  margins,  and diminished operating
results.  We believe that some assisted living markets have become or are on the
verge  of  becoming  overbuilt.  The  barriers  to  entry in the assisted living
industry  are  not  substantial.  Consequently,  the development of new assisted
living facilities could outpace demand.  Overbuilding in the markets in which we
operate  could  thus  cause  us  to experience decreased occupancy and depressed
margins  and  could  otherwise  adversely  affect  our  operating  results.

Market  forces  could  undermine  our efforts to attract seniors with sufficient
resources. We rely on our residents' abilities to pay our fees from their own or
familial  financial  resources.  Generally,  only  seniors with income or assets
meeting  or  exceeding  the  comparable  median in the region where our assisted
living  communities  are  located  can  afford  our  fees.  Inflation  or  other
circumstances  may undermine the ability of seniors to pay for our services.  If
we encounter difficulty in attracting seniors with adequate resources to pay for
our  services,  our  occupancy  rates  may decline and we may suffer losses that
could  cause  the  value  of  your  investment  in  our  stock  to  decline.

Our  labor  costs may increase and may not be matched by corresponding increases
in rates we charge to our residents. We compete with other providers of assisted
living  services  and  long-term  care in attracting and retaining qualified and
skilled  personnel.  We  depend  on our ability to attract and retain management
personnel  responsible  for the day-to-day operations of each of our residences.
If  we are unable to attract or retain qualified residence management personnel,
our results of operations may suffer.  In addition, possible shortages of nurses
or trained personnel may require us to enhance our wage and benefits packages to
compete  in  the  hiring  and  retention  of  personnel.  We  also depend on the
available  labor  pool  of  semi-skilled  and unskilled employees in each of the
markets  in which we operate.  As a result of these and other factors, our labor
costs may increase and may not be matched by corresponding increases in rates we
charge  to  our  residents.

                                       48
<PAGE>

We  face  possible  environmental  liabilities  at each of our properties. Under
various federal, state and local environmental laws, ordinances and regulations,
a  current or previous owner or operator of real property may be held liable for
the  costs  of  removal or remediation of certain hazardous or toxic substances,
including  asbestos-containing  materials, that could be located on, in or under
its  property.  These laws and regulations often impose liability whether or not
the  owner  or  operator  knew  of,  or was responsible for, the presence of the
hazardous  or toxic substances.  We could face substantial costs of any required
remediation  or  removal of these substances, and our liability typically is not
limited  under  applicable laws and regulations.  Our liability could exceed our
properties'  value or the value of our assets.  We may be unable to sell or rent
our  properties,  or  borrow using our properties as collateral, if any of these
substances  is  present  or  if we fail to remediate them properly.  Under these
laws  and  regulations,  if  we  arrange  for the disposal of hazardous or toxic
substances such as asbestos-containing materials at a disposal site, we also may
be  liable  for the costs of the removal or of the hazardous or toxic substances
at  the  disposal  site.  In  addition to liability for these costs, we could be
liable  for  governmental  fines  and  injuries  to  persons  or  properties.

Some  of  our facilities generate infectious medical waste due to the illness or
physical  condition  of  the  residents,  including,  for  example, blood-soaked
bandages,  swabs  and other medical waste products, and incontinence products of
those  residents  diagnosed  with  an  infectious  disease.  The  management  of
infectious  medical  waste,  including  handling,  storage,  transportation,
treatment,  and disposal, is subject to regulation under various laws, including
federal  and  state  environmental laws.  These environmental laws set forth the
management  requirements,  as  well  as  permit,  record-keeping,  notice,  and
reporting  obligations.  Each  of  our  facilities has an agreement with a waste
management company for the proper disposal of all infectious medical waste.  Any
finding  that  we  are  not  in  compliance  with these environmental laws could
adversely  affect  our  business  and  financial  condition.  Because  these
environmental  laws are amended from time to time, we cannot predict when and to
what  extent liability may arise.  In addition, because these environmental laws
vary  from state to state, expansion of our operations to states where we do not
currently  operate  may  subject  us to additional restrictions on the manner in
which  we  operate  our  facilities.

Our  chief  executive  officer has personal interest that may conflict with ours
due  to  his  interest  in  Holiday  Retirement Corporation and Columbia-Pacific
Group,  Inc.  Mr. Baty, our Chief Executive Officer, is a principal shareholder,
director and Chairman of the Board of Holiday Retirement Corporation, and is the
principal  owner  of  Columbia-Pacific  Group,  Inc.  Substantially  all  of the
independent living facilities operated by Holiday are owned by partnerships that
are  controlled  by Mr. Baty and Holiday. Mr. Baty's varying financial interests
and  responsibilities  include  the  acquisition,  financing, and refinancing of
independent  living  facilities  and  the  development  and construction of, and
capital  raising  activities  to  finance, new facilities.  Columbia-Pacific and
affiliated  partnerships  operate  assisted  living  communities and independent
living  facilities, many of which we manage under various management agreements.
The  financial  interests  and  management and financing responsibilities of Mr.
Baty  with  respect  to  Holiday  and  Columbia-Pacific  and  their  affiliated
partnerships  could  present  conflicts of interest with us, including potential
competition  for residents in markets where both companies operate and competing
demands  for  the  time  and  efforts  of  Mr.  Baty.

                                       49
<PAGE>

Because  Mr.  Baty  is  both  our  Chief  Executive Officer as well as Holiday's
Chairman  of  the  Board  and  is  the  principal  owner  of  Columbia-Pacific,
circumstances  could  arise  that  would  distract  him from our operations. Our
interests  and  those  of  Holiday  and  Columbia-Pacific  interests may on some
occasions be incompatible.  We have entered into a noncompetition agreement with
Mr.  Baty,  but  this noncompetition agreement does not limit Mr. Baty's current
role  with  Holiday  or  its related partnerships, so long as assisted living is
only an incidental component of Holiday's operation or management of independent
living  facilities.

We  have  entered  into  agreements  with a number of entities that are owned or
controlled  by  Mr.  Baty,  whose  interests  with  respect  to  these companies
occasionally  may conflict with ours. We have entered into agreements, including
most  of  our management agreements, with a number of entities that are owned or
controlled by Mr. Baty.  Under these agreements, we provide management and other
services  to  senior  housing  and  assisted  living  communities owned by these
entities  and  we  have  material agreements with these entities relating to the
purchase, sale, and financing of a number of our operating communities. There is
a  risk  that  the  administration of these and any future arrangements could be
adversely  affected  by  these continuing relationships because our interest and
those  of  Mr.  Baty  may  not  be  consistent  at  all  times.

Some  of  our recent transactions and the operations of certain communities that
we  manage  are  supported  financially  by Mr. Baty with limited guarantees and
through  his  direct  and  indirect  ownership  of such communities; we would be
unable  to  benefit  from these transactions and manged communities without this
support.  Our  recent transactions to lease an additional 24 communities and our
agreements  to  manage 24 communities involve limited guarantees by Mr. Baty and
rely  on  his  direct  and  indirect  ownership of the communities involved.  We
believe  that  we  would  be  unable to take advantage of these transactions and
management  opportunities  without  Mr.  Baty's individual support.  The ongoing
administration  of  these  transactions, however, could be adversely affected by
these  continuing  relationships because our interests and those of Mr. Baty may
not  be  consistent  at  all  times.  In addition, we cannot guarantee that such
support  will  be  available  in  the  future.

We may be unable to attract and retain key management personnel. We depend upon,
and  will continue to depend upon, the services of Mr. Baty, our Chief Executive
Officer.  The  loss of Mr. Baty's services, in part or in whole, could adversely
affect  our  business  and  our  results  of operations.  Mr. Baty has financial
interests  and  management  responsibilities  with  respect  to  Holiday and its
related partnerships.  As a result, he does not devote his full time and efforts
to  Emeritus.  We  may be unable to attract and retain other qualified executive
personnel  critical  to  the  success  of  our  business.

Our  costs  of compliance with government regulations may significantly increase
in  the  future.  Federal,  state  and  local  authorities  heavily regulate the
healthcare  industry. Regulations change frequently, and sometimes require us to
make expensive changes in our operations. A number of legislative and regulatory
initiatives  relating  to long-term care are proposed or under study at both the
federal and state levels that, if enacted or adopted, could adversely affect our
business  and operating results. We cannot predict to what extent legislative or
regulatory  initiatives will be enacted or adopted or what effect any initiative
would have on our business and operating results. Changes in applicable laws and
new interpretations of existing laws can significantly affect our operations, as
well  as  our  revenues,  particularly  those from governmental sources, and our
expenses.  Our  residential  communities  are  subject  to  varying  degrees  of
regulation  and

                                       50
<PAGE>

licensing  by  local  and  state  health  and  social service agencies and other
regulatory authorities. While these regulations and licensing requirements often
vary  significantly  from  state  to  state,  they  typically  address:

*     fire  safety,
*     sanitation,
*     staff  training,
*     staffing  patterns,
*     living  accommodations  such  as  room  size,  number  of  bathrooms,  and
      ventilation,  and
*     health-related  services.

We  may  be unable to satisfy all regulations and requirements or to acquire and
maintain  any  required  licenses  on  a  cost-effective  basis.

In addition, with respect to our residents who receive financial assistance from
governmental  sources  for  their  assisted  living  services, we are subject to
federal  and  state  regulations  that  prohibit  certain business practices and
relationships.  Failure  to  comply  with  these  regulations  could  prevent
reimbursement  for  our  healthcare  services  under  Medicaid  or similar state
reimbursement  programs.  Our failure to comply with such regulations also could
result in fines and the suspension or inability to renew our operating licenses.
Federal,  state  and  local  governments  occasionally  conduct  unannounced
investigations, audits and reviews to determine whether violations of applicable
rules  and  regulations  exist.  Devoting  management  and  staff time and legal
resources  to  such investigations, as well as any material violation by us that
is  discovered  in  any  such  investigation,  audit or review, could strain our
resources  and  affect  our profitability.  In addition, regulatory oversight of
construction  efforts  associated  with  refurbishment  could  cause  us to lose
residents  and  disrupt  community  operations.

Our  stock price has been highly volatile, and a number of factors may cause our
common  stock  price  to  decline.  The  market  price  of  our common stock has
fluctuated  and  could  fluctuate  significantly  in  the  future in response to
various  factors  and  events,  including,  but  not  limited  to:

*     the  liquidity  of  the  market  for  our  common  stock;
*     variations  in  our  operating  results;
*     variations  from  analysts'  expectations;  and
*     new  statutes or regulations, or changes in the interpretation of existing
      statutes or regulations, affecting the healthcare industry generally or
      the assisted  living  residence  business  in  particular.

In  addition,  the  stock market in recent years has experienced broad price and
volume  fluctuations that often have been unrelated to the operating performance
of  particular  companies.  These  market fluctuations also may cause the market
price  of  our  common  stock  to  decline.

                                       51
<PAGE>

Our  share ownership and certain other factors may impede a proposed takeover of
our  business.  As  of February 28, 2003, Mr. Baty, our Chief Executive Officer,
controls about 39% of our outstanding common stock.  Together, our directors and
executive officers own, directly and indirectly, over 62% of the voting power of
our outstanding common and preferred stock.  Accordingly, Mr. Baty and the other
members  of  our  board and management would have significant influence over the
outcome  of  matters submitted to our shareholders for a vote, including matters
that  would  involve  a change of control of Emeritus.  Further, our Articles of
Incorporation  require  a  two-thirds  supermajority  vote to approve a business
combination  of  Emeritus with another company that is not approved by the board
of  directors.  Accordingly, the current management group and board of directors
could  prevent  approval  of  such  a business combination.  We currently have a
staggered  board  in  which only one-third of the board stands for election each
year.  Thus,  absent  removals  and  resignations,  a  complete  change in board
membership  could  not  be accomplished in fewer than approximately two calendar
years.

                                       52
<PAGE>

ITEM  7A.   QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

The  table  below  provides  information about our financial instruments entered
into  for  purposes other than trading that are sensitive to changes in interest
rates.  For  our  debt  obligations,  the table presents principal repayments in
thousands  of  dollars  and current weighted averages of interest rates on these
obligations  as  of  December  31, 2002.  For our debt obligations with variable
interest  rates,  the rates presented reflect the current rates in effect at the
end  of  2002.  These  rates  are  based  on  LIBOR  plus  a  margin  of  4%  .

<TABLE>
<CAPTION>

                              Expected maturity date (In thousands)
                     --------------------------------------------------------
                                                                                                 Average
                                                                                        Fair    interest
                     2003     2004     2005     2006     2007    Thereafter    Total    value     rate
                    -------  -------  -------  -------  -------  -----------  -------  -------  ---------
<S>                 <C>      <C>      <C>      <C>      <C>      <C>          <C>      <C>      <C>
Long-term debt:
     Fixed rate. .  $ 2,535  $ 2,431  $ 9,831  $ 5,830  $ 6,834  $    31,230  $58,691  $54,582      9.18%
     Variable rate  $ 1,069  $ 1,154  $ 1,241  $ 7,289  $54,047  $         -  $64,800  $64,800      6.67%
</TABLE>

If  market  interest  rates  average  2% more in 2003 than they did in 2002, our
interest expense and net loss would increase by $1.3 million.  These amounts are
determined  by  considering  the  impact  of  hypothetical interest rates on our
outstanding  variable  rate  borrowings  as  of  December  31,  2002, and do not
consider  changes in the actual level of borrowings that may occur subsequent to
December  31,  2002.  This  analysis  also  does not consider the effects of the
reduced  level  of  overall  economic  activity  that  could  exist  in  such an
environment  nor  does  it  consider possible actions that management could take
with  respect  to  our  financial  structure  to mitigate the exposure to such a
change.

                                       53
<PAGE>

ITEM  8.   FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

The financial statements and the Independent Auditors' report are listed at Item
14  and  are  included  beginning  on  Page  F-1.

ITEM  9.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
FINANCIAL  DISCLOSURE

Not  applicable.

                                       54
<PAGE>

                                    PART III

ITEM  10.   DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

The information under the caption "Executive Officers of the Registrant" in Part
I  of  this  Form 10-K and under the captions "Election of Directors -- Nominees
for Election" and "Compliance with Section 16(a) of the Exchange Act of 1934" in
the  Company's  Proxy  Statement  relating  to  its  2003  annual  meeting  of
shareholders  (the  "Proxy  Statement")  is  hereby  incorporated  by reference.


ITEM  11.   EXECUTIVE  COMPENSATION

The  information  under  the  captions "Executive Compensation" and "Election of
Directors  --  Director Compensation" in the Company's Proxy Statement is hereby
incorporated  by  reference.


ITEM  12.   SECURITY  OWNERSHIP  OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
EQUITY  COMPENSATION  PLAN  INFORMATION

The  information  under  the  caption  "Security Ownership of Certain Beneficial
Owners  and  Management"  and  "Equity  Compensation  Plan  Information"  in the
Company's  Proxy  Statement  is  hereby  incorporated  by  reference.

ITEM  13.   CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

The  information under the caption "Certain Transactions" in the Company's Proxy
Statement  is  hereby  incorporated  by  reference.


ITEM  14.   CONTROLS  AND  PROCEDURES

We  maintain  a  set of disclosure controls and procedures and internal controls
designed  to  ensure  that  information  required to be disclosed in our filings
under  the  Securities  Exchange Act of 1934 is recorded, processed, summarized,
and  reported  within  the time periods specified in the Securities and Exchange
Commission's  rules  and  forms.  Our principal executive and financial officers
have  evaluated  our  disclosure controls and procedures within 90 days prior to
the  filing  of  this  Annual  Report on Form 10-K and have determined that such
disclosure  controls  and  procedures  are  effective.

Subsequent  to  our  evaluation,  there  were no significant changes in internal
controls  or  other  factors  that could significantly affect internal controls.

                                       55
<PAGE>
ITEM  15.   EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  REPORTS ON FORM 8-K

(a)     The  following  documents  are  filed  as  a  part  of  the  report:

(1)     FINANCIAL  STATEMENTS.  The  following  financial  statements  of  the
Registrant and the Report of Independent Public Accountants therein are filed as
part  of  this  Report  on  Form  10-K:

<TABLE>
<CAPTION>

                                                                                                  Page
                                                                                                  ----
<S>                                                                                                <C>
Independent Auditors'  Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-2
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .  F-3
Consolidated Statements of Operations . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Shareholders' Deficit and Comprehensive Operations . . . . . . . . . .  F-7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-8
</TABLE>

(2)     FINANCIAL  STATEMENT  SCHEDULES.
<TABLE>
<CAPTION>
<S>                                                                                                <C>
Independent  Auditors'  Report  on  Financial  Statement  Schedule                                 S-1
Schedule  II  Valuation  and  Qualifying  Accounts                                                 S-2
</TABLE>

Other  financial  statement  schedules have been omitted because the information
     required  to  be  set  forth therein is not applicable, is immaterial or is
     shown  in  the  consolidated  financial  statements  or  notes  thereto.


(b)     REPORTS  ON  FORM 8-K. A reports on Form 8-K was filed by the Registrant
during  the  quarter  ended  December  31, 2002, dated October 15, 2002, and was
amended  on  December  16,  2002.

(c)     EXHIBITS: The following exhibits are filed as a part of, or incorporated
by  reference  into,  this  Report  on  Form  10-K:

<TABLE>
<CAPTION>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
<S>                                                                                                     <C>         <C>
  3.1      Restated Articles of Incorporation of registrant (Exhibit 3.1). . . . . . . . . . . . . . .         (2)
  3.2      Amended and Restated Bylaws of the registrant (Exhibit 3.2) . . . . . . . . . . . . . . . .         (1)
  4.1      Forms of 6.25% Convertible Subordinated Debenture due 2006 (Exhibit 4.1). . . . . . . . . .         (2)
  4.2      Indenture dated February 15, 1996, between the registrant and Fleet National Bank
           ("Trustee") (Exhibit 4.2).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (2)
  4.3      Preferred Stock Purchase Agreement (including Designation of Rights and Preferences of
           Series A Convertible Exchangeable Redeemable Preferred Stock of Emeritus
           Corporation Agreement, Registration of Rights Agreement and
           Shareholders Agreement) dated October 24, 1997, between the
           registrant ("Seller") and Merit Partners, L.L.C. ("Purchaser")
           (Exhibit 4.1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (12)
 10.1      Amended and Restated 1995 Stock Incentive Plan (Exhibit
           99.1).                                                                                             (14)
 10.2      Stock Option Plan for Nonemployee Directors (Exhibit 10.2). . . . . . . . . . . . . . . . .         (2)
 10.3      Form of Indemnification Agreement for officers and
           directors of the registrant (Exhibit 10.3). . . . . . . . . . . . . . . . . . . . . . . . .         (1)
 10.4      Noncompetition Agreements entered into between the
           registrant and each of the following individuals:
           10.4.1   Daniel R. Baty (Exhibit 10.4.1), Raymond R.
                    Brandstrom (Exhibit 10.4.2) and Frank A. Ruffo
                    (Exhibit 10.4.3).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (2)
 10.9      Rosewood Court in Fullerton, California, the Arbor at Olive
           Grove in Phoenix, Arizona, Renton Villa in Renton,
           Washington, Seabrook in Everett, Washington, Laurel Lake
           Estates in Vorhees, New Jersey, Green Meadows--

                                       56
<PAGE>
                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------

           Allentown in Allentown, Pennsylvania, Green Meadows--Dover in Dover,
           Delaware, Green Meadows--Latrobe in Latrobe, Pennsylvania,
           Green Meadows--Painted Post in Painted Post, New York,
           Heritage Health Center in Hendersonville, North Carolina.
           The following agreements are representative of those
           executed in connection with these properties:
           10.9.1   Lease Agreement dated March 29, 1996, between the
                    registrant ("Lessee") and Health Care Property
                    Investors, Inc. ("Lessor") (Exhibit 10.10.1).. . . . . . . . . . . . . . . . . . .         (3)
           10.9.2   First Amendment Lease Agreement dated April 25,
                    1996, by and between the registrant ("Lessee")
                    and Health Care Property Investors, Inc.
                    ("Lessor") (Exhibit 10.10.2).. . . . . . . . . . . . . . . . . . . . . . . . . . .         (3)
           10.9.3   Amended and Restated Master Lease Agreement dated September 18,
                    2002, between Health Care Property Investors, Inc., HCPI Trust,
                    Texas HCP Holding, L.P. ("Lessor") and Emeritus Corporation,
                    ESC III, L.P. ("Lessee").. . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (27)
           10.9.4  Promissory Note between Emeritus Corporation ("Maker")
                   Health Care Property Investors, Inc. ("Lender"),
                   dated September 18, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . .           (27)
 10.11     Summer Wind in Boise, Idaho
           10.11.1  Lease Agreement dated as of August 31, 1995,
                    between AHP of Washington, Inc. and the
                    registrant (Exhibit 10.18.1).. . . . . . . . . . . . . . . . . . . . . . . . . . .         (1)
           10.11.2  First Amended Lease Agreement dated as of
                    December 31, 1996, by and between the registrant
                    and AHP of Washington, Inc. (Exhibit 10.16.2). . . . . . . . . . . . . . . . . . .         (5)
 10.13     The Palisades in El Paso, Texas, Amber Oaks in San Antonio,
           Texas and Redwood Springs in San Marcos, Texas. The
           following agreements are representative of those executed
           in connection with these properties.
           10.13.1  Lease Agreement dated April 1, 1997, between ESC
                    III, L.P. D/B/A Texas-ESC III, L.P. ("Lessee")
                    and Texas HCP Holding , L.P. ("Lessor") (Exhibit
                    10.4.1).                                                                                   (6)
           10.13.2  First Amendment to Lease Agreement dated April 1,
                    1997, between Lessee and Texas HCP Holding , L.P.
                    Lessor (Exhibit 10.4.2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (6)
           10.13.3  Guaranty dated April 1, 1997, by the registrant
                    ("Guarantor") in favor of Texas HCP Holding ,
                    L.P. (Exhibit 10.4.3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (6)
           10.13.4  Assignment Agreement dated April 1, 1997, between
                    the registrant ("Assignor") and Texas HCP Holding
                    , L.P. ("Assignee") (Exhibit 10.4.4).. . . . . . . . . . . . . . . . . . . . . . .         (6)
 10.15     Green Meadows Communities
           10.15.1  Consent to Assignment of and First Amendment to
                    Asset Purchase Agreement dated September 1, 1995,
                    among the registrant, The Standish Care Company
                    and Painted Post Partnership, Allentown Personal
                    Car General Partnership, Unity Partnership,
                    Saulsbury General Partnership and P. Jules Patt
                    (collectively, the "Partnerships"), together with
                    Asset Purchase Agreement dated July 27, 1995,
                    among The Standish Care Company and the
                    Partnerships (Exhibit 10.24.1).. . . . . . . . . . . . . . . . . . . . . . . . . .         (1)
           10.15.2  Agreement to Provide Administrative Services to
                    an Adult Home dated October 23, 1995, between the
                    registrant and P. Jules Patt and Pamela J. Patt
                    (Exhibit 10.24.6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (1)
           10.15.3  Assignment Agreement dated October 19, 1995,
                    between the registrant, HCPI Trust and Health
                    Care Property Investors, Inc. (Exhibit 10.24.8). . . . . . . . . . . . . . . . . .         (1)
           10.15.4  Assignment and Assumption Agreement dated August
                    31, 1995, between the registrant and The Standish
                    Care Company (Exhibit 10.24.9).. . . . . . . . . . . . . . . . . . . . . . . . . .         (1)
           10.15.5  Guaranty dated October 19, 1995, by Daniel R.
                    Baty in favor of Health Care Property Investors,
                    Inc., and HCPI Trust (Exhibit 10.24.10). . . . . . . . . . . . . . . . . . . . . .         (1)
           10.15.6  Guaranty dated October 19, 1995, by the
                    registrant in favor of Health Care Property
                    Investors, Inc. (Exhibit 10.24.11).. . . . . . . . . . . . . . . . . . . . . . . .         (1)
           10.15.7  Second Amendment to Agreement to provide
                    Administrative Services to an Adult Home dated
                    January 1, 1997, between Painted Post Partners
                    and the registrant (Exhibit 10.2). . . . . . . . . . . . . . . . . . . . . . . . .        (10)
 10.16     Carolina Communities
           10.16.1  Lease Agreement dated January 26, 1996, between
                    the registrant and HCPI Trust with respect to
                    Countryside Facility (Exhibit 10.23.1).. . . . . . . . . . . . . . . . . . . . . .         (2)

                                       57
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
           10.16.3  Promissory Note dated as of January 26, 1996, in
                    the amount of $3,991,190 from Heritage Hills
                    Retirement, Inc. ("Borrower") to Health Care
                    Property Investors, Inc. ("Lender")
                    (Exhibit 10.23.4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (2)
           10.16.4  Loan Agreement dated January 26, 1996, between
                    the Borrower and the Lender (Exhibit 10.23.5). . . . . . . . . . . . . . . . . . .         (2)
           10.16.5  Guaranty dated January 26, 1996, by the
                    registrant in favor of the Borrower (Exhibit
                    10.23.6).                                                                                  (2)
           10.16.6  Deed of Trust with Assignment of Rents, Security
                    Agreement and Fixture Filing dated as of January
                    26, 1996, by and among Heritage Hills Retirement,
                    Inc. ("Grantor"), Chicago Title Insurance Company
                    ("Trustee") and Health Care Property Investor,
                    Inc. ("Beneficiary") (Exhibit 10.23.7).. . . . . . . . . . . . . . . . . . . . . .         (2)
           10.16.7  Lease Agreement dated as of January 26, 1996,
                    between the registrant and Health Care Property
                    Investor, Inc. with respect to Heritage Lodge
                    Facility (Exhibit 10.23.8).. . . . . . . . . . . . . . . . . . . . . . . . . . . .         (2)
           10.16.8  Lease Agreement dated as of January 26, 1996,
                    between the registrant and Health Care Property
                    Investor, Inc. with respect to Pine Park Facility
                    (Exhibit 10.23.9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (2)
           10.16.9  Lease Agreement dated January 26, 1996, between
                    the registrant and HCPI Trust with respect to
                    Skylyn Facility (Exhibit 10.23.10).. . . . . . . . . . . . . . . . . . . . . . . .         (2)
           10.16.10 Lease Agreement dated January 26, 1996, between
                    the registrant and HCPI Trust with respect to
                    Summit Place Facility (Exhibit 10.23.11).. . . . . . . . . . . . . . . . . . . . .         (2)
           10.16.11 Amendment to Deed of Trust dated April 25, 1996,
                    between Heritage Hills Retirement, Inc.
                    ("Grantor"), and Health Care Property Investors,
                    Inc. ("Beneficiary") (Exhibit 10.21.12). . . . . . . . . . . . . . . . . . . . . .         (5)
 10.18     Garrison Creek Lodge in Walla Walla, Washington, Cambria
           in El Paso Texas, and Sherwood Place in Odessa, Texas.
           The following agreements are representative of those
           executed in connection with these properties:
           10.18.1  Lease Agreement dated July, August and
                    September 1996, between the registrant
                    ("Lessee") and American Health Properties, Inc.
                    ("Lessor") (Exhibit 10.3.1). . . . . . . . . . . . . . . . . . . . . . . . . . . .         (4)
           10.18.2  First Amendment to Lease Agreement dated
                    December 31, 1996, between the registrant
                    ("Lessee") and AHP of Washington, Inc.,
                    ("Lessor") (Exhibit 10.35.2).. . . . . . . . . . . . . . . . . . . . . . . . . . .         (5)
 10.20     Rosewood Court in Fullerton, California, The Arbor at
           Olive Grove in Phoenix, Arizona, Renton Villa in Renton,
           Washington, Seabrook in Everett, Washington and Laurel
           Lake Estates in Voorhees, New Jersey, Green Meadows--
           Allentown in Allentown, Pennsylvania, Green Meadows--
           Dover in Dover, Delaware, Green Meadows--Latrobe in
           Latrobe, Pennsylvania, Green Meadows--Painted Post in
           Painted Post, New York. The following agreements are
           representative of those executed in connection with these
           properties:
           10.20.1  Second Amended Lease Agreement dated as of
                    December 30, 1996, by and between the
                    registrant and Health Care Property Investors,
                    Inc. (Exhibit 10.37.1).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (5)
 10.21     Cooper George Partners Limited Partnership
           10.21.2  Partnership Interest Purchase Agreement dated
                    June 4, 1998, between Emeritus Real Estate L.L.C.
                    IV ("Seller") and Columbia Pacific Master Fund
                    98 General Partnership ("Buyer") (Exhibit
                    10.3.2).                                                                                  (15)
           10.21.4  Amended and Restated Agreement of Limited
                    Partnership of Cooper George Partners Limited
                    Partnership dated June 29, 1998, between
                    Columbia Pacific Master Fund '98 General
                    Partnership, Emeritus Real Estate IV, L.L.C.
                    and Bella Torre De Pisa Limited Partnership
                    (Exhibit 10.3.4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (15)
 10.22     Registration Rights Agreement dated February 8, 1996,
           with respect to the registrant's 6.25%
           Convertible Subordinated Debentures due 2006 (Exhibit
           10.44).                                                                                             (2)
 10.23     Registration Rights Agreement dated February 8, 1996,
           with respect to the registrant's 6.25%
           Convertible Subordinated Debentures due 2006 (Exhibit
           10.45).                                                                                             (2)
 10.24     Office Lease Agreement dated April 29, 1996, between
           Martin Selig ("Lessor") and the registrant ("Lessee")
           (Exhibit 10.8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (3)
 10.25     Colonie Manor in Latham, New York, Bassett Manor in
           Williamsville, New York, West Side Manor in Liverpool, New
           York, Bellevue Manor in Syracuse, New York, Perinton Park
           Manor in Fairport, New York, Bassett Park Manor in
           Williamsville, New York, Woodland Manor in Vestal, New York,
           East Side Manor in Fayetteville, New York and West Side Manor
           in Rochester, New York. The following agreement is
           representative of those executed in connection with these
           properties:

                                       58
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
           10.25.1  Lease Agreement dated September 1, 1996, between
                    Philip Wegman ("Landlord") and Painted Post
                    Partners ("Tenant") (Exhibit 10.4.1).. . . . . . . . . . . . . . . . . . . . . . .         (4)
           10.25.2  Agreement to Provide Administrative Services to an
                    Adult Home dated September 2, 1996, between the
                    registrant and Painted Post Partners ("Operator")
                    (Exhibit 10.4.2).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (4)
           10.25.3  First Amendment to Agreement to Provide
                    Administrative Services to an Adult Home dated
                    January 1, 1997, between Painted Post Partners and
                    the registrant (Exhibit 10.1). . . . . . . . . . . . . . . . . . . . . . . . . . .        (10)
 10.26     Columbia House Communities.
           10.26.1  Management Services Agreement between the
                    Registrant ("Manager") and Columbia House, L.L.C.
                    ("Lessee") dated November 1, 1996, with respect to
                    Camlu Retirement (Exhibit 10.6.1). . . . . . . . . . . . . . . . . . . . . . . . .         (4)
           10.26.2  Management Services Agreement dated January 1,
                    1998, between the registrant ("Manager") and
                    Columbia House L.L.C. ("Lessee") with respect to York
                    Care.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (13)
           10.26.4  Management Services Agreement dated June 1, 1997,
                    between the registrant ("Manager") and Columbia
                    House L.L.C. ("Owner") with respect to Autumn Ridge
                    (Exhibit 10.3.1).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (9)
           10.26.6  Assignment and First Amendment to Agreement to
                    Provide Management Services dated September 1,
                    1997, between the registrant, Columbia House,
                    L.L.C., Acorn Service Corporation and Camlu Coeur
                    d'Alene, L.L.C. with respect to Camlu. . . . . . . . . . . . . . . . . . . . . . .        (13)
           10.26.7  Assignment and First Amendment to Agreement to
                    Provide Management Services dated September 1,
                    1997, between the registrant, Columbia House,
                    L.L.C., Acorn Service Corporation and Autumn Ridge
                    Herculaneum, L.L.C. with respect to Autumn Ridge.. . . . . . . . . . . . . . . . .        (13)
           10.26.8  Management Services Agreement dated January 1,
                    1998, between the registrant ("Manager") and
                    Columbia House L.L.C. ("Owner") with respect to Park
                    Lane.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (13)
 10.27     Vickery Towers in Dallas, Texas
           10.27.1  Partnership Interest Purchase and Sale Agreement
                    dated June 4, 1998, between ESC GP II, Inc. and
                    Emeritus Properties IV, Inc. (together "Seller")
                    and Columbia Pacific Master Fund 98 General
                    Partnership and Daniel R. Baty (together
                    "Purchaser") (Exhibit 10.4.1). . . . . . . . . . . . . . . . . . . . . . . . . . .        (15)
           10.27.2  Amended and Restated Agreement of Limited
                    Partnership of ESC II, LP dated June 30, 1998,
                    between Columbia Pacific Master Fund '98 General
                    Partnership and Daniel R. Baty (Exhibit 10.4.2). . . . . . . . . . . . . . . . . .        (15)
           10.27.3  Agreement to Provide Management Services To An
                    Independent and Assisted Living Facility dated June
                    30, 1998, between ESC II, LP ("Owner") and ESC III,
                    LP ("Manager") (Exhibit 10.4.3). . . . . . . . . . . . . . . . . . . . . . . . . .        (15)
 10.29     Development Properties in Auburn, Massachusetts, Louisville,
           Kentucky and Rocky Hill, Connecticut. The following
           agreements are representative of those executed in connection
           with these properties:
           10.29.1  Lease Agreement dated February 1996, between the
                    registrant ("Lessee") and LM Auburn Assisted Living
                    L.L.C., and LM Louisville Assisted Living L.L.C.,
                    ("Landlords") with respect to the development
                    properties in Auburn and Louisville (Exhibit
                    10.58.1).                                                                                  (5)
           10.29.2  Amended and Restated Lease Agreement dated February
                    26, 1996, between the registrant ("Lessee") and LM
                    Rocky Hill Assisted Living Limited Partnership,
                    ("Landlord") with respect to the development
                    property in Rocky Hill (Exhibit 10.58.2).. . . . . . . . . . . . . . . . . . . . .         (5)
           10.29.3  Lease Agreement dated October 10, 1996, between the
                    registrant ("Lessee") and LM Chelmsford Assisted
                    Living L.L.C., ("Landlord") with respect to the
                    development property in Chelmsford (Exhibit
                    10.58.3).                                                                                  (5)
           10.29.4  Promissory Note in the amount of $1,255,000 dated
                    December 1996, between the registrant ("Lender")
                    and LM Auburn Assisted Living L.L.C., ("Borrower")
                    with respect to the development property in
                    Auburn (Exhibit 10.58.4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (5)
           10.29.5  Promissory Note in the amount of $1,450,000 dated
                    January 1997, between the registrant ("Lender")
                    and LM Louisville Assisted Living L.L.C.,
                    ("Borrower") with respect to the development
                    property in Louisville (Exhibit 10.58.5).. . . . . . . . . . . . . . . . . . . . .         (5)
           10.29.6  Promissory Note in the amount of $1,275,000 dated
                    January 1997, between the registrant ("Lender")
                    and LM Rocky Hill Assisted Living Limited
                    Liability Partnership, ("Borrower") with respect
                    to the development property in Rocky Hill
                    (Exhibit 10.58.6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (5)

                                       59
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
           10.29.7  Promissory Note in the amount of $300,000 dated
                    January 1997, between the registrant ("Lender")
                    and LM Chelmsford Assisted Living L.L.C.,
                    ("Borrower") with respect to the development
                    property in Chelmsford (Exhibit 10.58.7).. . . . . . . . . . . . . . . . . . . . .         (5)
           10.29.8  Real Estate Purchase and Sale Agreement under the purchase
                    option on the lease dated January 1, 2000, between Auburn
                    Land L.L.C. ("Seller") and Emeritus Properties XIV, L.L.C. ("Buyer")
                    dated August 26, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (27)
           10.29.9  Sublease Termination and Release Agreement between
                    Sage Assisted Living L.L.C. ("Landlord") and Emeritus
                    Properties XIV, L.L.C. ("Tenant") dated August 26, 2002.. . . . . . . . . . . . .         (27)
 10.31     Senior Management Employment Agreements and Amendments
           entered into between the registrant and each of the
           following individuals:
           10.31.1  Frank A. Ruffo (Exhibit 10.6.2) and Raymond R. Brandstrom (Exhibit 10.6.5).. . . .         (9)
           10.31.2  Raymond R. Brandstrom (Exhibit 10.11.1) and Frank A. Ruffo (Exhibit10.11.3). . . .         (9)
 10.32     La Casa Grande in New Port Richey, Florida, River Oaks in
           Englewood, Florida, and Stanford Centre in Altamonte
           Springs, Florida. The following agreements are
           representative of those executed in connection with these
           properties.
           10.32.1  Stock Purchase Agreement dated September 30,
                    1996, between Wayne Voegele, Jerome Lang, Ronald
                    Carlson, Thomas Stanford, Frank McMillan, Lonnie
                    Carlson, and Carla Holweger ("Seller") and the
                    registrant ("Purchaser") with respect to La Casa
                    Grande (Exhibit 10.1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (7)
           10.32.2  First Amendment to Stock Purchase Agreement dated
                    January 31, 1997, between the Seller and the
                    registrant with respect to La Case Grande
                    (Exhibit 10.2).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (7)
           10.32.3  Stock Purchase Agreement dated September 30,
                    1996, between the Seller and the registrant with
                    respect to River Oaks (Exhibit 10.3).. . . . . . . . . . . . . . . . . . . . . . .         (7)
           10.32.4  First Amendment to Stock Purchase Agreement dated
                    January 31, 1997, between the Seller and the
                    registrant with respect to River Oaks (Exhibit
                    10.4).                                                                                     (7)
           10.32.5  Stock Purchase Agreement dated September 30,
                    1996, between the Seller and the registrant with
                    respect to Stanford Centre (Exhibit 10.5). . . . . . . . . . . . . . . . . . . . .         (7)
           10.32.6  First Amendment to Stock Purchase Agreement dated
                    January 31, 1997, between the Seller and the
                    registrant with respect to Stanford Centre
                    (Exhibit 10.6).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (7)
 10.33     Painted Post Partnership
           10.33.1  Painted Post Partners Partnership Agreement dated
                    October 1, 1995 (Exhibit 10.24.7). . . . . . . . . . . . . . . . . . . . . . . . .         (1)
           10.33.2  First Amendment to Painted Post Partners
                    Partnership Agreement dated October 22, 1996,
                    between Daniel R. Baty and Raymond R. Brandstrom
                    (Exhibit 10.20.20).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (5)
           10.33.3  Indemnity Agreement dated November 3, 1996,
                    between the registrant and Painted Post Partners
                    (Exhibit 10.3).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (10)
           10.33.4  First Amendment to Indemnity Agreement dated
                    January 1, 1997, between the registrant and
                    Painted Post Partners (Exhibit 10.4).. . . . . . . . . . . . . . . . . . . . . . .        (10)
           10.33.5  Undertaking and Indemnity Agreement dated October
                    23, 1995, between the registrant, P. Jules Patt
                    and Pamela J. Patt and Painted Post Partnership
                    (Exhibit 10.5).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (10)
           10.33.6  First Amendment to Undertaking and Indemnity
                    Agreement dated January 1, 1997, between Painted
                    post Partners and the registrant (Exhibit 10.6). . . . . . . . . . . . . . . . . .        (10)
           10.33.7  First Amendment to Non-Competition Agreement
                    between the registrant and Daniel R. Baty
                    (Exhibit 10.1.1) and Raymond R. Brandstrom
                    (Exhibit 10.1.2).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (11)
 10.34     Ridgeland Court in Ridgeland, Mississippi
           10.34.1  Master Agreement and Subordination Agreement
                    dated September 5, 1997, between the
                    registrant, Emeritus Properties I, Inc., and
                    Mississippi Baptist Health Systems, Inc.
                    (Exhibit 10.1.1).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (12)
           10.34.2  License Agreement dated September 5, 1997,
                    between the registrant and its subsidiary and
                    affiliated corporations and Mississippi Baptist
                    Health Systems, Inc. (Exhibit 10.1.2). . . . . . . . . . . . . . . . . . . . . . .        (12)
           10.34.3  Economic Interest Assignment Agreement and
                    Subordination Agreement dated September 5,
                    1997, between the registrant, Emeritus
                    Properties I, Inc., and Mississippi Baptist
                    Health Systems, Inc. (Exhibit 10.1.3). . . . . . . . . . . . . . . . . . . . . . .        (12)
           10.34.4  Operating Agreement for Ridgeland Assisted
                    Living, L.L.C. dated December 23, 1998, between
                    the registrant,

                                       60
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
                    Emeritust Properties XI, L.L.C.
                    and Mississippi Baptist Medical Enterprises,
                    Inc. (Exhibit 10.46.4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (16)
           10.34.5  Purchase and Sale Agreement dated December 23,
                    1998, between the registrant and Meditrust
                    Company L.L.C(Exhibit 10.46.5).. . . . . . . . . . . . . . . . . . . . . . . . . .        (16)
 10.36     Amendment to Office Lease Agreement dated September 6,
           1996, between Martin Selig ("Lessor") and the registrant. . . . . . . . . . . . . . . . . .        (13)
 10.37     Villa Del Rey in Escondido, California
           10.37.1  Purchase and Sale Agreement dated December 19,
                    1996, between the registrant ("Purchaser") and
                    Northwest Retirement ("Seller") (Exhibit
                    10.1.1).                                                                                   (6)
 10.38     Development Property in Paso Robles, California
           10.38.1  Agreement of TDC/Emeritus Paso Robles
                    Associates dated June 1, 1995, between the
                    registrant and TDC Convalescent, Inc. (Exhibit
                    10.2.1).                                                                                   (6)
           10.38.7  Purchase and Sale Agreement between TDC Convalescent, Inc.
                    ("Seller") and the registrant ("Purchaser") dated March 26, 2002.. . . . . . . . .        (25)
 10.41     Development Property in Danville, Illinois
           10.41.1  Purchase and Sale Agreement dated October 14,
                    1997, between South Bay Partners, Inc.
                    ("Purchaser") and Elks Lodge No. 332, BPOE
                    ("Seller") (Exhibit 10.74.1).. . . . . . . . . . . . . . . . . . . . . . . . . . .        (13)
           10.41.2  Assignment and Assumption of Purchase and Sale
                    Agreement dated October 21, 1997, between South
                    Bay Partners, Inc. and the registrant (Exhibit
                    10.74.2).                                                                                 (13)
 10.43     Sanyo Electric Co., Ltd.
           10.43.1  Agreement entered into on May 30, 1996, between
                    the registrant and Sanyo Electric Co., Ltd. for
                    the interest in jointly entering the
                    development, construction and /or operation of
                    the Senior Housing Business in Japan (Exhibit
                    10.76.1).                                                                                 (13)
           10.43.2  Joint Venture Agreement entered into on July 9,
                    1997, between the registrant and Sanyo Electric
                    Co., Ltd. (Exhibit 10.76.2). . . . . . . . . . . . . . . . . . . . . . . . . . . .        (13)
 10.45     1998 Employee Stock Purchase Plan (Exhibit 99.2). . . . . . . . . . . . . . . . . . . . . .        (14)
 10.49     Richland Gardens in Richland, Washington, Charlton Place
           in Tacoma Washington, The Pines of Goldsboro in
           Goldsboro, North Carolina, Silverleaf Manor in Meridian,
           Mississippi and Wilburn Gardens in Fredericksburg,
           Virginia. The following agreement is representative of
           those executed in connection with these properties.
           10.49.1  Agreement To Provide Management Services To An
                    Assisted Living Facility dated February 2,
                    1998, between Richland Assisted, L.L.C.
                    ("Owner") and Acorn Service Corporation
                    ("Manager") (Exhibit 10.9.1).. . . . . . . . . . . . . . . . . . . . . . . . . . .        (15)
 10.50     Richland Gardens in Richland, Washington, The Pines of
           Goldsboro in Goldsboro, North Carolina, Silverleaf Manor
           in Meridian, Mississippi, Wilburn Gardens in
           Fredericksburg, Virginia and Park Lane in Toledo, Ohio.
           The following agreement is representative of those
           executed in connection with these properties.
           10.50.1  Marketing Agreement dated February 2, 1998,
                    between Acorn Service Corporation ("Acorn") and
                    Richland Assisted, L.L.C. ("RAL.L.C.") (Exhibit
                    10.10.1).                                                                                 (15)
 10.51     Kirkland Lodge in Kirkland, Washington
           10.51.1  Purchase and Sale Agreement dated December 23,
                    1998, between the registrant and Meditrust
                    Company L.L.C(Exhibit 10.46.5).. . . . . . . . . . . . . . . . . . . . . . . . . .        (16)
           10.51.2  Loan Agreement dated December 28, 1998, between
                    Emeritus Properties X, L.L.C and Guaranty
                    Federal Bank (Exhibit 10.65.2).. . . . . . . . . . . . . . . . . . . . . . . . . .        (16)
           10.51.3  Promissory Note Agreement dated December 28,
                    1998, between Emeritus Properties X, L.L.C and
                    Guaranty Federal Bank (Exhibit 10.65.3). . . . . . . . . . . . . . . . . . . . . .        (16)
           10.51.4  Guaranty Agreement dated December 28, 1998,
                    between the registrant and Guaranty Federal
                    Bank (Exhibit 10.65.3).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (16)
 10.52     Emeritrust Communities
           10.52.1  Purchase and Sale Agreement dated December 30,
                    1998, between the registrant, Emeritus
                    Properties VI, Inc., ESC I, L.P. and AL
                    Investors L.L.C(Exhibit 10.66.1).. . . . . . . . . . . . . . . . . . . . . . . . .        (16)
           10.52.2  Supplemental Purchase Agreement in Connection
                    with Purchase of Facilities dated December 30,
                    1998, between the registrant, Emeritus
                    Properties I, Inc. Emeritus Properties VI,
                    Inc., ESC I, L.P. and AL Investors L.L.C

                                       61
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
                    (Exhibit 10.66.2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (16)
           10.52.3  Management Agreement with Option to Purchase
                    dated December 30, 1998, between the
                    registrant, Emeritus Management I LP, Emeritus
                    Properties I, Inc, ESC I, L.P., Emeritus
                    Management L.L.C. and AL Investors L.L.C(Exhibit
                    10.66.3).                                                                                 (16)
           10.52.4  Guaranty of Management Agreement and Shortfall
                    Funding Agreement dated December 30, 1998,
                    between the registrant and AL Investors L.L.C
                    (Exhibit 10.66.4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (16)
           10.52.5  Put and Purchase Agreement dated December 30,
                    1998, between Daniel R. Baty and AL Investors
                    L.L.C(Exhibit 10.66.5) Second Emeritrust.. . . . . . . . . . . . . . . . . . . . .        (16)
           10.52.6  First Amendment to Management Agreement with Option
                    to Purchase (AL I - Emeritrust 25 Facilities) dated March 22, 2001,
                    between the registrant, Emeritus Management I LP, and AL
                    Investors L.L.C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (24)
           10.52.7  Amendment to Guaranty of Management Agreement and
                    Shortfall Funding Agreement (Emeritrust 25) dated March 22, 2001,
                    between the registrant and AL Investors L.L.C. . . . . . . . . . . . . . . . . . . .      (24)
           10.52.8  Second Amendment to Put and Purchase Agreement (AL I -
                    Emeritrust 25 Facilities) dated March 22, 2001, between Daniel R.
                    Baty and AL Investors L.L.C . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (24)
           10.52.9  Second Amendment to Management Agreement with Option to
                    Purchase (AL I - Emeritrust 25 Facilities) dated January 1, 2002,
                    between the registrant, Emeritus Management I LP, and AL
                    Investors L.L.C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (24)
           10.52.10 Third Amendment to Put and Purchase Agreement (AL I -
                    Emeritrust 25 Facilities) dated January 1, 2002, between Daniel R. Baty
                    and AL Investors L.L.C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (24)
           10.52.11 Waiver, Consent, and Amendment to Management Agreement dated
                    May 1, 2002, (AL I-Laurel Place) between Emeritus Management, L.L.C.,
                    the registrant, and AL I Investors, L.L.C.. . . . . . . . . . . . . . . . . . . . . . .   (25)
 10.53     Emeritrust II Communities
           10.53.1  Supplemental Purchase Agreement in Connection
                    with Purchase of Facilities (AL II--14
                    Operating Facilities) dated March 26,1999,
                    between the registrant, Emeritus Properties I,
                    Inc., ESC G.G. I, Inc., ESC I, L.P. and AL
                    Investors II LLC. (Exhibit 10.1.1).. . . . . . . . . . . . . . . . . . . . . . .        (17)
           10.53.2  Management Agreement with Option to Purchase
                    (AL II--14 Operating Facilities) dated March
                    26, 1999, between the registrant, Emeritus
                    Management I LP, Emeritus Properties I, Inc.,
                    ESC G.P. I, Inc., ESC I, L.P., Emeritus
                    Management L.L.C. and AL Investors II L.L.C. (Exhibit
                    10.1.2).                                                                                  (17)
           10.53.3  Guaranty of Management Agreement (AL II--14
                    Operating Facilities) dated March 26, 1999,
                    between the registrant and AL Investors II L.L.C.
                    (Exhibit 10.1.3).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (17)
           10.53.4  Supplemental Purchase Agreement in Connection
                    with Purchase of Facilities (AL II--5
                    Development Facilities) dated March 26, 1999,
                    between the registrant, Emeritus Properties I,
                    Inc. and AL Investors Development L.L.C. (Exhibit
                    10.1.4).                                                                                  (17)
           10.53.5  Management Agreement with Option to Purchase
                    (AL II--5 Development Facilities) dated
                    March 26, 1999, between the registrant,
                    Emeritus Properties I, Inc., Emeritus
                    Management LLC and AL Investors Development LLC
                    (Exhibit 10.1.5).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (17)
           10.53.6  Guaranty of Management Agreement and Shortfall
                    Funding Agreement (AL II--5 Development
                    Facilities) dated March 26, 1999, between the
                    registrant and AL Investors Development LLC
                    (Exhibit 10.1.6).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (17)
           10.53.7  Put and Purchase Agreement (AL II Holdings--14
                    Operating Facilities and 5 Development
                    Facilities) dated March 26, 1999, between
                    Daniel R. Baty and AL II Holdings L.L.C., AL
                    Investors II L.L.C. and AL Investors Development
                    L.L.C. (Exhibit 10.1.7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (17)
           10.53.8  Second Amendment to Management Agreement (AL II -
                    14 Operating Facilities) (GMAC) dated March 22, 2001, between the
                    registrant, Emeritus Management L.L.C., Emeritus Management I,
                    and AL Investors II L.L.C. . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (24)
           10.53.9  Second Amendment to Put and Purchase Agreement (AL
                    II Holdings - 14 Operating Facilities and 5 Development Facilities)
                    dated March 22, 2001, between Daniel R. Baty and AL II Holdings
                    L.L.C., AL Investors II L.L.C. and AL Investors Development L.L.C. . . . . . . . .        (24)
           10.53.10 First Amendment to Management Agreement (AL II -
                    5 Development Facilities) dated January 1, 2002, between the
                    registrant, Emeritus Management L.L.C., and AL Investors
                    Development L.L.C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (24)
           10.53.11 Third Amendment to Put and Purchase Agreement (AL II
                    Holdings - 14 Operating Facilities and 5 Development Facilities)
                    dated January 1, 2002, between Daniel R. Baty and AL II Holdings
                    L.L.C., AL Investors II L.L.C., and AL

                                       62
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
                    Investors Development L.L.C. . . . . . . . .                                              (24)
           10.53.12 Third Amendment to Management Agreement (AL II -
                    14 Operating Facilities) (GMAC) dated January 1, 2002, between
                    the registrant, Emeritus Management L.L.C., Emeritus Management I LP,
                    and AL Investors II L.L.C . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (24)
 10.54     Meadow Lodge at Drum Lodge Hill in Chelmsford,
           Massachusetts
           10.54.1  Purchase and Sales Agreement dated April 23,
                    1999, between LM Chelmsford Assisted Living,
                    L.L.C. ("Seller") and the registrant ("purchaser")
                    (Exhibit 10.1.1).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (18)
 10.55     Meadow Lodge at Drum Hill in Chelmsford, Massachusetts,
           Cobblestones at Fairmont in Manassas, Virginia, Kirkland
           Lodge in Kirkland, Washington and Ridgeland Pointe in
           Ridgeland, Mississippi. The following agreements are
           representative of those executed in conjunction with these
           properties.
           10.55.1   Fixed Rate Note dated September 29, 1999,
                     between Amresco Capital, L.P. ("Payee") and the
                     registrant ("Maker") (Exhibit 10.2.1).. . . . . . . . . . . . . . . . . . . . . .        (18)
           10.55.2   Mortgage and Security Agreement dated September
                     29, 1999, between Amresco Capital, L.P.
                     (Mortgagee") and the registrant ("mortgagor")
                     (Exhibit 10.2.2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (18)
 10.56     Series B Preferred Stock Purchase Agreement dated as of
           December 10, 1999, between Emeritus Corporation and Saratoga
           Partners IV, L.P. (Exhibit 4.1).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (19)
 10.57     Designation of Rights and Preferences of Series B
           Convertible Preferred Stock as filed with the Secretary of
           State of Washington on December 29, 1999 (Exhibit 4.2). . . . . . . . . . . . . . . . . . .        (19)
 10.58     Shareholders Agreement dated as of December 30, 1999, among
           Emeritus Corporation, Daniel R. Baty, B.F., Limited
           Partnership and Saratoga Partners IV, L.P. (Exhibit 4.3). . . . . . . . . . . . . . . . . .        (19)
 10.59     Registration Rights Agreement dated as of December 30, 1999,
           between Emeritus Corporation and Saratoga Partners IV, L.P.
           (Exhibit 4.4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (19)
 10.60     Investment Agreement dated as of December 30, 1999, among
           Emeritus Corporation, Daniel R. Baty, B.F., Limited
           Partnership and Saratoga Partners IV, L.P., Saratoga
           Partners IV, L.P. and Saratoga Management Company L.L.C
           (Exhibit 4.5).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (19)
 10.62     Emerald Hills in Auburn
           10.62.2  Lease agreement dated September 5, 2001, between Health
                    Care Property Investors, Inc. ("Lessor"), and Emeritus
                    Corporation ("Lessee").. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (24)
 10.63     Sierra Hills in Cheyenne, Wyoming
           10.63.1  Lease agreement dated September 29, 2000, and
                    effective October 1, 2000, between HR
                    Acquisitions I Corporation ("Lessor") and
                    Emeritus Corporation ("Lessee").. . . . . . . . . . . . . . . . . . . . . . . . .         (20)
           10.63.2  Lease Assignment and  Operations Transfer Agreement dated
                    September 30, 2001, between Emeritus Corporation ("Tenant")
                    and Sierra Hills Assisted Living Community, L.L.C., ("Assignee")
                    and Jon M. and Kristin P. Harder, husband and wife, Darryl E.
                    and Carol L. Fisher, husband and wife, Eric W. and Marti M.
                    Jacobson, husband and wife and Sunwest Management, Inc.
                    ("Guarantor").. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (24)
 10.65     Loyalton of Hattiesburg in Hattiesburg, Mississippi
           10.65.2  Purchase agreement for Hattiesburg between ALCO XII L.L.C.
                    ("Seller") and the registrant ("Purchaser") dated March  27, 2002.. . . . . . . .         (25)
 10.66     Loyalton of Biloxi in Biloxi, Mississippi
           10.66.2  Lease agreement dated September 5, 2001, between Health
                    Care Property Investors, Inc. ("Lessor"), and Emeritus
                    Corporation ("Lessee"). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (24)
10.67     Amended 1998 Employee Stock Purchase Plan (as amended and
          restated on May 19, 1999, and August 17, 2001).  (Appendix B). . . . . . . . . . . . . .            (23)
10.68     Kingsley Place at Alexandria, Louisiana, Kingsley Place at Lake Charles,
              Louisiana, Kingsley Place at Lafayette, Louisiana, Kingsley Place
              of Shreveport, Louisiana, Kingsley Place of Henderson, Texas,
              Kingsley Placeat Oakwell Farms, Texas, Kingsley Place at the Medical
              Center, Texas, Kingsley Place at Stonebridge, Texas. The following
              agreements are representative of those executed in connection
              with these properties:
           10.68.1  Horizon Bay Lease Facilities Purchase Agreement between Integrated
                    Living Communities of Alexandria, L.L.C, Integrated Living Communities
                    of Lake Charles, L.L.C., Integrated Living Communities of Lafayette, L.L.C.,

                                       63
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
                    Integrated Living Communities of Henderson, L.P., Integrated Living
                    Communities of Oakwell, L.P., Integrated Living Communities of
                    San Antonio, L.P., and Integrated Living Communities of McKinney, L.P.,
                    (collectively, the  "Seller") and the registrant ("Purchaser") dated
                    April 4, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.2  Horizon Bay Purchase Agreement between the registrant ("Purchaser")
                    and Senior Lifestyle Shreveport, L.L.C. ("Seller"), dated April 17, 2002. . . . .         (25)
           10.68.3  First Amendment to the Horizon Bay Lease Facilities Purchase
                    Agreement between the registrant ("Purchaser") and Integrated Living
                    Communities of Alexandria, L.L.C,  Integrated Living Communities
                    of Lake Charles, L.L.C., Integrated Living Communities of Lafayette, L.L.C.,
                    Integrated Living Communities of Henderson, L.P., Integrated Living
                    Communities of Oakwell, L.P., Integrated Living Communities of
                    San Antonio, L.P., and Integrated Living Communities of McKinney, L.P.,
                    (collectively, the  "Seller") dated May 1, 2002.. . . . . . . . . . . . . . . . .         (25)
           10.68.4  First Amendment to the Horizon Bay Purchase Agreement
                    between the registrant ("Purchaser") and Senior Lifestyle
                    Shreveport, L.L.C. ("Seller"), dated May 1, 2002. . . . . . . . . . . . . . . . .         (25)
           10.68.5  Amended and restated funding agreement between the registrant
                    and HB-ESC I, L.L.C., HB-ESC II, L.L.C., and HB-ESC V, L.P.,
                    dated May 1, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.6  Agreement to provide management services to assisted living
                    facilities (Lafayette) between HB-ESC II, L.P., and the registrant
                    dated May 1, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.7  Agreement to provide management services to assisted living
                    facilities (Lake Charles) between HB-ESC II, L.P., and the registrant
                    dated May 1, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.8  Agreement to provide management services to assisted living
                    facilities (Alexandria) between HB-ESC II, L.P., and the registrant
                    dated May 1, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.9  Agreement to provide management services to assisted living
                    facilities (Shreveport) between HB-ESC I, L.P., and the registrant
                    dated May 1, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.10 Agreement to provide management services to assisted living
                    facilities (Henderson) between HB-ESC V, L.P., and the registrant
                    dated May 9, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.11 Agreement to provide management services to assisted living
                    facilities (Medical Center) between HB-ESC V, L.P., and the registrant
                    dated May 9, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.12 Agreement to provide management services to assisted living
                    facilities (Oakwell Farms) between HB-ESC V, L.P., and the registrant
                    dated May 9, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.13 Agreement to provide management services to assisted living
                    facilities (Stonebridge) between HB-ESC V, L.P., and the registrant
                    dated May 9, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (25)
           10.68.14 Second Amendment to the Horizon Bay Purchase Agreement
                    between the registrant ("Purchaser") and Senior Lifestyle
                    Shreveport, L.L.C. ("Seller"), dated May 31, 2002.. . . . . . . . . . . . . . . .         (25)
           10.68.15 Third Amendment to the Horizon Bay Purchase Agreement
                    between the registrant ("Purchaser") and Senior Lifestyle
                    Shreveport, L.L.C. ("Seller"), dated June 14, 2002. . . . . . . . . . . . . . . .         (25)
           10.68.16 Fourth Amendment to the Horizon Bay Purchase Agreement
                    between the registrant ("Purchaser") and Senior Lifestyle
                    Shreveport, L.L.C. ("Seller"), dated June 28, 2002. . . . . . . . . . . . . . . .         (25)
10.69     Willow Park and West Wind in Boise, Idaho,  Sunshine Villa in Santa Cruz,
              California, Orchard Park in Clovis, California, Willow Creek in Folsom,
              California, Regent Court in Medesto, California, Villa Sera in Salinas,
              California, Regent House in Merced, California, Regent Senior Living in
              West Covina, California, Sheldon Park in Eugene, Oregon, Regency Park in
              Portland, Oregon, Regent Court in Corvalis, Oregon, Hamilton House in
              San Antonio, Texas, Regent Court at Scottsdale and Desert Flower
              in Scottsdale, Arizona, Sterling Park in Redmond, Washington, Regent Court
              in Kent, Washington, and Northshore House in Kenmore, Washington
              The following agreements are representative of those executed in connection
              with these properties:
           10.69.1  Amended and Restated Agreement to provide management services
                    to Assisted Living Facilities between  Regent Assisted Living, Inc.
                    ("Owner"), and the registrant ("Manager") dated December 31, 2001. . . . . . . .          (25)
           10.69.2  Amended and Restated Agreement to provide accounting and
                    consulting services to California Assisted Living Facilities between
                    Regent Assisted Living, Inc. ("Owner"), and the registrant ("Manager")
                    dated December 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (25)

                                       64
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
           10.69.3  Agreement to provide management services to Washington
                    Assisted Living Facilities between  Regent Assisted Living, Inc.
                    ("Owner"), and the registrant ("Manager") dated December 31, 2001. . . . . . . .          (25)
           10.69.4  Agreement to provide accounting and consulting services to
                    California Assisted Living Facilities (Willow Creek-Folsom) between
                    Regent Assisted Living, Inc. ("Owner"), and the registrant ("Manager")
                    dated February 15, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (25)
           10.69.5  Lease and Working Capital Agreement between Sacramento County
                    Assisted, L.L.C.("Landlord") and Regent Assisted Living, Inc.("Tenant")
                    dated February 15, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (25)
           10.69.6  Assignment and Release Agreement between Regent Assisted Living,
                    Inc.("Assignor"), the registrant ("Assignee"), and Sacramento County
                    Assisted, L.L.C. ("Landlord") dated July 2, 2002.. . . . . . . . . . . . . . . .          (25)
           10.69.7  First Amendment to  Lease and Working Capital Agreement between
                    Sacramento County Assisted, L.L.C. ("Landlord")  and the registrant
                    ("Tenant") dated July 2, 2002. . . . . . . . . . . . . . . . . . . . . . . . . .          (25)
           10.69.8  Agreement and Consent of Assignment of Lease between . . . . . . . . . . . . . . .        (27)
                    Texas HCP Holding, Inc. ("Lessor"), Regent Assisted Living ("Assignor"),
                    ESC III, L.P. ("Assignee") dated September 18, 2002. . . . . . . . . . . . . . .          (27)
           10.69.9  Lease Assignment and Operations Transfer Agreement between . . . . . . . . . . . .        (27)
                    Regent Assisted Living ("Tenant") and ESC III, L.P. ("Assignee")
                    dated September 18, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . .          (27)
10.70     Loyalton Court at Scottsdale, Arizona.  The following agreements are
          representative of those executed in connection with the property:
           10.70.1  Agreement to provide management services to Assisted Living
                    Facilities (Scottsdale) between Scottsdale Assisted, L.L.C, ("Owner")
                    and the registrant ("Manager") dated February 8, 2002. . . . . . . . . . . . . .          (25)
           10.70.2  First Amendment to Management Agreement (Scottsdale) between
                    Scottsdale Assisted, L.L.C, ("Owner") and the registrant ("Manager")
                    dated February 15, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (25)
10.71     Lodge at Eddy Pond, Massachusetts.  The following agreements are
          representative of those executed in connection with the property:
           10.71.1  Loan Agreement between Heller Healthcare Finance, Inc. ("Lender")
                    and Emeritus Properties XIV, L.L.C. ("Borrower") dated August 26, 2002.. . . . .          (27)
           10.71.2  Promissory Note A between Heller Healthcare Finance, Inc. ("Holder")
                    and Emeritus Properties XIV, L.L.C. ("Maker") dated August 26, 2002. . . . . . .          (27)
           10.71.3  Subordinate Promissory Note B between Heller Healthcare
                    Finance, Inc. ("Holder") and Emeritus Properties XIV, L.L.C.
                    ("Maker") dated August 26, 2002. . . . . . . . . . . . . . . . . . . . . . . . .          (27)
           10.71.4  Real Property Mortgage with Power of Sale and Security
                    Agreement (Massachusetts) dated August 21, 2002. . . . . . . . . . . . . . . . .          (27)
           10.71.5  Collateral Assignment of Management Agreement and
                    Waiver of Property Management and Broker Liens
                    dated August 26, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (27)
           10.71.6  Guaranty by registrant ("Guarantor") to Heller Healthcare Finance,
                    Inc. ("Lender") dated August 26, 2002.. . . . . . . . . . . . . . . . . . . . . .         (27)
           10.71.7  Lease and Rent Assignment Agreement between Emeritus
                    Properties XIV, L.L.C. ("Assignor") to Heller Healthcare Finance,
                    Inc. ("Assignee") dated August 21, 2002.. . . . . . . . . . . . . . . . . . . . .         (27)
           10.71.8  Side Letter regarding Deutsche Bank Refinancing and the registrants
                    intent on refinancing with Heller Healthcare Finance, Inc. ("Lender")
                    dated August 26, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (27)
           10.71.9  Senior Housing Rider between Emeritus Properties XIV, L.L.C. ("Borrower"),
                    Emeritus Corporation ("Manager") and Heller Healthcare Finance,
                    Inc. ("Lender") dated August 26, 2002. . . . . . . . . . . . . . . . . . . . . .          (27)
           10.71.10 Hazardous Materials Indemnity Agreement between Emeritus
                    Properties XIV, L.L.C. ("Borrower"), Emeritus Corporation ("Guarantor")
                    and Heller Healthcare Finance, Inc. ("Lender") dated August 26, 2002.. . . . . .          (27)
10.72     Champion Oaks, Texas, Collin Oaks, Texas, Galleria Oaks, Alabama,
          Loyalton of Austin, Texas, Loyalton of Lake Highlands, Texas,
          Memorial Oaks, Texas, Meridian Oaks, Indiana, Sugar Land Oaks, Texas,
          Tanglewood Oaks, Texas, Woodbridge Estates, Texas, Village Oaks at
          Chandler, Arizona,  Cielo Vista, Texas,  Conway, Florida,  Farmers Branch, Texas,
          Fort Wayne, Indiana,  Glendale, Arizona,  Greenwood, Indiana,
          Hollywood Park, Texas,  Las Vegas, Nevada,  Melbourne, Florida,  Mesa, Arizona,
          Orange Park, Florida,  Southpoint, Florida,  Tuskawilla, Florida.  The following
          agreements are representative of those executed in connection with the properties:
           10.72.1  Master Lease Agreement between various subsidiaries and
                    affiliates of Fretus Investors L.L.C. ("Landlord") and

                                       65
<PAGE>

                                                                                                            Footnote
  Number                              Description                                                            Number
 ---------  -------------------------------------------------------------------------------------------    ------------
                    Emeritus Properties-NGH, L.L.C. and ESC-NGH, L.P. ("Tenant")
                    dated October 1, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (26)
10.73    Concorde, Nevada, Courtyard at the Willows, Washington, Fulton Villa, California,
              Juniper Meadows, Idaho , La Casa Grande, Florida , Lodge at Eddy Pond, Massachusetts,
              River Oaks, Florida, Silver Pines, Iowa , Springmeadows, Montana,
              Stanford Centre, Florida, Villa del Rey, California.  The following agreements
              are representative of those executed in connection with these properties:
           10.73.1  Master Lease by Emeritus Realty II, LLC, Emeritus Realty III, LLC,
                    Emeritus  Realty V, LLC, Emeritus Realty VII, LLC, Emeritus Realty XIV, LLC,
                    Emeritus  Realty Puyallup, LLC, Emeritus Realty Bozeman, LLC,
                    ESC-Port St. Richie,  LLC, (collectively and Emeritus Corporation,
                    Emeritus Properties II,  Inc., Emeritus Properties III, Inc.,
                    Emeritus Properties V, Inc., Emeritus  Properties XIV, LLC,
                    ESC-New Port Richey, LLC, ESC-Bozeman, LLC, dated  December 6, 2002. . . . . . .          (28)
           10.73.2  Loan Agreement by and between General Electric Capital Corporation,
                    a  Delaware corporation, and Emeritus Realty II, LLC, Emeritus Realty III, LLC,
                    Emeritus Realty V, LLC, Emeritus Realty VII, LLC, Emeritus Realty XIV, LLC,
                    Emeritus Realty Bozeman, LLC, Emeritus Realty Puyallup, LLC,
                    ESC-Port St.  Richie. LLC, dated December 6, 2002. . . . . . . . . . . . . . . .          (28)
           10.73.3  Promissory Note A by Emeritus Realty II, LLC, Emeritus Realty III, LLC,
                    Emeritus Realty V, LLC, Emeritus Realty VII, LLC, Emeritus Realty XIV, LLC,
                    Emeritus Realty Bozeman, LLC, Emeritus Realty Puyallup, LLC,
                    ESC-Port St.  Richie. LLC, to General Electric Capital Corporation,
                    a Delaware corporation,  dated December 6, 2002. . . . . . . . . . . . . . . . .          (28)
           10.73.4  Subordinated Promissory Note B by ESC-Port St. Richie, LLC,
                    a Washington  limited liability company, to General Electric
                    Capital Corporation, dated  December 6, 2002.. . . . . . . . . . . . . . . . . .          (28)
           10.73.5  Loan Agreement by and between Emeritus Realty Corporation,
                    a Nevada  corporation and Health Care Property Investors, Inc.,
                    a Maryland corporation,  dated December 6, 2002. . . . . . . . . . . . . . . . .          (28)
           10.73.6  Promissory Note by Emeritus Realty Corporation, a Nevada corporation,
                    to Health Care Property investors, Inc., a Maryland corporation,
                    dated December  6, 2002.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (28)
10.74    Hearthside Issaquah, Washington.  The following agreements are representative
         of those executed in connection with these properties:
           10.74.1  Second Amendment to Loan Agreement by and between Emeritus
                    Properties XIII, LLC ("Borrower") and GMAC Commercial Mortgage
                    Corporation, ("Lender") dated January 29, 2003. . . . . . . . . . . . . . . . . .         (28)
           10.74.2  Restatement, Amendment, and Bifurcation of Promissory Note A
                    between Emeritus Properties XIII, LLC  ("Borrower"), and GMAC Commercial
                    Mortgage Corporation  ("Lender") dated January 29, 2003.. . . . . . . . . . . . .         (28)
           10.74.3  Restatement, Amendment, and Bifurcation of Promissory Note B
                    between Emeritus Properties XIII, LLC  ("Borrower"), and GMAC Commercial
                    Mortgage Corporation  ("Lender") dated January 29, 2003.. . . . . . . . . . . . .         (28)
           10.74.4  Amendment to Promissory Note between M&M Properties ("Holder")
                    and Emeritus Corporation and Emeritus Properties XIII, LLC  ("Maker")
                    dated January 29, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (28)
 21.1      Subsidiaries of the registrant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (28)
 23.1      Consent of KPMG LLP.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (28)
 99.1      Certification of Periodic Reports
           99.1.1   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002 for Daniel R. Baty dated
                    March 27, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (28)(29)
           99.1.2   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002 for Raymond R. Brandstrom
                    dated March 27, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (28)(29)
 99.2      Press Releases
           99.2.1   Press Release dated October 1, 2002, announcing the 24
                    Marriott community acquisition.  . . . . . . . . . . . . . . . . . . . . .                (26)
           99.2.2   Press Release dated March 25, 2003, reports on fourth quarter and year
                    2002 results.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (28)
</TABLE>


     (1)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Registration  Statement  on  Form  S-1  (File  No. 33-97508) declared
effective  on  November  21,  1995.
     (2)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Annual  Report  on  Form  10-K (File No. 1-14012) on March 29, 1996.

                                       66
<PAGE>

     (3)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Second  Quarter  Report on Form 10-Q (File No. 1-14012) on August 14,
1996.
     (4)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Third  Quarter Report on Form 10-Q (File No. 1-14012) on November 14,
1996.
     (5)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Annual  Report  on  Form  10-K (File No. 1-14012) on March 31, 1997.
     (6)     Incorporated  by  reference to the indicated exhibit filed with the
Company's First Quarter Report on Form 10-Q (File No. 1-14012) on May 15, 1997.
     (7)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Current  Report  on  Form  8-K  (File  No. 1-14012) on May 16, 1997.
     (8)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Current Report on Form 8-K Amendment No. 1 (File No. 1-14012) on July
14,  1997.
     (9)     Incorporated  by  reference to the indicated exhibit filed with the
Company's  Second  Quarter  Report on Form 10-Q (File No. 1-14012) on August 14,
1997.
(10)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Registration  Statement  on  Form  S-3  Amendment  No.  2  (File  No.
333-20805)  on  August  14,  1997.
(11)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Registration  Statement  on  Form  S-3  Amendment  No.  3  (File  No.
333-20805)  on  October  29,  1997.
(12)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Third  Quarter Report on Form 10-Q (File No. 1-14012) on November 14,
1997.
(13)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Annual  Report  on  Form  10-K  (File No. 1-14012) on March 30, 1998.
(14)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Registration  Statement  on Form S-8 (File No. 333-60323) on July 31,
1998.
(15)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Second  Quarter  Report on Form 10-Q (File No. 1-14012) on August 14,
1998
(16)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Annual  Report  on  Form  10-K  (File No. 1-14012) on March 31, 1999.
(17)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  First Quarter Report on Form 10-Q (File No. 1-14012) on May 10, 1999.
(18)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Third  Quarter Report on Form 10-Q (File No. 1-14012) on November 15,
1999.
(19)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Form  8-K  (File  No.  1-14012)  on  January  14,  2000.
(20)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Third  Quarter Report on Form 10-Q (File No. 1-14012) on November 14,
2000.
(21)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Annual  Report  on  Form  10-K  (File  No. 1-14012) on April 2, 2001.
(22)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Current  Report  on  Form  8-K  (File  No. 1-14012) on July 18, 2001.
(23)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Definitive  Proxy  Statement  on  Form  DEF  14A  on August 17, 2001.
               (24)   Incorporated  by  reference to the indicated exhibit filed
with  the  Company's  Annual Report on Form 10-K (File No. 1-14012) on March 29,
2002.
(25)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Second  Quarter  Report on Form 10-Q (File No. 1-14012) on August 14,
2002.
(26)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Form  8-K  (File  No.  1-14012)  on  October  15,  2002.
(27)     Incorporated  by  reference  to  the  indicated  exhibit filed with the
Company's  Third  Quarter  Report on Form 10-Q (File No. 1-14012) on November 8,
2002.
(28)   Filed  herewith.
(29)   A  signed  original of this written statement required by Section 906 has
been  provided  to  Emeritus  Corporation  and  will  be  retained  by  Emeritus
Corporation and furnished to the Securities and Exchange Commission or its staff
upon  request

                                       67
<PAGE>

                                   SIGNATURES

Pursuant  to  the  requirements of 13 Of 15(d) Of The Securities Exchange Act of
1934,  The  registrant has duly caused this report to be signed on its behalf by
the  undersigned  thereunto  duly  authorized.


                                                         EMERITUS  CORPORATION
                                                             (Registrant)

Dated:  March  28,  2003


                                   SIGNATURES

Pursuant  to  the  requirements of 13 of 15(d) of the Securities Exchange Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the  undersigned  thereunto  duly  authorized.


                                           Emeritus Corporation
                                               (Registrant)

Dated: March 28, 2003

<TABLE>
<CAPTION>



<S>                           <C>

                   Signature. . . . . . . . . .  Title
          ----------------------------  ---------------------------


          /s/   Daniel R. Baty . . . .  Chief Executive Officer and
          ----------------------------
          Daniel R. Baty . . . . . . .  Chairman of the Board


          /s/   Raymond R. Brandstrom.  Vice President of Finance,
          ----------------------------
          Raymond R. Brandstrom. .  .   Secretary, and Chief Financial
                                        Officer


          /s/   Patrick Carter . . . .  Director
          ----------------------------
          Patrick Carter


          /s/   Charles P. Durkin. . .  Director
          ----------------------------
          Charles P. Durkin


          /s/   David Hamamoto . . . .  Director
          ----------------------------
          David Hamamoto


          /s/   David W. Niemiec . . .  Director
          ----------------------------
          David W. Niemiec

</TABLE>

                                       68
<PAGE>
                                 CERTIFICATIONS


I,  Daniel  R.  Baty,  Chief  Executive  Officer,  certify  that:
1.  I  have  reviewed  this  annual report on Form 10-K of Emeritus Corporation;

2.  Based  on  my  knowledge,  this  annual  report  does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  we  have:
a)  designed  such  disclosure  controls  and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is  made  known  to  us by others within those entities, particularly during the
period  in  which  the  annual  report  is  being  prepared;
b)  evaluated  the  effectiveness  of  the  issuer's  disclosure  controls  and
procedures  as  of a date within 90 days prior to the filing date of this annual
report  (the  "Evaluation  Date");  and
c)  presented  in  this Annual report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on  our  evaluation as of the
Evaluation  Date;

5.  The registrant's other certifying officer and I have disclosed, based on our
most  recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a)  all significant deficiencies in the design or operation of internal controls
(a  pre-existing  term  relating  to  internal  controls  regarding  financial
reporting) which could adversely affect the issuer's ability to record, process,
summarize  and  report  financial  data  and  have  identified  for the issuer's
auditors  any  material  weaknesses  in  internal  controls;  and
b)  any  fraud,  whether  or  not  material,  that  involves management or other
employees  who  have  a  significant role in the issuer's internal controls; and

6.  The  registrant's  other  certifying  officer  and  I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of their evaluation, including any corrective actions with regard to
significant  deficiencies  and  material  weaknesses.

                                            /S/    Daniel  R.  Baty
                                            Daniel  R.  Baty
                                            Chief  Executive  Officer
                                            March  27,  2003


                                       69
<PAGE>
                                 CERTIFICATIONS

I,  Raymond  R.  Brandstrom,  certify  that:
1.  I  have  reviewed  this  annual report on Form 10-K of Emeritus Corporation;

2.  Based  on  my  knowledge,  this  annual  report  does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  we  have:
a)  designed  such  disclosure  controls  and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is  made  known  to  us by others within those entities, particularly during the
period  in  which  the  annual  report  is  being  prepared;
b)  evaluated  the  effectiveness  of  the  issuer's  disclosure  controls  and
procedures  as  of a date within 90 days prior to the filing date of this annual
report  (the  "Evaluation  Date");  and
c)  presented  in  this Annual report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on  our  evaluation as of the
Evaluation  Date;

5.  The registrant's other certifying officer and I have disclosed, based on our
most  recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a)  all significant deficiencies in the design or operation of internal controls
(a  pre-existing  term  relating  to  internal  controls  regarding  financial
reporting) which could adversely affect the issuer's ability to record, process,
summarize  and  report  financial  data  and  have  identified  for the issuer's
auditors  any  material  weaknesses  in  internal  controls;  and
b)  any  fraud,  whether  or  not  material,  that  involves management or other
employees  who  have  a  significant role in the issuer's internal controls; and

6.  The  registrant's  other  certifying  officer  and  I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of their evaluation, including any corrective actions with regard to
significant  deficiencies  and  material  weaknesses.

                                            /S/    Raymond  R.  Brandstrom
                                            Raymond  R.  Brandstrom
                                            Chief  Financial  Officer
                                            March  27,  2003



                                       70
<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                  Page
                                                                                                  ----
<S>                                                                                                <C>
Independent Auditors'  Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-2
Consolidated Balance Sheets as of December 31, 2002 and 2001. . . . . . . . . . . . . . . . . . .  F-3
Consolidated Statements of Operations for the years ended December 31, 2002, 2001, and 2000 . . .  F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000 . . .  F-5
Consolidated Statements of Shareholders' Deficit and Comprehensive Operations for the years ended
   December 31, 2002, 2001, and 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-8
Independent Auditors'  Report on Financial Statement Schedule . . . . . . . . . . . . . . . . . .  S-1
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . .  S-2
</TABLE>

                                       F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The  Board  of  Directors  and  Shareholders
Emeritus  Corporation

We  have  audited  the  consolidated  balance sheets of Emeritus Corporation and
subsidiaries  ("the  Company") as of December 31, 2002 and 2001, and the related
consolidated  statements  of operations, shareholders' deficit and comprehensive
operations,  and cash flows for each of the years in the three-year period ended
December  31,  2002.  These  consolidated  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Emeritus Corporation
and  subsidiaries  as  of  December  31, 2002 and 2001, and the results of their
operations  and  their cash flows for each of the years in the three-year period
ended  December  31,  2002,  in  conformity with accounting principles generally
accepted  in  the  United  States  of  America.

/s/KPMG  LLP
Seattle,  Washington
March  14,  2003
                                       F-2
<PAGE>

<TABLE>
<CAPTION>

                                                EMERITUS CORPORATION
                                             CONSOLIDATED BALANCE SHEETS
                                          (IN THOUSANDS, EXCEPT SHARE DATA)
                                                       ASSETS


                                                                                       December 31,    December 31,
                                                                                           2002            2001
                                                                                      --------------  --------------
<S>                                                                                   <C>             <C>
Current Assets:
 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $       6,960   $       9,811
 Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,759           1,376
 Trade accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . .          1,662           1,172
 Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          3,645           2,859
 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . .          5,217           2,463
 Property held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              -           2,242
                                                                                      --------------  --------------
         Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .         20,243          19,923
                                                                                      --------------  --------------
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . .        119,583         131,200
Property held for development. . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,254           1,040
Notes receivable from and investments in affiliates. . . . . . . . . . . . . . . . .          6,358           3,675
Restricted deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          5,555           5,520
Lease acquisition costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .          6,081           4,864
Other assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          3,759           2,206
                                                                                      --------------  --------------
         Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     162,833   $     168,428
                                                                                      ==============  ==============

                                       LIABILITIES AND SHAREHOLDERS' DEFICIT

Current Liabilities:
 Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .  $       3,604   $       4,523
 Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          3,108           2,105
 Accrued employee compensation and benefits. . . . . . . . . . . . . . . . . . . . .          5,355           3,301
 Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,737           2,861
 Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,463           1,415
 Accrued dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . ..         13,457           7,429
 Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          9,080           8,690
 Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,884               -
 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          5,040           1,699
                                                                                      --------------  --------------
     Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .         46,728          32,023
                                                                                      --------------  --------------
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . .        119,887         131,070
Convertible debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         32,000          32,000
Deferred gain on sale of communities . . . . . . . . . . . . . . . . . . . . . . . .         20,324          18,671
Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,508           2,404
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .            894             256
                                                                                      --------------  --------------
     Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        222,341         216,424
                                                                                      --------------  --------------
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            558           1,145
Redeemable preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         25,000          25,000
Commitments and contingencies
Shareholders' Deficit:
Preferred stock, $.0001 par value. Authorized 70,000 shares; issued and outstanding
    33,473 and 30,609 at December 31, 2002, and December 31, 2001, respectively. . .              -               -
Common stock, $.0001 par value. Authorized 40,000,000 shares; issued and
    outstanding 10,247,226 and 10,196,030 shares at December 31, 2002, and
    December 31, 2001, respectively. . . . . . . . . . . . . . . . . . . . . . . . .              1               1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         68,944          67,686
Accumulated other comprehensive gain (loss). . . . . . . . . . . . . . . . . . . . .          1,247            (136)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (155,258)       (141,692)
                                                                                      --------------  --------------
     Total shareholders' deficit . . . . . . . . . . . . . . . . . . . . . . . . . .        (85,066)        (74,141)
                                                                                      --------------  --------------
     Total liabilities and shareholders' deficit . . . . . . . . . . . . . . . . . .  $     162,833   $     168,428
                                                                                      ==============  ==============
</TABLE>


          See accompanying notes to consolidated financial statements.
                                       F-3
<PAGE>


<TABLE>
<CAPTION>

                                     EMERITUS CORPORATION
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                             (In thousands, except per share data)


                                                           Year Ended December 31,
                                            -------------------------------------------------
                                                 2002             2001             2000
                                            ---------------  ---------------  ---------------
<S>                                         <C>              <C>              <C>
 Revenues:
   Community revenue . . . . . . . . . . .  $      137,662   $      129,561   $      118,655
   Other service fees. . . . . . . . . . .           4,575            2,291            1,977
   Management fees . . . . . . . . . . . .          10,892            8,725            4,560
                                            ---------------  ---------------  ---------------
           Total operating revenues. . . .         153,129          140,577          125,192
                                            ---------------  ---------------  ---------------
 Expenses:
   Community operations. . . . . . . . . .          93,822           80,829           76,838
   General and administrative. . . . . . .          21,112           17,864           17,429
   Depreciation and amortization . . . . .           7,223            7,260            7,383
   Facility lease expense. . . . . . . . .          29,975           27,123           24,255
                                            ---------------  ---------------  ---------------
           Total operating expenses. . . .         152,132          133,076          125,905
                                            ---------------  ---------------  ---------------
           Income (loss) from operations .             997            7,501             (713)

 Other income (expense):
   Interest income . . . . . . . . . . . .             403              980              990
   Interest expense. . . . . . . . . . . .         (11,728)         (13,296)         (15,066)
   Other, net. . . . . . . . . . . . . . .           4,105              581           (7,147)
                                            ---------------  ---------------  ---------------
           Net other expense . . . . . . .          (7,220)         (11,735)         (21,223)
                                            ---------------  ---------------  ---------------

           Net loss. . . . . . . . . . . .          (6,223)          (4,234)         (21,936)

 Preferred stock dividends . . . . . . . .           7,343            6,368            5,327
                                            ---------------  ---------------  ---------------
           Net loss to common shareholders  $      (13,566)  $      (10,602)  $      (27,263)
                                            ===============  ===============  ===============

 Loss per common share - basic and diluted  $        (1.33)  $        (1.04)  $        (2.69)
                                            ===============  ===============  ===============

 Weighted average number of common shares
       outstanding - basic and diluted . .          10,207           10,162           10,117
                                            ===============  ===============  ===============
</TABLE>


          See accompanying notes to consolidated financial statements.
                                       F-4
<PAGE>


<TABLE>
<CAPTION>

                                                     EMERITUS CORPORATION
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (In thousands)
                                                                                          Year  ended  December  31,
                                                                                ----------------------------------------------
                                                                                     2002            2001            2000
                                                                                --------------  --------------  --------------
<S>                                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      (6,223)  $      (4,234)  $     (21,936)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . .          7,223           7,260           7,213
      Amortization of deferred gains . . . . . . . . . . . . . . . . . . . . .           (320)           (221)           (190)
      Gain on refinancings and sale of properties, net . . . . . . . . . . . .         (4,544)         (1,392)              -
      Write down of lease acquisition costs. . . . . . . . . . . . . . . . . .            262             835               -
      Write down of loan fees and amortization . . . . . . . . . . . . . . . .            381               -               -
      Write off of deferred gain . . . . . . . . . . . . . . . . . . . . . . .            265               -               -
      Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . . .            (71)            466             359
      Write off of property held for development . . . . . . . . . . . . . . .              -               -           1,267
      Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            364             894             377
   Changes in operating assets and liabilities:. . . . . . . . . . . . . . . .              -               -               -
      Trade accounts receivable. . . . . . . . . . . . . . . . . . . . . . . .           (419)            179            (281)
      Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . .           (404)              -               -
      Prepaid expenses and other current assets. . . . . . . . . . . . . . . .         (2,545)            265             (55)
      Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .          1,003          (1,038)           (491)
      Accrued employee compensation and benefits . . . . . . . . . . . . . . .          2,054             852            (909)
      Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (1,259)           (130)            194
      Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . .          1,048            (391)           (228)
      Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . .            (33)           (531)          4,593
      Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,884               -               -
      Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . .          3,485             484             691
      Security deposits and other long-term liabilities. . . . . . . . . . . .            627              14             (14)
      Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            104             272             245
                                                                                --------------  --------------  --------------
            Net cash provided by (used in) operating activities. . . . . . . .          3,882           3,584          (9,165)
                                                                                --------------  --------------  --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Acquisition of property and equipment. . . . . . . . . . . . . . . . . .        (11,698)         (1,429)        (11,441)
      Purchase of minority partner interest. . . . . . . . . . . . . . . . . .         (3,070)              -               -
      Proceeds from sale of facilities, property, and equipment. . . . . . . .         25,010           2,350             565
      Construction expenditures - leased communities . . . . . . . . . . . . .         (1,154)           (694)           (197)
      Change in restricted cash. . . . . . . . . . . . . . . . . . . . . . . .              -               -          13,500
      Repayments from and (advances to) investments in affiliates, net . . . .           (941)          2,699           2,199
      Distribution to minority partners. . . . . . . . . . . . . . . . . . . .           (500)              -               -
      Additions to lease acquisition costs . . . . . . . . . . . . . . . . . .         (2,229)           (416)           (943)
      Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . .         (2,971)              -               -
      Sale of investments in affiliates. . . . . . . . . . . . . . . . . . . .            750               -               -
                                                                                --------------  --------------  --------------
            Net cash provided by investing activities. . . . . . . . . . . . .          3,197           2,510           3,683
                                                                                --------------  --------------  --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Decrease (increase) in restricted deposits . . . . . . . . . . . . . . .            (35)            748             261
      Proceeds from (repayment of) short-term borrowings, net. . . . . . . . .         (2,210)         (1,650)            650
      Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . .        120,838             145           7,879
      Repayment of long-term borrowings. . . . . . . . . . . . . . . . . . . .       (125,092)         (3,067)         (2,883)
      Repurchase/retirement of common stock. . . . . . . . . . . . . . . . . .              -               -          (1,400)
      Payment of preferred stock dividends . . . . . . . . . . . . . . . . . .              -               -          (4,024)
      Debt issue and other financing costs . . . . . . . . . . . . . . . . . .         (3,374)              -               -
      Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (57)             45            (365)
                                                                                --------------  --------------  --------------
            Net cash provided by (used in) financing activities. . . . . . . .         (9,930)         (3,779)            118
                                                                                --------------  --------------  --------------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . .         (2,851)          2,315          (5,364)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . .          9,811           7,496          12,860
                                                                                --------------  --------------  --------------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . .  $       6,960   $       9,811   $       7,496
                                                                                ==============  ==============  ==============

                                       F-5
<PAGE>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
      Cash paid during the year for interest . . . . . . . . . . . . . . . . .  $      12,852   $      13,426   $      13,659
                                                                                ==============  ==============  ==============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
      Transfer of property held for sale to property and equipment . . . . . .          2,028               -               -
      Transfer of property and equipment to property held for sale . . . . . .              -               -             270
      Transfer of property and equipment from property held for development. .            214             730               -
      Notes receivable from buyer in sales . . . . . . . . . . . . . . . . . .              -           1,000               -
      Assumption of debt by buyer in sale. . . . . . . . . . . . . . . . . . .              -           3,162               -
      Unrealized holding gains (losses) in investment securities . . . . . . .          1,383             951            (709)
      Series B preferred stock in-kind dividends . . . . . . . . . . . . . . .          1,315           1,268           1,224
      Accrued preferred stock cash dividends . . . . . . . . . . . . . . . . .          6,028           5,100           2,329
      Transfer of other assets to property and equipment . . . . . . . . . . .              -               -           1,002
</TABLE>


           See accompanying notes to consolidated financial statements.
                                       F-6
<PAGE>

<TABLE>
<CAPTION>

                                                       EMERITUS CORPORATION
                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT AND COMPREHENSIVE OPERATIONS
                                                (In thousands, except share data)


                                                                                            Accum.
                                     Preferred stock       Common stock                     other
                                    -----------------   ------------------    Additional     Comp.                    Total
                                     Number              Number                paid-in      income      Accum.     shareholders'
                                    of shares  Amount   of shares   Amount     capital      (loss)     deficit        deficit
                                    ---------  ------  -----------  -------  ------------  ---------  ----------  ---------------
<S>                                 <C>        <C>     <C>          <C>      <C>           <C>        <C>         <C>
 Balances at December 31, 1999 . .     30,000       -  10,323,950   $     1  $    66,916   $   (380)  $(103,827)  $      (37,290)
 Unrealized loss on investment
    securities . . . . . . . . . .          -       -           -         -            -       (708)          -             (708)
 Additional costs from issuance of
    preferred stock .. . . . . . .          -       -           -         -         (516)         -           -             (516)
 Foreign currency translation
    adjustment . . . . . . . . . .          -       -           -         -            -          1           -                1
 Repurchase of common stock. . . .          -       -    (260,200)        -       (1,400)         -           -           (1,400)
 Issuances of shares under
    Employee Stock Purchase Plan .          -       -      56,295         -          149          -           -              149
 Preferred stock dividends . . . .        609       -           -         -        1,224          -      (5,327)          (4,103)
 Net loss for the year ended
    December  31, 2000 . . . . . .          -       -           -         -            -          -     (21,936)         (21,936)
                                    ---------  ------  -----------  -------  ------------  ---------  ----------  ---------------
 Balances at December 31, 2000 . .     30,609       -  10,120,045   $     1  $    66,373   $ (1,087)  $(131,090)  $      (65,803)
 Unrealized gain on investment
    securities . . . . . . . . . .          -       -           -         -            -        951           -              951
 Issuances of shares under
    Employee Stock Purchase Plan .          -       -      75,985         -           45          -           -               45
 Preferred stock dividends . . . .          -       -           -         -        1,268          -      (6,368)          (5,100)
 Net loss for the year ended
    December  31, 2001 . . . . . .          -       -           -         -            -     (4,234)     (4,234)
                                    ---------  ------  -----------  -------  ------------  ---------  ----------  ---------------
 Balances at December 31, 2001 . .     30,609       -  10,196,031   $     1  $    67,686   $   (136)  $(141,692)  $      (74,141)
 Unrealized gain on investment
    securities . . . . . . . . . .          -       -           -         -            -      1,383           -            1,383
Issuances of shares under
    Employee Stock Purchase Plan,
      net of repurchases. . . . .          -        -      43,695         -          (73)         -           -              (73)
Options Exercised . . . . . . . .          -        -       7,501         -           16          -           -               16
 Preferred stock dividends . . . .      2,864       -           -         -        1,315          -      (7,343)          (6,028)
 Net loss for the year ended
   December 31, 2002 . . . . . . .          -       -           -         -            -          -      (6,223)          (6,223)
                                    ---------  ------  -----------  -------  ------------  ---------  ----------  ---------------
 Balances at December 31, 2002 . .     33,473       -  10,247,226   $     1  $    68,944   $  1,247   $(155,258)  $      (85,066)
                                    =========  ======  ===========  =======  ============  =========  ==========  ===============
</TABLE>


           See accompanying notes to consolidated financial statements.
                                       F-7
<PAGE>

                              EMERITUS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)     DESCRIPTION  OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description  of  Business

Emeritus  Corporation  ("Emeritus"  or the "Company") is a nationally integrated
assisted  living  company  focused  on  operating residential style communities.
These  communities provide a residential housing alternative for senior citizens
who  need help with the activities of daily living, with an emphasis on assisted
living  and  personal care services.  The Company owns 17 communities and leases
67  communities.  These  84 communities comprise the communities included in the
consolidated  financial  statements.

In  addition,  the  Company also provides management services to independent and
related-party  owners  of  assisted  living  communities  for  an  additional 96
communities,  for  which only management fees are recognized in the consolidated
financial  statements.

The  management agreements include management agreements covering 46 communities
in  connection  with  the  Emeritrust  transactions,  which  are  referred  to
extensively  throughout  these  financial  statements,  detailed  as  follows:

*    EMERITRUST  I:  25  communities that the Company began managing in December
     1998.  Until  December 31, 2001, the Company received a base management fee
     of  5% of gross revenues, but was entitled to receive up to 7% depending on
     the  cash  flow  performance  of  the communities managed. As of January 1,
     2002,  however,  the  Company received a base management fee of 3% of gross
     revenues,  but  may receive up to 7% depending on the cash flow performance
     of  the  communities  managed. Additionally, the Company is required by its
     management  contracts  to  fund  cash  operating deficits. In May 2002, the
     Company entered into an agreement for a third party to operate one of these
     communities.  The new operator has responsibility for all economic benefits
     and  detriments  and an option to purchase this community from the owner of
     the  community.

*    EMERITRUST  II:  21  communities  that  the Company began managing in March
     1999,  consisting  of:

     *    EMERITRUST  II  OPERATING: 16 communities for which the Company has no
          obligation  to  fund  cash  operating deficits. The Company receives a
          base  management fee of 5% of gross revenues, but may receive up to 7%
          depending  on  the  cash  flow performance of the communities managed.

     *    EMERITRUST  II  DEVELOPMENT:  5  communities  for which the Company is
          required  to fund cash operating deficits. The Company receives a base
          management  fee  of  5%  of  gross  revenues, but may receive up to 7%
          depending  on  the  cash  flow performance of the communities managed.

                                       F-8
<PAGE>

Other  management  agreements  are  as  follows:

*    management  agreements covering 30 communities owned by entities controlled
     by  Mr. Baty, the Company's Chairman and Chief Executive Officer and one of
     its  principal  shareholders.  The  Company generally receives fees ranging
     from  4%  to  6%  of  the  gross  revenues  generated  by  the communities.

*    management  agreements  covering two communities owned by joint ventures in
     which the Company has a financial interest. The Company receives management
     fees  ranging  from  4%  to  7%  of  gross  revenues.

*     management  agreements  covering  four  communities  owned  by independent
parties.  The  Company  receives  management fees ranging from 4% to 7% of gross
revenues,  or  similar  arrangement  based  on  occupied  capacity.

*     management  agreements  covering  14  communities owned by Regent Assisted
Living,  Inc. The Company receives a flat management fee of $8,000 per community
with  opportunities  to  earn  additional  fees  based  on  operating cash flow.

Summary  of  Significant  Accounting  Policies  and  Use  of  Estimates

The  preparation  of  these  financial  statements  requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,  and  related  disclosure  of  contingent  assets  and
liabilities. On an ongoing basis, the Company evaluates its estimates, including
those  related  to  resident  programs  and  incentives, bad debts, investments,
intangible  assets, income taxes, financing operations, restructuring, long-term
service  contracts,  contingencies, insurance deductibles, health insurance, and
litigation.  The  Company  bases  its  estimates on historical experience and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances,  the  results  of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other  sources.  Actual  results may differ from these estimates under different
assumptions  or  conditions.

The  Company  believes the following accounting policies are most significant to
the  judgments  and  estimates  used  in  the  preparation  of  its consolidated
financial  statements.  Revisions in such estimates are charged to income in the
period  in  which  the  facts  that  give  rise  to  the  revision become known.

*     The  Company  utilizes  third-party  insurance  providers  for  losses and
liabilities  associated with general and professional liability insurance claims
subject  to established self-insured retention levels on a per occurrence basis.
Losses  up  to  these  self-insured  retention  levels  are  accrued  based upon
actuarially determined estimates of the aggregate liability for claims incurred.

*     For  health  insurance, the Company self-insures up to a certain level for
each  occurrence  above  which  a  catastrophic  insurance  policy  covers  any
additional  costs.  Health  insurance  expense  is accrued based upon historical
experience  of  the aggregate liability for claims incurred.  If these estimates
are  insufficient,  additional  charges  may  be  required.

*  The  Company  maintains allowances for doubtful accounts for estimated losses
resulting  from the inability of its residents to make required payments. If the
financial  condition  of  the  Company's

                                       F-9
<PAGE>
residents  were  to  deteriorate, resulting in an impairment of their ability to
make  payments,  additional  charges  may  be  required.

*     The  Company  holds  shares in ARV Assisted Living, Inc. amounting to less
than  5%  of its shares.  ARV is publicly traded and has a volatile share price.
The  Company  records  an  investment  impairment  charge  when it believes this
investment  has  experienced  a  decline  in value that is other than temporary.
Future adverse changes in market conditions or poor operating results underlying
this  investment  could result in losses or an inability to recover the carrying
value  of  the investment that may not be reflected in this investment's current
carrying  value,  thereby possibly requiring an impairment charge in the future.

*     The  Company  records  a  valuation  allowance  to reduce its deferred tax
assets  to the amount that is more likely than not to be realized, which at this
time  shows  a  net  asset  valuation of zero.  While the Company has considered
future  taxable  income and ongoing prudent and feasible tax planning strategies
in assessing the need for the valuation allowance, in the event the Company were
to  determine  that  it  would be able to realize its deferred tax assets in the
future  in  excess of its net recorded amount, an adjustment to the deferred tax
asset  would  increase  income  in  the  period  such  determination  was  made.


Basis  of  Presentation  and  Principles  of  Consolidation

The  consolidated  financial  statements include the accounts of the Company and
its majority-owned subsidiaries.  In addition, the accounts of limited liability
companies  and  partnerships  are  consolidated  where  the  Company  maintains
effective  control  over such entities' assets and operations, notwithstanding a
lack of technical majority ownership.  The Company's management contracts do not
result  in  control  and  those  entities are not consolidated.  All significant
inter-company  balances  and  transactions  are  eliminated  in  consolidation.


Revenue  Recognition

Operating  revenue  consists  of  resident  fee  revenue and management services
revenue.  Resident  units  are  rented  on  a  month-to-month  basis and rent is
recognized  in  the  month the unit is occupied.  Service fees paid by residents
for  assisted  living  and  other  related  services  and  management  fees  are
recognized  in the period services are rendered.  Management services revenue is
comprised of revenue from management contracts and is recognized in the month in
which  services  are  performed  in  accordance with the terms of the management
contract.

In  2001  and  prior years, the Company recognized nonrefundable move-in fees at
the time the resident occupied the unit and the related services were performed.
This  treatment  was not materially different than recognition of such fees over
the  average  period of occupancy.  However, in 2002, the Company began charging
significantly higher fees for move-ins than were previously charged.  Therefore,
the  Company  has  instituted  a  policy  consistent  with  SEC Staff Accounting
Bulletin  101  "Revenue Recognition", to defer such fees and recognize them over
the  average  period of occupancy, approximately 16 months.  The Company has not
deferred  any  of  the  costs  related  to  move-ins.

                                       F-10
<PAGE>

Cash  and  Cash  Equivalents

Cash  and  cash  equivalents  consist  primarily  of  money  market investments,
commercial paper and certificates of deposit with a maturity date at purchase of
three  months or less.  Cash equivalents at December 31, 2002, and 2001 were not
material.


Property  and  Equipment

Property  and  equipment  are  stated at cost. Depreciation and amortization are
computed  using  the straight-line method over the estimated useful lives of the
assets  as  follows:  buildings  and  improvements,  25  to 40 years; furniture,
equipment  and  vehicles,  five to seven years; leasehold improvements, over the
lease  term.

The Company accounts for impairment of long-lived assets, which include property
and  equipment,  investments,  amortizable  intangible  assets, and goodwill, in
accordance  with the provisions of SFAS No. 144 Accounting for the Impairment or
Disposal  of  Long-Lived  Assets  or  SFAS No. 142 Goodwill and Other Intangible
Assets, as applicable.  An impairment review is performed annually or whenever a
change  in  condition occurs which indicates that the carrying amounts of assets
may not be recoverable.  Such changes include changes in our business strategies
and  plans,  changes  in  the quality or structure of our relationships with our
partners,  and  deteriorating  operating  performance of individual communities.
The  Company  uses a variety of factors to assess the realizable value of assets
depending  on  their  nature and use.  Such assessments are primarily based upon
the  sum of expected future undiscounted net cash flows over the expected period
the  asset  will  be  utilized,  as  well  as market values and conditions.  The
computation  of  expected  future undiscounted net cash flows can be complex and
involves  a  number  of subjective assumptions.  Any changes in these factors or
assumptions  could  impact  the  assessed  value  of  an  asset and result in an
impairment  charge  equal  to the amount by which its carrying value exceeds its
actual  or  estimated  fair  value.


Investments

Investment  securities  are classified as available-for-sale and are recorded at
fair value.  Unrealized holding gains and losses, net of any related tax effect,
are excluded from results of operations and are reported as a component of other
comprehensive  income  (loss).

Investments  in  20%  to 50% owned affiliates are accounted for under the equity
method except where a lack of voting power exists.  Investments in less than 20%
owned  entities  are  accounted  for  under  the  cost method unless the Company
exercises  significant  influence  by  means  other  than  ownership.

                                       F-11

<PAGE>

Intangible  Assets

Intangible  assets, which are comprised of deferred financing costs (included in
other  assets)  and  lease acquisition costs, are amortized on the straight-line
method  over  the  term  of  the  related  debt  or  lease  agreement.


Income  Taxes

Deferred  income taxes are provided based on the estimated future tax effects of
loss  carryforwards  and  temporary  differences  between  financial  statement
carrying  amounts  of  existing  assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
that  are  expected  to  apply  to  taxable  income  in the years in which those
carryforwards and temporary differences are expected to be recovered or settled.
The  effect  on  deferred tax assets and liabilities of a change in tax rates is
recognized  in  income  in  the  period  that  includes  the  enactment date.  A
valuation  allowance  is recorded for deferred tax assets when it is more likely
than  not  that  such  deferred  tax  assets  will  not  be  realized.

Deferred  Revenue

In  2001  and  prior years, the Company recognized nonrefundable move-in fees at
the time the resident occupied the unit and the related services were performed.
This  treatment  was not materially different than recognition of such fees over
the  average  period of occupancy.  However, in 2002, the Company began charging
significantly higher fees for move-ins than were previously charged.  Therefore,
the  Company  has  instituted  a  policy  consistent  with  SEC Staff Accounting
Bulletin  101  "Revenue Recognition", to defer such fees and recognize them over
the  average  period of occupancy, approximately 16 months.  The Company has not
deferred  any  of  the  costs  related  to  move-ins.

Due to dramatic increases in liability insurance premiums for the year 2002, the
Company  decided  to  institute  an  insurance surcharge to the residents of its
communities  in  the  first  quarter  of  2002.  The associated revenue is being
recognized  on  a  straight-line  basis  over  the  2002  policy  period.

Deferred  Rent

Deferred  rent  primarily  represents  lease  incentives  that  are deferred and
amortized  using  the  straight-line  method  over  the  terms of the associated
leases.


Deferred  Gain  on  Sales  of  Communities

Deferred  gains  on  sales  of  communities  consist  of  deferred  gains  on
sale/leaseback  transactions  and deferred gains on sale transactions.  Deferred
gains  on  sale/leaseback  transactions  are  amortized  using the straight-line
method  over  the  terms  of  the  associated  leases  where  the Company has no
continued financial involvement in communities that it has sold and leased back.
Deferred  gains  on  sale/leaseback  and sale transactions where the Company has
continuing  financial involvement, other than the leasebacks, are deferred until
such  involvement  terminates.

                                       F12
<PAGE>


Community  Operations

Community  operations  expenses  represent  direct costs incurred to operate the
communities  and  include  costs  such  as  resident  activities,  marketing,
housekeeping,  food  service,  payroll  and  benefits,  facility  maintenance,
utilities,  taxes,  and  licenses.


Stock-Based  Compensation

The Company applies APB Opinion No. 25, Accounting for Stock Issued to Employees
and related interpretations in measuring compensation costs for its stock option
plans.  The  Company  discloses  pro forma net loss and net loss per share as if
compensation  cost  had  been  determined consistent with Statement of Financial
Accounting  Standards  (SFAS)  No. 123, Accounting for Stock-Based Compensation.

Had  compensation  cost  for  the  Company's  stock  option plan been determined
pursuant  to  SFAS  123, the Company's pro forma net loss and pro forma net loss
per  share,  including  the effect of the repricing, would have been as follows:

<TABLE>
<CAPTION>
                                                                  Year  ended  December  31,
                                                             (In thousands, except per share data)
                                                           ----------------------------------------
                                                              2002          2001          2000
                                                           ------------  ------------  ------------

<S>                                                        <C>           <C>           <C>
Net loss to common shareholders:
As reported . . . . . . . . . . . . . . . . . . . . . . .  $   (13,566)  $   (10,602)  $   (27,263)
Add:  Stock-based employee compensation expense
  included in reported net loss                                      -             -             -
Deduct:  Stock-based employee compensation
  determined under fair value based method for all awards         (773)       (1,074)       (1,780)
                                                           ------------  ------------  ------------
Pro forma . . . . . . . . . . . . . . . . . . . . . . . .  $   (14,339)  $   (11,676)  $   (29,043)
                                                           ============  ============  ============
Net loss per common share -- basic and diluted:
As reported . . . . . . . . . . . . . . . . . . . . . . .  $     (1.33)  $     (1.04)  $     (2.69)
                                                           ============  ============  ============

Pro forma . . . . . . . . . . . . . . . . . . . . . . . .  $     (1.40)  $     (1.15)  $     (2.87)
                                                           ============  ============  ============
</TABLE>


SFAS  No. 148 Accounting for Stock-based Compensation-Transition and Disclosure,
which  was  issued  in December 2002, provides alternative methods of transition
for  a  voluntary  change  to  the  fair  value-based  method  of accounting for
stock-based  employee  compensation  and also requires disclosures in interim as
well  as  annual  financial  statements  regarding  our method of accounting for
stock-based  employee compensation and the effect of the method used on reported
results.  The  amount  shown  above  for 2001 has been adjusted to correct for a
computational  error.

                                       F-13

<PAGE>

Net  Loss  Per  Share

Basic  net  loss  per  share  is  computed  based  on  weighted  average  shares
outstanding.  Diluted  per  share  amounts  are  computed  on  the  basis of the
weighted  average  number  of  shares outstanding plus dilutive potential common
shares  (if  any) using the treasury stock method.  The capital structure of the
Company  includes  convertible  debentures,  redeemable  and  non-redeemable
convertible preferred stock, as well as stock options and common stock warrants.
The  assumed  conversion  and  exercise  of  stock  options  totaling 1,714,333;
1,192,552;  and  1,321,707  in  2002,  2001,  and  2000, respectively, have been
excluded  from the calculation of diluted net loss per share, as their effect is
anti-dilutive.

Comprehensive  Income  (Loss)

Comprehensive  income  (loss)  consists of net income (loss) and other gains and
losses  affecting  shareholders'  equity,  which  under  accounting  principles
generally  accepted  in  the  United  States,  are  excluded  from  results  of
operations.  For  the  Company,  these consist of unrealized gains and losses on
investment  securities  and foreign currency translation adjustments, net of any
related  tax  effect.


Foreign  Currency  Translation

Foreign currency amounts attributable to foreign operations have been translated
into  U.S.  dollars  using  year-end  exchange rates for assets and liabilities,
historical rates for equity, and average annual rates for revenues and expenses.
Unrealized  gains  and losses arising from fluctuations in the year-end exchange
rates  are  recorded  as  a  component  of  other  comprehensive  income (loss).

 Recent  Accounting  Pronouncements

In  June  2001,  FASB  issued  SFAS  No.  143,  Accounting  for Asset Retirement
Obligations.  SFAS  No.  143 requires the Company to record the fair value of an
asset  retirement  obligation  as a liability in the period in which it incurs a
legal  obligation  associated  with the retirement of tangible long-lived assets
that  result  from the acquisition, construction, development, and/or normal use
of  the  assets.  The  Company  also  records  a  corresponding  asset  that  is
depreciated  over  the life of the asset.  Subsequent to the initial measurement
of  the  asset retirement obligation, the obligation will be adjusted at the end
of  each  period  to  reflect  the  passage of time and changes in the estimated
future  cash  flows underlying the obligation.  The Company is required to adopt
SFAS  No.  143 on January 1, 2003.  Management is currently assessing the impact
of  SFAS  No. 143 to determine the effect on the Company's financial statements.

In  April  2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4,  44  and  64,  Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS  No.  145  amends  existing  guidance  on reporting gains and losses on the
extinguishment  of  debt  to  prohibit the classification of the gain or loss as
extraordinary,  as  the use of such extinguishments have become part of the risk
management  strategy  of many companies. SFAS No. 145 also amends SFAS No. 13 to
require  sale-leaseback  accounting  for  certain  lease modifications that have
economic  effects  similar  to  sale-leaseback  transactions.  The

                                       F-14
<PAGE>
provisions  of  the  Statement  related  to the rescission of Statement No. 4 is
applied  in  fiscal  years  beginning after May 15, 2002. Earlier application of
these  provisions  is  encouraged.  The  provisions  of the Statement related to
Statement  No.  13 were effective for transactions occurring after May 15, 2002,
with  early  application  encouraged.  The  Company  adopted SFAS No. 145 in the
fourth  quarter  of 2002 and have included the extraordinary gain on refinancing
long-term  debt  in  other  income.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit  or  Disposal  Activities.  SFAS No. 146 addresses financial accounting and
reporting  for  costs  associated with exit or disposal activities and nullifies
Emerging  Issues Task Force (EITF) Issue 94-3, Liability Recognition for Certain
Employee  Termination  Benefits  and  Other  Costs  to  Exit  an  Activity.  The
provisions  of this Statement are effective for exit or disposal activities that
are  initiated  after  December  31,  2002,  with  early application encouraged.
Management  cannot  determine  the  impact  of  SFAS  No.  146  on the Company's
financial  statements  as  it  will  be  applied  prospectively.

In  November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and  Disclosure  Requirements  for  Guarantees, Including Indirect Guarantees of
Indebtedness  to  Others, an interpretation of FASB Statements No. 5, 57 and 107
and  a  rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements  about  its  obligations under guarantees issued.  The Interpretation
also  clarifies  that  a  guarantor  is required to recognize, at inception of a
guarantee,  a  liability  for  the fair value of the obligation undertaken.  The
initial  recognition  and  measurement  provisions  of  the  Interpretation  are
applicable to guarantees issued or modified after December 31, 2002, and are not
expected  to  have a material effect on the Company's financial statements.  The
disclosure  requirements  are  effective  for financial statements of interim or
annual  periods  ending  after  December  15,  2002.

In  December  2002,  the  FASB  issued  SFAS No. 148, Accounting for Stock-Based
Compensation  -  Transition  and  Disclosure, an amendment of FASB Statement No.
123.  This  Statement  amends FASB Statement No. 123, Accounting for Stock-Based
Compensation,  to  provide  alternative  methods  of  transition for a voluntary
change  to  the  fair  value  method  of  accounting  for  stock-based  employee
compensation.  In addition, this Statement amends the disclosure requirements of
Statement  No.  123  to require prominent disclosures in both annual and interim
financial  statements.  Certain of the disclosure modifications are required for
fiscal  years  ending  after December 15, 2002, and are included in the notes to
these  consolidated  financial  statements.

In  January  2003,  the  FASB  issued  Interpretation  No.  46, Consolidation of
Variable  Interest  Entities,  an  interpretation  of  ARB  No.  51.  This
Interpretation  addresses  the consolidation by business enterprises of variable
interest  entities as defined in the Interpretation.  The Interpretation applies
immediately  to  variable  interests in variable interest entities created after
January  31,  2003,  and  to  variable  interests  in variable interest entities
obtained  after  January  31,  2003.  For  nonpublic  enterprises,  such  as the
Company,  with  a variable interest in a variable interest entity created before
February  1, 2003, the Interpretation is applied to the enterprise no later than
the  end  of  the  first  annual reporting period beginning after June 15, 2003.
Management  is  currently  evaluating  the  impact of this Interpretation on the
Company's  financial  statements.

                                       F-15

<PAGE>

Reclassifications

Certain  reclassifications of 2000 and 2001 amounts have been made to conform to
the  2002  presentation.


(2)     SHORT-TERM  INVESTMENTS

In  1999,  the  Company  wrote  down  its  investment in the common stock of ARV
Assisted  Living,  Inc.  ("ARV")  by  $7.4  million  as management concluded the
decline  in  the  fair market value of this investment was other than temporary.
Details regarding the ARV investment, which is designated as available for sale,
as  of  December  31,  as  follows  (In  thousands):

<TABLE>
<CAPTION>

                           Gross
                         Unrealized    Fair
            Amortized      Gains      Market
               Cost       (losses)     Value
            ----------  ------------  -------
<S>         <C>         <C>           <C>
2002 . . .  $    1,512  $     1,247   $ 2,759
            ==========  ============  =======
2001 . . .  $    1,512  $      (136)  $ 1,376
            ==========  ============  =======
2000 . . .  $    1,512  $    (1,087)  $   425
            ==========  ============  =======
</TABLE>


(3)     OTHER  RECEIVABLES

Other  receivables  consisted  of  the  following at December 31 (In thousands):

<TABLE>
<CAPTION>

                                                             2002         2001
                                                          -----------  -----------

<S>                                                       <C>          <C>
Working capital advances to third parties and affiliates  $     3,645  $     1,859
Notes receivable from buyer in sale of communities . . .            -        1,000
                                                          -----------  -----------
                                                          $     3,645  $     2,859
                                                          ===========  ===========
</TABLE>

                                       F-16
<PAGE>


(4)     PROPERTY  AND  EQUIPMENT

Property  and  equipment consist of the following at December 31 (In thousands):


<TABLE>
<CAPTION>

                                  2002      2001
                               ---------  ---------
<S>                             <C>       <C>
 Land and improvements . . . .  $ 12,378  $ 13,779
 Buildings and improvements. .   112,085   120,827
 Furniture and equipment . . .    14,298    14,764
 Vehicles. . . . . . . . . . .     4,247     3,461
 Leasehold improvements. . . .     6,529     5,402
                                --------  --------
                                 149,537   158,233
 Less accumulated depreciation    30,335    27,167
                                --------  --------
                                 119,202   131,066
 Construction in progress. . .       381       134
                                --------  --------
                                $119,583  $131,200
                                ========  ========
</TABLE>

(5)     NOTES  RECEIVABLE  FROM  AND  INVESTMENTS  IN  AFFILIATED  COMPANIES

During  1998, the Company sold its interest in a community located in Texas to a
Baty-related  entity.  Pursuant  to the purchase and sale agreement, the Company
advanced  funds  to  the  Baty-related  entity  of  $1.0  million,  which  was
subsequently  repaid  in 1999, and $800,000, subject to promissory notes bearing
interest  at  9%  and payable in 10 years and on demand, respectively.  The $1.0
million  note  contained additional funding provisions whereby the Company funds
20%  of  the losses generated by the community up to $500,000, of which $500,000
was  outstanding  at  December 31, 2002 and 2001 which also bears interest at 9%
and payable in 10 years.  In addition, the Company has advanced the Baty-related
entity  $450,000  under a repair note, bearing interest at 9% and due June 2008.
At  December 31, 2002, the Baty-related entity's obligations to the Company were
$2.1  million.

In  January  2000,  the  Company  purchased  a  30%  equity  interest  in Senior
Healthcare  Partners,  LLC,  a  pharmaceutical supply limited liability company.
The  Company has cash funding obligations of up to $1.8 million.  As of December
31,  2002,  the  Company  had  no funding obligation and recognized its share of
partnership  gain  of $98,000.  At December 31, 2001, the Company had funded the
entire  $1.8  million and during 2001 recognized its share of partnership losses
of  $313,000,  which  is  included  in  "Other,  net".


(6)     RESTRICTED  DEPOSITS

Restricted  deposits consist of funds required by various Real Estate Investment
Trusts  ("REITs")  to  be placed on deposit until the Company's communities meet
certain  debt coverage and/or cash flow coverage ratios, at which time the funds
will  be  released  to  the  Company.

                                       F-17

<PAGE>



(7)     LONG-TERM  DEBT

Long-term  debt  consists  of  the  following  at  December  31  (In thousands):

<TABLE>
<CAPTION>



                                                                      2002             2001
                                                                ----------------  ---------------

<S>                                                            <C>               <C>
Notes payable, principal and interest at LIBOR* plus 4.15%
with a floor of 6.5% (6.5% at December 31, 2002), payable
monthly, unpaid principal and interest due December 2006,
with an option to extend to September 2007) . . . . . . . . .  $         58,000  $              -

Notes payable, interest-only at 12% payable monthly plus
1.75% accrued interest, unpaid principal and 1.75 % accrued
interest due December 2007. . . . . . . . . . . . . . . . . .            16,020                 -

Note payable, interest-only at 12% with a 50 basis point
increase each anniversary, unpaid principal and interest due
March 2005. . . . . . . . . . . . . . . . . . . . . . . . . .             6,800                 -

Notes payable, interest-only at LIBOR* plus 3.25%,  payable
monthly, unpaid principal and interest due December 2001,
refinanced with long-term debt. . . . . . . . . . . . . . . .                 -            46,287

Notes payable, interest-only at LIBOR* plus 3.25%, payable
monthly, unpaid principal and interest due December 2001,
refinanced with long-term debt. . . . . . . . . . . . . . . .                 -            25,548

Notes payable, interest-only at LIBOR* plus 3.25% (5.4% at
December 31, 2001), payable monthly, unpaid principal and
interest due on demand. . . . . . . . . . . . . . . . . . . .                 -             1,747

Note payable, interest at 7.82%, payable monthly, unpaid
principal and interest due July 2004. . . . . . . . . . . . .                 -            12,130

Note payable, interest at 8.38%, payable monthly, unpaid
principal and interest due February 2003. . . . . . . . . . .                 -             5,719

Notes payable, principal & interest at LIBOR* plus 4.5% and
LIBOR plus 7.75%, payable monthly, unpaid principal and
interest due March 2006, see note 20 . . . . . . . . . . . . .            6,800             6,800

Notes payable, interest at 7.43%, payable monthly, unpaid
principal and interest due October 2009 . . . . . . . . . . .            24,640            25,075

Notes payable, interest at rates from 8.0% to 12%, payable
monthly, due through July 2009. . . . . . . . . . . . . . . .            11,231            12,286
                                                               ----------------  ----------------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . .  $        123,491          $135,593
Less current portion. . . . . . . . . . . . . . . . . . . . .             3,604             4,523
                                                               ----------------  ----------------
Long-term debt, less current portion. . . . . . . . . . . . .  $        119,887          $131,070
                                                               ================  ================
</TABLE>


*     LIBOR  is  the  London  Interbank  Offering  Rate.

                                       F-18
<PAGE>

Substantially  all  long-term  debt  is  secured  by  the Company's property and
equipment.

During  2002,  the Company refinanced approximately $71.8 million of outstanding
debt  as  described  below  and wrote off $333,000 of related deferred financing
costs.  No  additional  refinancing  or  write-offs  of  deferred costs occurred
during  2001  or  2000.

In  February 2002, the Company reached an agreement with GE Healthcare Financial
Services  ("GE")  to  refinance  three  of  the  properties in the $71.8 million
portfolio that previously were financed by Deutsche Bank AG and matured December
14,  2001.  The  new  loan  of  $30.6  million  was  to mature February 2004 and
provided  for monthly principal payments of approximately $40,000 in addition to
interest  at  LIBOR  plus  4%.  These  terms  have since been modified as it was
included  in  the  December 6, 2002, refinancing transaction, which is discussed
below.  This refinancing in turn satisfied the extension agreement dated May 31,
2001, with Deutsche Bank AG to extend the maturity date of the remaining debt of
$46.3  million  secured by seven properties in the original portfolio to May 31,
2003,  provided  that  the  Company  paid to the lender a fee equal to 1% of the
outstanding  portfolio  balance  at  May  31,  2002.

On  December  6, 2002, the Company completed the refinancing of $77.8 million of
existing mortgage debt related to 11 assisted living communities.  The refinance
included  seven communities representing $39.3 million of mortgage debt maturing
in  May  2003  (the remaining balance owed to Deutsche Bank AG described above),
three  communities  that  were  previously  refinanced  in  March 2002 for $30.2
million  maturing  in  March  2004, and a single community repurchased in August
2002  with  existing  debt  of  $8.3  million.

The  refinance was facilitated by a four-year $58.0 million first mortgage which
matures  on  December  5, 2006, provided by GE Healthcare Financial Services and
$16.0  million  of five-year subordinated financing which matures on December 5,
2007,  provided  by Health Care Property Investors, Inc. ("HCPI"), a real estate
investment  trust.  The  GE  debt  is  a  LIBOR-based  loan which has an initial
interest  rate  of  6.5%  with  a  25-year  amortization period and includes the
opportunity  for a nine-month extension option.  The GE debt includes an earnout
provision  that  allows the Company to draw an additional $7.0 million, based on
operating  performance  of  the  communities,  for  use  in  paying  down  the
subordinated  HCPI  debt.  The HCPI debt provides for a current interest payment
of  12.0%  and  an  accrual  of  additional  interest  at  1.75% to be paid upon
repayment  of  the  principal.

As  part  of  the  refinancing  agreement, the Company transferred all long-term
assets  and  liabilities  related to the above properties from four wholly-owned
subsidiaries  to  Emeritus Realty Corporation.  Emeritus Realty Corporation is a
wholly-owned  subsidiary  of  the  Company  and  is included in the consolidated
financial  statements.  Not  withstanding  consolidation for financial statement
purposes,  it  is  management's  intention that Emeritus Realty Corporation be a
separate  legal  entity  wherein the assets and liabilities are not available to
pay  other debts or obligations of the consolidated Company and the consolidated
Company  is  not  liable  for  the  liabilities  of Emeritus Realty Corporation.

The  Company  recorded a gain of approximately $5.1 million in the quarter ended
December  31, 2002, related to discounts it received upon the payoff of existing
financing  offset by certain costs related to the transaction.  This refinancing
extends  the  maturity  for  the  entire  $77.8  million  for  four  years.

                                       F-19
<PAGE>

In January 2003, the Company reached an agreement with General Motors Acceptance
Corporation  ("GMAC")  to  extend  a $6.8 million note set to mature February 1,
2003.  The  original  $6.8  million note has been bifurcated into a $6.2 million
Note  A  and a $560,000 Note B.  The new notes of $6.8 million matures March, 1,
2006,  and  provides  for monthly principal payments of approximately $22,000 in
addition  to interest at LIBOR plus 4.5% and LIBOR plus 7.75%, respectively.  As
a result of this refinancing, the Company has reclassified the long-term portion
of  $6.6  million  principal  balance  to long-term debt from current portion of
long-term  debt  in  its  December  31,  2002,  financial  statements.

Additionally,  related  to  the  GMAC extension, the original Seller note for $1
million  was  also extended.  The original seller note principal balance for the
year  ended  December  31,  2002, was $921,000 with a maturity of March 1, 2003.
This  amendment  extends  the  principal maturity to March 1, 2006, and requires
$12,500  monthly principal and interest payments, with interest accruing at 12%.
The  Company  made  a $200,000 principal paydown in February 2003.  As a result,
the Company has reclassified the long-term portion of $656,000 principal balance
to  long-term  debt  from current portion of long-term debt in its, December 31,
2002,  financial  statements.

Certain  of the Company's indebtedness include restrictive provisions related to
cash  dividends, investments, and borrowings and require maintenance of specific
operating  ratios,  and levels of working capital.  As of December 31, 2002, the
Company  was  in compliance with all such covenants except for one, in which the
Company  has  obtained  a  waiver  and  as  of  year  ended  December  31,  2002


Principal  maturities of long-term debt at December 31, 2002, are as follows (In
thousands):

<TABLE>
<CAPTION>

<S>         <C>
2003 . . .  $  3,604
2004 . . .     3,585
2005 . . .    11,072
2006 . . .    13,119
2007 . . .    60,881
Thereafter    31,230
            --------
Total. . .  $123,491
            ========
</TABLE>


(8)     CONVERTIBLE  DEBENTURES

The  Company has $32.0 million of 6.25% convertible subordinated debentures (the
"Debentures")  that are due in 2006.  The Debentures are convertible into common
stock  at  the  rate  of  $22  per  share,  which  equates  to  an  aggregate of
approximately  1,454,545  shares of the Company's common stock.  Interest on the
debenture  is  payable  semiannually  on January 1 and July 1 of each year.  The
Debentures  are  unsecured  and  subordinated  to  all other indebtedness of the
Company.

The Debentures are subject to redemption, as a whole or in part, at a redemption
price  of  100%  of  the  principal  amount.

                                       F-20
<PAGE>



(9)     REDEEMABLE  PREFERRED  STOCK

The  Company  has  authorized  5,000,000  shares of preferred stock, $0.0001 par
value.  Pursuant  to  such  authority,  in October 1997, the Company sold 25,000
shares  of  Series  A cumulative convertible, exchangeable, redeemable preferred
stock  for  $25,000,000.  The Series A redeemable Preferred Stock is entitled to
receive  quarterly  dividends  payable  in cash.  The dividend rate is 9% of the
stated  value  of $25,000,000.  Dividends accumulate, whether or not declared or
paid.  If cash dividends are not paid quarterly, the dividend rate will increase
to  11% ("arrearage rate") until the unpaid cash dividends have been fully paid.
The  preferred  stock  has a mandatory redemption date of October 24, 2004, at a
price  equal  to  $1,000 per share, plus any accrued but unpaid dividends.  Each
share  of preferred stock may be converted, at the option of the holder, into 55
shares  of  common  stock,  at the trading price at the time of conversion.  The
preferred  stock  is  also  exchangeable  in  whole  only,  at the option of the
Company,  into  9%  subordinated convertible notes due October 24, 2004.  The 9%
subordinated  notes  would  contain the same conversion rights, restrictions and
other  terms  as  the preferred stock.  For each of the years ended December 31,
2002  and  2001,  the Company accumulated dividends aggregating $2.75 million at
the  arrearage  dividend  rate  of  11%,  for  a  total  of  $5.5  million.

At  December 31, 2002, the Company has accrued excess dividends of $1.25 million
to  its  Series  A  preferred  shareholders  related  to non-payment of the cash
portion of their dividends.  Since the Company was unable to pay these dividends
for  more  than  six  consecutive  quarters,  the  Series  A shareholders became
entitled  to  elect  one additional director to their board of directors at each
annual  shareholders'  meeting  until such time the Company has paid the accrued
dividends.  The  Series  A  shareholders  have  opted not to elect an additional
director.  In  addition, because the Company has been unable to pay dividends to
their Series A shareholders for more than six consecutive quarters, beginning in
2002,  the  Series A dividends were calculated on a compounded cumulative basis,
retroactively.  The  retroactive  adjustment  of Series A dividends for 2000 and
2001  were  $19,000  and  $275,000, respectively, which were recognized in 2002.
The  cumulative  compounding  for  2002  was  an  additional  $622,000.

The  Company may redeem the preferred stock, in whole or in part, for $1,050 per
share  plus accrued dividends, provided that the market price of common stock is
at  least  130% of the conversion price for the preferred stock. In the event of
liquidation  of  the  Company,  the  holders  of outstanding preferred stock are
entitled  to  receive a distribution of $1,000 per share plus accrued dividends.


(10)     INCOME  TAXES

Income taxes reported by the Company differ from the amount computed by applying
the  statutory  rate  primarily  due  to  limitations on utilizing net operating
losses.

The  tax  effect  of  temporary  differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities are comprised of the
following  at  December  31,  (In  thousands):

                                       F-21
<PAGE>


<TABLE>
<CAPTION>

                                                                2002        2001
                                                             ---------   ---------
<S>                                                            <C>       <C>
Gross deferred tax liabilities-depreciation and amortization.  $(1,880)  $(1,801)
Gross deferred tax assets:
     Net operating loss carryforwards . . . . . . . . . . . .   29,433    29,914
     Deferred gains on sale/leaseback . . . . . . . . . . . .    7,621     6,086
     Impairment of investment securities. . . . . . . . . . .    2,411     2,411
     Unearned rental income . . . . . . . . . . . . . . . . .    1,066       562
     Vacation accrual . . . . . . . . . . . . . . . . . . . .      481       452
     Health insurance accrual . . . . . . . . . . . . . . . .      723       502
     Insurance accrual. . . . . . . . . . . . . . . . . . . .      746       491
     Incentive Compensation accrual . . . . . . . . . . . . .      270       312
     Deferred Lease Payments. . . . . . . . . . . . . . . . .      665       586
     Other .. . . . . . . . . . . . . . . . . . . . . . . . .       55       656
                                                               --------  --------
          Gross deferred tax assets . . . . . . . . . . . . .   43,471    41,972
Less valuation allowance. . . . . . . . . . . . . . . . . . .   41,591    40,171
                                                               --------  --------
Deferred tax assets, net. . . . . . . . . . . . . . . . . . .    1,880     1,801
                                                               --------  --------
          Net deferred tax assets . . . . . . . . . . . . . .  $     -   $     -
                                                               ========  ========
</TABLE>


The increase in the valuation allowance was $1.4 million, $1.6 million, and $4.8
million for 2002, 2001, and 2000, respectively. The increases were primarily due
to  the amount of net operating loss carryforwards and deferred gains, for which
management  does not believe that it is more likely than not that realization is
assured.

For  federal  income  tax  purposes,  the  Company  has  net  operating  loss
carryforwards  at  December 31, 2002, available to offset future federal taxable
income,  if  any,  of  approximately  $86.6  million expiring beginning in 2005.


(11)      SHAREHOLDERS'  DEFICIT

The  Company's  board  of  directors  authorized  a  stock repurchase program to
acquire  up  to  aggregate  1,000,000  shares of the Company's common stock.  In
March  2000,  the stock repurchase plan was discontinued.  At December 31, 2000,
the  Company  had  acquired  a  total of 941,100 shares of its common stock at a
cumulative  cost  of  $8.3  million.
Preferred  Stock

In  December 1999, the Company entered an agreement to sell 40,000 shares of its
Series  B preferred stock to Saratoga Partners IV, L.P. ("Saratoga") and certain
investors  related  to  Saratoga  for  a  purchase  price  of

                                       F-22
<PAGE>

$1,000 per share. On December 30, 1999, the Company completed the sale of 30,000
shares  of  Series  B  Stock,  and  agreed to complete the sale of the remaining
10,000  shares  during  the first half of 2000. Each share of Series B Stock has
voting  authority,  and is convertible into the number of shares of common stock
equal  to  the  stated value of $1,000 divided by an initial conversion price of
$7.22, to be adjusted for any anti-dilutive transactions. The net proceeds to be
received by the Company from the sale of all 40,000 shares of the Series B Stock
were  to  be  approximately  $38.6  million,  after  fees  and  expenses  of the
transaction  estimated  at  $1.4  million.  The  purchase  agreement and related
documents  provided  that  the Company's use of the proceeds would be subject to
Saratoga's  approval  after June 2000 if a substantial portion had not been used
for  the acquisition of specified properties. Under a letter agreement dated May
15,  2000,  the agreements with Saratoga were modified to (i) cancel the sale of
the  remaining 10,000 shares of Series B Stock, (ii) remove all restrictions and
requirements  relating  to  the  use  of  proceeds received from the sale of the
original  30,000  shares,  and  (iii)  provide  that  the Company would issue to
Saratoga  a seven-year warrant ("the Warrant") to purchase one million shares of
Common  Stock  at  an  exercise price of $4.30 per share or, in the alternative,
make  a  specified cash payment to Saratoga. On August 31, 2000, the Warrant was
issued  to  Saratoga.

The  Series  B  Stock  is  entitled  to receive quarterly dividends payable in a
combination  of  cash  and additional shares of Series B Stock. From issuance to
January  1, 2004, the dividend rate will be 6% of the stated value of $1,000, of
which  2%  is payable in cash and 4% is payable in Series B Stock at the rate of
one  share  of  Series  B  Stock for every $1,000 of dividend.  After January 1,
2004,  the  dividend  rate  will  be 7% of which 3% is payable in cash and 4% is
payable  in  Series  B  Stock.  Dividends accumulate, whether or not declared or
paid.  Prior to January 1, 2007, however, if the cash portion of the dividend is
not  paid,  the cash dividend rate will increase to 7% ("arrearage rate"), until
the  unpaid  cash  dividends  have  been  fully  paid  or until January 1, 2007,
whichever  first  occurs. Beginning January 10, 2003, the Company can redeem all
of  the Series B Stock at $1,000 per share plus unpaid dividends, if the closing
price  for  the  common stock on the American Stock Exchange is at least 175% of
the then conversion price for 30 consecutive trading days.  In 2000, the Company
accrued  $1.3  million  in  cash  dividends, including one quarter at the higher
arrearage rate, and $1.2 million equivalent to 1,224 shares of Series B Stock as
in-kind  dividends,  of  which  $302,000 were paid and 609 shares were issued in
2000.  In 2001, the Company accrued $2.4 million in cash dividends at the higher
arrearage rate, and $1.3 million equivalent to 1,266 shares of Series B Stock as
in-kind  dividends,  none  of  which  were paid or issued in 2001.  In 2002, the
Company accrued $2.4 million in cash dividends at the higher arrearage rate, and
$1.3  million equivalent to 1,317 shares of Series B Stock as in-kind dividends.
In  the third quarter of 2002, the Company issued 2,533 shares of Series B Stock
for the in-kind dividends accrued from 2000, 2001, and the first two quarters of
2002.  In  the  fourth quarter of 2002, another 331 shares of Series B Stock was
issued for the third quarter accrual.  Accordingly, the Company had a cumulative
commitment  to  issue 334 shares, 1,881 shares, and 615 shares of Series B Stock
at  December  31,  2002,  2001,  and  2000  respectively.

At  December  31,  2002,  the  Company  had accrued additional dividends of $3.6
million  as  a  result  of the arrearage rate, which is included in the total of
$5.7  million  of cash dividends on Series B Stock that the Company has accrued.
Since  the  Company  has  failed  to  pay  these  dividends  for  more  than six
consecutive  quarters,  the  Series  B  shareholders  are  entitled to elect one
additional  director  to  the  Board  of  Directors at each annual shareholders'
meeting  until such time the Company has paid the accrued dividends.  The Series
B  shareholders  have  opted  not  to  elect  an  additional  director.

                                       F-23
<PAGE>

1995  Stock  Incentive  Plan

The  Company  has  a  1995 stock incentive plan ("1995 Plan") which combines the
features of an incentive and non-qualified stock option plan, stock appreciation
rights, and a stock award plan (including restricted stock).  The 1995 Plan is a
long-term  incentive  compensation plan and is designed to provide a competitive
and  balanced  incentive  and  reward  program  for  participants.

The  Company  has authorized 2,400,000 shares of common stock to be reserved for
grants  under the 1995 Plan of which 673,316 were available for future awards at
December  31,  2002.  Options  generally  vest  between  three-year to five-year
periods,  at  the  discretion  of  the  Compensation  Committee  of the Board of
Directors,  in  cumulative  increments  beginning one year after the date of the
grant  and  expire not later than ten years from the date of grant.  The options
are  granted  at  an exercise price equal to the fair market value of the common
stock  on  the  date  of  the  grant.

In  May  2001, the Company announced an offer to exchange options under the 1995
Plan held by current employees, including executive officers, for new options to
be  granted  under  the  1995  Plan and new option letter agreements.  Under the
offer,  employees  were  required  to  tender  all  or  none of their options in
exchange for new options subject to the same number of shares of common stock as
the  options  tendered  for  exchange.  Approximately 99% of outstanding options
were  exchanged.  The  new  options were granted on December 10, 2001, which was
the  first  business day that was at least six months and one day after the date
tendered  options  were  accepted for exchange. The new options have an exercise
price of $2.11 and will fully vest 2 1/2 years from the date the new options are
granted under the following schedule:  33 1/3 percent will vest six months after
the  date  of grant; 33 1/3 percent will vest 18 months after the date of grant;
and  33  1/3  percent will vest 30 months after the date of grant.  In all other
respects, the terms of the new options were the same as the terms of the options
tendered  for  exchange.

The  fair  value  of  each  option grant has been estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for  grants  in  2002,  2001,  and 2000: dividend yield of 0.0% for all periods;
expected  volatility  of  90.4%  to 93.3% for 2002, 80.7% to 82.1% for 2001, and
48.0% to 49.6% for 2000, and; risk-free interest rates of 2.9% to 4.3% for 2002,
4.12%  to  4.39%  for  2001, and 6.06% to 6.69% for 2000; and an expected option
term  of  4  years,  giving  effect  to  the  option  repricing.

                                       F-24
<PAGE>


A  summary  of  the  activity  in  the  Company's  stock  option  plans follows:

<TABLE>
<CAPTION>
                                                 2002                     2001                      2000
                                        ----------------------   ------------------------  ------------------------
                                                        Weighted-                 Weighted-                 Weighted-
                                                         Average                   Average                   Average
                                                        Exercise                  Exercise                  Exercise
                                            Shares        Price        Shares       Price        Shares       Price
                                         ------------  -----------  ------------  -----------  -----------  -----------
<S>                                      <C>           <C>          <C>           <C>          <C>          <C>
 Outstanding at beginning of year . . .    1,192,552   $      2.39    1,321,707   $      9.13   1,761,601   $      6.82
 Granted. . . . . . . . . . . . . . . .      601,000   $      2.94    1,144,083   $      2.11      16,000   $      3.12
 Exercised. . . . . . . . . . . . . . .       (7,501)  $      2.11            -   $         -           -   $         -
 Canceled . . . . . . . . . . . . . . .      (71,718)  $      2.96   (1,273,238)  $      9.13    (455,894)  $      9.28
                                         ------------  -----------  ------------  -----------  -----------  -----------
 Outstanding at end of year . . . . . .    1,714,333   $      2.56    1,192,552   $      2.39   1,321,707   $      9.13
 Options exercisable at year-end. . . .      420,110   $      2.82       49,869   $      9.21     817,414   $      9.50
 Weighted-average fair value of options
 granted during the year. . . . . . . .                $      1.99                $      1.31               $      1.24
</TABLE>


The  following  is  a summary of stock options outstanding at December 31, 2002:
<TABLE>
<CAPTION>
                                    Options Outstanding            Options Exercisable
                         --------------------------------------- ----------------------
                                          Weighted-
                                           Average     Weighted-               Weighted-
                                         Remaining      Average                 Average
       Range of               Number     Contractual    Exercise     Number     Exercise
     Exercise Prices       Outstanding     Life          Price    Exercisable    Price
------------------------   -----------  ------------  ----------  ---------  ----------

<S>         <C>   <C>      <C>          <C>           <C>         <C>        <C>
1.60. . .     -  $  2.11    1,113,083          8.95  $     2.10    376,027  $     2.10
2.56. . .     -  $  4.06      570,500          9.06  $     2.92     13,333  $     2.94
6.50. . .     -  $  7.25        5,750          6.98  $     6.60      5,750  $     6.60
9.63. . .     -  $  9.81        1,500          5.89  $     9.75      1,500  $     9.75
10.25 . .     -  $ 15.25       23,500          4.87  $    13.01     23,500  $    13.01
                           -----------  ------------  ----------  ---------  ----------
                            1,714,333          8.92  $     2.56    420,110  $     2.82
                           ==========    ===========  ==========  =========  ==========

</TABLE>

                                       F-25
<PAGE>

Employee  Stock  Purchase  Plan

In  July 1998, the Company adopted an Employee Stock Purchase Plan (the Plan) to
provide  substantially all employees who have completed six months of service an
opportunity  to  purchase shares of its common stock through payroll deductions,
at a price equal to 85% of the fair market value.  A total of 400,000 shares are
available  for  purchase  under  the  Plan.  Periodically,  participant  account
balances  are  used to purchase shares of stock on the open market at the lesser
of the fair market value of shares on the first or last day of the participation
period.  Employees may not exceed $25,000 in annual purchases or 15% of eligible
compensation.  The  Employee  Stock  Purchase Plan expires in May 2008.  Through
December  31,  2002,  employees  have  purchased  an aggregate of 192,871 common
shares  through  the  Employee  Stock  Purchase  Plan.


(12)  COMPREHENSIVE  INCOME  (LOSS)

Comprehensive  income  (loss)  consists  of  the  following  for the years ended
December  31,  2002,  2001,  and  2000,  respectively  (In  thousands):


<TABLE>
<CAPTION>
                                                     2002            2001            2000
                                                --------------  --------------  --------------
<S>                                             <C>             <C>             <C>
Net loss to common shareholders. . . . . . . .  $     (13,566)  $     (10,602)  $     (27,263)
Other comprehensive income:
     Foreign currency translation adjustments.              -               -               1
     Unrealized holding gains (losses)
          on investment securities . . . . . .          1,383             951            (708)
                                                --------------  --------------  --------------
Comprehensive loss . . . . . . . . . . . . . .  $     (12,183)  $      (9,651)  $     (27,970)
                                                ==============  ==============  ==============
</TABLE>



(13)      FINANCIAL  INSTRUMENTS

The  Company  has  financial  instruments  other  than  investment  securities
consisting  of  cash  and  cash  equivalents,  trade  accounts receivable, other
receivables,  notes  receivable from affiliates, short-term borrowings, accounts
payable, convertible debentures, redeemable preferred stock, and long-term debt.
The fair value of the Company's financial instruments, based on their short-term
nature  or  current  market  indicators  such  as  prevailing  interest  rates,
approximates their carrying value with the exception of the following: long-term
debt  had  an estimated fair value, based on the Company's incremental borrowing
rate,  of  $119.4  million  versus  a  carrying value of $123.5 million; and the
convertible  debentures that had an estimated fair value, based on the Company's
incremental  borrowing  rate,  of  $31.9  million  versus  a book value of $32.0
million  at  December  31,  2002.

                                       F-26
<PAGE>

(14)      RELATED-PARTY  MANAGEMENT  AGREEMENTS

During  1995,  the  Company's  two  most  senior  executive  officers, its Chief
Executive  Officer,  and  its  then  President,  who  is now its Chief Financial
Officer, formed a New York general partnership (the "Partnership") to facilitate
the  operation  of  assisted  living communities in the state of New York, which
generally  requires that natural persons be designated as the licensed operators
of  assisted living communities. The Partnership operates ten leased communities
in  New  York.  The Company has agreements with the Partnership and the partners
under  which  all of the Partnership's profits have been assigned to the Company
and  the Company has indemnified the partners against losses. As the Company has
unilateral  and  perpetual control over the Partnership's assets and operations,
the  results of operations of the Partnership are consolidated with those of the
Company.

The  Company  has  management  agreements  with  a  number  of entities owned or
controlled  by  Baty  relating  to  30  communities.  The  agreements have terms
ranging  from  two  to  four  years,  with  options  to  renew,  and provide for
management  fees  ranging from 4% to 7% of gross operating revenues.  Management
fee  revenue  earned under these agreements was approximately $4.3 million, $2.4
million,  and  $1.7  million  in  2002,  2001,  and  2000,  respectively.

In  1998,  the  Company  and XL Management Company L.L.C., ("XL Management"), an
affiliate  of  Holiday  Retirement  Corp.,  an owner and operator of independent
living  communities,  entered  into  four  management  agreements  whereby  XL
Management  was to provide management services relating to four of the Company's
newly developed assisted living communities located in Texas. The agreements had
initial  terms of two years and six months with management fees based upon 6% of
gross  revenues  payable  monthly.  XL  Management  ceased  management  of these
buildings  during  2000.  Total fees in 2000 amounted to $150,000. The Company's
Chairman  and Chief Executive Officer and a former member of the Company's board
of  directors  are  principal  shareholders  and  officers  of  Holiday.

                                       F-27
(15)     LEASES

At  December  31,  2002,  the Company leases office space and 67 assisted living
communities. The office lease expires in 2006 and contains two five-year renewal
options.  The  community  leases  expire  from  2004 to 2017 and contain various
extension  options,  ranging  from  five  to  ten  years.


<PAGE>

Minimum  lease  payments  under  noncancelable  operating leases at December 31,
2002,  are  as  follows  (In  thousands):

<TABLE>
<CAPTION>



<S>         <C>
2003 . . .  $ 27,568
2004 . . .    27,780
2005 . . .    27,992
2006 . . .    27,635
2007 . . .    25,968
Thereafter   152,795
            --------
Total. . .  $289,738
            ========
</TABLE>

Facility  lease  expense  under noncancelable operating leases was approximately
$29.9  million,  $27.1  million,  and  $24.3  million  for 2002, 2001, and 2000,
respectively.  A  number  of  operating  leases  provide  for  additional  lease
payments after 24 months computed at 5% of additional revenues of the community.
In  2002,  additional  facility  lease  expense  under  these  provisions  was
approximately  $ 3.1 million.  Additional lease payment after 13 months computed
at  rates  ranging  from  7%  to 8.5% of gross revenues in excess of a specified
threshold  are  related to the 24 community lease acquisition (discussed in Note
16).


(16)     SALES  AND  ACQUISITIONS,  INCLUDING CERTAIN RELATED-PARTY TRANSACTIONS

In two separate transactions during the fall of 1998 and the spring of 1999, the
Company  arranged  for two investor groups to purchase an aggregate of 41 of our
operating  communities  and  five  communities  under  development  for  a total
purchase price of approximately $292.2 million.  Of the 46 communities involved,
43  had  been, or were proposed to be leased to the Company by Meditrust Company
LLC under sale/leaseback financing arrangements, and three had been owned by the
Company.  The  first  purchase,  consisting  of  25  communities,  subsequently
referred  to as the Emeritrust I communities, was completed in December 1998 and
the  second purchase, consisting of 21 communities, 16 of which are subsequently
referred  to  as  the  Emeritrust II Operating communities and five of which are
subsequently  referred  to  as  the  Emeritrust  II Development communities, was
completed  in  March  1999.

Of  the  $168.0  million purchase price for the Emeritrust I communities, $138.0
million  was  financed  through  a  three-year  first  mortgage  loan  with  an
independent  party  and $30.0 million was financed through subordinated debt and
equity  investments  from the investor group, which includes Daniel R. Baty, the
Company's  Chief  Executive  Officer,  who  is  also  a director and a principal
shareholder.  Of  the  $124.2  million  purchase  price  for  the  Emeritrust II
Operating  communities  and Emeritrust II Development communities, approximately
$99.6  million  was  financed  through  three-year  first  mortgage  loans  with
independent  third  parties  and $24.6 million was financed through subordinated
debt  and  equity  investments from the investor group, which includes Mr. Baty.

                                       F-28
<PAGE>

The  investor  groups  retained  the  Company  to  manage all of the communities
through  December  31,  2001,  and  granted  the Company options to purchase the
communities  during  2001.  During  2000, the Emeritrust I communities failed to
comply with covenants under the $138 million mortgage loan and in 2001 it became
clear  that  the Company would not be able to purchase the communities under the
options.  As  a  result, the mortgage loans were restructured and the management
agreements  and  options to purchase were extended to June 30, 2003 (to December
31,  2003  in  the case of the five Emeritrust II Development communities).  The
discussion  below  reflects  the  terms  of  these  arrangements  as  modified.
From  January  1,  2002, through June 30, 2003, the Company will receive for the
Emeritrust I communities a base management fee of 3% of gross revenues generated
by the communities and an additional management fee of 4%, payable out of 50% of
cash  flow.  The  availability  of operating cash flow to pay management fees is
subject  to  first  meeting  mandatory  owner  distribution  requirements, which
include  repayment  of  fees  and expenses related to restructuring the mortgage
loan  and  subsequent  extension  in  September  2002.    For  the Emeritrust II
Operating communities and the Emeritrust II Development communities, the Company
has  received  and  continue  to  receive  a  base management fee of 5% of gross
revenues  and an additional management fee of 2%, payable to the extent that the
communities  meet  certain  cash  flow standards.  Prior to January 1, 2002, the
management  fees for the Emeritrust I communities were computed in this fashion.
Under  the  management  agreements,  the  Company  is obligated to reimburse the
investor  groups  for cumulative cash operating losses greater than $4.5 million
in  the case of the Emeritrust I communities and $2.5 million in the case of the
Emeritrust  II  Development  communities.  Since  these  thresholds  have  been
exceeded,  the  Company  is currently responsible for most cash operating losses
generated  by  these  communities  if  they  occur.  There  is  no  such funding
arrangement  with  respect  to  the  Emeritrust  II  Operating communities.  The
Company's  funding  obligations  for  the  Emeritrust  I  communities  have been
$184,000,  $1.3 million, and $4.9 million for 2002, 2001 and 2000, respectively.
The  Company's funding obligations for the Emeritrust II Development communities
have  been  $137,000,  $310,000  and  $1.6  million  in  2002,  2001,  and 2000,
respectively.

Although  the  amounts  of  the  Company's  funding obligation each year include
management  fees  earned  by  the  Company  under the management agreements, the
Company  does  not  recognize  these management fees as revenue in its financial
statements  to  the extent that the Company is funding the cash operating losses
that  include  them.  Correspondingly,  the  Company  recognizes  the  funding
obligation  under  the  agreement,  less  the  applicable management fees, as an
expense  in  its  financial  statements  under  the  category  "Other,  net."
Conversely,  if  the  applicable  management  fees  exceed the Company's funding
obligation,  the  Company  recognizes  the  management  fees  less  the  funding
obligation  as  management fee revenue in its consolidated financial statements.
Management  fees earned for the Emeritrust I communities have been $2.0 million,
$4.0  million,  and $2.1 million in 2002, 2001, and 2000, respectively, of which
$1.8  million,  $2.8  million, and zero, have been recognized in 2002, 2001, and
2000,  respectively.  Management  fees  earned for the Emeritrust II Development
communities  have  been  $764,000,  $766,000,  and  $360,000, of which $699,000,
$673,000,  and  $174,000  have  been  recognized  in  2002,  2001,  and  2000,
respectively.  Management  fees  earned  for  the  Emeritrust  II  Operating
communities  have  been $1.9 million earned and recognized in each of the years,
2002,  2001,  and  2000.

                                       F29
<PAGE>

The  Company has an option to purchase 43 of the 46 Emeritrust communities and a
right  of first refusal with respect to the remaining three communities, both of
which expire June 30, 2003 for the Emeritrust Operating communities and December
31,  2003,  for  the  Emeritrust  Development  communities.  The  option must be
exercised  with  respect  to all communities or may not be exercised at all.  If
investor  groups  require  Mr. Baty to purchase certain of the communities, upon
the  conditions described below, we have the right to exercise our option within
60  days  of  receiving  notice  of  this  action.  The  option price for the 43
Emeritrust  communities  is  equal  to  the  original cost of the communities of
approximately  $292  million,  plus  an  amount  that would provide the investor
groups  with  an  18%  rate  of  return,  compounded annually, on their original
investment  of  $54.6  million  (less  any  cash  distributions  received).  In
connection with the exercise of the option, we are also obligated to pay certain
costs and fees.  Based upon current market conditions and valuations, we believe
the option purchase price for these facilities exceeds their current fair market
value.

The  management  agreements,  including  the  options  to  purchase  the related
communities,  are  subject  to  various  termination  provisions,  including
cross-default  provisions among all three groups of communities.  The management
agreement  for  the  Emeritrust  I  communities  may  be  terminated  if  cash
distributions  to  the  investor  group  do  not  meet  certain levels or if the
communities  fail to meet certain coverage requirements under the mortgage loan.
In  addition,  certain of the communities have been refinanced and, accordingly,
the  Company's ability to exercise the option will depend on whether the Company
can  assume  or refinance the debt secured by these communities.  Termination of
the management agreements or failure to exercise the options could result in the
loss  of  management  fees  and  the  substantial  decrease  in  the  number  of
communities  the  Company  operates.

Under  related  agreements, the investor groups may require Mr. Baty to purchase
between  ten  and  twelve  of  the  Emeritrust  communities,  depending  on  the
occurrence  of  any  one  of  the  following  events:  (a)  the Company does not
exercise  its  option to purchase the communities before the option expires, (b)
the  Company  defaults under the management agreements, (c) Mr. Baty's net worth
falls below a certain threshold, (d) the Company experiences a change of control
or (e) Mr. Baty ceases to be the Company's chief executive officer.  If Mr. Baty
is required to purchase some of the communities, he will also have the option to
purchase  all  of  the  Emeritrust communities on the same terms under which the
Company  is  entitled  purchase  the communities, subject to the Company's prior
right  to  do  so  within  a  specified  time  period.

The  management  agreements  and  related  options to purchase these communities
expire  June  30,  2003, (except that management agreements with respect to five
communities would continue until December 31, 2003).  Because the Company is not
in  a  position  to  exercise  the  options  to acquire the communities prior to
expiration,  the  Company  is  currently  in  discussions with the owners of the
communities  and  their  lenders to extend the management agreements and related
options.  While  the  Company believes that these arrangements will be extended,
the  Company  cannot  guarantee that these discussions will be successful or, if
the  arrangements  are  extended,  what  the  terms  will be.  If the Company is
unsuccessful,  the  Company  could  lose  the  management fee revenue from these
communities  and  future  rights  with  respect  to  them.

In  January  2002,  the  Company entered into management and accounting services
agreements  with  Regent Assisted Living, Inc. of Portland, Oregon, to manage or
provide  administrative  services  to  18  of  their communities. The agreements
provide  for  the  Company  to  receive  a  fixed-base  management/service  fee

                                       F-30
<PAGE>

with  some  agreements  having provisions for incentive fees based upon improved
community  performance.  In February 2002, two of the communities were sold to a
Baty-related entity; the Company has continued to manage these communities under
agreements  providing for 5% of gross revenues. In March 2002, the Company began
managing  one additional Regent community. In April 2002, one community that the
Company  had  been  managing  for  Regent  was sold and our management agreement
terminated.  In  September 2002, the Company purchased one community it had been
managing,  as  discussed  below.  In October 2002, one community the Company had
been  managing was sold and the management agreement terminated. Management fees
recognized  from managing the Regent communities were approximately $1.5 million
for  the  year  ended  December  31,  2002.

In  March 2002, the Company entered into a 15-year master lease arrangement with
HC  REIT,  Inc.  for  four communities, two of which Emeritus previously held an
ownership interest in and two of which it previously leased from another lessor.
A  Baty-related entity held a 50% economic interest in one of the communities in
which  the Company had an interest.  Preceding the HC REIT transaction, Emeritus
purchased  the  Baty-related entity's economic interest for its investment basis
of  $2.1  million  plus  a  9% return, a $2.95 million total payment.  The other
community  in  which  the  Company  had  an interest was 50% owned by an outside
investor.  Also  preceding  the  HC  REIT transaction, the Company purchased the
remaining  50%  interest in this community for $2.65 million.  Subsequent to the
two  purchase transactions, Emeritus entered into a master lease arrangement for
all  four communities and recognized a net loss of approximately $530,000, which
is  recorded  in "Other, net" in the consolidated statements of operations.  The
loss  is  primarily  comprised  of  write-offs  of  existing loan fees and lease
acquisition  costs  for  the  four  buildings.  Additionally,  the Company has a
deferred  gain  on  sale  associated with the transaction that approximates $1.8
million  and  new  lease  acquisition  costs  of $1.0 million, that will both be
amortized  over  the  lease  period  of  15  years.

On  April  1,  2002,  in  conjunction with the HC REIT master lease, the Company
received  $6.7  million  in  proceeds  from a $6.8 million debt issuance under a
separate loan agreement with HC REIT.  The loan agreement requires interest-only
payments  and  bears interest at 12% per annum with fixed annual increases of 50
basis  points  for  a  term  of  36  months.

In  April  2002,  the  Company  entered into agreements to acquire the ownership
interest  of  one  community and the leasehold interest of seven communities for
the  assumption  of  the  mortgage  debt relating to the owned community and the
lease  obligations  relating  to  the leased communities. The eight communities,
comprising  617  units  in  Louisiana and Texas, had been previously operated by
Horizon Bay Management L.L.C. In May 2002, the Company assigned its rights under
these  agreements  to  Baty-owned entities and entered into five-year management
agreements  expiring  April  30,  2007,  with  the Baty entities providing for a
management  fee  of  5%  of  gross  revenue.  As a part of these agreements, the
Company  has  the  right  to  reacquire  the  one  community  and  seven  leased
communities  at  any time prior to April 30, 2007, by assuming the mortgage debt
and  lease  obligations  and  paying  the  Baty  entities the amount of any cash
investment  in the communities, plus 9% per annum. In the original agreements of
acquisition  with the Baty entities, Horizon Bay agreed to fund operating losses
of  the communities to the extent of $2.3 million in the first twelve months and
$1.1  million  in  the  second  twelve  months  following the closing. Under the
management agreements with the Baty entities, the Company has agreed to fund any
operating  losses  in excess of these limits over the five-year management term.
In  late  2002,  the  Baty  entities  and  Horizon  Bay

                                       F-31
<PAGE>

altered  their  agreement  relating  to operating losses whereby (i) Horizon Bay
paid  the Baty entities $2 million and (ii) the Baty entities waived any further
funding  by  Horizon of operating losses of the communities. This alteration did
not  change  the  Company's  funding  commitment.

In  July  of  2002,  the  Company  terminated  the operating lease on an 88-unit
building  in Bedford, Virginia, and entered into a management agreement for that
facility  for  a  period  equal  to  the  remainder  of  the  lease  term.

In  August  of  2002,  the  Company  terminated  the management agreement with a
Baty-related  entity  for  a 214-unit facility in Cincinnati, Ohio.  In the same
month,  the Company exercised the purchase option to acquire a 108-unit facility
in  Auburn, Massachusetts, from Hanseatic Corporation.  The cost to exercise the
option  was  approximately $10.4 million, which consisted of the option price of
$10.2  million  and  approximately  $200,000  in transaction costs.  The Company
financed  the  transaction  using  $8.3 million in debt financing provided by GE
Healthcare  Financial Services and approximately $2.1 million in cash.  The debt
financing  bears  interest  at  LIBOR  plus  3.85%, with a floor of 6.5%, and is
secured  by  the  mortgage  and  the  assignment  of  leases.

In September of 2002, the Company purchased the leasehold interest in a 111-unit
facility located in San Antonio, Texas, from Regent Assisted Living.  Regent had
a  cash  security  deposit on this property of approximately $742,000, which was
replaced  with  a  letter  of  credit  from  the Company.  The Company also paid
$408,000  in  additional  consideration  to  purchase  RAL's leasehold interest.
Total  cash  paid  was  approximately  $1.2  million  after  transaction  costs.
Healthcare  Property  Investors provided 5-year debt financing of $800,000, with
interest-only  payments  at  an  effective  rate  of  15%  per  annum.

In October of 2002, the Company purchased $2.9 million of mezzanine debt secured
by  interests in three communities leased by the Company; interest receivable on
the  debt  will  partially offset lease payments as the Company's lease payments
are  used  to  pay  interest  on the debt.  Also in October of 2002, the Company
began  managing a 72-unit assisted living and dementia care community in Austin,
Texas  owned  by  a  Baty-related entity.  The management agreement is effective
until  terminated by either party on specified written notice and provides for a
fee  of  5%  of  revenue  or  $5,000  per  month,  whichever  is  greater.

On  October  1,  2002,  the  Company  entered into a lease agreement with Fretus
Investors  LLC ("Fretus"), for 24 assisted living communities (the "Properties")
in  six  states  containing  an  aggregate of approximately 1,650 units.  Fretus
acquired  the  Properties  from Marriott Senior Living Services, a subsidiary of
Marriott  International.  Fretus  is  a private investment joint venture between
Fremont  Realty  Capital  ("Fremont"),  which  holds  a 65% stake, and an entity
controlled by Baty and in which he holds an indirect 36% interest, which holds a
35%  minority  stake.    Mr. Baty is also guarantor of a portion of the debt and
the  Baty-related  entity  is  the  administrative member of Fretus.  Fretus, in
turn,  leased the Properties to the Company.  The Company has no obligation with
respect to the properties other than its responsibilities under the lease, which
includes  the  option  to  purchase  solely  at  the  discretion of the Company.

The Fretus lease is for an initial 10-year period with two 5-year extensions and
includes  an  opportunity  for  the Company to acquire the Properties during the
third,  fourth,  or fifth year and the right under certain circumstances for the
lease  to  be  cancelled  as  to  one  or  more properties upon the payment of a
termination

                                       F-32
<PAGE>

fee  to  Emeritus.  The  lease is a net lease, with base rental equal to (i) the
debt  service  on the outstanding senior mortgage granted by Fretus, and (ii) an
amount necessary to provide a 12% annual return on equity to Fretus. The initial
senior  mortgage debt is for $45.0 million and interest is accrued at LIBOR plus
3.5%,  subject  to  a  floor  of 6.25%. The Fretus equity is approximately $24.8
million  but  may  increase  as a result of additional capital contributions for
specified  purposes  and  will  decrease  as  a  result of cash distributions to
investors. Based on the initial senior mortgage terms and Fretus equity, current
rental  is approximately $500,000 per month. In addition to the base rental, the
lease also provides for percentage rental equal to a percentage (ranging from 7%
to  8.5%)  of gross revenues in excess of a specified threshold, commencing with
the  thirteenth  month of the lease. Total rent expense as of December 31, 2002,
was  approximately  $1.5  million.  The  Properties  in this acquisition are all
purpose-built  assisted  living  communities in which the Company plans to offer
both  assisted  and  memory  loss  services  in  selected  communities.

The  following  summary,  prepared on a pro forma basis, combines the results of
operations  as  if  the acquisition of the Properties had been consummated as of
the  beginning  of  both of the periods presented, after including the impact of
certain  adjustments  such  as amortization of acquisition costs, elimination of
management  fees,  lease  costs  and  income  tax  effects.

<TABLE>
<CAPTION>

                                               (In thousands)
                                           Year ended December 31,
                                           ------------------------
                                              2002           2001
                                           ---------      ---------
                                                  (unaudited)
<S>                                        <C>            <C>
Net revenues. . . . . . . . . . . . . . .  $184,115       $180,873

Net loss. . . . . . . . . . . . . . . . .    (9,694)        (3,211)
Preferred dividends . . . . . . . . . . .     7,343          6,368
                                           ---------      ---------
Net loss to common shareholders . . . . .  $(17,037)      $ (9,579)
                                           =========      =========

Loss per common share - basic and diluted  $  (1.67)      $  (0.94)
                                           =========      =========

Weighted average number of common shares
      outstanding - basic and diluted . .    10,207         10,162
                                           =========      =========
</TABLE>


These  unaudited  pro  forma  results  are  not  necessarily  indicative of what
actually  would  have  occurred if the acquisitions had been completed as of the
beginning  of both of the periods presented.  In addition, they are not intended
to  be  a  projection of future results and do not reflect all of the synergies,
additional  revenue-generating  services  or  reductions  in  direct  community
operating  expenses  that  might  be  achieved  from  combined  operations.

                                       F-33
<PAGE>

(17)     COMMITMENTS  AND  CONTINGENCIES

The  Company  is involved in legal proceedings, claims and litigation arising in
the  ordinary  course  of business. In the opinion of management, the outcome of
these  matters  will  not  have  a  material  effect on the Company's results of
operations  or  financial  position.

The  Company is self-insured for certain employee health benefits. The Company's
policy is to accrue amounts equal to the actuarial liabilities that are based on
historical  information  along  with  certain  assumptions  about future events.
Changes  in  assumptions  for  such  matters  as  health  care  costs and actual
experience  could  cause  these  estimates  to  change.



(18)     LIQUIDITY

The  Company  has  incurred significant operating losses since its inception and
has a working capital deficit of $26.7 million, although $2.9 million represents
deferred  revenue  and  $13.5  million  of  preferred  dividends  is due only if
declared  by  the  Company's  board  of directors.  In 2001 and 2002 the Company
reported  positive  net  cash  from  operating  activities  in  its consolidated
statements  of  cash flows.  At times in the past, however, the Company has been
dependent upon third party financing or disposition of assets to fund operations
and  the  Company  cannot  guarantee  that,  if  necessary  in  the future, such
transactions  will  be available timely or at all, or on terms attractive to the
Company.

In  2002,  the  Company  refinanced  substantially  all of its debt obligations,
extending  the  maturities of such financings to dates in 2005 or thereafter, at
which  time  the  Company  will  need  to  refinance  or  otherwise  repay  the
obligations.  Many  of  the  Company's  debt  instruments  and  leases  contain
"cross-default"  provisions pursuant to which a default under one obligation can
cause  a  default  under  one  or  more  other obligations to the same lender or
lessor.  Such  cross-default  provisions  affect  16  owned  assisted  living
properties  and  64  operated  under  leases.  Accordingly, any event of default
could  cause  a  material adverse effect on the Company's financial condition if
such  debt  or  leases  are  cross-defaulted.

Management  believes that the Company will be able to sustain positive operating
cash  flow  at  least through 2003 and will have adequate cash for all necessary
investing  and  financing activities including required debt service and capital
expenditures.

                                       F-34
<PAGE>

(19)     QUARTERLY  RESULTS  (UNAUDITED)
<TABLE>
<CAPTION>

                                             (In thousands, except per share data)
                                                Q1        Q2        Q3        Q4
                                             --------  --------  --------  --------
<S>                                          <C>       <C>       <C>       <C>
2002
--------
Total Operating revenue . . . . . . . . . .  $36,146   $34,015   $36,037   $46,931
Income (loss) from operations . . . . . . .    2,082    (1,021)      243      (307)
Other income and expense. . . . . . . . . .   (3,384)   (2,913)   (2,945)    2,022
Net loss. . . . . . . . . . . . . . . . . .   (1,302)   (3,934)   (2,702)    1,715
Preferred dividends . . . . . . . . . . . .    1,997     1,732     1,777     1,837
Net loss to common shareholders . . . . . .  $(3,299)  $(5,666)  $(4,479)  $  (122)
Loss per common share -- basic and diluted:  $ (0.32)  $ (0.56)  $ (0.44)  $ (0.01)


                                                Q1        Q2        Q3        Q4
                                             --------  --------  --------  --------
2001
--------
Total Operating revenue . . . . . . . . . .  $34,781   $35,177   $34,964   $35,655
Income (loss) from operations . . . . . . .    1,320     1,904     1,027     3,250
Net loss. . . . . . . . . . . . . . . . . .   (2,117)   (1,422)     (846)      151
Preferred dividends . . . . . . . . . . . .    1,611     1,620     1,565     1,572
Net loss to common shareholders . . . . . .  $(3,728)  $(3,042)  $(2,411)  $(1,421)
Loss per common share -- basic and diluted.  $ (0.37)  $ (0.30)  $ (0.24)  $ (0.14)
</TABLE>


The sum of quarterly per share data may not equal the per share total reported
for the year.



(20)     SUBSEQUENT  EVENTS

In  January  2003,  the  Company reached an agreement with GMAC to extend a $6.8
million note set to mature February 1, 2003.  The original $6.8 million note has
been bifurcated into a $6.2 million Note A and a $560,000 Note B.  The new notes
of  $6.8  million  matures  March  1,  2006,  and provides for monthly principal
payments of approximately $22,000 in addition to interest at LIBOR plus 4.5% and
LIBOR  plus  7.75%,  respectively.  As a result of this refinancing, the Company
has  reclassified  the  long-term  portion  of $6.6 million principal balance to
long-term  debt from current portion of long-term debt in its December 31, 2002,
consolidated  financial  statements.

Additionally,  related  to  the  GMAC extension, the original Seller note for $1
million  was  also extended.  The original Seller note principal balance for the
year  ended  December  31,  2002, was $921,000 with a maturity of March 1, 2003.
This  amendment  extends  the  principal maturity to March 1, 2006, and requires
$12,500  monthly principal and interest payments, with interest accruing at 12%.
Additionally, the Company has also made a $200,000 principal paydown in February
2003.  As  a  result,  the  Company  has  reclassified  the long-term portion of
$656,000  principal  balance to long-term debt from current portion of long-term
debt  in  its,  December  31,  2002,  consolidated  financial  statements.

                                       F-35
<PAGE>
                         INDEPENDENT AUDITORS' REPORT ON
                          FINANCIAL STATEMENT SCHEDULE

The  Board  of  Directors  and  Shareholders
Emeritus  Corporation:

     Under  date  of  March  14,  2003,  we reported on the consolidated balance
sheets  of  Emeritus  Corporation  and  subsidiaries as of December 31, 2002 and
2001,  and  the  related  consolidated  statements  of operations, shareholders'
deficit  and  comprehensive  operations, and cash flows for each of the years in
the  three-year  period  ended December 31, 2002, which are included in the Form
10-K. In connection with our audits of the aforementioned consolidated financial
statements,  we  also  audited  the  related  consolidated  financial  statement
schedule  for each of the years in the three-year period ended December 31, 2002
in  the Form 10-K. The financial statement schedule is the responsibility of the
Company's  management.  Our  responsibility  is  to  express  an  opinion on the
financial  statement  schedule  based  on  our  audits.

     In  our  opinion,  such  financial  statement  schedule, when considered in
relation  to  the  basic  consolidated  financial  statements  taken as a whole,
presents  fairly,  in  all material respects, the information set forth therein.

/s/    KPMG  LLP

Seattle,  Washington
March  14,  2003


                                       S-1
<PAGE>

<TABLE>
<CAPTION>

                                             Schedule II
                                        Emeritus Corporation
                                  Valuation and Qualifying Accounts
                            Years Ended December 31, 2002, 2001, and 2000
                                           (In thousands)


Column A                                        Column B     Column C        Column D      Column E
---------------------------------------------  ----------  -------------  ---------------  ---------
                                                Balance       Charged
                                                   at           to                         Balance
                                               Beginning    Other Costs                     at End
                                                of Year    and Expenses   Deductions (1)    of Year
                                               ----------  -------------  ---------------  ---------
<S>                                            <C>         <C>            <C>              <C>
Description
-----------
Year ended December 31, 2002:
     Valuation accounts deducted from assets:
          Allowance for doubtful receivables.  $      398  $         346  $           417  $     327
                                               ==========  =============  ===============  =========




Year ended December 31, 2001:
     Valuation accounts deducted from assets:
          Allowance for doubtful receivables.  $      594  $         466  $           662  $     398
                                               ==========  =============  ===============  =========



Year ended December 31, 2000:
     Valuation accounts deducted from assets:
          Allowance for doubtful receivables.  $      583  $         359  $           348  $     594
                                               ==========  =============  ===============  =========

_____________
(1) Represents amounts written off
</TABLE>

                                       S-2
<PAGE>